1982-12-13

MOTIONS UNDER S.O. 43   SHIPBUILDING CALL FOR ANNOUNCEMENT OF NEW SHIPBUILDING ASSISTANCE ACT

['No.\nOral Questions']
Mr. Gus Mitges (Grey-Simcoe):: Madam Speaker, in view of the fact that it takes nine months of preparation, planning and designing before the actual building of a ship can take place in any of our shipyards, and in view of the fact that shipbuilding orders have slowed down to a trickle because the Government has delayed and delayed its announcement of the new Shipbuilding Assistance Act, I move, seconded by the Hon. Member for Prince Edward-Hastings (Mr. Ellis):
That the Government cease its delaying tactics, cease playing cat and mouse with our shipyards, and immediately announce the long awaited provisions of the Shipbuilding Assistance Act.


Madam Speaker:: Is there unanimous consent for this motion?


Some Hon. Members:: Agreed.


Some Hon. Members:: No.



Mr. Joe Reid (St. Catharines):: Madam Speaker, earlier this year the Government recognized the Royal Canadian Henley Regatta by issuing a centennial commemorative stamp. Ninety-three of those events were rowed in St. Catharines on the Henley course there. It is now proposed that the Henley regatta be moved to Montreal, money being a factor. I therefore move, seconded by the Hon. Member for Erie (Mr. Fretz):
That Sports Canada be urged to intervene in the best interests of rowing and Firmly establish that tradition, convention and good sportsmanship cannot be purchased by a mess of pottage.


Madam Speaker:: Is there unanimous consent for this motion?


Some Hon. Members:: Agreed.


Some Hon. Members:: No.


CHARTER OF RIGHTS
Mr. Rod Murphy (Churchill):: Madam Speaker, the Ontario Labour Relations Board decided last week to restrict activities which are totally in line with the traditional interest of the labour movement in communicating the broadest concerns of its members as workers and as citizens. In view of the fact that the Charter of Rights, which came into being with the full support of the Province of Ontario, specifically guarantees freedom of expression and freedom of association in Canada, I move, seconded by the Hon. Member for Beaches (Mr. Young):
That this House urge the Ontario Government to review its labour legislation to determine whether it ensures these fundamental rights to all citizens as guaranteed in the Charter.


Madam Speaker:: Is there unanimous consent for this motion?


Some Hon. Members:: Agreed.


Some Hon. Members:: No.


LAW OF THE SEA
Mr. Alexandre Cyr (Gaspe):: Madam Speaker, I rise on a matter of urgent and pressing necessity, under the provisions of Standing Order 43.
The third Law of the Sea Conference ended December 10 of this year, when a convention was signed by 119 countries. Canada obtained a major victory during this conference, of which Canadians may be proud, and they should be especially proud of our ambassador and his team, who in twelve sessions negotiated an international convention that protects the interests of Canada.
December 13, 1982

I therefore move, seconded by the Hon. Member for Vancouver South (Mr. Fraser) and the Hon. Member for Nanai-mo-Alberni (Mr. Miller):
That this House recognize the contribution of the Ambassador, His Excellency Mr. Alan Beesley, and his team to the Law of the Sea Conference negotiations and congratulate them for the enormous work they have accomplished and the success they obtained for Canada and the international community.


Madam Speaker:: Is there unanimous consent for this motion?


Some Hon. Members:: Agreed.


Madam Speaker:: Is it the pleasure of the House to adopt this motion?


Some Hon. Members:: Agreed.


[Stage Direction]
Motion agreed to.

Mr. Blaine A. Thacker (Lethbridge-Foothills):: Madam Speaker, the Auditor General's report shows once again how the Liberal Government has sold out the heritage and future of our Canadian youth. In the Department of Agriculture, Research Branch, over 300 of the existing scientists will be eligible for retirement within four years, yet the Government has not made provision for their replacement. Therefore I move, seconded by the Hon. Member for Erie (Mr. Fretz):
Thai the youth of Canada note once again how the Liberal Government's philosophy and practice have injured their futures as scientists in Canada through its failure to fund the training of scientists adequately.


Madam Speaker:: Is there unanimous consent for this motion?


Some Hon. Members:: Agreed.


Some Hon. Members:: No.


EXTERNAL AFFAIRS
Mr. Ron Stewart (Simcoe South):: Madam Speaker, today marks the anniversary of the imposition of martial law in Poland which was imposed on December 13, 1981, bringing to a temporary halt the progress of the Polish people toward full human rights and political freedom. The situation in Poland a year later is still dark, but there are some hopeful signs that martial law may soon come to an end. Therefore I move,
seconded by the Hon. Member for St. John's West (Mr. Crosbie):
That this House urge the Polish authorities to end quickly martial law in that country, to agree to Lech Walesa's demand for a general amnesty of those who have been imprisoned for political reasons, and to resume negotiations with the Solidarity Trade Union and the Roman Catholic Church in Poland on reforms which would allow for economic, social and political freedom and progress in Poland.


Madam Speaker:: Is there unanimous consent for this motion?


Some Hon. Members:: Agreed.


Some Hon. Members:: No.


EXTERNAL AID
Mr. Arnold Malone (Crowfoot):: Madam Speaker, bearing in mind that 12,000 children per day in the world die of starvation and that here in the western hemisphere, in just one country, that of Brazil, 25 million children live on the streets, abandoned by their parents mostly for reasons of economy, and since UNICEF has done an outstanding, commendable job in bringing aid and assistance to the world's needy children, and since Members of Parliament generally send between several hundred and several thousand Christmas cards to friends and associates each year, I move, seconded by the Hon. Member for Kingston and the Islands (Miss MacDonald):
That this Parliament encourage each of its political Parties to put forward a name, and that this all-Party Committee of three be asked to consider the advisability of approaching the UNICEF organization for a special production of parliamentary Christmas cards so that we might, concurrently with extending good wishes, assist the needy children of the world and, in the act of so doing, encourage many others to do likewise.


Madam Speaker:: Is there unanimous consent for this motion?


Some Hon. Members:: Agreed.


Some Hon. Members:: No.


AGRICULTURE
Mr. Vic Althouse (Humboldt-Lake Centre):: Madam Speaker, in keeping with the deep concern for individual rights often expressed in the House for situations arising in Poland, Russia, Chile, El Salvador, et cetera, I move, seconded by the Hon. Member for The Battlefords-Meadow Lake (Mr. Anguish):
That this House urges the Government of Saskatchewan to continue with its land bank program in order that legal and individual rights of some 2,700 young
December 13, 1982

farm families may continue, that the contracts which they now hold be maintained and honoured, and that they not be subjected to arbitrary Government intervention without recourse to the courts as is now the intention under its Bill C-46.


Madam Speaker:: Is there unanimous consent for this motion?


Some Hon. Members:: Agreed,


Some Hon. Members:: No.


THIRTY-FIRST PARLIAMENT BUDGET DIVISION ANNIVERSARY
Mr. Roger Simmons (Burin-St. George's):: Madam Speaker,
1 rise under the provisions of Standing Order 43. Rarely do 1 resort to rhyme to make my point. However, as you will see, those I salute and the occasion I recall today clearly justify a bit of poetry:
Amazing John who, on this day Just three short years ago,
Did forfeit gain for short-term pain To put the boots to Joe.
When we've been here ten thousand years,
We'll still recall the time
That Walter's skill at counting failed.
And Liberals smiled, sublime.
And so I move a Forty-Three:
"That those to power inclined Be taught to add with accuracy,
Have eyes in their behind.''


Madam Speaker:: The Hon. Member for Erie (Mr. Fretz).


CROWN CORPORATIONS
Mr. Girve Fretz (Erie):: Madam Speaker, in the United States it was Watergate and Ellsberg; in Canada it is Crown corporations and an iceberg. With more people employed than Government, and spending $30 billion a year, the Auditor General perceptively stated that Crown corporations are a "hole in the taxpayers' pocket". Therefore I move, seconded by the Hon. Member for Perth (Mr. Jarvis):
That the huge hole in taxpayers' pockets be sewed up by following Mr. Dye's recommendations that "Crown corporations' finances must be specifically subject to the scrutiny of Parliament."


Madam Speaker:: Is there unanimous consent for this motion?


Some Hon. Members:: Agreed.


Some Hon. Members:: No.
Oral Questions



ORAL QUESTION PERIOD

['Madam Speaker, considerable progress was made last week, leading on', 'December 13, 1982\nOrder Paper Questions\nFriday to a finalization of a protocol for a return to work and an agreement leading to a settlement. However, these two documents have not been signed. The union leadership will put the two documents to the membership for ratification during this week. If-and I repeat if-the membership will ratify the two documents, then it is possible that service by Nordair will resume by next week.']
Madam Speaker:: The Hon. Member for Vancouver South.


Mr. Fraser:: Madam Speaker, my question is for the Hon. Minister of Fisheries and Oceans who has not yet come into the House. Perhaps 1 could defer the question.



Hon. Allan B. McKinnon (Victoria):: Madam Speaker, my question is for the Minister of National Defence. Last Thursday the Minister appeared to be quite confused in answering a question about the tragic loss of two planes and two pilots at Cold Lake. I trust by now the Minister's staff has briefed him and he can answer today in a more cogent manner. Can the Minister of National Defence tell the House if, on December 3, when the planes disappeared, there was for a period of time no radar coverage in this controlled air space? Also, was that due to equipment or human failure?


Hon. J. Gilles Lamontagne (Minister of National Defence):: Madam Speaker, the Hon. Member for Victoria is quite right.
I was going to send a letter to him and also to the Clerk of the House of Commons today stating that in fact there was a mistake when I answered his question concerning the new system and the old; RATCOM versus TRAC. In my answer of December 9, 1982, the words RATCOM and TRAC should be reversed. What is TRAC is RATCOM and what is RATCOM is TRAC.


Mr. Nielsen:: I hope it wasn't that way at the airport.


Mr. Lamontagne:: I think it is important that you know the difference. I knew the difference but I misplaced the two terms. The main thing is that we have a new system that will improve tremendously our way of following our pilots flying at high altitudes.
I cannot answer the question asked by the Hon. Member for Victoria today because an investigation of the matter is currently in progress. We had quite a discussion among the air commanders and all others in the Defence Council this morning to find out exactly what happened. It is quite a mystery for us because everything which had been working was working adequately. As I mentioned to the Hon. Member the other day we do not cover by radar from the airfield itself the whole area where these two pilots were flying. These pilots could have been flying at a low altitude where radar does not cover them. Despite all these facts, I do not think that at the point where the investigation is at the moment there is any answer I can give to the Hon. Member for the disappearance of these two pilots.

December 13, 1982
Oral Questions


REQUEST THAT BOARD OF INQUIRY FINDINGS BE MADE PUBLIC
Allan Bruce McKinnon: Madam Speaker, there will, no doubt, be a military board of inquiry on this accident. And as the Prime Minister has directed Departments to act as if the Freedom of Information Act had been proclaimed, will the Minister ensure the House that the findings of the board of inquiry will be made public, thus ensuring that his Department will show the same degree of public responsibility that any private corporation or company is required to do?


J. Gilles Lamontagne: Madam Speaker, as the Hon. Member knows well, the findings of boards of inquiries are not normally made public because we gather considerable information some of which is confidential. If we make public the findings of boards of inquiries every time we have an investigation, then witnesses may not answer our questions, or may not give the proper answer, because they will be afraid the information will become public. But whatever information we can give to the Hon. Member so that he can clarify in his mind that everything which should have been done has been done, I will be very glad to see him and see what 1 can give him when the investigation is complete.


NATIONAL SECURITY
Mr. Chris Speyer (Cambridge):: Madam Speaker, my question is for the Solicitor General who, during the past two weeks, has refused to give a full account of the Hambleton affair and has left many contradictions in his answers. I have a specific question for the Solicitor General. We know that after April 25, 1980, Hambleton made aware to the Security Service the fact that he, Hambleton, was passing NATO secrets on to the Soviets. The Solicitor General has indicated to this House, and has indicated outside of the House, that no deal was made, that there was no promise of immunity. If that is, in fact, the case, could the Solicitor General tell us why did the Security Service never return to the Department of Justice with the necessary evidence there would have been in order to initiate a prosecution?


Hon. Bob Kaplan (Solicitor General of Canada):: Madam Speaker, that is a question that I have been asked before and that 1 have answered before.


Chris Speyer: No, you have not.


Robert Phillip Kaplan: When the Department of Justice and the Minister decided that there would be no prosecution, it was further decided that that information be communicated to Hambleton, that the mode of the operation should be changed from an investigation, which might have led to the laying of charges, into a counter-intelligence operation in which information would be obtained from Hambleton for the benefit of
Canada's national security and that of friendly intelligence services.


Miss MacDonald:: It was a deal then?


Robert Phillip Kaplan: The Security Service already knew that if Olson, that if Hambleton was cautioned, he would refuse to answer NATO questions, because he had refused to answer NATO questions when he was cautioned, so that after April, it was agreed that he would not be cautioned, that he would give information on a basis in which it would not be very likely admissible in a prosecution against him. But it was clear to the Security Service and to the Attorney General of Canada that if any third party evidence turned up or could be found, they would go back to the Department of Justice and put the case to them again for the Attorney General's consent.


Chris Speyer: I think answers such as this past one that the Solicitor General gave just indicate how constipated he is on this issue as well as on the Olson issue.


REPORT THAT BRITISH SECURITY URGED PROFESSOR TO RETURN TO CANADA
Chris Speyer: Madam Speaker, in The Toronto Star on Saturday, as a result of a London Times story, it was indicated that Scotland Yard's Special Branch met Hambleton in London at Heathrow Airport. At that time they wanted Hambleton to return to Canada. They did not want to prosecute him. We have been going on the assumption that the Brits wanted to prosecute Hambleton when he got to Great Britain.
In light of the answers given by the Solicitor General two weeks ago today that the fullest co-operation existed between our Security Service and the British Security Service, would the Solicitor General say whether or not the report that the Special Branch of Scotland Yard tried to talk Hambleton into going back to Canada is accurate?


Robert Phillip Kaplan: Madam Speaker, obviously that is not information I can give.


Chris Speyer: You should know.


Robert Phillip Kaplan: 1 know, but I do not give answers for the Government of Great Britain. I give answers for the Government of Canada.


THE ECONOMY
Mr. Nelson A. Riis (Kamloops-Shuswap):: Madam Speaker, my question is directed to the Minister of Finance. As the Minister knows, increased capital spending is a key element in any recovery program. The forecasts now made by Industry,
December 13, 1982

Trade and Commerce show that new investment by large corporations will decline by $2.4 billion next year, an even larger drop than we experienced in 1982. Given the fact that these forecasts point to a potential loss of hundreds of thousands of jobs in 1983, will the Minister agree that we have now arrived at virtually a crisis situation, and will he bring in some kind of massive recovery program before the Christmas recess?


Hon. Marc Lalonde (Minister of Finance):: Madam Speaker, I think that one very helpful first step in that regard will be for the House to pass the amendments to the Income Tax Act coming before the House this afternoon. This particular Bill provides for significant reductions in terms of individual and corporate tax. It would provide certainty in the business sector and would be quite helpful in ensuring that the private sector would know under what circumstances it will be operating in the next few months.
As far as the specific figures that the Hon. Member has referred to are concerned, he knows that these forecasts are only for the larger businesses. We are confident that the small business sector will see a turn-around. As the Hon. Member knows as well, the housing sector is certainly showing greater strength at the present time.


FORECAST OF UNEMPLOYMENT
Nelson Andrew Riis: Madam Speaker,
I suspect that when we look closely at the amendments to the Income Tax Act we will actually see a loss of jobs as a result of that legislation, as opposed to anything additional.
The Minister must admit that another year of decline in corporate investment will not only mean that unemployed people will not go back to work but those who are already working will likely lose their jobs in the realm of hundreds of thousands in 1983. Does the Minister have any idea of how many jobs we will see lost in 1983?


Marc Lalonde: Madam Speaker, I have indicated that the level of unemployment in 1983 would remain high but that it would gradually decline below 12 per cent before the end of the year. That is a situation that would be similar to the one that is being forecast in the United States and in most industrialized countries over the course of the next year. We plan to do everything that we can to bring that level of unemployment down as fast as possible. Obviously we have to do it in terms of an international environment that would be favourable, while using all the resources of the provincial and federal Governments to stimulate the economy over the next year.


CONSEQUENCE OF REDUCTION IN CAPITAL INVESTMENT
Nelson Andrew Riis: Madam Speaker, with all due respect to my hon. friend, if the Minister cannot make an accurate forecast, perhaps I can.


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


Nelson Andrew Riis: Considering the fact that, in 1982, 500,000 jobs disappeared in Canada, will the Minister not agree that, with $2.4 billion lost in capital investment, much larger than in
1982,	it would at least mean 80,000 fewer production jobs in Canada next year and, using the multiplier effect, another
200,000	jobs in the service sector? These figures do not even take into account the jobs lost as the result of an expected low level of consumer spending. Now, with over 280,000 jobs guaranteed to be lost next year, plus many more as the result of a downturn in consumer spending, how can the Minister continue to justify not bringing in a comprehensive recovery program before Christmas?


Some Hon. Members:: Hear, hear!


Marc Lalonde: Madam Speaker, the only thing I can say is that I am confident that the New Democratic Party will be proven as wrong in this forecast as it has been proven in all its previous forecasts.


Some Hon. Members:: We were not!


Marc Lalonde: I would also indicate that the forecasts of not only the Department of Finance, but also of all the major, private institutions in Canada, are to the effect that, although there will still be a higher rate of unemployment next year, the rate of unemployment will decline during the course of the year, not increase. Therefore, rather than having an increase in the total percentage of unemployed, it is foreseen that in the course of 1983 the rate of unemployment will gradually go down toward the latter part of 1983. This being said, I have indicated before that it might be that, in the early part of
1983,	we will still have a very high rate of unemployment indeed.


FISHERIES
John Allen Fraser: Madam Speaker, my question is directed to the Minister of Fisheries and Oceans, who has now been able to come into the House. In 1982 the Department of Fisheries and Oceans established an enterprise allocation system for Atlantic Canada's offshore fishery. This commendable initiative gave each participant a quota to catch for the entire year and thus allowed for a rational plan for fishing, processing, marketing and financing. It stopped the frantic rush by everyone to get a maximum catch from a common quota in a very short time, which had created problems in processing, marketing, quality control, and had resulted in inefficient use of boats, manpower and working capital. On Thursday the Minister cancelled this system for

December 13, 1982
Oral Questions
1983, opening up the much condemned "free for all" for the coming year.
Just what is he up to? Does he want the banks to call their loans? Does he expect anyone to want to go back to the chaos that was in existence before? Can the Minister clarify the reasons for cancelling this, as I said, commendable program?


An Hon. Member:: Yes or no.


Hon. Pierre De Bane (Minister of Fisheries and Oceans):: Yes, Madam Speaker, the Enterprise Allocation Program, as the Hon. Member suggests, was established on a trial basis last year to the benefit of the offshore fleet. As the Hon. Member knows, at this moment there is a great uncertainty about the future of some of those companies, i have reached the conclusion pending the conclusion of this question concerning how the restructuring will develop, that I should wait until it is resolved before re-introducing this system which, as the Hon. Member said, has brought some positive improvement in the harvesting sector.


John Allen Fraser: Madam Speaker, the Minister, in his telex said that the reason that he did not want to proceed with this system was because of current instability in the industry. I want to remind the Minister through you, Madam Speaker, that there was plenty of instability all through 1982, but because of the fact of the system being in effect, that instability was at least diminished.


REQUEST THAT KIRBY TASK FORCE REPORT BE RELEASED
John Allen Fraser: Madam Speaker, it is common information in the fishing industry that the members of the Kirby Task Force were generally in support of enterprise allocation, but the Kirby Report is still secret. This allows the Minister to ignore the Report and it allows something else, Madam Speaker. It allows the Cabinet Committee that is studying it to launder the Report accordingly. What we want to know is when is the Report as originally submitted to the ad hoc Cabinet committee going to be released so that Parliament can tell what the Report said, as opposed to what the Minister may want to do before we get any chance whatsoever of seeing what those recommendations were.


Pierre De Bané: Madam Speaker, 1 hope to be able to bring the Kirby Report before Cabinet in the very near future. On the other hand, the Hon. Member should realize that the question that he is touching upon is not part of the Kirby Report. The Kirby Report touches on some of the most fundamental and general problems that affect the fisheries in the Atlantic, exactly like the Pearse Report does for the Pacific Coast fisheries.
The question of the restructuring of the companies themselves is not within the Kirby Report. I must remind you again that the moment the fish is landed it becomes a question of the processing companies and is essentially a provincial matter. Of
course we are ready to entertain helping that sector, like others.
I can tell the Hon. Member that at noon today 1 was meeting with a representative from one of the most important processing plants in the Altantic area, and he tells me that he understands fully that in view of the uncertainty we cannot renew those enterprise allocations before we know what is going to be their structuring.


REQUEST THAT PARLIAMENT BE CONSULTED ON POLICY
John Allen Fraser: Madam Speaker, the House knows that in January of this year, nearly a year ago, a Cabinet committee was going to implement a plan to salvage the Atlantic fisheries. They could not decide what to do, and so Mr. Kirby was appointed. He was going to report in July, then in September, then in November, and now possibly in January.
In view of the fact that the Minister of Veterans Affairs, a member of the Cabinet, has said that implementation of the Kirby Report would cost the taxpayers $100 million, and recent press reports quoting a source said that the bail-out is up to one-half a billion in debts and half as much again in working capital requirements, and the same source says that the ad hoc Cabinet committee is split, and in view of the almost incredible delay facing a fishery which everyone knows is in trouble, and knew it since the summer of 1981, when is the Minister going to present any policy for Atlantic Canada, and will Parliament have any say in it before it becomes policy?


Pierre De Bané: Madam Speaker, as you have noticed, the Hon. Member referred very often to what he said are rumours. Obviously, I will not comment on rumours.
Secondly, when he says that the fishery is in difficulty, I hope that he is knowledgeable enough about the Atlantic fisheries to know that we have different fisheries in the Atlantic. Some are doing very well; others are in difficulty. As some have told me, maybe it is because they did not want to listen to my predecessor when he told them that it was unwise to overexpand.
The Kirby Task Force was established less than a year ago, and 1 am very confident that in the very near future the Government will make its Report public. I can assure you immediately that there will be a lot of room for consultation and input from all the different groups, including provincial Governments, if they want to co-operate in the implementation.


REQUEST THAT GOVERNMENT ACT TO ASSIST ATLANTIC FISHING INDUSTRY
Hon. John C. Crosbie (St. John's West):: Madam Speaker, my question is directed to the Minister of Fisheries and Oceans. I am not going to deal with rumours. There are 40,000 fishermen in Atlantic Canada and 48,000 who work in fish
December 13, 1982

plants, normally, many of whom are now unemployed. That is 98,000; and the fish plants owned by the Nickerson group, the Lake group and the Fishery Products group, three of the four main companies in Atlantic Canada, are all in jeopardy because those companies are on the verge of bankruptcy.
These are not rumours. The plant is closed at Harbour Breton, at St. Lawrence, at Fermeuse, at Ramea; they are going to close a major plant at Burin. In my district the plant at Trepassey is closed. There are thousands out of work, thousands of fishermen in jeopardy.
When is the inaction and the evasion and the escaping of responsibilities going to end? When is the Government going to act to save the Atlantic Fisheries, the fishermen and the plant workers? The 12 months have now passed for these studies. When is the Minister and his Government going to take action? It is their responsibility, under the Constitution. They have refused to give the Provinces any responsibility.


Madam Speaker:: Order, this period is for questions.


John Carnell Crosbie: When is he going to act?


Pierre De Bané: Madam Speaker, I am appalled to see the Hon. Member trying to make cheap political gains out of that question. When he speaks about our constitutional responsibility, surely, in view of the time that he has spent in politics, both in the provincial legislature and in Ottawa, he should know that the processing plants are not within the federal responsibility. It is the Province which has allowed, over the objection of the federal Government, over 25 processing plants to be built in the last four years, when we said there was no room for them. Today he is trying to put the blame on us. It is really quite reprehensible and objectionable, coming from him.
Secondly, when he says that for over a year now we have been waiting, let me remind him that only two weeks ago one of those three companies he has named from Newfoundland came to see us for the first time ever and asked for help, and we are studying their requests on the most urgent basis. So stop making cheap politics.


Some Hon. Members:: Hear, hear!


GOVERNMENT SUPPORT FOR FISH PLANT AT ST. ANTHONY, NFLD.
John Carnell Crosbie: Madam Speaker, 1 am appalled that we have a Minister of Fisheries who knows so little about this situation. The Minister does not even realize that it was the Government of Canada, through DREE, that financed all these plant expansions throughout Atlantic Canada to the tune of $46 million at least.
My supplementary to the Minister, who is unconcerned apparently about the unemployed plant workers and the fishermen, is very specific. The federal Government financed the operation of a fish plant at St. Anthony this year, only for
Oral Questions
this year-and 800 jobs are in jeopardy-through the Fishery Prices Support Board. The Government of Canada gave the Lake group a guarantee of $12 million or $13 million to carry them on, but the guarantee expires on December 31. If it is not renewed, the Lake group and thousands of people will be out of work on January 1, 1983. Is the Government taking any action to renew those guarantees? What is the Government's plan for the St. Anthony plant next year?
What is the Government going to do to meet its responsibilities in the fishing industry, because only this Government can take action. Its Ministers have complete constitutional responsibility. What are they going to do-stop evading the issue, and twisting and turning as you are.


Madam Speaker:: Order.


Pierre De Bané: Madam Speaker, I have heard a lot of inconsistencies coming from that Member of Parliament, but it is the first time ever that in the first question he says we have done nothing and in the second he says, "You have re-opened St. Anthony, you have cared about the Lake group by advancing over $15 million".


John Carnell Crosbie: You did not advance a cent, you guaranteed it.


Pierre De Bané: He is the one reminding the House what we have done.


John Carnell Crosbie: What are you going to do?


Pierre De Bané: I have never seen such blatant incoherence coming from the same Member.


John Carnell Crosbie: What are you going to do?


Pierre De Bané: I would remind the Hon. Member that what we have done for St. Anthony, what we have done for the Lake group, we will continue doing, but I will not recommend to the Government any course of action before I get all the figures. At this moment, we have-


John Carnell Crosbie: You got them. You have had them for months.


Pierre De Bané: You believe in the private sector. We have given a study to the private sector, to two big accounting firms, to get us all the figures. When we get them, the Government will decide on a course.


John Carnell Crosbie: Another study.


Mr. Baker (Nepean-Carleton):: They will die of starvation.


Pierre De Bané: It is surprising. If he does not understand, I can tell you, Madam Speaker, that I have met with the Premier of Newfoundland and he understands fully that no course could be decided upon before we get those figures. When he speaks about all those municipalities I can tell him-


Madam Speaker:: Order.


Some Hon. Members:: More, more!

December 13, 1982
Oral Questions


John Carnell Crosbie: You are doing nothing. Get out and take Trudeau with you-MacEachen as well.


POSITION OF RESOURCE-SHORT PLANTS
Mr. Ted Miller (Nanaimo-Alberni):: Madam Speaker, my question is also directed to the Minister of Fisheries and Oceans. Last week at the NFFAWU Conference, the Minister of Fisheries for Newfoundland made the statement that he had met with the federal Minister of Fisheries and Oceans and that they had agreed there would be no quota allocation to the major companies unless those companies were prepared to give some guarantee that resource-short plants in Newfoundland would have access to some fish to process. In light of the statement of the Newfoundland Minister of Fisheries, who was against quota allocations, what is the mechanism by which resource-short plants such as those as Burin, Grand Bay and Ramea are going to be guaranteed some products this winter for shore workers and plant workers?


Pierre De Bané: Madam Speaker, it is true that the Newfoundland Minister of Fisheries suggested that at the last meeting of the Ministers of Atlantic Fisheries with myself. Mr. Jim Morgan suggested that the Enterprise Allocation Program not be renewed pending the uncertainty which is prevailing at the moment in the processing sector. As to the other point to which the Hon. Member has alluded, I raised that topic after having met with the mayors of the Southwest coast of Newfoundland who gave me the idea it may be worth exploring the possibility of allocating the quota, not on the fishermen, not on the boat, not on the company, but on the community. I promised to bring that to the attention of the other Ministers. We have agreed among ourselves to study that possibility.


IMPACT ON INDIVIDUAL COMMUNITIES
Edward Allan Miller: Madam Speaker, the Kirby Task Force has some serious reservations about resource allocations to specific communities and specific plants. I would like to clarify with the Minister just how he perceives that those communities, because of an over-capacity in the processing industries, the ones that he met with, will be guaranteed a continuation of employment in the coming fishing season. The Minister has not been specific in his comments today on how we will guarantee communities such as Burin that they will continue to have a resource to process.


Pierre De Bané: Madam Speaker, of course I cannot be specific. That suggestion was made to me by various town councillors and mayors about two weeks ago. 1 cannot now comment on it in detail. I asked my Department to study whether it is feasible, and to determine what are the different aspects of it. After that we will study the implications. 1 will then meet with my counterparts, the Atlantic Ministers of Fisheries, and hopefully we can then have a position based on consensus.


INDUSTRY
Alexandre Cyr: Madam Speaker, my question is directed to the Minister of Industry, Trade and Commerce and the Minister of Regional Economic Expansion. In 1977, the Government of Canada signed a subsidiary agreement with the Province of Quebec for the development of infrastructure. With respect to fisheries, the agreement provided for four service centres with winter pounds. Should Quebec be unable to make preparations for the development of infrastructures in these fishing centres before March 31, 1984, the date of expiry of the agreement, could the Minister inform the House whether this agreement with the Province of Quebec will be extended or renewed, so as to enable that Province to receive the Federal contribution which amounts to 60 per cent?


Hon. Ed Lumley (Minister of Industry, Trade and Commerce and Minister of Regional Economic Expansion):: Madam Speaker, as the Hon. Member knows, the particular general development agreement under which the service centre component receives its money has been extended for 2 years already. As the Prime Minister announced on January 12, it is highly unlikely that the Government will renew this particular agreement. If I were a Member of this House from that designated region, I would do everything I could to encourage the Quebec Government to fulfil its part of the commitment prior to March 31, 1984.


CRIMINAL CODE
Mr. David Kilgour (Edmonton-Strathcona):: Madam
Speaker, I have a question for the Minister of Justice. The Minister will be aware that a great many Canadians are concerned about hard core pornography. Does the Minister accept personally that the latest research shows there is now a connection between pornography and crimes against women and children, and what are his plans in this area?


Hon. Mark MacGuigan (Minister of Justice):: Madam Speaker, I share the Hon. Member's concern about pornography. I do not think that the scientific studies that have been made so far are absolutely clear on what are the social consequences. However, we have to assume as a working hypothesis that there are consequences and that they are serious. We can regard that as one of the bases of our present law. I think what the hon. gentleman is referring to is whether there should be additional laws beyond those which presently exist. That is very much on my mind at the moment. Indeed, in the new
December 13, 1982

session of Parliament I hope that we will be able to make our position very clear on that point.


CUSTOMS AND EXCISE
[Stage Direction]
&ED1764;-1 IMPORTATION OF PORNOGRAPHIC MATERIAL- INSTRUCTIONS TO CUSTOMS OFFICERS
David Kilgour: Madam
Speaker, 1 have a supplementary question for the Minister of National Revenue on the same subject. The Ontario Provincial Police have objected that one of the problems with pornography is that Canada Customs officers are too lax in what they permit to come into the country. Will the Minister tell us what his specific directions are to his customs officers, and what advice he has received on this subject from his colleague, the Minister of Justice?


Hon. Pierre Bussieres (Minister of National Revenue):: Madam Speaker, the Hon. Member is aware that our customs officers are responsible for implementing a schedule to the Customs Tariff which refers to the provisions of the Criminal Code regarding pornography. In the implementation of these provisions, customs officers follow generally known guidelines based on the approach of the Criminal Code to pornography and also on court decisions in cases of seizures and especially in the case of appeals. I think that to date, the guidelines and the manner in which customs officers have applied the tariff items in accordance with the spirit of the Criminal Code, have been generally accepted by Canadians.


NATIONAL SECURITY
Hon. Ray Hnatyshyn (Saskatoon West):: Madam Speaker, my question is for the Minister of Justice, who can again demonstrate his agility on his feet. My question is with regard to the Hugh Hambleton matter. People across Canada are asking themselves why in fact there is no prosecution of spies in Canada, particularly in this instance. In light of the fact there is now clear evidence of the transmittal by Mr. Hambleton of American secrets to the KGB on Canadian soil, is it the opinion of the Minister that there is no prosecution available in Canada that would be successful for the transmittal of American military and other secrets in Canada?


Mark R. MacGuigan: Madam Speaker, I am not sure of the facts to which my hon. friend is referring. I do not have the report of the case in Britain. My impression from the newspapers is that he was convicted, not of passing U.S. secrets, but of NATO secrets. To the best of
Oral Questions
my information, that concerned the time he spent at NATO. If my hon. friend is asking whether we would charge him in Canada with the same things for which he has already been charged and convicted in the United Kingdom, I would be interested in having his opinion on whether that would be a violation of double jeopardy or not, but certainly I have not as of now, because of a lack of evidence, decided that question.


Ramon John Hnatyshyn: That is not double jeopardy; it is double talk.


CIRCUMSTANCES UNDER WHICH PROFESSOR WAS QUESTIONED
Ramon John Hnatyshyn: Madam Speaker, my supplementary question is directed to the Solicitor General. After April 25, 1980, Mr. Hambleton gave a great deal of information to the RCMP security branch. Why did the Solicitor General not return to the Attorney General to obtain a legal opinion as to whether Mr. Hambleton should have been prosecuted at that time? Second, why did the Minister not ask for a legal opinion from the Attorney General on whether the circumstances under which Mr. Hambleton gave this information constituted an inducement?


Robert Phillip Kaplan: Madam Speaker, as I have indicated, the ground rules that were established for further questioning of Hambleton were that he would not be cautioned because, when he had been cautioned in the past, he had refused to give information about his role with NATO; that he would not be cautioned but that his cooperation would be sought. It was sought. It was forthcoming. Valuable information was obtained from him about NATO, but no third-party information was ever obtained by the Security Service, although it was agreed that, if further third-party information had been obtained, they would have indeed returned to the Attorney General of Canada and once again sought his consent.


ELEMENTS OF BASIS FOR QUESTIONING
Right Hon. Joe Clark (Leader of the Opposition):: So we are
clear on the elements of the deal, is the Solicitor General saying that, on his side of the deal, the Government of Canada said that Hambleton would not be cautioned, and on Hamble-ton's side of the deal he said in exchange for that undertaking he would provide information? Are those the fundamental elements of the deal?


Robert Phillip Kaplan: Madam Speaker, there was no deal, as I have indicated everytime I have been asked that question. Hambleton gave his information because he was encouraged to do so. He was aware, 1 am sure, that without a caution that information would not be admissible. But the reason it was not admissible was not because of any agreement with him. It was not admissible because of my understanding and because of the advice we have had about the implications of the law.

December 13, 1982
Oral Questions


BRITISH DETECTIVES' WISH TO HAVE PROFESSOR RETURN TO CANADA
Charles Joseph Clark: To coin a phrase, I find the Solicitor General incredibly naive. He tells us that in exchange for the undertaking that there would not be a caution, Hambleton gave information, but that was not a deal. Well, it is a deal in any other man's language, and I do not know why the Solicitor General will not admit in the House of Commons that he made a deal, and then, having done that, why he will not tell the House of Commons and the people of Canada what the consequences to Canada were of his deal.
Let me come to the question of the British. The Solicitor General earlier in this House today said he knew why British detectives tried to urge Hambleton to come back to Canada. He knew, but he will not tell Parliament. That is what he said. Will the Solicitor General tell us whether the immunity which Canada had granted Hambleton influenced the British detectives' decision to send him back to Canada?


Robert Phillip Kaplan: Madam Speaker, Canada did not give an immunity to Hambleton. I have indicated repeatedly that it was very clear to officials on our side, in Justice and in the RCMP, that if any basis could be found for prosecuting Hambleton after April 25, they would seek to do so. That is why I cannot understand how the Opposition can characterize that as a deal. The Government did not agree to give up anything to Hambleton in return for getting information, and Hambleton gave his information to them without any expectation that he would be any better off or any worse off for giving information. Therefore, there was not a deal within that very simple definition. There was no consideration coming from the Government, and there was no consideration expected by Hambleton.


REASONS FOR NOT LAUNCHING PROSECUTION
Charles Joseph Clark: If the
Government of Canada did not give up the right to prosecute Hambleton, why did they not prosecute him?


Robert Phillip Kaplan: The
Government of Canada did not prosecute Hambleton because no additional third-party evidence was forthcoming after April 25. They got a considerable amount of information of value. They shared that information with the Government of the United Kingdom and other friendly intelligence services, but it was not information which would have been admissible in a court in Canada, in the opinion of the law officers of the Crown, by the ground rules which they had set out in the meeting at which the decision of April was reached.


NATURE OF ARRANGEMENT FOR QUESTIONING
Charles Joseph Clark: Madam Speaker, a very brief supplementary. Was the arrangement his officials had with Hambleton-I will not call it a "deal" if the Minister insists-that no prosecution would be brought by the
Government of Canada except on the basis of third-party evidence?


Robert Phillip Kaplan: Madam Speaker, we are learning the extent of the ignorance of the Leader of the Opposition of the law. It was not an agreement at all.


An Hon. Member:: He is way ahead of you.


Robert Phillip Kaplan: It was the effect of obtaining information from Mr. Hambleton without caution, and it was obtained from him without caution because efforts over a period of months to obtain information from him about NATO after caution had been unsuccessful. If the RCMP had been able to get his NATO connection from him before going to the Attorney General, they would have presented it to the Attorney General. They were unable to get it from him because he refused to answer questions relating to his role in NATO. After the meeting of April, 1980, the RCMP went back to Hambleton and told him of the decision which had been reached by the Attorney General. They asked for his co-operation, and Hambleton established a relationship with them which produced that information, and very good value was made of it, as the Hon. Member knows.


LABOUR CONDITIONS
Mr. Jim Fulton (Skeena):: Madam Speaker, my question is for the Minister of Employment and Immigration. I am sure the Minister is aware that last year's federal labour market study by David Dodge confirmed that in western Canada 20 per cent of the labour market growth in this decade will be among native people. Recent federal studies in British Columbia and Saskatchewan have shown that off-reserves unemployment among native Indians is three to six times higher than among the non-native population. In northwestern British Columbia, where a third of the native people in the Province reside, reserve unemployment has now exceeded 90 per cent for several months.
A report is now before the Minister from his own Advisory Council. I would like to ask the Minister whether or not he concurs with the recommendation that all funds and programs should be turned over to the native people in relation to employment programs, or does he accept 90 per cent unemployment as their lot in life?


Hon. Lloyd Axworthy (Minister of Employment and Immigration):: Madam Speaker, we have never accepted that as being the condition of native people. My colleague, the Minister of Indian Affairs, and many other Ministers in this Ministry, have spent a lot of time and effort working with native organizations to try to improve their ability to create jobs and economic development, including many efforts which we are making in my own Department, by special training
December 13, 1982

programs and the special allocation of job-creation plans, which the Hon. Member is spending in his own constituency, as he well knows. As far as the report from the Advisory Council is concerned, I just received it about a week ago and we are now looking at it in the Department. As soon as we have given that report a careful and proper assessment, we will let this House and other Members know the results.


SENATE FUNDING
James Ross Fulton: Madam Speaker, my supplementary is directed to the Prime Minister. He has a rather unique employment strategy under way at this time. 1 understand that during the Christmas break 15-odd Senate vacancies are going to be filled. The Prime Minister has made an offer to his friends across the floor, the Conservatives, for four of those slots, and they found some unemployed millionaires to fill them. 1 wonder if the Prime Minister would not agree in principle that, with one and a half million Canadians out of work, and those Canadians have done just as much for this country as anyone at present or in the future in that Senate, that money should be directed towards those million and a half unemployed rather than toward some political hacks.


Right Hon. P. E. Trudeau (Prime Minister):: Madam Speaker, the record would have to be set straight in many regards in relation to that question. The premise to it is completely false. In so far as filling vacancies in the Senate is concerned, Madam Speaker, the Hon. Member knows that Members of the New Democratic Party in the past have been even offered seats in the Cabinet, and none of them dare get that close to exercising responsibility, because-


Some Hon. Members:: Hear, hear!


Pierre Elliott Trudeau: -it is much easier to criticize from the Opposition than it is to bear the responsibilities of governing.


HOUSING
Hon. David Crombie (Rosedale):: Madam Speaker, in the absence of the Minister responsible for Canada Mortage and Housing, I wonder if I might direct my question to the Minister of State for Finance. The Minister is probably aware that in the last couple of days there have been published reports which indicated the federal Government was going to slash its commitment to non-profit and social housing in the Province of Ontario from 2,800 to 2,200 units. In light of the fact that the vacancy rate in the Metropolitan Toronto area alone is less than 1 per cent, and we have 25 per cent unemployed in the construction industry, I would like to ask the Minister whether or not that figure is correct and, if so, how does he justify such an outrageous policy.
Oral Questions


Hon. Paul J. Cosgrove (Minister of State (Finance)):: Madam Speaker, I do not have the advantage of the reports which the Hon. Member for Rosedale has at his fingertips today, but the material is quite novel. It is somewhat surprising and a little bit shocking, in view of the efforts which the former Minister responsible for CMHC to the House made, for example, in increasing the amount of funds which were available to non-profit and social housing over the last three years. It has been a priority of this Government, and I dare say it will continue to be a priority.


David Edward Crombie: Madam Speaker, shocking is the word for this, and that is why I am pleased to have this Minister respond to the question.


REQUEST THAT MINISTER MEET WITH TORONTO OFFICIALS
David Edward Crombie: Madam Speaker, I would like to ask the Minister of State for Finance if he would use his good offices and speak to his colleague who is responsible for CMHC about this. Would he remind him that we are talking about five specific projects which have been slashed by the City of Toronto as a consequence of this policy, and that two projects dealing with emotionally disturbed children and handicapped people have also been slashed as a result of this policy? The Mayor and the Chairman have asked for a meeting with the Minister and, so far, have been unable to get one. Would the Minister ask his colleague who is responsible for housing if he would meet with those officials? Would he see what he can do?


Paul James Cosgrove: Madam Speaker, I am sure that the Minister, like all former Ministers with the responsibility, has to respond not only to representatives from the City of Toronto, for example, but to Canadians right across the country. In that vein, since November last year the Government has allocated some $900 million to assist people with housing problems in all areas of the economy, all areas of the country and all Provinces. I am sure that the Minister who is now responsible for housing will continue that concern.


LABOUR RELATIONS
Mr. Maurice Foster (Algoma):: Madam Speaker, my question is for the Minister of Labour. In view of the tremendous inconvenience to travellers during the past five or six months due to the Nordair strike, and the busy holiday season ahead, is he able to say whether the strike will end soon and when services will be resumed to those cities that are served only by Nordair?


Hon.   Chas. L. Caccia@Minister of Labour: Madam Speaker, considerable progress was made last week, leading on

December 13, 1982
Order Paper Questions
Friday to a finalization of a protocol for a return to work and an agreement leading to a settlement. However, these two documents have not been signed. The union leadership will put the two documents to the membership for ratification during this week. If-and I repeat if-the membership will ratify the two documents, then it is possible that service by Nordair will resume by next week.



ROUTINE PROCEEDINGS


Hon. Jake Epp (Provencher):: Madam Speaker, if this is the appropriate time I should like to give notice, pursuant to Section 10 of the House of Commons Act, that a vacancy has occurred in the representation of the House of Commons for the electoral district of Brandon-Souris in the Province of Manitoba by reason of the unfortunate and untimely death of Hon. Walter Dinsdale, the Member for that district.


QUESTIONS ON THE ORDER PAPER
[Stage Direction]
(Questions answered orally are indicated by an asterisk.)
Mr. David Smith (Parliamentary Secretary to President of the Privy Council):: Madam Speaker, the following questions will be answered today: Nos. 4,516 and 4,517.


Mr. Crouse: 1.	What is the amount approved for dredging at West Green Harbour, Shelburne County, Nova Scotia in 1982?
2.	What is the anticipated date when dredging operations will be carried out?
3.	What is the extent of the area to be dredged?


Pierre De Bané: 1.	The amount approved for dredging for 1982/83 fiscal year is $9,500 for land based dredging. In addition to the land based dredging, Public Works Canada Floating Plant No. 16 is currently doing channel dredging.
2.	Dredging operations began on October 20, 1982. It is anticipated the work will be completed by late January or early February, 1983.
3.	A channel will be dredged 450 metres long by 20 metres wide to a depth of two metres below low water by floating plant. Approximately 8,700 cubic metres of material will be removed. In addition, land based dredging will be carried out around the wharf.


Mr. Crouse: 1.	What is the amount to be allocated for dredging in Lunenburg Harbour, Nova Scotia during the fiscal year 1982-83?
2.	What is the anticipated date when dredging operations will be carried out?
3.	What is the extent of the area to be dredged?


Pierre De Bané: 1.	There will be no contract dredging done. Dredging will be done by Public Works Canada.
2.	It is expected that Public Works' dredge No. 400 will be at Lunenburg to commence dredging on, or before December 15, 1982.
3.	The dredging will consist of 22,000 cubic metres of material to a depth of six metres below low water ordinary spring tide. This will provide a berthing area of 30 metres wide by 110 metres long on the northern side of the government wharf as well as a dog leg shaped section of 310 metres long by 50 metres wide, which will be dredged in the turn basin.
[ English ]


David P. Smith: I ask, Madam Speaker, that the remaining questions be allowed to stand.
[ Translation]


Madam Speaker:: The questions enumerated by the Parliamentary Secretary have been answered. Shall the remaining questions be allowed to stand?


Some Hon. Members:: Agreed.



GOVERNMENT ORDERS


Marc Lalonde: that Bill C-139, an Act to amend the statute law relating to income tax (No. 2), be read the second time and referred to a Committee of the Whole.
He said: Madam Speaker, I am indeed very pleased to open the debate on this major Bill to amend the Income Tax Act. 1 want to discuss its provisions in both broad and specific terms. Not only is this legislation of great importance because of the positive changes it proposes in the tax system, but its passage will end the uncertainty that has lingered for too long on this subject. The Bill also provides an important example of the expanding role of consultation in shaping a tax system that works better for all of us.
As you know, the measures before us today represent the culmination of a process begun with the November, 1981 budget, the June, 1982 budget and my economic statement to
December 13, 1982

the House on October 27 this year. Since becoming Minister of Finance three months ago, I have looked forward to the day when we could get on with this final stage of the job. The time span covered by the process reflects the intensive and comprehensive consultation that has been followed.
My predecessor and I met directly with a wide range of individuals and organizations who had advice to give on tax issues. Members of the House and of the Senate have contributed greatly to the process through both formal and informal consideration of many of the issues. The Finance Committee of the House worked through the summer and reported in October. The Senate Committee on Banking, Trade and Commerce also held hearings on the original ways and means motion. The Lortie Committee of outside experts has made a valuable contribution on the questions of inflation and taxation of personal investment income. Several other groups of outside tax experts and private sector representatives were appointed to examine important tax proposals.
The proof that all that consultation was for real is in the Bill itself. We asked for a lot of advice and we received it. More to the point, we accepted a lot of that advice and I will discuss some of those adjustments in just a few minutes.
We will continue to work to improve the consultative process in order to make the tax system more effective in achieving many important goals. We want to make the process more accessible to taxpayers. You will note, for example, that we have made available for the first time explanatory notes on the measures contained in the Bill. Those notes are written in a language that the average taxpayer can understand when he finds that a particular tax provision applies to him.
We have also made available draft regulations relating to the taxation of life insurance policies and annuity contracts. This is an area of particular complexity. By broadening the base on which budget decisions are made, we can look forward to both an improved process and improved results.
With this Bill today we are proposing commonsense management of the tax system. We have taken account of both the difficult current economic circumstances and the need to encourage a more efficient and productive economy through a tax system that is fair to taxpayers.
To accomplish those goals we must give immediate priority to creating a stable tax environment. Accordingly, the measures before us today reflect a number of decisions to delay or modify initiatives which, however worthy in their own right, would have created unwarranted disruption in a particularly difficult period for the economy.
As 1 have noted, there has been a lot of public debate about the Bill. Some of it has been highly emotional. It is understandable that particular groups and individuals should object strenuously to tax changes affecting them, and obviously it is understandable that people do not like to pay taxes. There is nothing new about this in the history of the world.
Income Tax
1 believe that Canadians as a whole understand that their Government cannot continue to spend more and more while it taxes them less and less. Equally they understand that taxes cannot be lowered for some without being raised for others. It is the job of the Minister of Finance, of the Government and of Parliament to weigh the merits of this or that special interest against the good of society as a whole.
Therefore, before getting down to specifics, 1 believe it would be extremely worthwile to look beyond the merits or acceptability of individual measures to specific interest groups and to focus on the fundamental thrust of this Bill.

Mr. Speaker, this Bill is based on the principle that the Canadian tax system is better off with lower tax rates applied to a broader income base. I firmly support this principle and 1 think it would be difficult to disprove it. Although many changes have been made to the Bill during the last few months, that same principle continues to be reflected in the tenor of the legislation before the House today, namely, that we should try to broaden the tax base and thus reduce tax levels. Actually, a tax system that rests on a broad base and provides for lower taxation rates is not superior in itself, but it is less likely to disrupt the market, to discourage individuals from saving, working and investing, in short, less likely to interfere with market operations and the rational allocation of resources.
We have heard a great deal about incentives. The basic incentives of our economic system are those created by the market, not by the tax system. The notion that a good dose of incentives would create a streamlined, flourishing and highly productive economy is simply unacceptable, since it would very probably lead to the creation of a motley group of overlapping and contradictory preferential measures.
I shall, if I may, clarify my position on this issue. 1 am not proposing, and I am not in favour of, a system totally devoid of tax incentives. In fact, even if we tried to achieve this, we would still have a system that would contain a certain number of incentives. A glance at the tax laws of almost any industrialized country in the world shows us that there are always a certain number of incentives in certain specific sectors. Some people think, and they are wrong, that the Government is trying to get rid of these incentives. 1 hasten to say that this is absolutely untrue and has no basis in fact. Even with the amendments we are proposing today, many incentives still remain in our tax legislation, and in fact, this Bill puts greater emphasis on some of those incentives. In fact, it has the advantage of reinforcing the impact of the remaining incentives and making them more effective. The proliferation of incentives in our tax system has unfortunately added to the daunting complexity of the system itself, and has aroused considerable criticism during the past few years.
I think the system should be further simplified, although we must not forget that it will necessarily reflect the complexity of

December 13, 1982
Income Tax
the world we live in. Furthermore, our desire to stabilize the tax environment unavoidably leads to some degree of complexity, which is evident in the wording of the legislation itself. Insofar as incentives continue to be a part of the system, they will continue to render it more complex. Nowhere has this been as obvious, perhaps, as in the small business sector. Year after year, Finance Ministers have received representations aimed at improving the tax system as it applies to small businesses in Canada, and year after year, they have proposed adjustments to that same tax system. The net result is, that today, we have a tax system for small businesses that is terrifying in its complexity, and that we shall now have to renew our efforts to take a less complex approach to small business taxation.

In effect, efforts have been made to simplify the Bill before the House today. The revised small business dividend tax measure about which I will speak in a moment is a good example. Moreover, I invited the Canadian Tax Foundation to suggest alternative approaches to tax simplification, with particular concentration on the issue of the taxation of small business. I am happy to report that the Canadian Tax Foundation accepted my invitation and that it is preparing itself to work on the very issue in the next few months. It may well be impossible to make major headway in simplifying the tax law until we are again prepared to address the issue of eliminating more special provisions, broadening the tax base, and reducing tax rates.
For example, much, if not all, of the complexity in the small business tax system arises because of the special tax rate which provides over $1.2 billion a year to small businesses and is being enriched in this Bill. The fact is that the small business tax system would be much simpler if tax rates were the same as those for other corporations, just as unincorporated small businesses are taxed like other individual taxpayers. I am not suggesting that incentives to small businesses are a bad thing, and I doubt if anyone would suggest it, but it underlines the point that tax complexity is one of the prices to be paid for special treatment of any group.
Before dealing with some of the specific measures and adjustments in the Bill, permit me a further word on the subject of consultation. Some people have interpreted the Government's response to the consultation process as a sign of weakness. Some have catalogued the number of changes made as a result of the process and interpreted it as a sign that the whole Bill should or would be withdrawn. With all due respect,
I say that this is irresponsible. I suppose it is the old game in politics of being damned if you do and damned if you don't.


Mr. Blenkarn:: If you have a bad Bill, you withdraw it.


Marc Lalonde: The Government's responsiveness is a sign of its commitment to consultation and of its repectiveness to constructive comment. I will illustrate that point by citing the
Government's response to particular issues raised by the House committee and many other groups and individuals. My colleague, the Minister of State for Finance (Mr. Cosgrove), will address in detail the consultation and response that has been made on the taxation of life insurance. I would like to thank my colleague and many of our backbenchers for their contribution in the analysis of this very complex and very difficult issue. I would like to express my appreciation to them for the excellent work which they have done in bringing before the House measures that I think meet most, if not all, the objections raised to previous proposals. I would merely cite this area of life insurance as evidence that significant adjustments can be made while preserving the basic intent of broadening the tax base in a fundamentally fair and efficient manner.
Another example. The November budget imposed a tax on dividend distributions by small business with a very specific and defensible purpose. The aim is to ensure that income withdrawn from a small busines for personal use of owners is taxed in the same way as other income, including hard-earned wages and salaries.


Mr. Lambert:: That is nonsense.


Marc Lalonde: Few have disputed the basic purpose of this tax.


Some Hon. Members:: Oh, oh!


Mr. Darling:: Come on, thousands have.


Marc Lalonde: You see another example across the aisle of people who are criticizing before hearing it all, Mr. Speaker. The measure was criticized for its complexity and also for its application to dividends paid out of income earned before the measure was introduced.


Donald Alex Blenkarn: You withdrew it.


Marc Lalonde: That is right. I am glad to hear that. What we have done is to take account of those criticisms and representations. That issue was raised by several organizations: for instance, the Canadian Institute of Chartered Accountants; the Canadian Bar Association; the Canadian Federation of Independent Business; the CMA; the Tourism Industry Association of Canada.


Stan Darling: Why didn't you forget about it then?


Marc Lalonde: I invite my hon. friend to read at least the explanatory notes if he cannot read the Bill. He will find that we have taken into account those representations and amended the Bill. The Bill before us today does address those very concerns. The tax applies only to dividends paid out of income earned after 1982. We are not taxing dividends that have been accumulated in the past. This and other technical adjustments have allowed for significant simplification of these rules. This is a very important example of how the process of consultation can be carried on effectively and how we can end up with a better system, one less complex but which will at the same time be fairer to the average taxpayer. It will make the
December 13, 1982

Canadian taxpayer, whether he is taking his money in the form of dividends or whether he is getting it in the form of wages and salaries, feel that he is being treated equitably and fairly and that there is no undue advantage to one taxpayer because he happens to get his money in one form rather than in another form.
Another area that raised concern was the question of the liability of a director of a company. This was addressed in the November, 1981 budget. That budget proposed to expand the liability of a director by imposing joint and several liability on directors where the corporation fails to withhold various payroll and non-resident taxes. The House Finance Committee noted that the Canadian Bar Association considered the scope of the application too broad. Similar representations were made by other groups. In response, we have amended the proposal to include a due care and diligence test to ensure that innocent directors are not adversely affected in cases where taxes are withheld but not remitted.
In response to advice from the Finance Committee of this House and various professional associations, the change in treatment of professionals' work in progress will not apply to professionals who are ineligible for the low small-business tax rate or who would be ineligible if they were incorporated. This includes doctors, dentists, lawyers, accountants, veterinarians and chiropractors, among others, and will mean that many professionals will not have to face the complexity and the paper burden represented by evaluating every file which they have on record at the end of every year. That measure has been abandoned, and this decision, I would argue, has been very well received by all parties concerned.


Stan Darling: It was stupid in the first place.


Marc Lalonde: Although not part of this legislation, I would like to say a word about the proposed move of the federal sales tax from the manufacturers' to the wholesale level. This is an issue of importance for both small and large business. In response to representations, the introduction of this measure is being delayed. This will provide time for further consultation with industry representatives who suggest that a modified proposal might achieve our objectives of improving the tax structure and removing some serious biases in favour of imported goods over those manufactured in Canada. 1 have invited interested associations to designate their representatives, and I expect to be able to announce the composition of that task force in the next few days. We will see this further phase of consultation going ahead soon. Again, what is required is rational debate and rational and thorough examination of an issue that is very complex.
My colleagues in this House will no doubt have read press reports put out by business groups who have complained that we have not proceeded with this measure aimed at transferring the federal sales tax from the manufacturers' level to the wholesale level. On the other hand, I and Members of this House have been receiving many representations from other business groups saying "Don't do a thing; don't proceed with this now".
Income Tax
In effect, we have a strong division of views among the business community in this regard. We have sectors, such as the auto parts industry in particular, which claim that the present regime favours imports at the expense of domestically produced parts. Also we have a number of businesses, retail and wholesale, that say they cannot afford to assume an additional burden at the present time, that there must be a better way. So we agreed to give them some time. As a matter of fact, 1 have indicated that we would give them until at least the middle of 1984, the next 18 months, to sit down in an attempt to work out between themselves as well as with the Government a better way of doing it.
One fact which must be made clear is that we will not be able to continue indefinitely with the present arrangement. Clearly, I am sure any Party in the House would not want to encourage this direction of favouring imports rather than Canadian production in certain sectors in particular. Instead of telling the Government to abandon its notion of taxation at the wholesale level, we must all try to find a better solution than what is in place at the present time. I recognize that this is not a particularly easy task since it is a complex problem which implies changing some of the traditional, well-established practices of many businesses. Some of these businesses have been doing well with the present regime by avoiding some requirements that they may be faced with under a different regime.
Again, the House will be invited in due course, after those consultations have taken place, to consider a changed system, which 1 hope will carry broad support because I do not think there is much disagreement over the fundamental objectives being pursued in these particular amendments.
To underline the Government's commitment to consultation and stability in the tax system, I have also made clear again that the proposal will not be implemented before the legislation on wholesale tax receives Royal Assent after being passed through both Houses of Parliament.
The consultation process has also led to significant adjustments in proposals affecting the taxation of personal investment incomes. The proposed restriction of deductibility for interest expense has been dropped on the advice of a committee of prominent tax professionals. We will also be proceeding with draft legislation for a registered shareholder investment plan under which the taxation of capital gains will be limited to the real after inflation gain. The Lortie Committee, to which I have referred already and which endorsed such a plan as proposed by my predecessor, has also proposed a major study of the desirability of adjusting the taxation of business income for inflation. We hope to proceed in that direction shortly. This will clearly be an important area of exploration in the continuing effort to improve the tax system in an orderly, consultative manner.
I have already noted that the Government remains committed to special measures to assist small business in spite of the associated problem of tax complexity. This support of small

December 13, 1982
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business is one goal that this Government has always been committed to. Today, 1 would like to give a very clear renewed commitment to this support, and since my appointment 1 have made it a point of consulting quite frequently and regularly with the official spokesmen representing various areas of small business in this country.
A very significant example of the commitment of this Government to help small business is provided in this Bill. The amount of income subject to the low small-business tax rate is being raised from $150,000 to $200,000 annually and from $750,000 to $1 million in total retail earnings. These measures should be of substantial help to the Canadian small business sector at the present time.
As Members know, in the case of manufacturing profits the tax rate for small business corporations is 10 per cent as compared to 30 per cent for larger corporations. For other types of active business income, the small business rate is 15 per cent instead of 36 per cent for larger corporations. Therefore, the benefit is clearly in substantial favour of small business in this country. This Bill provides significant new incentive for the growth of the small business sector in Canada.
This Bill also gives effect to an extension of the Small Business Bond to assist eligible small businesses in financial difficulty. This is a measure which I announced in October.

Measures affecting all taxpayers included a proposal to tax benefits derived from private health insurance and dental care plans. This proposal would have made the tax system more equitable, but representations against the proposal were made before the House Committee on Finance, Trade and Economic Affairs, by many groups, including the Life Underwriters Association of Canada, the Canadian Life and Health Insurance Association, the Canadian Manufacturers Association, the Canadian Federation of Labour, the Canadian Association of University Teachers, the Canadian Federation of Independent Business and the Canadian Dental Association.
I concluded that the time was not ripe to introduce this measure. The benefits of the average health insurance and dental care plan for a married couple may total from $400 to $600 per year. Tax on these amounts would have been from $120 to $175 for the employee with an average income. Thanks to the decision announced in my statement in the House on October 27 of this year, Canadians will not have to pay this tax.

The result of abandoning this measure will be that the health and dental care insurance premiums or contributions paid by the employers will not be subject to taxation for the employee. This will be of significant help to those workers who are presently benefitting from health or dental care plans in their jobs. It is a significant tax relief which would not have been available had we proceeded with this particular measure.

The bill before the House today has also absorbed a number of important aspects of the 6 and 5 program, reflected in the capping of indexation of personal income tax rates at 6 and 5 per cent for the next two years. I am glad to see that in Canada, the rate of inflation is falling towards the 6 and 5 level. If we manage to control inflation, the impact of capped indexation on the Canadian taxpayer will be considerably lessened and even practically non-existent, if we reach our objective.
I think this measure aptly illustrates the validity of the 6 and 5 program, which, in fact, cancels out its own drawbacks in the short term, while providing the tremendous advantage of reducing inflation in the long term. We should also remember that since 1974, Canadians have had the benefit of full indexation of personal income tax. Furthermore, indexation at 6 and 5 is clearly preferable to the complete absence of indexation experienced by the American taxpayers over the same period, that is, since 1974. In fact, many Canadians are unaware that people in the United States do not have the indexation which Canadian taxpayers have enjoyed since 1974. Many Canadians pointed out to us that last year in the United States, they had a tax reduction of 10 per cent. What they forgot, however, is that since 1974, Americans had not enjoyed the tax rate indexation we had here in Canada, and that Canadians, as a result of the indexation since 1974, had enjoyed a far more substantial tax adjustment than the one announced last year by President Reagan and adopted by the U.S. Congress.
In addition to indexation at 6 and 5 per cent, this Bill provides for a general reduction in income tax starting in 1982 and totalling more than $1 billion per year. I may add that this measure has not received the attention it deserves. I cannot blame the Opposition, because that is not really their role. They are supposed to point out the negative aspects they see or think they see in any draft legislation introduced by the Government. Nevertheless, the Canadian taxpayer ought to know that the Bill before Parliament today will mean a general tax reduction of over $1 billion in 1982.
For a married worker with two dependent children and earning the average industrial wage of $22,000 per year, the reduction in tax rates and the reduction in Federal transferable tax will mean a savings of over $220 per year. Furthermore, the Child Tax Credit has been increased by $50 per year per child, up to a maximum of $343 for fiscal 1982. This measure will mean a savings of another $100 for low or middle-income families with two dependent children.
The Bill also provides for a reduction in Federal tax, so that the taxpayer with a dependent spouse and an income of less than $20,000 will save an additional $200.
The Opposition, especially the Members of the New Democratic Party, has tried, during the last few months or weeks, to convince us that the tax changes contained in this bill will only benefit people with income of $100,000 and over, in other
December 13, 1982

words, people in the upper tax bracket. However, the facts 1 mentioned earlier clearly demonstrate that millions of Canadians, and I say millions of Canadians will benefit from the tax advantages provided by the draft legislation being considered by Parliament today. I am not referring to Canadians in the upper tax bracket but to Canadians with incomes of less than $20,000 per year, and workers earning an average industrial wage of $22,000 per year, who will benefit substantially from the tax changes contained in the Bill before the House today. As 1 said before, the general reduction in income tax rates provided in this Bill should encourage Canadians to save and invest in order to develop our country. The Bill represents a substantial structural change in the system, and its long-term benefits are very promising. Nevertheless, we must not lose sight of our fiscal responsibility. Earlier, I commented that few people like to pay taxes. In fact, I think all Canadians would prefer their taxes to go down or disappear altogether. However, even in the best of worlds, taxes would be inevitable.
In these difficult times, the Government is under constant pressure from all sides to spend more money or to reduce taxes in order to stimulate the economy. Often, I see people who ask me to spend more money, reduce taxes and reduce the Government's deficit, all at the same time. I must admit that my officials and advisers and I have been unable to find a way to achieve all three objectives at the same time.
My hon. colleague, however, seems to have found a way to reduce taxes, expenditures and the deficit. I noticed that when his party was in power, it failed to find the magic formula, and 1 am afraid that any claims that one would be able to do all three simultaneously are more reminiscent of the claims of snake oil salesmen than of the principles of economics or sound fiscal management.


Donald Alex Blenkarn: Why don't you let us take over, Marc, and then you'll find out?


Marc Lalonde: The Hon. Member says that we should let them take over and we would find out. The Canadian public did find out in 1980, and after six months they could not stand it any more.


Donald Alex Blenkarn: Now they wish we were back.


Marc Lalonde: I would suggest to the Hon. Member that the recipe has not been tried and that the Canadian people rejected being force-fed the kind of economic horse medicine that the Conservative Party was trying to impose upon them.
[ Translation]
Notwithstanding interruptions by my colleagues opposite, I shall listen carefully to any suggestions and give them my attention. However, I urge Hon. Members to remember the economic problems facing our country and this Government at the present time with respect to our fiscal policy, as a result of the automatic impact the recession has on our tax system.
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Government revenue has dropped considerably-by several billion dollars-because corporate profits are down, as well as personal income, and the latter particularly as a result of unemployment. Thus, Government revenue has fallen dramatically and at the same time, Government expenditures have increased very substantially, because we have to provide assistance to people who are hurt by the recession. We have had to help hundreds of thousands of Canadians who are now unemployed and are either drawing unemployment insurance benefits or welfare or being helped by one of the many direct employment programs created by the Government to help Canadians cope with the economic crisis we are going through at the present time. Financially, our room to manoeuvre has shrunk considerably. In the circumstances, it is impossible to grant further substantial tax breaks to any group without increasing taxes for another group in order to bring down Government expenditures by a corresponding amount. The bill before the House today, Mr. Speaker, reflects fiscal reality, because it proposes a balanced selection of carefully thought out measures aimed at improving the tax climate, laying the foundation for economic recovery and enabling Canadians- and this is very important-to continue to help those who need help.

In conclusion, I believe the basic philosophy of this Bill is sound.


Donald Alex Blenkarn: What about the tax increases?


Erik Nielsen: Iron-clad.


Marc Lalonde: Its provisions are good and it responds to criticisms which have been made.


An Hon. Member:: Hear, hear!


Erik Nielsen: Here? Where?


Marc Lalonde: The time has come to pass this legislation. The time has come to end the uncertainty surrounding these tax issues.


Erik Nielsen: Never should have been started.


Marc Lalonde: The time has come to move on and to face and solve the pressing and serious problems before us. The passage of this legislation is a prerequisite for further budgetary moves directed at our economic problems.


Mr. Wilson:: Don't hit us again.


Marc Lalonde: It would be irresponsible to introduce a new budget before the uncertainty of the old measures is cleared up. I can say, in the process of consultations I have had since I have been appointed Minister of Finance, that this is the message that has been repeated over and over again to me by everybody I have consulted. This message has come through quite clearly from the 30 different organizations with whom I

December 13, 1982
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have had meetings in the first month and a half after my appointment.


Michael Holcombe Wilson: Why did you not bring the budget in then?


Marc Lalonde: That message has been clearly repeated since 1 started consulting, anticipating the next budget.


Michael Holcombe Wilson: Why the delay in bringing it in?


An Hon. Member:: What message?


Marc Lalonde: The Hon. Member is asking what is the message. The message is that we should pass the legislation resulting from the previous budgets-


Michael Holcombe Wilson: Why did you wait two months to bring it in?


Marc Lalonde: -that we should clear the air, that we should remove the uncertainty and that we should not proceed with a new budget until we at least know exactly what is happening with the measures resulting from the previous budgets. The message from labour, management, farming organizations and small business has been clear; they want to know what the rules of the game are going to be.


Erik Nielsen: You will change them anyway.


Marc Lalonde: They want to be assured by Parliament that the measures affecting the fiscal situation for 1982 are going to be implemented without further delay and without leaving an air of uncertainty around those measures.
1 read last week that the Leader of the Opposition (Mr. Clark) declared that he would do everything he could to block this legislation and prevent it from going ahead. Obviously, I can understand that in a flight of high rhetoric any politician can make high-sounding statements. 1 hope this is one of those. Obviously, the Opposition can drag out this Bill for a very extended period, but I believe that the Opposition will adopt a more responsible attitude and, after due consideration, we will be able to proceed not only with debating these measures but with the voting on and adoption of them. They have been the subject of extensive debate over the last year.


Michael Holcombe Wilson: It is the first time they have hit the House.


Marc Lalonde: They have been the subject of consideration by outside experts, by groups and organizations that have made representations before the Government, before parliamentary committees, the committee of the House and the committee of the Senate. The committee of the House sat through the summer right into the fall, heard briefs and made representations. How much more study do we need?


Michael Holcombe Wilson: You are starting to weep now. Wipe the tear from your eye, Marc.


Marc Lalonde: In fact, we know now exactly what kind of measures the Government is proceeding with. I have indicated the changes that have been made. A number of those changes have already been included in the Bill which was considered by
the parliamentary committee, and I submit to the House that the Canadian public is expecting us to proceed expeditiously-


Michael Holcombe Wilson: And responsibly.


Marc Lalonde: And responsibly-with this particular measure.
As far as we on this side of the House are concerned, we will co-operate to provide all the information that is relevant and required, but at the same time I hope that we get good cooperation from other Members of the House to make sure that this Bill receives Royal Assent with not too long a delay.
I remind the Members of this House that last year there were more than 15 million tax returns filed, of which more than 11 million resulted in refunds. We expect this year there will be even more refunds than last year because there are people who have been unemployed during the course of the year who will have a lower level of income than they had anticipated and will be entitled to significant and I hope large tax refunds when they file their income tax return.
Early passage of the legislation will help Revenue Canada get on with the job of processing the 1982 returns and mailing the refunds to Canadian citizens who are entitled to them. It is clear that many Canadians will be in urgent need of their tax refunds during the period we are going through. I therefore look forward to a speedy debate that recognizes the extensive consultation process that has contributed so much to the Bill before us.
My colleague, the Minister of State for Finance, will be taking this Bill through the House during the debate and consideration before committee.


Some Hon. Members:: No.


Marc Lalonde: My Parliamentary Secretary and myself will be very happy to be present and to give him a hand whenever he needs a hand. 1 must say my colleague has shown such competence, such ability and such expertise in that subject-


An Hon. Member:: When?


Marc Lalonde: -that 1 am sure the Opposition will be very happy to support him in advancing consideration of this Bill.


Michael Holcombe Wilson: When?


Marc Lalonde: I conclude by pledging to continue to expand consultation in the development of a better budget-making process, a process that promotes tax certainty, stability and fairness and the efficient and productive use of Canada's great human and material resources.
I started those consultations last week in Vancouver, for instance, with the B.C. Employers' Council and representatives of the labour movement. This morning I met with the board of directors of the Canadian Chamber of Commerce and we had an extended discussion about the approach to the next budget. That organization will be able to present a formal brief to me within the next two or three weeks.
December 13, 1982

I intend to meet with my provincial colleagues, the Ministers of Finance, this coming Thursday at which time I hope we will be able together to develop a general posture that will lead to Government fiscal policies that will go in the same direction, that will reinforce each other rather than working at crosspurposes. That will help all Canadians in every single Province in this country see 1983 as a better year in all respects than 1982 has been for Canadians generally.


The Acting Speaker (Mr. Corbin):: The Hon. Member for Yukon is rising on a point of order?


Erik Nielsen: Will the Minister permit a brief question?


Marc Lalonde: With pleasure.


Erik Nielsen: The Minister will know that the leader of the Government in Yukon has requested to attend the federal-provincial meeting of Ministers of Finance to commence, I believe, this Thursday. To date the attitude of the federal Government and the Minister's Department has been that neither of the two northern territories will be favoured with attendance at that federal-provincial meeting of Ministers of Finance.
The leader of the Government in Yukon, as well as an elected representative from the Northwest Territories, are now attending a federal-provincial meeting of Ministers of Mines in New Brunswick and will be in Ottawa on the day the federal-provincial meeting of the Ministers of Finance is to be held.
1 ask the Minister this question now, in keeping with the spirit of his announcement and that of the Minister of Indian Affairs and Northern Development (Mr. Munro) with respect to fiscal reforms in Yukon and the Northwest Territories, made a little over a week ago. Since there is utterly no provincial objection, will the Minister here and now extend that invitation to the two Northern Territories to be represented by their appropriate Ministers, particularly since the subject matter of the discussion affects us just as vitally as it does the Provinces and since we are expected to make fiscal decisions on the same basis?


Marc Lalonde: Mr. Speaker, I have noted the representation made by the Hon. Member. The only answer I can give him is the answer that has been provided generally in the past, a view shared by both the provincial and federal Governments, that, contrary to what the Hon. Member has indicated, the conference of Finance Ministers should be limited to Finance Ministers of the Provinces and the federal Government. However, I have indicated to the people referred to by the Hon. Member for Yukon (Mr. Nielsen) that I would be very happy to meet with the representatives of those two Territories at their earliest convenience and have a general discussion with them about the next budget as well as the financial situation in the Northwest Territories and Yukon.


Michael Holcombe Wilson: Mr. Speaker, today we are commencing the first formal consideration of the tax legislation arising out of the November budget, some 13
Income Tax
months after the fact. That is far too long a period of time for Canadians to wait. It is incredible that the Minister of Finance (Mr. Lalonde) should be urging this House to move quickly on this legislation when we have just now seen the Bill representing that budget, plus the June budget, plus his October statement, all brought into one omnibus piece of tax legislation. The Government House Leader is urging us to come to grips with this Bill and pass it within the next eight sitting days. That is unacceptable.
Much has been lost since that time, 13 months of valuable time. A Minister has lost his job and a Deputy Minister has lost his job. A Government which used to pride itself on being known as a competent manager has lost all credibility as well as the confidence of the Canadian people.
More seriously, in human terms over 500,000 people have lost their jobs and some 50,000 bankruptcies have been declared during this period. To put this in some perspective, that over 500,000 job loss figure is just about equal to the entire population of Quebec City or Calgary, Edmonton, Winnipeg or Hamilton. It is an incredible figure.
Also during this period of time Canada has seen its place in the international community slip noticeably. We have seen articles in the London Economist entitled "Maple Leaf Crumbles", as well as in The Wall Street Journal, The New York Times and Business Week. These stories were not written in anger or with any vindictiveness but with sorrow and disbelief that we as a country have plunged so low in spite of our rich human and natural resources.
That November budget played a pivotal role in this decline. In my opening statement following the Minister's speech at the time of that budget, I warned of a tax revolt. Those words were acutely prophetic, judging from what in fact has happened since then.
Let me remind Hon. Members of the reaction to that budget. I want to direct these words to some of the Liberal Members. I quote from The Toronto Star of November 14 last year:
Liberal politicians were chuckling like schoolboys yesterday.
For the relaxing Liberals the snickering came at Wilson's expense.
"There is nothing he can say against this budget", said one smiling Liberal who has aspirations of a Cabinet post in next February's promised shuffle.
Maybe it was the Hon. Member for Willowdale (Mr. Peterson) who made that snickering comment.
"We covered everything. There is just nothing left to criticize."
While many Liberals were in a buoyant mood yesterday, their glee could swiftly change to sorrow if MacEachen's objective of reducing inflation by cutting the deficit, withholding investment incentives and avoiding either a tax increase or reduction for average consumers backfires ... So while the bored Liberal backbenchers were able to giggle and laugh yesterday in the sleepy Commons, economic realities may come crashing down on them with each new release from Statistics Canada of inflation and unemployment rates as well as the Bank of Canada's weekly interest rate lottery.
I mention that because I want to remind Liberal Members how wrong they were. Thirteen months ago today they sat snickering on the other side of the House, thinking that that

December 13, 1982
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budget was just what the people wanted, just what people in this country asked for.


Mr. Peterson:: That's nonsense.


Michael Holcombe Wilson: That's not nonsense. The Hon. Member for Willowdale says it is nonsense. Maybe he should stand up and tell us what is nonsense. What is nonsense is since that time Canadians have been so angry, upset and disturbed with that budget that they came out in droves and spoke to him and his colleagues as well as those on this side of the House complaining bitterly about the direction that budget took.


James Scott (Jim) Peterson: Mr. Speaker, I rise on a point of order. I resent very much the personal attacks that have been made by the Hon. Member opposite to the effect that we were sitting here snickering. We have taken that budget process very seriously.


The Acting Speaker (Mr. Corbin):: Order. That is obviously not a point of order. That is debate.


Michael Holcombe Wilson: Mr. Speaker, I think the Parliamentary Secretary is displaying his sensitivity to what happened in the budget and what happened to him. I wonder whether he is looking at the polls that are being taken in his riding which show that his performance, his popularity and his position in that riding have gone straight down since November 13, 1981 when he was here snickering behind the curtains of the House.
1 wish to quote from a few reports and other representations that have been made to me and other Conservative Members about that budget. I am going to give a number of random quotes that came to me either through letters that I received or in the course of the meetings that 62 Conservative Members of Parliament held in 15 cities across the country, which gave Canadians the first and, with a few exceptions, almost the only opportunity that they had to speak out directly to Members of Parliament in a formal way about what was wrong with that budget. 1 quote:
Robin Hood MacEachen takes not from rich but from millions of Canadians.
Budget, a recipe for recession.
Home owners: Little reason to cheer.
Mr. MacEachen's can of worms.
The over-all economic condition loaded the gun and the budget is going to pull the trigger.
I have another quote:
As a young married Canadian with two children, to be honest, I'm scared. I'm scared because I don't know if I'll be able to provide a roof over their heads. I'm scared because I have been classified as one of the wealthy in the country now.
Another one reads:
It seems hard to believe, but the budget appears bent on the objective of slowing or destroying investment incentives.
The Minister spoke in a very false way to that in his comments earlier:
The recent budget makes all of us who borrowed money to create this company which now employs 200 people appear to be rip-off artists, speculators and Shylocks unwilling to pay our way.
Another one:
For a Government to introduce a series of tax incentives over the years and then make an about-face and call these incentives loopholes is both ludicrous and intolerable.


James Scott (Jim) Peterson: You are dealing with ancient history. Why don't you deal with the budget?


Michael Holcombe Wilson: I am not dealing with ancient history, I am dealing with this tax legislation. Many of the same things that these people spoke of are still in this legislation. I will be coming back to that in due course, if the Member has any patience and can keep himself in the House and not snicker behind the curtain.
The next quote is from an older gentleman:
I was trying to save the Government from having to support me in my old age. Damn the Government now. I am going to spend every cent I can get my hands on and when I run out of money I won't be ashamed to ask the Government for help. They're certainly not ashamed of taking it from us.
And the next one:
The November 12th budget pulled the rug from under my feet. If that "Financial fiasco" is implemented, it appears that our family farm will no longer exist and my family will be forced to accept a lower standard of living.
The final quote I want to give, Mr. Speaker, is this:
We object to the victimization of low and middle income groups to trap the affluent.
All of these quotes came to me from real people. We received them in the course of our meetings across the country. There is no imagination here; these are real quotes. The Minister implied that we are using our imagination in drumming up criticism of this budget. These are real people assessing the true impact of that budget, this tax legislation, on their lives, on their jobs, their businesses and their families. Many of these statements have been confirmed by the experience of the past 13 months and are still very pertinent to this legislation.
Our Party opposed that budget right from the start. We encouraged the Government not to proceed without a full public debate. We wanted those most affected to be able to explain to the Government the true damage which the budget was going to cause. The Government refused this course of action, probably out of crass political self-interest, because as we look back over the past 13 months it is incredible the number of changes which have been made. There have been as many as 47 changes. Some areas have been changed a full three times. That is a clear indication that the Minister and his officials proceeded with this major tax reform in a totally blind vacuum. Many areas were changed, including multiple unit residential buildings, capital cost allowances, retiring allowances, work in progress, employee benefits, life insurance and annuities, automobile stand-by charges, charitable foundations, housing and travel benefits and Small Business Bonds. Most of these changes were only transitional in nature, and that is what brings us to this particular piece of legislation.
We called for a new budget and, Mr. Speaker, some people criticized us at the time for being too blatantly partisan; but
December 13, 1982

considering the piece of legislation which is before us today, how much better, how much less destructive, it would have been had the Government taken our advice and introduced a new budget. Instead, we have had an ongoing series of changes over the past 13 months. Changes have been made, I think, some six or seven different times during that 13-month period. The changes have been spread over that full year and the uncertainty of not knowing whether further changes would be made has hurt many small businesses, many business plans, and has contributed directly to the job loss we have suffered during this period. It is as if the budget has been struck as a flash fire strikes a building. Much of the interior is destroyed, but the building is still left standing.
Let us look at what is left in that budget, Mr. Speaker, the contents of the Bill before us, and try to judge whether the entire budget should have been scrapped back in November-December of last year. It is ironic, but the most damaging part of the budget will not even be voted upon by this House. The change in capital cost allowance, which has had the effect of reducing the amount of investment in new plant and equipment and other job-creating projects, will be dealt with by regulation. I ask Liberal Members of Parliament whether they are happy that this Government has slipped this one by them without even having had a chance to consider it in the House of Commons. Investment in new plant and equipment has dropped by 12 per cent in Canada over a one-year period.
The Canadian Manufacturers' Association says that manufacturers will not show any investment growth until 1985. The comparable figure in the United States is down 6 per cent. The reduction in the capital cost allowance clearly has been the major factor in the poor performance in Canada. It is also a clear reason why over the past year our unemployment rate has gone up four percentage points, while that in the United States has only gone up three percentage points. Our unemployment rate is standing now at 12.7 per cent, almost two percentage points higher than in the United States.
The areas which do remain from the budget and which are in this legislation will compound an already poor economy. The small businessman is hit particularly hard. The 12.5 per cent small business distribution tax remains. Deferred profitsharing plans are now almost totally impractical for all but a few small businesses. There will be a considerably less favourable treatment of a capital gain in the sale of a business where the payment stretches over a period of years. The gutting of the Small Business Development Bond and its replacement by the small business bail-out bond makes this type of financial support almost unavailable to small businesses.
Finally, an element which the Minister totally ignored in his remarks earlier is that the small business lower tax rate will be lost when the cumulative earnings of a company reach SI million, regardless of the amount of earnings retained in the business and regardless of the amount of capital needed to run that business. The result of this is that in time many small businesses will be taxed at the same tax rate as the largest businesses in Canada. The effect of this is to put the real risk-takers of the country on the same basis as the large companies
Income Tax
and the salaried employees, and that, Mr. Speaker, is a totally wrong way to go. Is it any wonder that the small business community is now almost totally opposed to the Liberal Party of Canada? Is it any wonder that they and other Canadians are very apprehensive about their future? The new Minister of Finance has said there will not be any further tax reform for now as long as we are in a recession. Small businessmen are terribly worried that, as soon as the economy turns around, the Liberals will spring the rest of the MacEachen budget without any warning. The changes in interest deductibility, the federal sales tax and the tighter rules on capital gains are three examples of what they are fearing right now.
The construction industry has been suffering terribly in the past year. It suffers from some of the same effects of this budget as the small businessman. The result is that thousands of workers have been laid off. Yet the Government persists in retaining the capital cost allowance changes and the new policy to capitalize so-called soft costs during construction. Previously, architects' and engineers' fees, legal fees, fees for interest costs during construction, could be charged against current income. Now they must be capitalized. The result of this is that these two changes remove a considerable amount of cash income at the start of a major capital investment. The consequence is that, with the very high interest rates today, many projects have become uneconomical. Many are cancelled, jobs are lost. This indicates that these changes are sheer madness at a time of high unemployment. Either that or the government displays a total ignorance of or insensitivity to the effect of the changes, which is massive job loss in that industry.
Forward averaging is another backward step in this legislation. It is being sold by the Minister and his Department as a fair means of spreading the tax load. But let us be honest with the taxpayer: it is a sneaky way of transferring money from the private sector to the public sector.
There has been a system of forward averaging in place for a number of years now. It was called an income averaging annuity contract, IAAC for short. IAACs allowed the taxpayer to spread over an extended period the tax load of a large bulge in taxable income-for instance, from the sale of a business or a farm. Now these options are much more restricted. There will be no more IAACs and no general averaging. The taxpayer either pays taxes on the large income in that year or he averages it over future years.
The Government has a number of assumptions on how this forward averaging works, and they can come up with some assumptions which show the income averaging annuity is about the same as forward averaging. This requires some very selective assumptions, but it does not work in most normal cases. Let us for a minute just accept the Government's assumptions and reasoning here. The big difference between the IAAC, on the one hand, and forward averaging, on the other hand, is that with an IAAC the money is left in the hands of the private sector. The taxpayer gives the money to his choice of trust company or insurance company to invest.

December 13, 1982
Income Tax
His money will be invested in real estate, mortgages, stock or bonds-creating jobs, generating income and more production.
With forward averaging, the new approach, the money goes to the Government, to the bureaucrat to invest, perhaps in Maislin or Dome. It will be invested not in productive job-creating projects, but probably in make-work programs.
This is an excellent example of the difference between the Conservative Party and Liberals and the NDP. We have opposed the loss of lAACs strongly. We believe the money will be more productive to the economy if left in the private sector. The other two parties want it left with the Government where it can be controlled by decision makers here in Ottawa. The result will be a less productive economy and more people out of work.
There is another reason that we oppose forward averaging. If a taxpayer elects forward averaging today, he must pay the taxes now at the top personal rate and take his chances that in the future he will recover some of these taxes if his rate in those future years is lower than the top rate. Who is likely to benefit from this system? The person in the top income bracket? Probably, because he has nothing to lose; either way he has to pay taxes at the top rate.
What about the person in a lower income bracket? He has a very difficult decision to make. If he elects forward averaging, he must pay taxes today at the top rate and hope he can get it back in future years if his taxes are lower. But if he guesses wrong, he will have paid more tax than he should to the Government. With forward averaging, he has to survive to get the benefits. With an 1AAC, his surviving wife and children receive the proceeds. With forward averaging, the agreement expires upon his death.
In effect, it is heads the Government wins, tails the taxpayer loses-except for the wealthy taxpayer, about whom the Liberals seem to be more concerned than the vast number of small businessmen and farmers who make up an important part of the vast group of middle income Canadians who have given this country such strength and stability over the years but have been so severely attacked by the budget and by this legislation.
Let me point out two other aspects of this Bill which run directly counter to the interests of the country.

Last week, the Government tabled its proposals on pension reform. The message of that report is clear: Canadians are not adequately prepared for retirement. And now, in this Bill, the Government is discouraging Canadians from saving through RRSP's or other plans. Who is going to be hurt most by this measure? Not the person who is well-off and can find various ways of reducing his taxable income. The impact of this measure will be felt most severely by those on low incomes, who probably do not have decent pension plans and who need interest deductibility most. To many of these people, a loan contracted at the end of February in order to be able to
contribute to an RRSP is a form of forced saving, and they will have to work very hard to pay off the loan in the following months. If there is any abuse among those in the upper tax brackets, by all means put a stop to it, but not if it means discouraging saving for one's retirement.

Mobility of Canadians has always been an important part of our work life. National companies have traditionally moved their staff around, giving them experience and exposing them to different parts of the country. Here again, the tax Bill takes a major step backward by taxing the benefit received on low-cost loans made to assist this type of move. The Government has said this is a loophole that the rich are taking advantage of, yet company after company has shown that these loans have been made more to their lower and middle management than top management people. There could not be a loophole for the rich because there is already a $50,000 limit on the size of loan allowed under the existing rules.
This is another example of how the middle income people in this country are being attacked by the Liberal Government. I hope that in Committee of the Whole and in subsequent speeches Members opposite and the Minister will tell us what they have against the middle income earners in our country.
We oppose the limitation of the indexation factor on personal taxes according to the six and five program. This is nothing more than a sneaky income tax increase. If the Government wishes to increase taxes, let it do so. To slip this through without proper debate and backed up by a massive advertising program supporting the six and five program is pure and simple deceit.
Now is not the time to increase taxes. The economy is still in decline. Canadians should be encouraged to spend their money. A tax increase to feed the ever-growing appetite of the Government is counter-productive.
If the Government feels so strongly about the size of the deficit, let it cut spending. Let it curtail the 50 per cent increase in ministerial travel. Let it keep its little JetStars on the ground. Let it cut back on the size of the increase in the Minister's Department and show it means business. Let it cut back where any businessman would start-on overhead and the administrative costs of running the Government. We have yet to hear why the overhead costs in the 12 largest Departments will increase by 17.1 per cent. These are not my figures; these are Government figures taken from the Blue Book of the Government Estimates this year. I say do not increase personal taxes; rather, reduce Government spending and get the Government off our backs.
There have been many changes to the original proposals on life insurance and annuities, as I have already indicated. The rules of the game have changed significantly. If a policy is cancelled because of a financial emergency, the tax consequences are major. The tax on surrender will increase by between 25 per cent and 50 per cent-depending on the age of the person-just when the policy holder can least afford it.
December 13, 1982

Policy loans-loans using the insurance policy as collateral-will now be taxed. This again will occur when the policy holder can afford it the least.
The conversion of an insurance policy into an annuity will be taxed on the same basis as if the policy were cancelled. Surely this ignores totally the use of life insurance as a source of retirement income after the policy holder reaches a certain age and his dependants no longer need life insurance protection.
This tax Bill also continues the unfair requirement to tax the interest element of deferred annuity contracts every three years, even though no cash income has been received. There may have been abuses here, but no recognition is being made of those annuities which are purchased for true retirement purposes.
Together these provisions attack retirement planning and run totally counter to the spirit of pension reform which this same Minister and his colleagues espoused last week. Words are cheap Mr. Speaker, but actions reveal far more accurately the philosophy and policy of this Government.
This tax Bill says one of two things, Mr. Speaker. Either the Government is not prepared to follow through with real actions to support the desire of Canadians to prepare for a happy, selfreliant retirement, or the Government is attempting to undermine this healthy motive in the hope that retiring Canadians will be thrown more into the hands of Government. This potential loss of freedom and independence for our retiring Canadians poses a serious question for all Members.
There is another part of this tax bill which is a bit of a sleeper. The Minister has never discussed it before. It has to do with the long-standing principle of confidentiality in the tax system. The legislation now requires information regarding the name, address, occupation or type of business of a taxpayer to be given to other federal or provincial Departments for the purpose of enabling these Departments to do analyses and research work. What does this mean? What information is required? How detailed will it be? How soon will it be before the specific tax information will be bandied about? What control will there be on how these other Departments use that information?
Also this amendment extends the access to tax information for purposes of administering the Petroleum Incentives Program and the Unemployment Insurance Act. What controls will be instituted to prevent fishing expeditions on the part of curious or vindictive administrators? How far will this administration go? These are serious questions which Members must ask themselves. How far wilT we allow "big brother" to go?
1 could go on. There are many other parts of this tax Bill which are clearly wrong-the treatment of automobile expenses, allowances for those living in our northern communities, retiring allowances, iron ore processing changes, and the elimination of the lower withholding tax on dividends from Canadian-controlled companies. That is a puzzler for me, from a Governement so intent on improving the degree of Canadian ownership. Through this Bill it takes away one of the incentives for increasing Canadian ownership.
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I am sure my colleagues will raise these matters later in the debate. It is absolutely clear that there are sufficient reasons the Bill should not be passed. During the course of debate we will be putting up amendments on all these areas to try to improve the Bill and meet the objectives which we feel should be sought in a Bill such as this. If those amendments are not accepted, then we have no alternative but to vote against the Bill.
I say this because it undermines the strength of our small business community today, the source of some two-thirds of the jobs in the country. It undermines the ability of Canadians to prepare for retirement without fear of becoming overly reliant on Government. It also attacks the long-standing provision of confidentiality in the tax laws. It is against this background that the Minister is asking the House to ram the Bill through. As I said earlier, the Government House Leader wants the Bill passed in eight sitting days, by December 22. That is totally irresponsible. Let us not forget that it is basically the same bureaucrats who gave us the disaster of November 12, 1981 who also produced this Bill. There are 295 pages of very complex legislation, and the Government is asking us to give rubber stamp approval of it over the next eight days without proper debate. That is totally irresponsible.

Many Canadians have asked me personally to make sure that this Bill would be a good piece of legislation. They have kept after me with requests for amendments. This Bill is the most complex piece of tax legislation since the Benson reform 11 years ago. To pass this legislation in its entirety in eight days is both preposterous and unacceptable, as I see it.

The Minister says we need the legislation passed, that we need it to relieve Canadians of some uncertainty. I have been advised by lawyers and tax accountants that they do not need this legislation before mid-February next year. They are more concerned that the Government do it right this time and remove the worst parts of the Bill. If the Minister felt so strongly about getting this legislation through, why did he not bring it in at the end of October when it was ready? Or why did the previous Minister not bring it in last June when there was a detailed ways and means motion which proved that detailed tax legislation had been prepared? Why the delay? Why put Members of Parliament under the gun to try to pass this Bill in eight days?
It must be totally transparent by now that the only reason for the haste in rushing the Bill through the House in eight days is its fear of reopening the old wounds from November of last year. Sure, people want to know the rules of the game, but they also want to get the right rules of the game. That is the responsibility which Parliament has today.
If we needed any more proof of the transparent nature of the Government's pleas to get the Bill through, we have only to look at the red herring which the Minister and the Minister of
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December 13, 1982
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State for Finance (Mr. Cosgrove) have thrown out, saying that Canadians need tax refunds. These tax refunds will not be processed until the first of March anyway, so why the rush? Surely people understand that.
Returning to the budget of last November, it caused the most adverse and widespread reaction to Government policy that any of us in the House can recall. Our Conservative special committee on the budget experienced that first-hand when it travelled across the country. All Members of the House of Commons have received a massive response from their ridings, particularly at personal meetings and town-hall type meetings, as well as in letters. The former Minister of Finance had to take on a new staff of some 40 people just to answer his budget-related mail. It is human nature that the Government would want to avoid a repeat of that; we can understand that. But Members of Parliament have a greater responsibility to those Canadians affected than they do to the feelings of the present or former Minister of Finance. The Conservative Party is determined to give this legislation the responsible, comprehensive consideration and treatment which all Canadians expect from the House.
Before I close I want to ask Members and all Canadians to assess the Bill in the context of recent statements made by the Minister of Finance. He has said that there is not much that can be done, that the Government has done about all it can about the recession and that now it is up to the private sector to get the economy rolling again. How will the private sector do it? There are many remaining obstacles which will prevent the private sector from doing the job. 1 have spoken on many occasions about the vicious circle that we are in. Business activity is slow. Investment in new plant and equipment is projected to decline next year by 8 per cent. In 1982 it has already gone down signficantly. Business is not investing because consumers are not buying, and consumers are not buying particularly because they fear that they or someone in their families will lose their job. As I said, it is a vicious circle.
The key to breaking that vicious circle is to stabilize the unemployment outlook, to get business activity going and thereby increase the number of jobs available to Canadians. If we do not have this stability, which Canadians will buy new cars, stoves or houses, if they may need the money in a few months' time when they are laid off? This would give individual Canadians more confidence in the future, and only then would they consider making some of the purchases they have been putting off for such a long time.
The economic policy of the Progressive Conservative Party is aimed directly at breaking that log jam or vicious circle. How can we get business to hire more people? Existing companies are not likely to do this. They have been going through the wringer lately, cutting down the size of their operations. They have made many wrenching decisions to improve their productivity. Now we have to look elsewhere. We have to look outside the existing job-creation mechanism for new jobs.
Our economic policy has targeted five ways of encouraging new job-creating investment. The first is mini-projects, encouraging the start-ups of small businesses, encouraging
people to leave the comfort and security of well-paying jobs with large companies or Government. This is where this Bill is so wrong. In nine separate ways it makes it more difficult and less attractive for small business to prosper. It is more difficult for a person to leave that secure job, pull up stakes and build his future around the risky success of a small business. Many small-businessmen have told me that they would not leave a secure job with a large company today to start a small business. That attitude must be reversed if we are to create new jobs. The first steps toward changing that attitude can be taken by cancelling some elements of this Bill.
The Progressive Conservative economic policy would go further. We would take as a priority, as a new government, the objective of introducing a clear bias toward encouraging risktaking investment. This would provide a major step to improving our economic future.
Our second step is in the mega-projects. We would change those parts of the energy program which inhibit start-ups of these projects, the major sources of new job-creating investment. These changes would include the cancellation of the 25 per cent confiscatory back-in provision. They would also include a reduction in federal taxes where a reduction would contribute to major capital investment, such as in petrochemical projects where the federal natural gas tax has made these projects uncompetitive.
A third area of incremental investment is foreign investment. Foreign investment was actively discouraged by the former Minister of Industry, Trade and Commerce. This Government has acknowledged and has made some tentative changes in the operations of FIRA. More changes must be made to show that foreign investment is welcome in Canada, because it is investment that will create new jobs. It is investment incremental to that which we have in the country today.
As a fourth step we would reduce interest rates further. The inflation rate in the marketplace, the non-Government controlled part of the economy, is between 5 per cent and 6 per cent. The current interest rate at 13 per cent or 14 per cent is simply too high. It is a major deterrent to these new projects.
The fifth area that the Progressive Conservative policy would attack directly is the burden of Government. The current deficit of $24 billion is a dead-weight deficit. It is producing little by way of long-term job creation. Its size is both a psychological and a real burden on the capital market. It is inhibiting the reduction of interest rates.
Our policy would involve a reduction in Government spending. I have already touched on ways in which we would do that. Our policy would also involve a reduction in Government regulation and centralized decision making. Let me remind you again, Mr. Speaker, of the precise example I gave concerning income averaging annuities which took that decisionmaking process from the private sector and dropped it right into the middle of Government Departments. This is one area
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we would reverse and one which would clearly address that problem.
It must be clear to Hon. Members that these five targets of Progressive Conservative economic policy would reduce the roadblocks to growth of which I have spoken. If these roadblocks are now removed, the private sector simply will not be able to do the job which the Minister is asking of it. All that the Government has offered is the six and five program. There is no long-term program. There is no program to remove these roadblocks to growth, so essential to the private sector being able to create jobs. I expect that the next budget in February or March next year will appear to go in that direction. It will sound pro-business, it will use the right words, but it will do nothing to change the direction which this Government has taken since 1980.
Let me point out two recent statements to support my thinking. The first is by the Prime Minister (Mr. Trudeau). Last week the Leader of the New Democratic Party (Mr. Broadbent) asked why the Government had backed off on its stated intention to make the Foreign Investment Review Agency a more interventionist part of Government policy. Did the Prime Minister say his Government realized what it was proposing was wrong, that it would have been too interventionist, that the Government thought it might scare away foreign investment from the country? No, not at all. Not a word of withdrawal, nothing like that. The Prime Minister said only that there would be no changes because the economy today is too weak. What happens when the economy gets stronger? What does the threat of a stronger Foreign Investment Review Agency do to those contemplating investment in Canada today? It scares them away.
The second statement to support my thinking was by the Minister of Finance, to which I have referred.


An Hon. Member:: Would you withdraw FIRA?


Michael Holcombe Wilson: In answer to the Hon. Member, we would not do away with FIRA. We have proposed a number of specific changes in the Foreign Investment Review Agency to make it more effective in doing what it is supposed to do. Instead of being a policing agency as it is now, it would be a screening agency to get the right sort, the right type of foreign investment which will create the jobs and technology we need in Canada today and not scare that investment away.


Mr. McDermid:: We would make it a positive tool, not a negative one.


Michael Holcombe Wilson: Let me refer again to the Minister of Finance's statement, to which I referred a moment or so ago. He said:
Now is not the time for further tax reform. The economy is too weak.
Again the Minister of Finance will wait until the economy recovers and then bring back those parts of the November budget that were dropped. The expectation that two of the greatest mistakes in the life of this Government will be repeated when the economy recovers will further slow down the economic recovery we need so much. Those two statements are
Adjournment Motion
very revealing of the way these two men think. Their action through this tax bill further supports my opinion.
My point, Mr. Speaker, is that I expect the policy of this Government to appear to be pro-business, and to be supportive of the private sector over the next few months. Then, because the road blocks are still there, job-creation and economic growth in the private sector will probably not be that good. The state will have been set. The Prime Minister and the Minister of Finance will be able to say: "We gave the private sector a chance; it did not perform. It dropped the ball. Now we will do it our way, by more intervention, more Government ownership and a higher Government deficit.''
What are the signs of that now? What makes me think that I am right when I make those statements? First, the Canada Development Investment Corporation has been created. There is no clear mandate for it. There is no parliamentary debate on what it will be doing. Those in charge are clearly identified with the more interventionist side of the Government. Senator Jack Austin, Maurice Strong and Joel Bell, the architects of the greatest thrust into the Canadian private sector that we have seen in years.
The Minister of Finance is already talking about possibly softening his stand on the size of the federal Government deficit. He has said: "Interest rates are coming down. Canadians seem to support a higher deficit. They are putting up billions to buy our Canada Savings Bonds." What a shortsighted point of view, but clearly one which is massaging public opinion in support of a larger deficit, a deficit which ultimately means higher taxes and more government in our lives.
In summary, this tax bill is the first sign of the Government's strategy to take a greater share of the economy. It confirms the Minister's words that he is prepared to rely more on the private sector, but these are only words. There is no evident desire to change the Government's fundamental course. The reduction in the capital cost allowance remains. The small business community remains under attack. Retirement savings are undermined.
We must defeat this Bill. We must work hard to change the damaging parts of the Bill. If we are not successful, I am sure that when we look back a year from now the direction toward greater Government control in our lives and the unhealthy private sector which must result from that will be abundantly clear. That is the mission on which we are embarked today.



PROCEEDINGS ON ADJOURNMENT MOTION

The Acting Speaker (Mr. Blaker):: Order, please. Before I recognize the next Hon. Member, may I deal with the debate on the adjournment motion this evening.

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It is my duty, pursuant to Standing Order 40, to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the Hon. Member for Surrey-White Rock-North Delta (Mr. Friesen)-Administration of Justice, (a) Mandatory supervision program-Release of dangerous sexual offenders, (b) Request for definition of "a bad evaluation"; the Hon. Member for Annapolis Valley-Hants (Mr. Nowlan)-Administration of Justice-(a) Request for federal-provincial co-operation on issue, (b) Request that Minister take action; the Hon. Member for Saskatoon West (Mr. Hnatyshyn)-National Security-(a) Case of Canadian professor-Application of Official Secrets Act. (b) Timing of decision of prosecution in Great Britain.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed consideration of the motion of Mr. Lalonde that Bill C-139, to amend the Statute Law relating to Income Tax (No. 2) be read the second time and referred to a Committee of the Whole.
Nelson Andrew Riis: Mr. Speaker, I am very pleased to rise to participate in the opening debate on Bill C-139, an Act to amend the statute law relating to income tax. I suspect that it should read "an Act to tinker with the statute law relating to income tax". This is a Bill consisting of 295 pages which has come about 13 months after the introduction of the budget of November 12, 1981. This Bill also brings into effect certain aspects of the June 28, 1982 budget, the mini-budget of October 27, 1982, as well as incorporating the material which was covered in 17 press releases by both the present Minister of Finance (Mr. Lalonde) and his predecessor.
The Minister of Finance is now asking us to jam this legislation through the House very quickly in the remaining eight days of this session. This Bill is 295 pages of very difficult, conflicting and confusing tax law. In effect, the Minister is asking us to have faith in his Government and ram this contract between the Government of Canada and the people of Canada through without bothering to read, study or debate it. I guarantee you, Mr. Speaker, that that is not what we intend to do. We do not plan to rush a document through the House when it affects every person in this country, especially when those effects are not beneficial.
In his most recent press conference, the Minister urged Parliament to end this time of uncertainty that surrounds the tax situation which has arisen from the last two and a half budgets. If the Minister of Finance expects this Bill to end the uncertainty in this country for one moment, I suspect that he must be a colleague of ET, someone coming from a different
planet. This Bill will not end uncertainty; it will add to uncertainty and confusion in terms of what lies ahead for the people of Canada.
1 clipped an interesting cartoon out of a newspaper from my constituency. It is an illustration of Mr. Hugh Hambleton's lawyer who is saying: "I respectfully submit, my Lord, that my client, Mr. Hugh Hambleton, passed some information to the Russians. But I can prove that he was a western agent working toward destabilizing the Soviet Union. The documents, my Lord, that he passed were blueprints of the Canadian Liberal Government's economic policy and tax laws." If anything was to destabilize an economy, it certainly would be the economic policies of this Government, complemented with its most recent introduction of tax reform.
This tax Bill comes before us at a time when there is a general sense of fear among Canadians across the country. Shortly after the introduction of the November 12 budget, the New Democratic Party toured the country with a series of open hearings in various towns. We asked for people's reactions to the budget. Whether the hearing was in eastern Canada, central Canada or western Canada, people demonstrated the same concern about the budget being a serious departure from traditional Government policy. There was very little in the budget to enhance the economic recovery which the country needed at that time. When we see the tax Bill that eventually evolved from the November budget and subsequent budgets, we find 13 months later a tax system that can only be described as a jungle. It is a tangle of legislation, regulations and interpretations that are becoming more entangled every year. The tax laws are virtually incomprehensible to almost everyone, including those in the tax Department.
As a matter of fact, the Minister of Finance was recently asked during a Standing Committee on Finance, Trade and Economic Affairs hearing whether he could fill out his own income tax form. I give the Minister credit for honestly admitting that he found it impossible to fill out his personal income tax form; he had to go to a tax accountant for assistance. Here we have the Minister of Finance of Canada saying that he is unable to fill out a so-called simple tax form.
The small business sector is equally perplexed. I suspect that many small businesses are virtually on the edge of giving up totally. When one looks at the tax return that a small business is required to fill out and sees the pages of complex information that is required, one can see why a typical small business in this country literally throws these documents out of the door. These small businesses simply cannot handle the red tape, regulations and the jungle of information that they are required to give. They can no longer keep up with the requirements. Canadians are being asked today to participate in a tax process that is beyond comprehension. One simply has to call the tax Department and seek clarification or interpretation of what has been introduced in the last two and a half budgets in order to have an indication of the confusion in the Canadian tax system.
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The Income Tax Act in 1971 consisted of approximately 916 pages of legislation. The Government has been attempting to streamline this legislation over the years in order to make it more simplified. However, when one compares the 1981 Income Tax Act to the 1971 Income Tax Act, one sees that it consists of 1,256 pages instead of the former 916 pages. In other words, the Government has added another third to the explanations in order to make it more understandable. This is the Government's notion of encouraging the private sector to participate in the system, but adding more and more pages of complex legislation seems to be a rather peculiar way to streamline the system.
As we move toward the end of 1982, the prevalent trend which we see today is for accountants to run around with their pocket calculators advising their clients about the various year-end tax plans. We see many advertisements at this time of year by the financial institutions which are encouraging people to buy RRSPs, RHOSPs, MURBs and participate in oil and gas and drilling funds. People are being encouraged to buy a share in a Canadian film. One begins to wonder what is happening. For whom are these tax deferrals designed? Are the textile workers and fishermen running out to participate in drilling funds? Are the IWA members or auto workers running out and picking up MURBs, or are the fellows down in the shops or the secretaries in the offices running out and selling off their stocks in order to get the $2,000 capital loss against other income?
Are tax deductions good or bad? A few months ago, MURBs were considered a good investment. The Government encouraged people to buy MURBs. We now find out that they are bad and people can no longer buy them. At one time the Government said that health and dental plans were beneficial and should be encouraged. It then said that these plans were bad and were to be taxed. Now it is again saying that they are good. The Government was saying that investment should be encouraged to buy stocks and the interest on that investment should be tax deductible. That was good then, but a few months ago we were told that it was bad and now, once again, we are told that it is good.
We were told that workers should be encouraged to move out into remote areas of the country to participate in resource development and that they should be encouraged to move there by having their housing subsidized. Then the former Minister of Finance suggested that that was a bad thing, and now we are hearing, once again, that it is not too bad, that it is only bad in certain instances but not in others. Is it any wonder that there is an incredible atmosphere of uncertainty and confusion when it comes to trying to figure out just what on earth the Government is trying to do?
We have heard Hon. Members discussing the whole matter of economic development and how it needs to be encouraged. We found out today that capital investment in this country will fall by $2.4 billion which, of course, will result in something
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like an extra 280,000 jobs lost in 1983, plus many more unemployed as a result of the lack of consumer confidence.
The Government brings in legislation to kill economic activity, and it does it instantly. When one introduces tax legislation to stop a certain economic activity, it does it instantly. Then when one brings in tax reform to encourage certain kinds of investment, it takes place very slowly. It is a little like a marathon runner, running down the lane, and one walks up to him with a sledgehammer and busts one of his knees; it stops him dead in his tracks. Then we say: "We will just get that cast on and get him going again", but he moves off, very, very slowly.
The people of Canada have lost faith in this tax system. People have looked at the tax system and tried to figure out the motive behind it. Of course, one of the motives was that it would redistribute income in this country, yet when one looks at how income is distributed in Canada, comparing 1960 to 1980, one finds that the top small percentage still controls the majority of income and the percentage of poor remains the same. In other words, the rich are still in place and the poor are still in place, in the same percentages as they were 10 years, 20 years or 30 years ago. Therefore, in terms of redistribution of income, it has not happened.
We hear that the tax system is used by the Government to foster certain economic and social policies. While there has been marginal success in this area, it has been only marginal. I think one of the best examples of this was found in the incentive provided through the tax system for people to participate in the development of the Canadian film industry. With this incentive, upper income earners, by and large, were given a 100 per cent tax write-off if they bought shares in the Canadian feature film industry. In a sense, I think we must recognize that this is a direct grant to the upper income earners of this country to the tune of about $50 million a year. It is a hidden subsidy, then, to the upper income earners. However, the facts show that the films produced before this measure was introduced actually reflected the true essence of Canadian society better than those produced afterwards, because what kind of films were they? American movie moguls were coming into Canada, picking sites in Canada which would look very much like parts of San Francisco, New York, Wyoming or Alaska. There were also obvious, blatant tax avoidance efforts. There were certainly many stories going around concerning inflated movie budgets. In the end result, the movie industry in Canada was perhaps actually harmed as the result of this so-called tax incentive to encourage and invest in the film industry of this country.
In terms of using the tax system to advance good Government policy, that has not worked in Canada because so much of the policy has not been good. It has not been thought through in a careful way. That is why I was quite pleased when the Leader of my party suggested that, indeed, it was possible to use the tax system to encourage critical and strategic industries to develop programs in the research and development area, and to introduce affirmative action programs. In other words, to use the tax system to encourage and reward

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those corporations which, in fact, were developing in the best interests, not only of themselves but of Canadians as well.
When one gets right down to it, one must admit that the tax system in this country has become nothing but a money grab, nothing but a revenue grab, nothing but a Government bailout, really, these days. It has created a very peculiar phenomenon in our country. A whole group of people have become participants in guerrilla warfare of tax avoidance. Tax evasion and tax avoidance are becoming almost a preoccupation with more and more Canadians. Normal, decent folks have been driven into discussing and planning how to avoid paying income tax in this country. Yes, 1 suspect that tax avoidance has moved from being a simple financial migraine into a financial epidemic in this country. If one goes into the bookstores at this time of year, one sees that the best sellers are those books telling one how to avoid paying income tax.
We can identify various groups, certainly those in the executive and highly paid professional category, who have the financial wherewithal to employ high-priced tax lawyers and accountants to assist them to dodge and weave through the various loopholes in the tax system. Then there are those upper middle class people who are exchanging services without any records to show financial transactions. For instance, someone will fix someone else's teeth in exchange for doing a tax return or will take on a particular legal case in exchange for the loan of a condominium in Maui. Goods and services are being exchanged with no record of transaction in terms of national revenue. This is occurring right on down to the blue collar workers, who are taking on extra jobs at night for cash at wages lower than what they would normally expect because the tax man will be unaware of such transactions. Someone will fix someone else's car in return for some plumbing work in the basement for that extra suite, and so on. An entire underground economy is developing, keeping money out of the federal treasury, affecting between 5 per cent and 20 per cent of our gross national product. It is a very serious situation when we have a system which is turning regular, normal, decent people into people who are trying to scheme and dodge around paying tax.
Why have people lost faith in the system? First, they have lost faith because they see how their money is being spent. After all, virtually every Canadian is affected by this tax system. Most Canadians are paying at least some income tax, particularly working Canadians. They see how it is being spent. It is almost like being spent by a drunken sailor but not quite, because a drunken sailor spends his own money. It is like being spent by a drunken sailor who is spending the petty cash he has lifted off the ship.
The Canadian people say that they are simply not appreciative of the way the Government is expending their money. Then when they consider how it is collected, they feel the tax system is obviously unfair and unjust. It favours certain income earners at the expense of others. To be very blatant about it, it favours the upper income people, the rich in this country. The budgets which have been introduced, in spite of what Ministers of Finance have said about their being more
equitable, more just, or more fair, have been quite the contrary.
The publication of one of the tax experts in this country is entitled "The New Canadian Tax and Investment Guide". This man has spent his entire life trying to advise people and finding ways to avoid paying tax, legally, as per the Income Tax Act. He says that the wealthy investor in Canada in 1983 will pay the same tax rate, even if his investment increases from, say, $200,000 to $300,000 in a given year.
While the MacEachen budget has been promoted as an attack against the rich, a close analysis of these numbers will show that the rich are virtually unaffected. For the rich and the super-rich the budget provides a 10 per cent decrease in tax rate.
One could look at what happens to one of these upper income earners in the Province of British Columbia or Ontario, just to take two Provinces as a sample. In 1981, under the old Budget, at a $100,000 income he would pay $32,589 in federal income tax. In 1982, as a result of the changes he would pay $29,085. When one considers that the provincial tax is related to the federal tax, for the person making $100,000 in British Columbia or Ontario, this budget and this tax Bill will save him in excess of $5,000 a year. Those are the facts.
What we are saying is that the tax system of this country favours certainly a very select upper income group, and that is why people are fed up. That is why people are going out of their way to try to find ways and means to manipulate the system to avoid paying what they know is an unjust tax.
Mr. Speaker, if you look very closely at the tax Bill and at the tax laws of this country, it becomes more incredible all the time: a tax system that consciously taxes the very poorest, those with incomes well below the poverty line. I raise this as a fundamental criticism of our tax system and one that really demonstrates clearly how desperate this Government is in terms of grabbing money.
In our country, the poverty level for a single person is about $5,000 a year. In 1981, a single person paying tax would have a number of deductions totalling something in the neighbourhood of $3,500. After $3,500, that single individual would be paying tax on money earned. What that says is that people who are living below the poverty line in this country, and there are hundreds of thousands of them in that category, are paying federal income tax. Surely to goodness we could allow an individual to work his or her way up to the basic poverty level of Canada before we start taxing them. But no, this Government taxes people whose incomes are below, and in many cases well below, the poverty line as defined by Statistics Canada. I think that demonstrates clearly just how desperate or perhaps how thoughtless this Government's tax system really is.


Mr. Blackburn:: It gives millionaires a break.


Nelson Andrew Riis: It gives millionaires a break, as my colleague from Brant indicates.
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Let us look at a few sectors of this tax Bill and how it impacts on certain sectors. Many of my colleagues in the days ahead will discuss the impact on the life insurance business, on the energy sector, on the agricultural sector, as it affects a number of women's issues, how it relates to the housing industry and how labour is influenced by this tax Bill.
1 want to just focus for a moment or two on the area of small business. I choose small business because this Bill, C-139, goes out of its way to make life miserable for the small business person. Here is a sector of our country made up of about 940,000 small businesses and shrinking, by the way, every day.
There is a story circulating as to how you start a small business in this country. The best way to build a small business or to find yourself the proprietor of a small business is to buy a large corporation, vote Liberal and wait a little while. Then, of course, you will end up with a small business very, very quickly.
These are the businesses that are virtually 100 per cent Canadian-owned. They are community oriented. They are labour-intensive as opposed to being capital-intensive. They represent the sector that is most effective in job creation. They do not send out vast amounts of money out of Canada in terms of interest and dividends. In other words, this is the sector of our economy that should be encouraged, that should be supported, that should be nurtured.
When you look at Bill C-139, you find that the Income Tax Act as it existed prior to the November budget-without taking into account Bill C-139-provided that a Canadian-controlled private corporation in the business of earning income from an active or non-qualifying business would be eligible for the low rate of 25 per cent, including provincial and federal combined tax; 25 per cent of the first $150,000 of income each year. When the small business has claimed the low rate on $750,000 during its lifetime, the small business would no longer be eligible for this low rate of tax and their tax rate would jump to the 50 per cent range.
However, if a corporation paid a taxable dividend to its shareholders, the payment of the dividend would then reduce the amount on which the low rate has been claimed. Thus, the shareholders of the small business corporation would make sure that the small business cumulative deduction account was rejuvenated by paying taxable dividends to himself or herself, or to the shareholders of that small operation. Then the individual would personally pay the tax on the taxable dividend, after the dividend tax credit.
What this meant was that the payment of the dividend rejuvenated the availability of the small business deduction in the year that followed. This provision enabled the small business peson to finance that operation from its earnings because of the shareholders reinvesting most of the dividends back into the small business. In other words, it enabled the small business to build equity capital, and it gave some encouragement for that small business to avoid going to the financial institutions and borrowing at excessive interest rates.
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However, Bill C-139 changes all this, Mr. Speaker, the annual income eligible for the low tax rate will increase from the original $150,000 up to $200,000, and the total amount on which a corporation can claim the low tax rate, during the life of the corporation, is on accumulated earnings of $1 million as opposed to $750,000.
However-and this is where the major change has occurred-any dividends paid after 1981 will not rejuvenate the accumulated earnings account. Furthermore, the corporation may have already accumulated earnings of, say, $400,000 as a result of earnings in the past which have not been divi-dended out. If this corporation earns $200,000 in each of the next three years, it will run out of the $1 million limit and in year four, and from then on, it will no longer be eligible for the small business tax rate. On the other hand, a similar business which had been paying out dividends will have five years at $200,000 a year before it would end up paying the high tax rate of 50 per cent.
The question 1 want to put to Members opposite is, why do they think that a small business should be entitled to a low tax rate on only its first $1 million of accumulated earnings? Does that small business all of a sudden become a large business in the sixth year of its operation? The Act, in Section 72(c), which concerns the transfer of shares of small business corporations from a father to his children, provides that a small business corporation would be a Canadian-controlled private company which carries on an act of business. One has to wonder why this defined small business is not a small business at the end of five years, with accumulated earnings of $1 million. Do Members opposite intend to destroy the small businesses of Canada by asking them to pay at a high corporate rate, when in fact their economic situation remains totally unchanged?
One could also comment on the corporate distribution tax of 12.5 per cent, now that it has been levied on the small business. Of course, the result of this will be to encourage small business, rather than to continue on as a family operation, to sell up, so that the father who wants to sell to his son or to his daughter now will have to pay that 12.5 per cent. That will be encouragement to sell the operation lock, stock and barrel to someone else. Consequently we will see small business moving more and more into the national and multinational sector.
Let us be honest. This Bill was written for the large corporate sector and for the wealthy of Canada. It will make rich people richer and favour the rich at the expense of the poorer people of Canada. That is not rhetoric. Let us look at some of the facts.
Those with taxable income over $24,464 will receive a reduced tax rate as a result of this Bill. Those in the upper income levels with a taxable income of over $133,000 will have a significant tax decrease, from 43 per cent to 34 per cent. There will be a 9 per cent drop in the tax rate. This will result in a tax saving to the upper income earners per year of about

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$5.7 billion, a nice subsidy for the upper income earners of Canada.
The 1978 tax returns indicated that well over 2,000 individuals who had assessed incomes of more than $50,000 paid no income tax at all. Hundreds who earned in excess of $100,000 paid no income tax. In 1979 more than $30 billion in revenues were lost to the Government as a result of tax loopholes.
While most Canadians were paying tax rates in the area of 20 to 25 per cent, the banks of Canada were paying a tax rate of 18 per cent, Power Corporation a rate of 11 per cent, the Steel Company of Canada 7 per cent, and Cadillac-Fairview 6 per cent. In other words, while the average working Canadian was being asked to pay 20 to 25 per cent of his income in tax, the banks and major real estate corporations were being asked to pay significantly less. When you look carefully at this Bill and the tax system, it is interesting to find that it is a kind of hidden subsidy or welfare for the upper earners of Canada.
In 1979 the Clark Government published the first Government report outlining the tax expenditure account. It proved beyond any question that most Government spending is actually done through the tax system, not through the usual kind of system such as DREE. In fact, eight times as much money was spent on housing and urban renewal through the tax system than through direct spending.
In the resource sector, the manufacturing sector, the general business incentive sector, the Government spent about $1.5 billion directly and about $6 billion through the tax system. As an example, take the income from capital gains. In 1978 1 per cent of tax filers accounted for 55 per cent of all the capital gain reported. Five hundred individuals with incomes over $100,000 recorded all their income from capital gains. A capital gain is only taxed half. In other words, half the capital gain is taxed. Another way of putting it is this. In 1980, $1 billion was spent to subsidize those who speculate in the securities and commodity markets and those who realize profit from real estate and other capital property sales.
This is justified by saying these people are in a high-risk area. They are risking their funds, but capital gains applies to all or any property. While it may be true in certain areas, it certainly would not be true for those who are making their capital gains through investment-induced stocks where the risk is indeed extremely minimal.
Over the last number of months, many people to my right have been railing on how they despise the way the Government spends on the CBC, and yet are quite willing to accept a 100 per cent tax break for those individuals invited to participate in the Canadian film industry.
Who can argue against charities? Let us look at who participates in contributions to charities. If you are in the $100,000 a year bracket, a $100 donation will cost you $39. If you are in the $10,000 a year bracket, a $100 donation to a charity fund will cost you $73. In other words, the tax system of Canada gives the wealthy much more power over the spending of Government money. One per cent of the taxpayers allocate about 35 per cent of all the Government funds that go to certain charities. The charities that are associated with and
encouraged by the upper income earners are the ones that are funded. Lower income Canadians do not have the same flexibility in the tax system to support the charitable organizations that they would like to support.
Let us deal with child care costs. We recognize today that with the state of the economy, it is important often for both parents to be away from home working. If a single parent is working, day care expenses become very important. If you are in the 65 per cent tax bracket, you get a subsidy from the Government of $650 for child care costs. If you are in the typical 20 to 25 per cent bracket, you get $250. If you are in the low income bracket you get nothing because there is no deduction. Any deduction in a low income area would be worthless. The Minister of Finance should say that we have a system which supports child care costs and some help to those who are very wealthy, a little less for the middle income group and nothing for the poor of Canada in terms of child care costs.
I listened with interest this afternoon when we were talking about deferred profit sharing. The idea behind that is good. However, when we hear that 90 per cent of the deferred profit sharing programs are used by firms participating with only three or fewer, we get the impression that this tax legislation is not being used for the purpose for which it was intended.
This Bill is simply too important and complex to gloss over. It is too important to pass quickly. In fact, when you consider what this Bill does, Mr. Speaker, it must be opposed. We waited 13 months for this Bill to come before the House. We know that there will be another budget in 90 days. There will likely be another set of tax changes. In the best interests of stability and certainty, perhaps we should hold off passing this Bill. Perhaps we should pass one Bill associated with that new budget and settle this whole matter. It would give the people of Canada some years where they could predict that no serious changes would be made to the tax laws.	.
I said at the outset of my comments that this Bill is tinkering with a system that is unjust. Further tinkering will not help the situation. When you consider the complexity, it is likely going to make it more unjust and more confusing. The average wage earners in Canada who cannot afford a tax lawyer or accountant to help them with their tax returns are being disadvantaged as the complexity grows more and more.
We plan to study this Bill very carefully. We plan to debate this Bill and point out its shortcomings in the hope that the Government will see fit to remove some of the more problematic clauses. We certainly do not plan to support this Bill so as to see its rapid completion in the next eight days before Christmas.


Miss Pat Carney (Vancouver Centre):: Mr. Speaker, it was almost exactly one year ago when I rose to speak on the origins of this income tax legislation, the November, 1981, budget. It has taken this Government 389 days to bring in the income tax
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legislation to implement portions of that budget in the form of Bill C-139. This Bill is being presented by the new Finance Minister (Mr. Lalonde), a new hand at the helm of the financial ship of state, but these changes must be viewed in the context of the economic distress which this Government's fiscal and monetary policy has imposed on Canadians because we want to ensure that the measures in this Bill help to alleviate that stress.
A year ago I detailed the hardship, uncertainty and chaos being created by that November budget. 1 reviewed some of its most damaging aspects such as the taxation of income from life insurance, the removal of incentives for construction of rental accommodation, the blows to investment, the taxation of income before it is received and the taxation of employee benefits. I said then, that these measures are damaging at any time but are particularly destructive when the economy is in a tailspin. I quoted comments which I received from Canadians who are outraged by the ineptness and incompetence of this Government. And I concluded that speech by saying, "Canadians will not accept the budget. It has caused too much pain and too many broken commitments." It gives me no pleasure at all, Mr. Speaker, to look back at that time and realize that my comments were all too accurate. That budget has had a devastating impact on the economy, on business, on investors, and on Canadians in general.
My Province of British Columbia has been particularly hard hit this year both by the recession and by this Government's policies. Its major employer, the forest sector, for example, is struggling to survive. We have heard in this House about the threat to our soft wood lumber exports which we face from the U.S. Major lumber companies are reporting huge third-quarter losses. For instance, one of our largest firms, MacMillan Bloedel Limited, of Vancouver has fired 22 per cent of its salaried work force, and at one point had laid off almost half of its hourly-paid employees. Fourth quarter losses are expected to be high also. The Council of Forest Industries reports between 25 per cent and 30 per cent of British Columbia lumber mill capacity is closed. The devaluation of the Scandinavian currency has had a stunning impact on our hopes for an early recovery of our offshore pulp markets. The IWA expects that total lay-offs will rise to 20 per cent of the lumber industry's work force. There are some towns, such as Port Alberni, which face 30 per cent to 40 per cent unemployment. Yet this Government has brought in no long-term solution to deal with some of these fundamental economic problems.
The hardest task to deal with, Mr. Speaker, for any Member of Parliament on either side of the House today is unemployment in his riding. We are daily meeting with very proud people, people in shock, people who have given the best years of their lives to agencies or to companies and who are out of work. Some of these people no longer even ask us to help them get jobs. Their problem is that they are running out of their unemployment insurance benefits and they are desperate for any measure at all that we can give them to re-enter the labour force. Given that reality in our ridings, I was truly astounded to hear the Finance Minister today say he expected unemployment to drop next year, because that is not the reality that we face here today. It is in keeping with this Government's track
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record, however, of disastrous economic policies and poor forecasts.
While B.C.'s unemployment soared by 100 per cent this year over last, this Government was draining the investment needed to create jobs through a series of anti-investment measures. With mines closing throughout the Province, the Minister planned to tax employee benefits and northern allowances, thus making remote sites uneconomical. As the B.C. economy plunged, the Government proposed to make it harder for Canadians to provide for their future by taxing life insurance, restricting the $1,000 pension deduction and disallowing the deduction of interest costs on funds borrowed to invest in registered retirement savings plans and deferred profit-sharing plans. While the number of business bankruptcies in B.C. doubled this year, this Government was gutting the small business development bond, eliminating reserves and applying a 12.5 per cent tax on dividends.
For over a year now this Government has not addressed the central issue facing our country today, the collapse of the economy. In fact, its policies have been making our problems very much worse. In my riding of Vancouver Centre, for example, small independent retailers of high fashion footwear are being put out of business by the Government's import quotas on footwear. These quotas were imposed last summer to protect the jobs of Canadian manufacturers in Central Canada at the expense of jobs elsewhere. Unfortunately, the Canadians who are being put out of business are the small retailers who sell highly specialized shoes for which there is no Canadian manufacturer. One merchant in my riding, for example, sells shoes which are designed in Canada by Canadians, but made offshore because it is uneconomical for any Canadian manufacturer to produce them. The quota he was allocated is too small to keep him in business and, unfortunately, he received his quota two months after the deadline for appealing it had passed. He tells me that unless he is allocated sufficient quota to keep him in business, he must close his doors. This Government, therefore, is forcing Canadians out of work in order to protect jobs which do not exist and cannot exist because of the size of the market in this country.
As a result of the Government's economic policies, a great deal of damage has been caused, and some of it long-term. The loss of faith and confidence in the future which some of my colleagues have referred to, Canadians will feel for a long time to come. For instance, a woman wrote to the Finance Minister about her husband. She said:
My husband's UIC ran out in June. He has been looking for employment for over a year. I have watched this man, who has lots of ability and experience in many areas, a man who would be an asset to anyone who would employ him, become discouraged, disheartened and finally to begin to feel that he is of no value to anyone. Whatever you think may happen in the decade of the 80s will be likely too late for us, and there are thousands like us.
Canadians have also lost faith in their Government. I continually meet Canadians with years of professional service who are out of work. I remember meeting with one bureaucrat who said he deals with former colleagues of his, people he went

December 13, 1982
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to college with, people he worked in business with, who are out of work, and their attitude toward him as a secure bureaucrat is one of burning resentment. Distrust, indifference and resentment are dangerous attitudes if we want to work together in the future to pull ourselves out of this crisis. As one of my constituents said in a letter:
I do not believe that the Canadian taxpayer will trust any Government incentive program for quite some time.
In fact, who could blame them? Businesses which have gone bankrupt will not easily re-open their doors. A senior citizen on a very limited income told me, "This budget is making everyone live in fear, and fear is foreign to me." She will not forget that feeling of insecurity. The tenants who cannot find affordable housing will never recapture the exorbitant rents they are having to pay because the Government removed effective incentives to build. Many Canadian taxpayers will pay more tax because the Government changed the taxation rules and disrupted their planning. Many Canadians will never return to their jobs because their jobs have vanished. And this is particularly hard on the young Canadians who tend to be the last hired and the first fired.
When 1 am working in my riding with Government programs which are too narrow to deal with the problems, one of the toughest problems 1 have is finding work for young kids who do not have a work record, do not have unemployment insurance and cannot qualify for the Government's job creation programs.
One of my constituents is a chartered accountant who wrote me recently that his practice had grown substantially for all the wrong reasons and he said his clients are desperate to find ways to survive while dealing with problems beyond their understanding. I think this constituent has touched on one of the major problems underlying this Government's economic policies, and that is the intrusion of the state into areas which have previously been reserved for the individual.
There are two disturbing themes which can be identified through the last two budgets, the Minister's economic statement, and in this income tax legislation. The first is the fact that the Government is forcing Canadians to depend on the state rather than on themselves. Second, the Government is taking money from people before they receive it. These two themes have formed the basis for the original November budget, and they are present in this income tax legislation.
There is no question, Mr. Speaker, but that this income tax legislation is a much improved document over that first budget. Over the last 13 months some 47 retreats and withdrawals have been made to the initial proposal, largely because of the efforts of the Official Opposition on behalf of and working with Canadians hurt by the budget. Certainly we welcome some positive measures that the Government has included in the legislation. I am glad to see, for example, that the Child Tax Credit has been increased by $50 per year, per child. 1 think this credit is one of the most fair means of helping out families with children. I applaud any move to strengthen it. With my NDP colleague, the Hon. Member for
Kamloops-Shuswap (Mr. Riis), 1 would welcome any measure to extend daycare credits.
1 think our income tax legislation is improved by the provision in the Bill which permits the tax-free transfer of an RRSP between spouses in the event of a marriage breakup. That is a constructive move. I am also very pleased to see that the Government has agreed not to touch the employer contribution to health and dental plans. I was afraid that if this measure had been included in the legislation, many Canadians would simply opt out of these plans.
Today the Minister of Finance claimed that the legislation reduces taxes for 5.8 million Canadians, for a total saving of approximately $1 billion per year. What the Minister failed to acknowledge is that the major beneficiaries are high income Canadians whose marginal tax rates has been reduced. Low and middle income Canadians gain little or nothing from lower or marginal tax rates and will lose proportionately more from the partial deindexation of old age and public service pensions.
Many employees are also adversely affected by the 40 per cent increase in unemployment insurance premiums announced by the Minister in his October economic statement and by the increased taxation of some important employee benefits. As an example, loans to employees to permit them to purchase a home or shares in their company will become taxable. This measure discourages employees from investing in their own firms, which is a measure that we need in order to encourage the productivity increases that we need to fuel our recovery.
In the case of loans for housing, it also represents a real barrier to worker mobility. As the Council of Forest Industries of B.C. wrote me, this will make it even more difficult to attract employees to areas of high housing costs, such as outside Vancouver. This measure seems particularly ill-timed, since the federal Government has been strongly encouraging the Provinces to eliminate all barriers to worker mobility. The cost of housing is certainly a major barrier to that kind of mobility.
Similarly, the standby charge on which the amount of taxation on company cars is calculated has been doubled. We in the Official Opposition did succeed in persuading the Government to limit the increase, since the November budget proposed an even higher rate of taxation, and we are pleased that the Government has agreed to modify the taxation for those who do not use their cars a great deal for personal business. We still believe this is an unnecessary tax increase at a time when this industry has been hit very hard by the recession. Many auto dealerships across the country have gone bankrupt over the past year, and yet the Government persists in adding to their burden by forcing the employers and the employees to keep much more detailed records in order to exact this tax.
One of the meanest aspects of this Income Tax Act is its effect on Canadians who are retired or who are trying to provide for their retirement. Many of these changes are
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extremely complicated and confusing to seniors who often do not understand the rules which keep changing and which are much more complex than they have been accustomed to.
For example, the Government has restricted the amounts that can be rolled over tax-free into registered pension plans and Registered Retirement Savings Plans, to $2,000 per year of employment plus $1,500 for each year that no money was contributed to a pension plan. Originally, the impact of this measure would have been extremely harsh, because it was retroactive. Many people who planned to retire at the end of 1981 were going to be affected without warning. For that reason, we forced the Government to grandfather this measure. Nevertheless, the Government severely disrupted the financial planning of many groups nearing retirement. We heard from many professional groups such as the Police Association of Ontario and the B.C. Federation of Teachers.
As one Canadian said of this measure in his letter to the Minister of Finance, "If the intent is to get people to not plan for retirement but rather to count on Guaranteed Income Supplements or other Government assistance, you are on the right track."
Furthermore, this Bill denies registration for future deferred profit sharing plans which allow an owner to qualify for a plan. It prevents owner-managers from using this means to provide for retirement. It is very unfair, particularly to small businessmen who may not know how much money their company will earn in a year and who draw limited salaries.
I was in that position when I ran my own company, before being elected. Everyone else is paid first, the bills are paid and then the boss is paid. A deferred profit sharing plan was a simple way to allocate part of your own wage cost when you did not know how much you would earn in a year. Its loss is going to be a very bad thing for a lot of small businessmen, particularly in times when costs are hard to forecast.
In addition, this legislation eliminates the deductibility of interest on loans taken out to purchase RRSPs. Particularly hard hit are middle-income Canadians since many rely on RRSPs to provide income security for their future. In fact, nearly 1 million people earning less than $30,000 per year declare contributions to RRSPs as deductions. Many of them borrow money to purchase their RRSPs because they do not happen to have the lump sum available to meet the purchasing deadline early in the year. This measure hurts low income Canadians. Fligher income people have the money available. As our task force toured the country it was told this by many groups, over and over again. As many of these loans are paid off within the year, they are a form of forced savings. In effect, the Government is penalizing Canadians for prudently putting money aside.
Another harmful measure in this legislation is the limits to the $1,000 pension deduction. In most cases the pension deduction is limited for those under age 60 who roll over a pension benefit into an RRSP. This affects those who retire early and who may wish to shelter income which at the present time is surplus to their needs. That is important in bad times when people are being asked to retire early. It also denies the
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pension deduction to those who receive lumpsum pension benefits in any form other than life annuities.
As with so many of the Government's measures, it hits hardest those most vulnerable-those Canadians who are at the end of their salaried years and who face a future on a fixed income.
Many small businessmen, farmers and those who are employed in seasonal occupations such as fishing and logging, are particularly hard hit by the elimination of general averaging and income averaging annuity contracts and their replacement with forward averaging.
For those who receive a once-in-a-lifetime income which they would like to set aside for their retirement, the IAAC is no longer available. For those whose income varied with the seasons and the harvests, the automatic system under which their gains and losses were evened out by the tax system is no longer available.
Both systems have been replaced by a very complicated procedure called forward averaging, in which a taxpayer will have to estimate whether his income will fall in the coming years, prepay the tax at the top marginal tax rate and claim it back in the future. He will have to hire an accountant to pilot him through the extremely complicated procedures. Should he neglect to tell the Government he intends to forward average initially-either because he does not understand the system or because he does not realize his income in future years will fall-he will not be able to claim back the tax he has paid. He is taking all the risk while the Government has fully hedged its bets, taking the money. Those who suffer least are those in top tax brackets who lose nothing by electing to forward average since they have to pay the top rate anyway.
After attacking in so many ways the ability of older Canadians to provide for their retirement, the Government caps it off by limiting the indexing of old age pensions and Public Service pensions. Nearly 1.2 million Canadians are affected by these two measures which are enshrined in Bills C-131 and C-133 currently being studied by committees of the House. What these measures represent collectively is best described by two people who wrote me from Vancouver. One investment analyst said the following about the victims of these measures:
Probably not since the depression years of the 1930s has a group of Canadians suffered such drastic reversals in their economic fortunes while having paid comparatively high tax levels during their productive years and having no responsibility whatsoever for the economic plight they find themselves faced with today, to say nothing of the loss of personal pride and dignity.
Recently the Minister of Finance said that he expected older Canadians to shoulder their share of the battle against inflation. As the President of the Vancouver branch of the Federal Superannuates National Association said with reference to the deindexing of Public Service pensions:
These are the same Canadians that were obliged to carry the main burden of the 1930-1939 depression. A great number of these Canadians bear the psychological scars of unemployment during their youth; of living in family homes in which welfare payments were their main subsistence; of soup kitchens

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and "riding the rods". This group of older Canadians is also the group that was called upon to carry their load during the period 1939-1945 war and facing all the rigors that war involves.
This group is one of the major victims of the Government's economic policies. They have suffered through a recession which has been made worse by a Government that is incompetent and shortsighted. They are being penalized for attempting to provide for themselves and for trusting the Government. The irony is that at the same time as the Government reduces the indexing on pensions, it is forcing more Canadians to become even more reliant on income from state resources after retirement.
In conclusion, I should like to touch briefly on the other very dangerous principle which underlies the Government's economic policies, that is, to tax money before it is received by the taxpayer. In his statement today, the Minister of Finance neglected to point out that that is still an underlying theme. The November budget established a very dangerous principle when it dwelt on the concept of tax expenditures and argued that the Government is forgoing a great deal of revenue by not imposing taxes on certain kinds of hidden income or imputed income.
The Government argued that many taxpayers were receiving benefits on which they were not paying tax, and it set out to capture some of this revenue. In the November budget, for example, it proposed to tax Canadians who sold property and then took back mortgages. Where in the past the taxpayer paid taxes as he received income, the Government proposed to force him to pay tax on the sale as if he or she received a lump sum from the purchaser rather than in instalments on a regular basis.
If we had not forced the Government to alter this provision, most small land developers would have been put out of business and with them the jobs they create would have disappeared. The Government has applied the same principle to the taxation of life insurance and annuities. Fortunately we have been successful in persuading the Government to modify the provision, but the principle remains and is embodied in this income tax legislation. Accrued income on some kinds of life insurance will now be taxable, thus affecting those Canadians for whom these policies are a major form of retirement income. Similarly, accrued interest on annuities is now taxable. Income from annuities is calculated every three years and tax must be paid on that amount even though the taxpayer does not receive a direct benefit from the annuity at that time. With the Government operating on this deemed-income principle, who knows what may become taxable in the future?
The income tax legislation before us requires careful scrutiny. It is extremely complicated. As the Minister of Finance said today in the House, income tax legislation is forbiddingly complex. This Bill is nearly 300 pages long. It has been pointed out that it is the most complex document we have seen since the Carter Commission on Taxation, a Commission which produced seven volumes of work, which met and held public hearings for months to discuss similar types of measures.
We in the Conservative Party have acted very responsibly in the past year in our efforts to gather information about the impacts of this income tax legislation, in our task force on the budget which travelled the country, in the volume of correspondence from constituents across the country with which we dealt, and in trying to seek, through committees, constructive solutions to some of the changes.
We are not about to be rushed now into forcing this legislation through the House. We are not here to stonewall the legislation, but we are here to ensure a sense of security about the measures contained in the legislation. It was this Government that created the tremendous uncertainty about our income tax legislation; trying to rush the legislation through will simply compound the problem. There are examples, for instance, in terms of work in progress. For many firms such as engineering and economic consulting firms, this measure will impose undue economic hardship.
I should like Government Members to consider the case of Dome Petroleum which hired all its consultants. The industry says that in the worst days of its financial difficulties it simply did not pay them. Is the Government proposing that those people bear the entire brunt of this kind of legislation?
We in the Conservative Party are anxious to proceed in a responsible manner with what we hope is the final instalment of this long budget process. We do not want to be identifying and debating once again unworkable aspects of the Bill long into the future. Stability is the key which we are seeking, and stability requires that we ensure that when this legislation is approved, it is the best we can make it.


Some Hon. Members:: Hear, hear!


Hon. Sinclair Stevens (York-Peel):: Mr. Speaker, in commencing my remarks today I cannot help but mention how odd it was to hear the Minister of Finance (Mr. Lalonde) earlier this afternoon rise in the House and talk about removing uncertainty and getting on with telling the people of Canada exactly where they stand with respect to income tax, and then to take a look at the Bill before us.
It is fair to say that the provisions in the Bill touching on small businesses, which are mainly involved with amendments to Section 125 of the existing Income Tax Act, are nothing but a morass. They are a morass through which most small-businessmen would virtually find themselves incapable of finding their way. 1 say this because the Minister of Finance in his press release, when the legislation was first but before us, stated that he had received calls from the "business community to end the uncertainty over our tax laws.'' He suggested that it was now time to "let affected taxpayers know precisely where they stand."
In this context it might be helpful to read into the record one short passage in the Bill which deals with small-businessmen and then ask ourselves honestly whether it is fair for a Minister to say that he is clearing the uncertainties and that he is allowing affected taxpayers to know precisely where they stand. I refer to page 189 wherein the following is indicated:
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(4) Subparagraphs 125(6)(6)(iii) and (iii.l) of the said Act are repealed and the following substituted therefor:
"(iii) the aggregate of
(A)	4/3 of the amount, if any, by which
(I)	The aggregate of all amounts each of which is a dividend (other than the portion thereof referred to in subclause (B)(1)) that was deductible under section 112 or subsection 113(1) from the corporation's income for the year
exceeds
Then it continues:
(II)	4 times the amount of the tax under Part IV that would be payable by the corporation for the year on the assumption that no amount was claimed by the corporation for the year under paragraph 186( 1 )(c) or (d) (other than the part thereof referred to in subclause (B)(II)), and
(B)	3/2-
I take it that is the draftmen's way of saying one and a half. In any event they said:
(B) 3/2 of the amount, if any, by which
(I) the aggregate of all amounts each of which is the portion of a dividend that was deductible-
I could go on by referring to the full page, but perhaps at eight o'clock I could continue to show how unintelligible the Act is, as put to the House by the Minister of Finance. We must bear in mind that it is small-business who will have to read that Clause and figure out where they now stand in relation to the income tax system of the country. Perhaps I could continue at eight o'clock.


The Acting Speaker (Mr. Blaker):: 1 thank the Hon. Member for calling it six o'clock. It being six o'clock, 1 do now leave the chair until eight o'clock this evening.
At 6 p.m. the House took recess.


[Stage Direction]
AFTER RECESS

The House resumed at 8 p.m.
Mr. Deputy Speaker:: Order, please. The Hon. Member for Hamilton West (Mr. Hudecki).


Mr. Fisher:: Mr. Speaker, I rise on a point of order. I am not clear on the arrangements that we normally make in order to permit the Hon. Member for York-Peel (Mr. Stevens) to finish his comments.


Mr. Deputy Speaker:: When the House rose at six o'clock, the Hon. Member for York-Peel (Mr. Stevens) had the floor. He is not present. Is there any other Member prepared to speak?


Mr. Weatherhead:: Mr. Speaker, I rise on a point of order. The Hon. Member for York-Peel (Mr. Stevens) is at a meeting down the hall. I saw him leave a minute ago and 1 am sure he is on his way.


An Hon. Member:: Here he is.


Mr. Deputy Speaker:: The Hon. Member for York-Peel.


Some Hon. Members:: Hear, hear!
Income Tax


Sinclair McKnight Stevens: Mr. Speaker, 1 must apologize for delaying the House. But as you know, we sometimes run into conflicts. Tonight there is a dinner meeting in the Railway Committee Room, which went a little longer than anticipated. In fact, the bells started to ring just as the main course was being brought in. I can only apologize in the sense that I was the unfortunate victim of the conflicts with which we live in the politics of Canada.
As you will recall, Mr. Speaker, I was simply pointing out that in sharp contrast to what the Minister of Finance had indicated as something that would remove uncertainty with respect to our tax laws and would, to use his words, "affect taxpayers and allow them to know precisely where they stand", that was really stretching the English language when one considers the type of Bill in the form of an amendment to the Income Tax Act that we have before us in Bill C-139.
I was reading in particular only parts of the Clause dealing with small business taxation. I pointed out that surely when you read the wording in that Clause, it is almost incomprehensible, certainly to us in the House of Commons and I would suggest even to the tax lawyers and accountants who are being asked to cope with these sections and passages every day of the week. This matter was brought to my attention soon after this Bill was tabled on December 7 by a number of tax authorities in Toronto and in other localities in Canada. After receiving the Bill and spending four hours reading the Clause, in the case of one of the largest chartered accountant firms in Canada, its experts were still unable to know how to advise their client as to the impact of the Clause.
If we could just follow the Clause to which I was referring starting on page 189, we find sub-paragraph 125(6)(6)(iii), of which I will read the preliminary part. It goes on to subparagraph (iii.l) where it states:
where the year in its first taxation year ending after 1982, the amount, if any, of the prescribed addition to the cumulative deduction account of the corporation, and
(iii.2) the aggregate of all amounts each of which is an amount required to be added to the amount of the cumulative deduction account of the corporation at the end of the year under subsection (8.1) or (8.4).
(5) Subparagraphs 125(6)(6)(iv) and (iv.l) of the said Act are repealed and the following substituted therefor:
I quote that just as an example. But this goes on not by the page or by tens of pages, but by hundreds of pages. We have a little less than 300 pages in this Bill that, if passed, will be put before the people of Canada, particularly those who have to pay taxes in this country, who will be asked to please pay up. It is "pay up the taxes" that in effect we say are properly payable under this Bill.
Let us put that into perspective. We are amending here an Income Tax Act that first began in 1917. It is interesting to look at the initial act. I have here a copy of the initial Act passed by this Parliament in 1917, at that time as a temporary war measure. The Act passed in 1917, was ten pages long; including the schedules it amounted to 11 pages. It had only 24 clauses, and that was it. Yet here a simple amendment to that

December 13, 1982
Income Tax
Act, as it was in 1917, has required 295 pages to be put into a special Bill, presented to Parliament, presumably passed, and we are all supposed to cheer, if you believe that the Minister of Finance has removed the ambiguities so that suddenly everything is made abundantly clear for the taxpayers of Canada.
That is only part of the problem. We find, when we review the matter, that this only deals with specific amendments to the Income Tax Act itself. It does not touch all the variances that are occurring even as we talk. There probably are some bureaucrats changing those regulations now.
The fact is that regulations are being changed. Let me refer to one example. I trust that every Liberal is very familiar with the Income Tax Act. When I refer to the fact that there is a Part XI-sometimes referred to as 11-of the Income Tax regulations dealing with capital cost allowances, those Members will know immediately that one of the most important changes suggested in November, 1981, with respect to our Income Tax Act was the very radical move made by the Government of reducing the capital cost allowance that businessmen were entitled to with respect to depreciation or write-offs on capital goods. That section has netted the federal Treasury for this year and next year an estimated $2 billion. But this change in the regulations did not even rate being put into the income tax amendment which we are now considering. Bill C-139 does not include any reference to that capital cost allowance adjustment because it has been touched upon in a regulation. It was simply a matter of amending Part XI to the income tax regulations to cut the normal write-off which included being able to write off, for example, $100,000 of equipment or other capital expenditures within the year to only half of that amount. I cite this example because this is a regulation that has a $2 billion impact as far as the taxpayers in Canada are concerned, yet we in the House of Commons are not even given an opportunity to consider that change in a direct way.
Not only are regulations used for that purpose, I would point out that included with the small bundle which we received with Bill C-139 was another press release from the Minister of Finance in which he stated that he was including draft regulations in such a form as to assist in the understanding of the Bill and to invite comments from interested persons before they are issued in final form. These draft regulations that the Minister referred to concern the taxation of certain debt obligations, annuities, and life insurance policies. How can one accept the credibility of a Minister of Finance, who said earlier today that he is trying to remove ambiguities, who wants us to believe his press release which states that he is calling for the passage of this law to let affected taxpayers know precisely where they stand, when he hands us at the very same time another press release which says, "Incidentally, I have passed a few more regulations in draft form that I would like you to look at and comment on because we are not sure what to do in that field."
In short, the Minister has introduced much more ambiguity into our tax system at a time when the public needs clarity, certainly from a taxpayer's point of view, and less uncertainty as to what the total impact of taxation is on individual Canadians. I suggest that any amendment to the Income Tax Act which requires a magnitude of explanation such as we see before us should be withdrawn, reconsidered and introduced in a simpler form. The time has come when we surely have to accept that if people are to be taxed to the extent they are now taxed in Canada, the least that can be done for them is to make it understandable as to when they do or do not pay taxes. I remind Hon. Members of the extent to which we are being taxed in this country. Let us never forget that the total take of the Government today is between 42 cents and 43 cents of every dollar that we earn. This means that in a five-day workweek the first two days that one works are simply to earn enough money to pay some level of Government what it believes is its take.
As has been said, slavery is living in a society that taxes its people 100 per cent. We are 42 per cent of the way there already. I believe that it is not only time to draw back from more taxation; we must make it abundantly clear that if taxation is necessary it must clearly be done in a manner that is understandable.
Some Members on the Government benches may suggest that it is easy for a critic from the Official Opposition to make these suggestions and that they know better. What I find most odd is that one of the Government's super Ministers, the Minister of State for Economic Development (Mr. Johnston) who is the czar, if you like, who hovers over all these lesser economic Ministers, has written various articles. For example, he wrote an article in the McGill Law Journal concerning the taxpayer and fiscal legislation. It is very interesting to hear what the super Minister on the Government side said about the very things we are discussing tonight. For example, he said:
The arbitrary or discretionary imposition of taxes is therefore incompatible with the first meaning of the 'Rule of Law'.
He goes on to state:
Yet even in the absence of arbitrary or discretionary powers, the individual may be unable to ascertain the consequences of his actions because of the language of the statute with which he is concerned.
He mentions how important it is not to have imprecision or ambiguity in legislation. The point that he is making is that if a Government tells its citizens that they cannot claim ignorance of the law or that they do not know what the law is, the legislators then must go out of their way to ensure that the law is easily understood. In short, the Minister points out in his article that:
The first rule of importance is that the subject is not to be taxed without clear words for that purpose.
He goes on to cite an English authority to support that statement. I suggest that all Hon. Members who wish to read this full article can turn to the McGill Law Journal of 1962, Volume 8, No. 2. They have a very interesting expose in support of the arguments that I am raising tonight. This is an
December 13, 1982

example of a senior Government Minister who has realized for the past 20 years the importance of having simply worded language in statutes if the Government is going to tax the people as a result of those statutes. He went on to state:
Unfortunately the existence of legislation which permits such arbitrary taxation probably does not arouse public concern to the same extent as legislation which confers arbitrary powers permitting encroachments upon physical freedom or freedom of expression.
He then went on to state:
It would seem therefore that liberty may be especially vulnerable to abuse in the realm of fiscal legislation.
Then he quotes a quotation to which I often refer myself. On November 18, 1783, William Pitt, the younger, stated:
Necessity is the plea for every infringement of human freedom. It is the argument of tyrants: it is the creed of slaves-
In short, that in effect is what we have in part here tonight. It is not just a question of people being taxed. It is a question of their being taxed and yet not fully understanding from the wording of the legislation to what degree they should or should not be paying tax to the federal Government. That is restricting their freedom. It is something that is not necessary, and I think it is time that we stood in this House, to a man, and said to this Minister, and to any other Minister who dares to bring such confused, complicated, needlessly wrongfully worded legislation in the sense of its being wordy and unclear, "Take it back. It will not be passed by this House of Commons until we can understand it". Hopefully, the people of Canada may then have some chance to understand the demand that will be made on them.


Some Hon. Members:: Hear, hear!


Derek Nigel Ernest Blackburn: Mr. Speaker, before I discuss the details of my speech on the budget this evening, I would like to advise those on the Government benches that, in view of the fact that we on this side of the House have waited some 13 months for this document, Bill C-139, I think it takes a lot of nerve on the part of the Minister of Finance (Mr. Lalonde) to expect us to allow the Bill to go through in the remaining seven days before Christmas.
I would also like to suggest to Hon. Members that, while the Government has attempted to bring in some minor changes or modifications to the budget of November 12, 1981 and the budget of June 28, 1982, this document, consisting of some 295 pages, is just as complicated and confusing and, for many Canadians, causes as much anger as the ways and means motions or notices with respect to the two previous budgets. It also includes recommendations for further change brought in by the new Minister of Finance this past October 27, yet the Government and the Minister of Finance expect us to zip through this Bill of 295 pages in the remaining seven days. That is just too much to ask, and I know that we on this side of the House will not grant the Government that demand.
The moral fibre of any government in a democracy is really judged by its system of taxation, because the system of taxation is really basic to a democratic government. If such a
Income Tax
system is fair and equitable, there will be a stable society with a minimum amount of discord, because what affects people or their pocketbooks really dictates their behaviour in a political sense. However, if a taxation system is not fair and equitable, then there is discord, confusion, anger and bitterness. At best, there may be a tax revolt, as mentioned by the Conservative finance critic this afternoon and, at worst, there could be revolution and social upheaval. I am not suggesting that we will have a revolution in Canada because of a series of ill-advised budgets.


John Horton McDermid: Yet.


Derek Nigel Ernest Blackburn: However, I refer Hon. Members to fairly modern history, to the French Revolution, and to the Bolshevik Revolution which occurred more recently in the Soviet Union in the Twentieth Century, and one will find that at the beginning of both those revolutions, taxation issues were at the hearts of the matter. They were the straw, so to speak, that broke the camel's back in both those countries.
1 suggest that when dealing with any tax Bill, we are dealing with something of extreme importance. When we are dealing with a confused, complicated and contradictory series of budgets which have been changed, rearranged, amended and appended for the past 13 months, contained in this one huge document, Bill C-139, 295 pages in length, none of us, neither on this side of the House nor across the way on the Government benches, should take it lightly and let it go through quickly and irresponsibly in a matter of a few days. Therefore, we must confront this piece of legislation and ensure that as many inequities as possible are vetted. Indeed, it is our duty.
I am not an idealist. I realize that we on this side of the House cannot rewrite whole sections of the Bill, but it is certainly our duty and responsibility to our respective constituents to make it very clear to the Government where we disagree with it as it affects their pocketbooks and their taxes.
I might also state that we know that the previous Minister of Finance and the present one have been deluged, almost set upon here in Ottawa by an endless string of powerful lobbyists, many of whom have travelled across the country to force their opinions and ideas upon the Minister and the Department of Finance. I am suggesting this evening that the previous and present Ministers of Finance, particularly the present one, have caved in to many of the demands of the lobbyists. Unfortunately, most ifnot all of those lobbyists represent powerful financial institutions and interests in this country.


Michael Holcombe Wilson: How about the unions?


Derek Nigel Ernest Blackburn: When the former Minister of Finance originally introduced his budget of November, 1982, I personally thought that the general thrust of the budget was good. He at least made an honest effort to plug many loopholes, the most obvious loopholes which had existed in a very unfair taxation system. Unfortunately, and this was my major criticism at the time, the budget was badly timed. It came, not at the beginning of a severe recession, but, rather, long after

December 13, 1982
Income Tax
that recession had set in. In plugging many of those loopholes, he was simply giving the powerful, vested financial interests of the country a chance to jump on him and his officials and say, "Look, we cannot afford plugging these loopholes at this time". Had that budget been announced in 1976, 1977 or 1978, when productivity was high, when our country was in a period of relative economic development and progress, I am quite sure that many of us in this Party would have accepted the plugging of those loopholes. We still do, but it is more difficult now for us to put forward those arguments.
I want to make brief reference to some of the changes that have come into this piece of legislation, an Act to amend the statute law relating to Income Tax, for two reasons: one, to show you how wide-ranging and all-encompassing these changes are and, two, to serve notice to the House that other Members of my Party will be speaking at greater length and in greater depth with respect to these proposed changes.
We have changes, for example, to annuities; to capital cost allowance-actually the Minister of Finance is flip-flopping on most of the clauses of the Bill 1 am referring to at the present time-to company reorganizations; deferred profit-sharing plans, interest expense; prescribed interest; capital reserves; work in progress; loans to non-residents; Canadianization and the incentive to Canadianize foreign industry in this country; life insurance. Every Member in this House could speak on the problems with respect to taxing certain life insurance policies because we have been deluged by lobbyists from the life insurance industry and by life insurance underwriters in our respective constituencies. We could all speak with respect to soft costs regarding certain aspects of real estate, such as the former MURB Program; to charities, as they affect individual contributions; to farmers, in selling their land to their children; and to house loans.
This Bill also includes such things as capital gains reserves, employee or shareholder interest deductibility, capital cost allowances, small business investment grants, Child Tax Credit, heritage tax deduction, pension income deduction, and so on and so forth. Investment dealers have lobbied for many changes. There are other lobbies, small businesses, the Retail Council of Canada, the Toronto Stock Exchange, the Housing and Urban Development Association, et cetera, et cetera. Yet the Minister of Finance expects us in seven days, to go through all these clauses and give him carte blanche to proceed? Absolutely ridiculous!
It is not that we want to hold up the business of the House simply for the sake of holding it up, but we would be irresponsible on this side of the House to let such important, complicated and all-encompassing tax legislation go through in a week and a day. Besides, what is the reason for our being so accommodating to this Government after waiting 13 months for this Bill? Secondly, the Minister of Finance has said that he is going to bring in yet another budget in late January or early February, so I see no need for rushing this through.
I am very concerned specifically about two major areas in Bill C-139. One is the drop in marginal income tax rates, and the other is the partial deindexation. When considering deindexation, along with the capping of Family Allowances and pensions, and personal income tax exemptions, we are reaching out virtually to every taxpayer in this country, as we are with the drop in marginal income tax rates.
The marginal rates were dropped because in the November 1981 budget there were 16 major tax loopholes which the Minister then wanted to plug. In order to try to sell the idea to the business community, and primarily to the wealthy people in the country, he argued, not in so many words, that if we were going to plug these tax loopholes then we would have to drop the marginal tax rates as they affect wealthy people who do the investing and who could take advantage of these loopholes. In other words, it was a trade-off.
However, we find when we look at this document, Bill C-139, that many of these loopholes have been unplugged or partly unplugged, or at least there is a promise there that in 1983 or 1984 they may be unplugged. But what has he done about the marginal tax rates? The new Minister of Finance has left them. In other words, the wealthy and the large investors in this country are going to have it both ways. First, they are going to have the tax loopholes unplugged and, second, we are going to continue with the lower marginal tax rate for the wealthy people in this country. I find that is totally unacceptable to the New Democratic Party, and indeed it should be totally unacceptable to any Member of Parliament in this House who has a strong social conviction that the poor and low income earners in this country are already over-taxed, and the rich in this country are patently undertaxed.
The Bill brings into law the lower personal income tax rate proposed in the November 1981 budget for the 1982 and the 1983 taxation year. I want to give some examples. For those whose taxable income bracket is under $1,112, the rate proposed in this tax Bill is 6 per cent. The old rate was 6 per cent. These rates do not change until we get to about the $20,000 to $24,000 a year income tax payer. But when we get to that income we find that the new tax rate has actually gone down, so the higher the income, the greater amount of tax rate decrease. If taxable income is between $24,000 and $31,000 a year, the rate proposed in the budget which is in this paper is 25 per cent, but the old rate was 28 per cent so there is a gain of 3 per cent on the income tax rate, it is 3 per cent lower. If we go to the top income earners, those whose taxable incomes are in excess of $133,440 a year we have an effective tax rate decrease from 43 per cent to 34 per cent. That is a decline, Mr. Speaker, of 9 percentage points.
The tax rates of the little guy at the bottom, do not change. They are just as high in this budget as they were in the November 1981 budget, but the big income earner has a lower rate of income tax. Keep in mind that the Government has now unplugged most of those so-called plugged loopholes which
December 13, 1982

were supposed to be the original trade-off, so I repeat, that the rich, and the rich investor, are getting it both ways. He still has the tax loopholes in most cases and he has a lower effective rate of income tax to pay.
Secondly, let us look at the partial deindexation of personal income tax. The June 1982 budget limits the personal income tax exemption indexing to 6 per cent in 1983 and 5 per cent in 1984. The result simply is that personal exemptions will not rise as much next year as they would have with full indexing to inflation. We have seen a slight moderation to 10 per cent, but it would be more than wishful thinking to assume that the rates of inflation will come down to six and five, unless of course we unleash Mr. Bouey totally. The rate of inflation has not dropped as one would have hoped because of the Government's regulated price component of the consumer price index.
I think this is very important when we are talking about six and five.
The Government has not made any effort to slow down the rate of increases in energy prices, which are going up 23.5 per cent, to which the Government has agreed. In addition they have not tried to provide Canadians with low, stable interest rates. All are items that contribute to keeping inflation running at 9 per cent plus and the rate in Government and Government-regulated industries at about 18 per cent. In other words, and I should stress this, regulated prices make up 23 per cent of the consumer price index. When you consider the 23 per cent, almost a quarter of the CPI, is that part of prices regulated by the federal Government, and the federal Government is still keeping interest rates and energy costs high, it is very doubtful whether the year-over-year inflation rate in this country will drop much below 9 per cent between now and late 1983 or 1984.
This partial deindexing amounts to a large tax bite of approximately $1.7 billion for 1983-84 fiscal year. Because a lot of workers are under the wage restraint program of the federal Government and various provincial Governments, as well as a lot of private employers, they will be getting a double whammy through wage restraint coupled with partial deindexation.
This partial deindexation could not come at a worse time for the majority of workers today. When you consider the 1.5 million officially unemployed and another 500,000 either on welfare or who have given up looking for jobs, they have already suffered the rigors of a major depression. Their incomes have already been cut back 30, 40 and 50 per cent and more.
Then we come to the partial deindexation of their income tax which is thrown at them. At the same time that Government-regulated prices are going up this year over next year and over the next year at a higher rate than the six and five the Government thinks everybody should hold to, I do not know how this Government can expect us to let it go through within the next seven days without giving them one hell of a good fight.
Income Tax
Deindexing of personal income tax exemptions allows Government to profiteer from inflation at the expense of individual Canadians and gives Government a vested interest in inflation. It should be remembered that Finance Minister John Turner in 1973 introduced the indexation of personal income tax exemptions and tax brackets to the inflation rate so that taxpayers would not be pushed into a higher tax bracket because of inflation. In Turner's words, indexing would "eliminate that unfair and unintended result from our tax system". Simply put, the effect of partial deindexing of personal tax exemptions will be to impose a tax increase on Canadians. That is basically what it means.
What this really means is the beginning of the end of indexation and any real taxation reform. I have a table here which I will explain as briefly and as clearly as possible. The 1984 federal and provincial income tax combined for a single taxpayer whose income is $7,500 without limitation will be $223 in income tax. With partial deindexing, he will pay $336 for a net increase of $113 or a 50.7 per cent increase. A person whose taxable income is $10,000 a year, without partial deindexing will pay $807 in income tax. With partial deindexing, he would pay $926 for a net increase of $119, or a 14.7 per cent increase. That is a far cry from the six and five limit that the Government is touting around the country as the saviour as far as our future is concerned.
The taxpayer whose income is $100,000 in 1984, without limitation, will pay $38,179. With partial deindexing he would pay $39,120, a tax increase of $941, but in percentage terms an increase of only 2.5 per cent. The Government is treating him fairly because that is very comfortably within the six and five. His tax goes up only 2.5 per cent on $100,000, but the poor guy earning $10,000 has to pay an additional 14.7 per cent as a result of partial deindexing.
It is little wonder that those who write popular bestsellers on how legally to beat the tax system in this country are saying that this budget, or combination of budgets and the financial or economic statement, plus Bill C-139, is a boon for wealthy people. I need only quote from Henry B. Zimmer's "The New Canadian Tax and Investment Guide", a reputable tax consultant. It says "Completely rewritten to include the 1981 budget changes". At page 5 it reads:
-the wealthy investor will pay the same tax rate even if his investment increases from, say, $200,000 to $300,000 in a given year. While the MacEachen budget has been promoted as an attack against the rich, a close analysis of these numbers will show that the rich are virtually unaffected. For the rich and the super-rich, the budget provides a 10 per cent decrease in tax rates.
There it is from Henry B. Zimmer, a tax expert. We, especially those of us in the New Democratic Party, are expected to let Bill C-139 go through in seven days. No way. It is not going through in seven days.
It is clear that, with the introduction of the 1981 and 1982 budgets, plus the economic statement of the Minister two months ago, ordinary income earners are the net losers. Some will quietly wonder what else is new. A lot of those will probably not stand up and say anything about it because of Party discipline.

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As far as marginal tax rates are concerned, there is no benefit to low and middle-income earners. With partial indexing there is a net loss. With capping of Family Allowances, again a net loss; capping of old age pensions, again a net loss; reduced services under the Canada Assistance Act, a net loss for those in greatest need. De facto wage restraint in the private sector is already down by 30 to 50 per cent for hundreds of thousands of Canadians because, as I said earlier, they are on unemployment insurance, welfare or not looking for work at this time.
Wage restraints in the public sector are being held to six and five, as they are for many in the private sector. Because of partial deindexing of personal income tax, as wages are held down, their income taxes for next year will go up.
I would like briefly at this time to put forward some of my Party's views on what we think would be an equitable tax system. I would be remiss at this stage if 1 did not include this in my remarks.
First, the tax system should be fairly based on the ability to pay. Ability to pay is the cornerstone of any progressive tax system. Second, all types of income should be treated equally for people earning the same level of income. Let us look at some recent tax developments, that is, before the 1981-82 budgets.
Since the 1960s the tax system has become more uneven, less comprehensive. Changes in the early 1970s brought new tax advantages to the corporate sector. Business taxes have assumed a declining proportion of federal revenue since the end of the Korean war. They peaked with the imposition of a tax on excess profits in 1950. At that time corporate taxes comprised 23 per cent of federal revenue, but by 1979 that amount had dropped to 10.3 per cent. The decline in the importance of corporate taxes corresponds directly to an increased reliance on personal income tax revenue. Since 1950 three-quarters of the growth in federal revenues have been as a result of increases in personal income tax. Thirty years ago personal income tax contributed 20 per cent of federal revenue. By 1979, the figure was 37 per cent. Individuals picked up an additional 20 per cent in sales and excise taxes. The last three decades, Mr. Speaker, have also seen the advent of a new series of levies, payroll taxes, special charges to cover the cost of unemployment insurance, Canada Pension Plan, and in some Provinces even Medicare premiums. These levies now account for 6 per cent of wages. The employers' contribution to those programs is generally considered forgone wages, although it is not apparent on the pay slip.
Taxes on wealth have assumed a declining role in the raising of revenues. In 1971 the federal estate tax was abolished, which led to the dismantling in most Provinces, with the exception of Quebec, of succession duties. In 1971 alone, the federal Treasury lost $4.5 billion, which would have otherwise been collected from our wealthiest citizens through estate taxes and succession duties. These changes left Canada with the dubious honour of having the lowest rate of tax on wealth in the industrialized world. Our rate of tax on wealth in Canada is .07 per cent of the GNP. Even in the United States
it is .42 per cent of the GNP, and in Switzerland a much more realistic 1.02 per cent. Most taxes on wealth in Canada are levied in the form of property taxes, a relatively unprogressive levy, leaving only 2 per cent collected from death taxes.
The federal Government also gains revenue from commodity taxes. These are usually applied on goods whose demand does not fluctuate with price changes, such as tobacco, alcohol and gasoline. It seems that the Government anticipates raising greater proportions of its revenue in future through substantially increasing energy excise taxes. Probably the most significant developments in the tax structure during the last decade have occurred through the expansion of the tax expenditure system. Through tax expenditures the Government encourages certain activities by giving preferential treatment to certain types of income, thus giving up taxes it would have normally collected.
In the existing Income Tax Act there are over 100 provisions for preferential treatment of income, including deferrals, deductions, exemptions, credits, exclusions and special rates. In 1979 the total tax expenditures were worth $30 billion. By 1980 they had risen to $39 billion or 60 per cent of direct expenditures. These developments occurred in direct opposition to the recommendations of the Carter Commission. Between 1976 and 1980 direct expenditure by the federal Government increased 30.4 per cent, whereas the value of tax expenditure grew 42 per cent.
What should a tax system accomplish, Mr. Speaker? I would like to suggest, first of all, that it should raise sufficient revenue to cover Government expenditure, including the increased revenue needs of a more activist Government. Second, these revenues should be raised fairly, adhering to the principle of ability, that is those with the largest income should have the highest rate of tax. This principle should be applied to both corporate and personal income taxes. Third, there should be a primary reliance on income taxes, both corporate and personal, to raise Government revenue. Income taxes can be the most progressive, hence the Government should reduce its reliance on commodity taxes and move toward the elimination of payroll taxes, funding these frugal programs through general revenue. Fourth, the tax system should be comprehensive. The existing structure of tax expenditures should be reduced and the existing goals of the system should be accomplished to a greater extent by direct spending. The tax expenditures that remain should, to a greater extent, take the form of refundable tax credit or direct grants. Fifth, the system should act to redistribute wealth. I think this is very important in any forward-looking, socially-conscious Government, that the tax system is really the major vehicle for redistributing wealth in the nation.
Over the last 30 years the combination of increased social security spending, and a supposedly progressive income tax, have done nothing to alter the balance of wealth in Canada. The top 20 per cent still control over 40 per cent of the national income, and the bottom 20 per cent have access to only 4 per
December 13, 1982

cent. Fulfilling its function as a redistributor of wealth, the Canadian federal tax could also compensate those least able to cope with current economic problems, with food and fuel credits for Northern residents, for example, and a cost of living tax credit for low income people. This, Mr. Speaker, is not happening, and that is the major problem with which we are faced in Canada today.
I would now like to refer to another very important aspect of our tax system and what it should do. As you know, we are in the middle, or in the depth, of a severe economic recession. Indeed, if you are out of work or have been out of work for any extended period of time, you are not in a recession, you are in a depression. Therefore, we in the New Democratic Party suggest very strongly, and argue very strongly, that a tax system and job creation can be combined, and the tax system or fiscal policy should be used with strength and determination to create jobs, the number one crisis in our country today.
One of the most important instruments for the establishment of priorities in job creation is the nation's tax system. Through the tax system Governments can make clear to investors where they would like to see investment dollars go. At present, there is a hodge-podge of incentive programs in effect to encourage investors to put their money into the economy. The principle of using a tax system to encourage investment is certainly not new. However, even if the principle is well established, the Canadian practice has never included anything resembling a strategy.
Canada needs to have investment streamed into key sectors if long-term job creation is to be achieved. The existing hodgepodge must be abolished. We need to pay special attention to the investment needs of a number of sectors, such as small business, forest products, energy, machinery, construction, manufacturing, transportation equipment, steel, chemicals, electrical products, fishing and, of course, the new and crucial high technology industry. Investments in these sectors during this decade can provide Canada with the economic base for large scale job creation and an internationally competitive economy. Such investment would benefit every region of Canada. The crucial continuing source of capital to meet the needs of these sectors must be the reinvestment of profit made in the Canadian economy. The profits earned by corporations in Canada are the fruits of the labour of all Canadians, not just investors, but those who work in the plants, the forests, or in the mines.
I believe that the federal Government must play a much more creative role in ensuring the reinvestment of these profits where it will do the most good. What I am talking about, Mr. Speaker, is corporate tax reform. We must begin by revamping the corporate tax system, something which Bill C-139 has not done, and something which neither the June 1982 budget nor the November 1981 budget did. The federal Government should put in place a much more attractive system of tax incentive for investment in the crucial sectors I have listed. Such a system should award companies tax points off for such things as research and development, Canadian ownership, the use of Canadian-made machinery, export orientation, effective
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job-training programs, and affirmative action in hiring policies. The object of such incentives is to make sure that profits are reinvested where they will create jobs and will contribute to an internationally competitive Canadian economy.
We do not get there, Mr. Speaker, by either ignoring our present corporate tax laws and leaving them on the statute books, as this Bill does, or by allowing more and more foreign money to come into the country to take over more and more control of the manufacturing sector. Because we need investment capital now to create jobs, such a system should not involve a net increase in the total amount of tax paid by corporations in Canada. Neither should it involve a net reduction at a time of very high Government deficit. Therefore, what I propose and what my Party proposes is an increase in the nominal corporate tax rate from the 36 per cent collected by the federal Government to 46 per cent. The additional revenue that would accrue from the increased nominal rate would not end up with the Government. Instead, it would serve as the basis for making possible substantial tax incentives to ensure investment in the key sectors under the conditions I have listed.
Such a system would reward those who invest in long-term job creation. Such investment would have effects far beyond the sectors singled out. Productivity advances in these fields would provide the economic underpinning for the whole of the economy, in particular the service sector where jobs and incomes depend upon the health of the key productive industries.
While we are speaking of corporate tax reform and fiscal change for the purpose of creating jobs, there is one more point that I should like to mention briefly. It goes with the corporate tax changes I have just suggested. We propose a surtax on upper income individuals which would go directly into job creation. Quite frankly, Mr. Speaker, I really do not think that those whose earned incomes are in excess of $40,000 per year would fight too much or be much opposed to helping in job creation, provided their extra tax dollars went into proper job creation and not just quick-fix make-work projects.
What we have in mind is not a flat rate for everyone whose earned income is over $40,000 per year. We propose that if your income is between $40,000 and $53,000, you would simply increase your tax by .75 per cent. However, if you earned $268,000 and upwards, then you would pay $2,409 more. The rate is graduated.
I see that my time is up, Mr. Speaker. I would have liked to proceed a little further with my remarks on the surtax. The Conservatives have misinterpreted it. We do not propose a flat rate, but a graduated rate. Not everyone who earned $40,000 plus would have to pay the same amount of added tax.


Hon. E. F. Whelan (Minister of Agriculture):: Mr. Speaker, it gives me great pleasure to take part in this debate. The Bill before us today, Bill C-139, is an important Bill that we have all been waiting for since almost this time a year ago. Income

December 13, 1982
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tax aspects of the last two budgets and of the recent economic statement by the Minister of Finance (Mr. Lalonde) will pass into law. As such, Bill C-139 contains important tax reforms and also reflects a need for fiscal restraint to limit growth in the deficit. In this context, it is inevitable that some individuals in certain circumstances will end up paying more taxes, but 1 hope they will recognize the importance of the goals being pursued in this Bill.
I am pleased to speak in support of Bill C-139 because it will provide assistance for those experiencing special difficulty, although the over-all framework has to be one of restraint. Moreover, in making tax reforms, the Bill shows sensitivity to the practical realities in the small business sector, especially agriculture.
In a fair system of taxation based on ability to pay, most people would see the importance of limiting opportunities for those with high incomes, to defer taxes. A postponed tax is a lower tax. If taxpayers with high incomes can defer tax, this shifts the burden on to those less able to bear it. At the same time, however, this Bill recognizes the importance of vendor financing in the sale of small businesses, and therefore preserves a meaningful capital gains reserve provision, so as not to cut off this source of financing.
I should like to review this provision briefly. The vendor will now have a maximum of five years to bring the total taxable capital gain into income. At least one-fifth of the taxable capital gain will be brought into income the year the property is sold. At the end of each of the following years there will have been brought into income, on a cumulative basis, an amount at least equal to one-fifth times the number of tax years ending after the property is sold.
About 99 per cent of all farms in Canada are family-owned and operated. They are the foundation of our successful agricultural industry. The Government supports the family farm as the most efficient form of farm enterprise, and that support can be seen in the Bill before us. Bill C-139 recognizes how important it is for farmers to be able to hand down their farming enterprises from one generation to the next within the family. It also recognizes the desire of many farming parents to help their children get established on the farm through easy terms of payment. Thus, the Bill doubles to 10 years the time limit for bringing into income, the taxable capital gain that results when an active farming operation is sold to a child or grandchild or great-grandchild.
The minimum amount of taxable capital gain which has to be declared as income in the first year, is reduced to one-tenth. At the same time, the minimum amount which must have been declared on a cumulative basis at the end of each tax year following sale, is also reduced to one-tenth times the number of tax years ending after the sale.
The agriculture sector has been quick to approve and support the federal Government's six and five restraint program. But in this period of economic restraint, Bill C-139 does not ignore the plight of debt-burdened farmers who are struggling to carry on until commodity prices improve. For incorporated farms and other businesses subject to the small business tax rate, the Small Business Development Bond has
been continued to the end of 1983, and has been focused on the need for refinancing of existing debt at lower rates of interest. The Small Business Development Bond carries the potential of cutting interest charges almost in half.
I am particularly pleased that this Bill includes a similar measure for unincorporated farmers and other small-business people. I am referring, of course, to the Small Business Bond, which will also be available until the end of 1983.
These two bond programs mean that farmers who are in financial difficulty will be able to retain the benefit of a lower interest rate for up to five years, if they get their banker to refinance existing debt under a Small Business Development Bond or a Small Business Bond loan before December 31, 1983.
Many farmers and small business people will be helped by the provisions which allow more than one Small Business Development Bond or Small Business Bond to be granted, as long as the total of the original value is no more than $500,000 per borrower.
I am sure that farmers who have incorporated their farms and want to build up their businesses by investing their profits back in the farm, will be pleased to see another provision of the Bill. This provision increases from $750,000 to $1 million the cumulative amount of income they can earn before losing the low small business tax rate. I am sure a lot of people are not aware of that.
On the other hand, in those cases where earnings are paid out in dividends, the new 12.5 per cent tax on dividends will apply. However, I want to point out that the total tax on the farming corporation and farmer, including the tax on dividends, will be approximately the same if the income had been earned by an individual unincorporated farmer.
1 know there have been questions about the chartered banks' participation in these programs. Many people accuse them of not participating at all. I can only say that the evidence I have so far is encouraging. As of September 24, Revenue Canada figures indicated that 758 unincorporated farmers had benefited from Small Business Bond refinancing, introduced in the November 12 budget, and that $146 million of debts had been refinanced for these farmers. Most of this refinancing probably took place in the eight-month period after the release of guidelines to lenders last January. In addition, a large amount of refinancing was provided in the same period to incorporated farmers under the Small Business Development Bond.
I believe that these measures have provided a lot of badly-needed help for farmers who are going through a very difficult economic period. 1 would urge the banks to continue providing as much refinancing through the two bond Programs as possible. The federal Government stands ready to absorb the cost of these Programs, in terms of forgone tax revenue on whatever number of bonds the banks and other lenders issue. Of course it is only because the Government is not taxing
December 13, 1982

interest income from these loans that lenders can offer such a greatly reduced rate of interest.
When we add on top of the benefits of the bond Programs the refinancing assistance program of the Farm Credit Corporation, we see that the Government is offering a meaningful package of financial aid programs for farmers.
The FCC's Special Farm Financial Assistance Program was introduced in the November 1981 budget-and many people said that it was not very good-with additional funding provided in the June 1982 budget. From the time it was started until November 30 this year, a total of $141.3 million was provided to 1,071 farmers. Since the June 28 budget, the interest rate charged on this money has been a full four percentage points below the normal FCC lending rate. This reduced rate is available to farmers in financial difficulty for up to two years.
Also I want to point out that as of December 9 the interest rate charged by the Farm Credit Corporation on regular loans was 13.25 per cent. Therefore the initial interest rate on FCC special loans is now 9.25 per cent, that is for farmers who are complying with special interest rates. If they are in financial straits where they need assistance, they can borrow money for the first two years, up to $500,000 at the present time for 9.25 per cent. For people who live in rich Provinces, it means their Provinces will not have to pay anything on those loans because they are guaranteeing to pay up to 12 per cent to finance it, to subsidize it, or whatever one wants to call it, up until that time.
Between now and the end of the present fiscal year, the Corporation may extend another $34 million under the special loan program. The FCC has the authority to lend a total of $130 million under the special assistance program in the 198283 fiscal year. 1 am sure this money will go a long way in helping financially hard-pressed farmers.
I would further like to point out that the small business investment grant is available to reduce the financing costs of farmers for new depreciable capital by a maximum of four percentage points. However, the interest rate may not be reduced below 12 per cent. Hon. Members can see from my comments that the federal Government is concerned about the financial situation of our Canadian farmers and offers a number of programs to help them through difficult times. One program we offered is a very controversial one as far as some farmers are concerned; it is called Canagrex, the Canadian agricultural export corporation.


Mr. Hargrave:: Mr. Speaker, I rise on a point of order. I am sure that nowhere in this almost 300-page Bill does the word "Canagrex" appear. I object very strenuously to the Minister exposing his bias to a certain Bill in the House.


The Acting Speaker (Mr. Blaker):: Order, please. The Hon. Member will know that this is a tax Bill and that the widest possible latitude is given to every Member to address himself
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to the debate. There can be no favouritism from one side of the House to the other in that regard.


Eugene Whelan: Mr. Speaker, 1 have listened to some of the other speakers. I have read the debate. They have talked about everything under the sun, as far as that goes.


BUSINESS OF THE HOUSE
Eugene Whelan: Mr. Speaker, I wish to inform the House that there has been consultation among the representatives of the Parties and that it has not been possible to reach an agreement pursuant to Standing Order 75A or 75B with regard to the allocation of time on report stage and third reading stage of Bill C-85, an Act to establish a corporation called Canagrex to promote, facilitate and engage in the export of agricultural and food products from Canada. Therefore, at the next sitting of the House I shall propose a motion pursuant to Standing Order 75C to allocate one sitting day to each of the said stages of the said Bill.


Some Hon. Members:: Hear, hear!


Some Hon. Members:: Shame, shame!


Eugene Whelan: We are talking about the economic plight of farmers and the economic plight of people. We talk about assisting them in some way. I entered that economic Bill to help farmers. 1 just want to say, yes, that is a notice which Hon. Members can take.


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[Stage Direction]
The House resumed consideration of the motion of Mr. Lalonde that Bill C-139, an Act to amend the Statute Law relating to Income Tax (No. 2), be read the second time and referred to a Committee of the Whole.
Eugene Whelan: Mr. Speaker, in conclusion, I stress that Bill C-139 is sensitive to the needs and problems of agricultural producers, as is the other Bill which I just mentioned. I urge those who really maintain that they have the concern of farmers and other people at heart to support Bill C-139 and to support in a real democratic fashion the other Bill which I just mentioned.


Arthur Jacob (Jake) Epp: Which one is that?


Eugene Whelan: Bill C-85, Canagrex. The Bill was thought up by farmers and supported by many, many people across the land.


Mr. Mayer:: Don't talk about democracy and then give us closure.

December 13, 1982
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Eugene Whelan: They thought it up, not we on this side of the House, We were asked by farm organizations to help them be in a better economic position. That is what we are doing and that is what we are trying to do, if they will just allow it.
I have checked procedures in other democratic Parliaments around the world, and I have found in the Ontario Legislative Assembly that the Premier, the Leader of that great Conservative Party and that great Government of Ontario, found it necessary to use time allocation. He even used guillotine law to get some legislation through the Provincial Legislative Assembly of Ontario. When we check the record we will find-and I think it has been for economic reasons, rather than wasting manpower or the facilities of the House of Commons-that the Liberals were in power over two-thirds of the time since Confederation but that that Party opposite used closure, guillotine laws and time allocation more than we did in the history of this Parliament.


Some Hon. Members:: Nonsense!


Eugene Whelan: If we cannot come to a gentleman's agreement on time allocation, as the Mother Parliament or the mother of democracy does in 90 per cent of all instances, it leaves me no other choice. As one who has been elected from the age of 21 years, I have never in my political career seen democracy being stymied like it has been in this instance with the little Bill called Canagrex. It is no wonder we cannot get on with the things we need to do.
What do they say? I have some of their old letters and old publications when they were supporting Canagrex on the other side of the House. It is amazing to read them and then to read what they are saying at this time.


Charles James Mayer: Read them, let's hear them.


Eugene Whelan: Mr. Speaker, 1 cannot wait until we debate the time allocation. I look forward to that and I will debate it at greater length at that time.


Some Hon. Members:: Hear, hear!


Mr. John Thomson (Calgary South):: Mr. Speaker, having listened to the Minister talk about parliamentary democracy makes a charade of this whole place. It is just farcical for him to rise and point to parliamentary democracy.


Eugene Whelan: You need a little understanding.


John William Thomson: You do not even have the vaguest understanding of what parliamentary democracy is all about.


Some Hon. Members:: Order, order!


Mr. Kelly:: You do not know.


John William Thomson: Is that right? In order to achieve a rapid economic recovery, Canada needs a private sector which will focus all of its talents on its investment, production and marketing decisions. Do you know who said that? It was the Minister of Finance (Mr. Lalonde) on October 27, 1982. Where has he been for the last 14 years? It is incredible the Minister would have that much gall to stand up in this House
and say, "In order to achieve a rapid economic recovery, Canada needs a private sector which will focus all of its talents on investment, production and marketing decisions." He no more means that statement than he would fly to the moon. He does not know what it is all about. He does not even know what those statements mean. Nor does he really care. He is a born again free enterpriser.


Some Hon. Members:: Oh, oh!


Mr. Kempling:: Hallelujah, Marc.


John William Thomson: Here is a man who single-handedly destroyed an industry. He should be very proud of himself. He destroyed the Canadian oil and gas industry. If there is one thing the Minister of Finance will be remembered for for the rest of his life, and it will go down in Canadian history, it will be that he destroyed the Canadian oil and gas industry.
A Government Minister of Finance should have some credibility. It is the second most important position in Government. Next to the Prime Minister (Mr. Trudeau) the Minister of Finance has to be seen by all sectors of society as being credible. But here we have the Minister of Finance who has destroyed the Canadian oil and gas industry and then has the gall to say that we need a private sector, by saying "Fellow Members, we need a private sector which will focus all of its talents on investment, production and marketing." Let me repeat that phrase, "All of its talents on investment." Here is a man who just drove $10 billion out of Canada. Those are undeniable facts. Here is the man, the Minister of Finance, who drove $10 billion out of Canada and goodness knows how many jobs, and yet says that we have to focus all our attention on investment, production and marketing. How can he say that to the Canadian people with such audacity?
Hon. Members, can you not smile a little bit? Surely that must tickle your funny bones just a bit.


Mr. Irwin:: How about your 400 per cent in the last decade? How can you stand there with a straight face?


John William Thomson: In his statement of October 27, the Minister went on to say that the people of this country recognize that the recession is a global problem. But here we have a Government that for 14 years, with the exception of nine months, has mismanaged the Canadian economy. The Liberals say it is not their fault, that it has nothing to do with them. They say "It is a global problem." We hear them say that all of these villains, all the other rotten countries around the globe, have brought Canada to the brink of where it is today.
The Liberals have no responsibility for the plight in which we find ourselves. Of course not. A Liberal Government would never assume responsibility for anything unless somehow it could take credit for something it had nothing to do with. The Liberals say they have no responsibility for the plight we are
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in. There is no admission. The Liberals would not take any responsibility for the faulty policies or the mismanagement of the country. The Liberals would never take responsibility for the disastrous National Energy Program or for FIR A and the adverse effects that has had on investment in this country and the adverse effect it has had on jobs in Canada. Nor would the Liberals assume any responsibility for the uncontrolled growth and spending of Crown corporations, which the Auditor General has just told us about. The Liberals would never assume responsibility for $200 million going to Canadair when that amount could be financed outside of the Government. What do the Liberals care? They do not want to take any responsibility for a $25 billion deficit.
The Minister of Industry, Trade and Commerce (Mr. Lumley) appeared before the committee the other day. We were talking about $200 million going to Canadair. I asked him where the money would come from. The President of Canadair said, "The Government, of course, where else?" Everybody lines up at the trough.
This Government has $25 billion less than nothing at all. Yet here we are going back to the trough for another $200 million. But that is peanuts. What about de Havilland? It wants only $1 billion.
This Government does not assume any responsibility for those Crown Corporations, nor any other Crown Corporation, nor the deficit. This Government likes to back losers. Maybe the Liberals do not take responsibility for backing losers either. The Liberals blew $125 million on Consolidated Computer, but the Liberals do not take any responsibility for that.
In looking back over 14 years of Liberal mismanagement, how could anyone go about mismanaging anything quite so badly? But there is one over-riding factor. It is sad to say but the Prime Minister of this country does not care about economics. He never has. He does not understand economics and he just does not have any interest in economics. He likes Constitutions, foreign travel and external affairs. He does not like economics because he does not understand economics. He has no understanding of business or business incentives. It is clearly evident from his speeches that he does not care. Yet we have a Minister of Finance who stands up and says, "We have to dedicate ourselves to the private sector. We must continue to practise fiscal responsibility. We must persist in restraining Government spending." That is what the Minister said on October 27. These statements come from the most profligate Government we have ever known in Canadian history. In 1968 Government spending was $12 billion. Fourteen years later it is $80 billion.


Donald Alex Blenkarn: It is $90 billion.


John William Thomson: But the Government says that it wants to restrain Government spending. Here, it spends $200 million on advocacy advertising. Yet it wants to restrain Government spending. It is a farce.
The Minister goes on to say that we must continue to rely primarily on the dynamism and creativity of the private sector as the engineer of growth in Canada. I seem to recall that it
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was only a couple of years ago when the Prime Minister said that the private sector could not be relied on any longer. Now the Minister of Finance tells us that we must rely on the private sector. Which will it be?
The problem faced by the Liberal Party is that it does not really believe in the private sector since it is locked into a dogma that does not allow Liberals to believe in it. This dogma states that the Liberals know best what is good for Canadians. Those Members on the other side have all that business experience so they will run our businesses for us, tell us what to do and give us the grants. They will spoonfeed those grants, however, and will decide who the winners and losers will be since they have all the business experience. I think there is one Member over there who was in the Coca-Cola bottling business who claims to be a businessman. The Liberal Party is locked into a dogma that says it knows what is best for Canadians and cannot allow the people to make their own decisions.
The November 1981 budget addresses businesses as if it were a dread disease, instead of the main force for economic growth and job creation, because the Government does not believe that the private sector is the main engine of economic growth and jobs. The Government only says it is that because it sounds good politically.
While the Government says that it must rely primarily on the private sector, the budget eliminated practically all incentives for investment in this country. Each incentive was originally placed in the Income Tax Act to encourage entrepreneurial activity and investment. But the Government decided that in our best interests it would eliminate those incentives because it does not want to provide incentives and does not like entrepreneurial activity. The Minister went on to say that he intends to foster the certainty and stability that are basic preconditions for a favourable economic climate. Therefore, if the Government intends to introduce basic stability in favourable economic climate, do you know what it will do? It will introduce a 300-page Bill with over 75 major changes to the Income Tax Act in order to create stability and this wonderful economic environment that it wants. The Government believes that the certain way to create that stability in our economic climate is to introduce a 300-page Bill with 75 major changes which no one in Canada will understand. That is how it intends to proceed.
The Minister went on to say that this requires development of our technological base, increased investment and new and innovative approaches to organizing work and labour management relations. The Minister enjoys that word "investment". He went on to say that in future, economic development in Canada will be managed by politicians and bureaucrats. 1 find it difficult to understand, when the Minister says that economic development in Canada will be managed by politicians and bureaucrats, how it compares with relying on the private sector as an engine of growth. Can anyone explain that logic to me? They appear to be completely contradictory statements. Either the Government will rely on politicians and bureaucrats or it will rely on the private sector, but it cannot do both. They do not represent the same thing.

December 13, 1982
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The Government has a great system of grants. Grants are available to everyone who simply lines up at the trough. If someone needs a grant, they can see the Minister of Industry, Trade and Commerce. While the Government has indicated it will rely on the private sector, it will decide who receives the grants, and therefore who are the winners and the losers. The Government will decide for itself if it will give its grants to Dome, Maislin or to Massey-Ferguson. The game is called "line up at the trough".
I believe my friends across the way will enjoy this article, particularly the Minister of Agriculture (Mr. Whelan) since he is from the agricultural community. It concerns the definitions of communism, fascism, socialism and capitalism. "You are a farmer and you own two milking cows. Under communism, the government would take both cows and give you a little milk for your needs. Under fascism, the government would take both cows and sell you some milk. Under benevolent socialism, you would give one cow to a neighbour in need. Under capitalism, you would sell one cow and buy a bull or perhaps lease one to build up your herd. What would be done under the current Canadian economic management? It is simple, the Government would buy both cows at inflated prices, shoot one, pay civil servants to milk the other, throw away the milk and pay you not to raise the feed for the one that was shot."
What was most disturbing about the November budget was its anti-business bias and its chronic opposition to tax relief and deferral. While these are strong enough words, the budget's attack on entrepreneurs is only one side of the vice. The other side can be found in a quote from the budget paper entitled "Economic Development for Canada in the Eighties". It says that the Government of Canada must assume a leadership role in the field of economic development. But it says that it will rely on the private sector.
Before addressing one specific area of Bill C-139 concerning retirement benefits, I wish to cite a few examples of the Canadian tax system from my own personal experience. One of my constituents phoned me to say that he had received a letter from the Winnipeg taxation centre. 1 see the former Minister of National Revenue sitting here and I think he will enjoy this anecdote. The Winnipeg taxation centre deals with the majority of western Canadian income tax returns. My constituent said that after receiving the letter from Winnipeg he tried to phone the Winnipeg taxation centre. They would not answer his call. He finally asked his taxation centre in Calgary why he cannot get in touch with the Winnipeg taxation centre. He said, "They have written me a letter and I am trying to contact the person to sort the matter out." He was told by the Calgary taxation office, "Well, you cannot do that. You cannot reach the Winnipeg taxation centre by means of telephone. You have to write a letter". Do Hon. Members know how much this adds to the cost of clearing up simple little problems? One would think that the bureaucracy would try to make itself at least somewhat accommodating to the constituency or to the people. But, no, no. Bureaucrats say,
"What we must do is force them to write a letter to Winnipeg. We will not answer any telephone calls from those ordinary, little old constituents".
The withholding of credit balances is a dandy. A letter was written to my constituent which stated, "A further review of your income tax accounts shows that a credit balance of $12,000 was reflected in your 1980 notice of assessment dated September 2, 1982. The above credit will be held pending assessment of your 1981 income tax return". The guy has already filed his 1981 income tax return and he has paid all of his taxes, and now the Government, through the Department of National Revenue, has the utter gall to withhold $12,000 which he has overpaid, which he has owing to him on his 1980 income tax return.


William James Kempling: At no interest.


John William Thomson: The arrogance is just incredible. Here is another beauty which has always bugged me, and that is that if one makes capital gains which, of course, one declares, one must pay full taxes on the capital gains, but if one has capital loss, no, it is only a one-way street. One pays full taxes on capital gains, but if one has capital loss, which one cannot offset by means of capital gains, one is only allowed to deduct one half of it in that year. Does that seem fair? Is it fair? There are full taxes on capital gains, but one can only claim one half of the loss. That does not seem to be very fair and equitable to me. One has two chances with the Liberal Government, and that is, lose and lose.


Some Hon. Members:: Oh, oh!


Some Hon. Members:: Hear, hear!


John William Thomson: This example is just one laugh. I could go on. I have reams of these in my pocket.


Some Hon. Members:: More, more!


John William Thomson: I know of a company in western Canada, and I will not name names, which is involved in oil and gas exploration.


Roger Simmons: Just give the street address.


John William Thomson: The company had worked for years trying to raise $10 million and had worked out a scheme to raise the $10 million in foreign capital. The deal was that it would be raised by means of debenture by debt, and the company would pay interest on this debt to the foreign investor. Therefore, it approached the Department of National Revenue, which gave a pre-ruling for which it had asked, and the Department of National Revenue said there would be no withholding taxes. That ruling was given on June 22, 1982. Six days later, the Department of Finance came out with its ruling, the changes to the Income Tax Act, and said, "No way. You cannot do that, no, no. We will tax you on that. You must pay withholding taxes". Therefore the company threw the $10 million deal overboard.
December 13, 1982

I said that 1 wanted to discuss retirement benefits for a few minutes. One would think that retirement benefits were sort of nasty, dirty words because our senior citizens, who have worked hard to build this country, will be taxed. The Government will get even with them, with all those people who have profited by investing in this country. The Government will tax their retirement benefits, and 1 will tell Hon. Members how it will do it. For those approaching retirement, the over-all effect of the changes which have been introduced in Bill C-139 will be to reduce the ability of people to save during their working years for their retirement years. First, the Government will disallow interest deductions for investing in Registered Retirement Savings Plans. The Government will not allow people to do that anymore. If one does not have the cash to put up, one will pay a penalty. One will not be able to go to the bank and borrow money in order to finance a Registered Retirement Savings Plan.
I cannot understand what is equitable about that. Why is it that if someone happens to have the cash to put into an RRSP, he should be treated differently from someone who does not, particularly now when many people do not have ready cash? Why would the Government penalize those who do not have the ready cash now? It is really a small, niggardly thing, it is not? If someone goes to the bank and borrows $3,500 and pays 12 per cent to 15 per cent interest on that amount, the Government will say to him, "No, you cannot deduct the $500 interest bill for investing in your own retirement income". Yet, who will pay to support people? We constantly hear about inadequacy. 1 hear the Minister of National Health and Welfare (Miss Begin) stand up in the House day after day and say, "Pensions to our elderly people are inadequate". Yet here the Government is introducing a tax provision which will deny people the opportunity to invest in their futures.
There has been much said on life insurance, but, here again, life insurance is a traditional way by which Canadians put away money for their retirement years. Now, all of a sudden, the Government will tax the income associated with life insurance policies. Even though one does not receive the cash, as in a whole life policy, it just contributes to the amount of the paid up value of the life insurance, but the Government will tax one on that amount. One will not get any cash, but the Government will force one to pay tax. I do not understand.
Why is it that all of a sudden, the Government had to turn the tax system upside down and change it, when people made commitments, and bought life insurance as a traditional way of looking after themselves for the future? All of a sudden, the Government has turned the income tax system upside down in order to tax these people.
I would like to discuss employee share purchase loans. If there is one thing in which I believe and in which a great many other Canadians believe, it is the value of an employee owning shares in a company for which he works. If there is anything to which an employee can point as being something which makes him a more productive and willing worker, it is the knowledge that he owns some of the equity in that company and he feels a part of that company. We have had a system whereby employees are encouraged to go out and purchase shares in their companies. It makes them more productive and they feel
Income Tax
more a part of their organization, but the Government will not allow them to deduct the interest any longer. It is niggardly. The Government seems to be taking the attitude that these employees are getting away with something. This was the law and no one was doing anything wrong, but now, all of a sudden, it is like being a criminal to take advantage of this right. An employee went out and bought shares in his company, but now the Government is plugging that loophole. It is saying, "We must stop that criminal action".
The November 1981 budget proposed limitations on the termination benefits and retiring allowances, which will significantly increase the taxation of such payments. Limitations on retiring allowances, on termination benefits and on the $1,000 pension income deduction will make it harder for many Canadians to prepare for their retirement years.
Bill C-139 will deny registration for future deferred profitsharing plans which would have allowed an owner to qualify as beneficiary for the plan. This will discourage all owner-managed firms from having such profit-sharing plans, leaving both the owners and employees without job-related retirement income.
Concerning the provision relating to income averaging annuities, this is a real villain, according to the Government, and has been badly abused. I know an elderly couple in Ottawa who have worked in a small grocery store all their lives. They had a piece of real estate put aside that they had invested in many years ago, and they sold it last year. They were going to use the proceeds from that for their retirement income and had decided on putting it into an income averaging annuity. We are going to get those two old people, because they are abusing the system!
I heard my colleague talk about forward averaging. I heard the Minister and other officials say that forward averaging is just about the same as an income averaging annuity. If any of you have ever taken the time to work it out, you will know it is not. It is a penalty system, and it is designed to abuse the taxpayer. Why should the taxpayer have to pay a maximum rate of 50 per cent, and then adjust his future income? Why should the onus be on the taxpayer to put money up, on the basis that it may be refundable? There is no equity in that.
Restricted claims for support of non-resident dependants- let me give you an example of why that is bad. Suppose a parent chooses to move to the United States, and he does not have enough income to live on. His son decides to help him, but he is not allowed to deduct that. He could deduct it if his parent was living in Canada. I do not understand, why should a deduction be allowed if the parent lives in Canada but not if the parent lives in the United States? Is there any equity in that? No, sir.
There is one good thing in the Bill and that is the spousal transfers of RRSP funds in the event of a marital breakdown; that was a good move on the part of the Government.

December 13, 1982
Income Tax
The over-all significance of our tax policies can of course be appreciated quite readily when we reflect for a moment on the fact that tax is the mechanism that appropriates over 45 per cent of our gross national product at all levels of Government. Instead of trying to address the problem by looking at that 45 per cent and seeing what we can do about that, this Government has taken the other approach and said, "What we will do is to raise the revenues to meet the expenditures. We will not cut the cloth to suit our incomes. We will adjust the income tax take by increasing taxes to the people of Canada; but we are not going to modify our expenditures".
The present Government has used the tax system to induce taxpayers to make certain investments. Later they criticize those who do make those investments for not paying their fair share of tax. Over the years the Canadian Government has introduced income tax incentives to encourage Canadians to invest in multiple-unit residential buildings, Canadian films and oil and gas drilling funds. They did that, presumably, with a view to creating homes for people; they wanted to develop a Canadian film industry and wanted security of oil supply, but no, those people who did that, the Canadians who responded by investing in these business ventures, are told that is unfair and that they are taking advantage of the system.
The Minister of Finance described the tax system as unfair and said that the well-advised or the wealthy very often pay less than their fair share. The Gospel according to the federal Government amounts to this: tax incentives are introduced, but when Canadians make use of them they become tax preferences or loopholes for the well-advised and the wealthy.
1 want to ask the federal Government: who did it think was going to invest in MURBs and drilling funds and Canadian films? Did it think that the people drawing unemployment insurance were going to invest in these things? They were put there for a purpose. I guess the implication which I find very disturbing is that the federal Government now takes the view that the gross income of everyone accrues first to the Government, and if we are allowed to retain some portion of it, then this is an act of benevolence on the part of the Government. I think we should ask ourselves what place this attitude has in a free and democratic society.


Erik Nielsen: A point of order.


The Acting Speaker (Mr. Blaker):: The Member for Yukon is rising on a point of order.


Erik Nielsen: Mr. Speaker, I hesitate to interrupt my colleague, and I do so with my apologies. I refer to an intervention made this evening by the Minister of Agriculture (Mr. Whelan), in which, I am informed, in my absence from the House, he purported to give notice under Standing Order 75C with respect to Canagrex, Bill C-85.
1 want to note, Mr. Speaker, that ordinarily this would trigger a debate tomorrow before Government Orders for two hours. 1 want to serve notice now that we do not accept the propriety of the procedure adopted by the Minister in giving that notice tonight. We do not accept the notice. We will be raising a point of order tomorrow, immediately prior to
embarking on Orders of the Day, and leaving the question with the Chair at that time for its decision, presumably immediately, upon conclusion of the Chair hearing adequate argument as to whether or not the Minister, in giving that notice this evening, was in order, it having been given during a debate on a tax measure.
Essentially the position we will be taking is that if that procedure is acceptable we could be in the middle of a debate on the acceptability or the non-acceptability, for instance, of capital punishment and be served with notice, under S.O. 75C, of time allocation on Canagrex.
Essentially that will be our position tomorrow. I rise now to give the Chair due notice of that so you will have the evening and tomorrow morning to consider the matter, but we absolutely do not accept the notice as being proper. We presume that the Chair will be accepting our very well-reasoned arguments tomorrow and declaring that that notice is not within our practice, and we will be proceeding with the debate on Bill C-139 tomorrow in the usual way.


David P. Smith: Mr. Speaker, I rise on that point of order. It was quite clear that the House Leader for the Conservative Party (Mr. Nielsen) has not read 75C, and 1 am sure that after he has had a chance to read it tonight he will rethink his position, because clearly the motion was in order. As to whether or not it was properly put is up to the Chair to decide, and not the Hon. Member for Yukon.


Some Hon. Members:: Hear, hear!


Erik Nielsen: Mr. Speaker, 1 agree wholeheartedly with the Parliamentary Secretary with the exception of that portion of his remarks dealing with my not having read 75C. The Government having exercised its prerogative under 75C this session 14 times more than any other parliamentary session in Canadian history, I have certainly read and re-read and reread 75C.


Some Hon. Members:: Hear, hear!


The Acting Speaker (Mr. Blaker):: The Chair can recognize the Hon. Member for Calgary South, but I must indicate his time has expired. It is very close to 10 o'clock.
May I extend to the Hon. Member the privilege of continuing for a few more seconds.


John William Thomson: Mr. Speaker, I would like to say that Bill C-139 is the most complex piece of tax legislation to come before this House since Mr. Benson's White Paper on taxation. This Bill will hit very hard the low and middle-income Canadians who gain little or nothing from the legislation. There is one thing for certain. The proposals in this Bill will ensure the continued employment of two professions which have arisen through the complications of the income tax which have mounted since the 1960s. Those are the tax accountants and the tax lawyers.
December 13, 1982

There was a time when 1 understood a little bit about the Income Tax Act intricacies, but today I doubt whether 1 have any knowledge whatsoever.


The Acting Speaker (Mr. Blaker):: Shall I recognize at one and the same time the Hon. Member for Burin-St. George's (Mr. Simmons) and call it ten o'clock?


Roger Simmons: Yes, Mr. Speaker.



PROCEEDINGS ON ADJOURNMENT MOTION

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

Mr. Benno Friesen (Surrey-White Rock-North Delta):: Mr. Speaker, I asked the Solicitor General (Mr. Kaplan), as is my want, questions on the subject of mandatory supervision. The question I am addressing tonight and on which I wish he would elaborate- I am glad he is in his place tonight to respond to my remarks-has to do with remarks he made to a gentleman about a week ago, a gentleman from Mississauga by the name of Mr. Les Crisp. He is quoted as saying to Mr. Crisp that no one with a bad evaluation will be released under mandatory supervision in the future.
This is my question to the Solicitor General. As it is clear the Solicitor General intends in the future to continue to release dangerous criminals to the public, if he is not going to use mandatory supervision in the future, what will he use in releasing these people? Such statements he has made in public raise very important questions.
I notice that the Chairman of the National Parole Board is starting a letter-writing campaign to the newspapers. 1 have before me a clipping from The Globe and Mail dated September 29 in which the Chairman of the National Parole Board is reported as having said, and I quote:
The decision to test the mandatory supervision release mechanisms which by law allow a federal penitentiary inmate to return to society after he has served two-thirds of his sentence was an action which was not taken lightly.
You bet is was not taken lightly. It has been 12 years since mandatory supervision was enacted. That policy has now been in place for 12 years. To my knowledge, it has never been challenged until the last several months. The Chairman of the National Parole Board could not have been more honest when he says he has not taken it very lightly. He has waited long enough to do it. That raises some very important questions.
The same article which quotes Mr. Crisp goes on to say that the Solicitor General has urged the provincial attorneys-general to make more frequent use of habitual criminal laws.
Adjournment Debate
The Solicitor General and the Minister of Justice (Mr. Mac-Guigan) are the senior law officers of the land. They are the ones who ought to be urging Crown prosecutors to press charges. They are the ones who ought to be implementing the laws of this land in conjunction with the Provinces.
I would like to ask the Solicitor General, as I did the other day, when he wants to assume authority in this area, why is he foisting it on to the provincial attorneys-general? Why is he always copping out on that subject? Why is he seemingly asking the Chairman of the National Parole Board to take action? These are very important questions.
What I would like to know from the Solicitor General is why it has taken so long for the Chairman of the National Parole Board or the Solicitor General or the Minister of Justice to act. Why, when a law was apparently brand new, a law which instituted mandatory supervision, and the Solicitor General had said that there has been an over 50 per cent failure rate in mandatory supervision-


Robert Phillip Kaplan: Forty-one per cent.


Benno Friesen: Now the Minister says it is 41 per cent. I guess it depends on how he wants to read the statistics. Forty-one per cent is not a very good batting average. If it has been that ineffective, why have we seen dangerous offenders released in society after two-thirds of their sentence for 12 years? Why has it taken 12 years to test the validity of that law? I know the Government is intent on rehabilitation, but certainly it ought not to be the policy of the Government to do that at the expense of the unsuspecting public.
The Chairman of the National Parole Board has been wont to issue two more press releases defending his position to continue to incarcerate some inmates. On December 3 he said this was in order to ensure public safety. I commend the Chairman for that, but why was he not doing that during the past 12 years?
On December 3 he further stated, and I quote:
As in the recent cases of west-coast inmates who were suspended 'at the gate' by the Board, this is a test case. There are few precedents for suspending mandatory supervision when the inmate has not been found responsible for misconduct which occurred subsequent to his release, and the National Parole Board fully expects its action to be challenged in Court.
There was another press release on December 7.
As I said the other day, Mr. Speaker, we need to re-examine the priorities of this Government. What are the values of this Government? As I said in a speech last Friday, "The mark of a civilized country is that it sees the role of a Government to defend and protect the defenceless in our society." If that is taken at face value, surely the defenceless ones are the ones who are living by the law without having to be urged by police officers to do so. But under this Government the defenceless ones are overlooked and ignored and those who are the rapists and the murderers are protected by the law.

December 13, 1982
Adjournment Debate
Just a few years ago this Government spent thousands of dollars providing staff from the Ministry of Justice to help one man in Manitoba defend himself against a traffic ticket. Yet there is not one penny allocated from the Minister of Justice or the Solicitor General to protect the families of those victims who have been murdered or who have been raped. The Government has not set aside money for that. If this Solicitor General wants to be the friend of the defenceless, it is time to set his values in order and to start providing a defence for the defenceless, not for those who would rape and plunder our society.


Robert Phillip Kaplan: Mr. Speaker, in spite of the criticism which 1 have received from the Hon. Member, I welcome very much his recognition of a very important fact which he has denied until tonight. Tonight in his opening remarks, and throughout his remarks, he finally admitted that this Government, and this Solicitor General, are getting tougher with dangerous offenders. In the past he suggested we were getting softer on them. Tonight, he finally recognizes we are getting tougher on them. He asks why it has taken so long? 1 cannot and do not propose to explain why it has taken many years to do these things. I will only say that they are being done. 1 am responsible for doing them and I am very pleased they are being done. I would like to deal with a few of them.
The Hon. Member asked why, in the case of the dangerous offender provisions, 1 was relying on provincial Attorneys General to do the job, and why I was not taking responsibility myself for having more Crown Attorneys seek dangerous offender classification of accused persons who are considered dangerous. There is a simple reason for this, Mr. Speaker. It is that the Crown Attorneys work for the provincial Governments. Those who prosecute these cases against dangerous offenders under the Criminal Code are always, 100 per cent of the time, in the employ of provincial Governments and report to provincial Attorneys General. That is why I directed my remarks to the Ministers responsible for them, namely, the provincial Attorneys General. I should like to do it myself and 1 should like to see it done, but legally the authority for those provincial Crown Attorneys is that of the provincial Attorneys General.
I do not think the Hon. Member knows the law very well but when he reflects on this 1 think he will understand why 1 chose to write to the provincial Attorneys General instead of writing to the people who are responsible to them.
The Hon. Member referred to the toughening of the mandatory supervision rules. One of those policies is totally within the responsibility of the Parole Board. I am very happy with the step it has taken and I support it. 1 would like to have seen that done years ago, but it is being done now and it is being challenged in the court. 1 look forward to the result of that challenge.
I have also taken a bill to the Senate to toughen mandatory supervision, and I know that the Hon. Member will support it.
In all, I am glad to see that he finally recognizes that the Government and I, as Solicitor General, are getting tough on the dangerous offender.


ADMINISTRATION OF JUSTICE-REQUEST FOR FEDERAL-PROVINCIAL CO-OPERATION ON ISSUE. (B) REQUEST THAT MINISTER TAKE ACTION
Mr. Pat Nowlan (Annapolis Valley-Hants):: Mr. Speaker, 1 must say it is rather ironic that tonight during the adjournment debate we have the Solicitor General (Mr. Kaplan) in a sort of three-hit tango on the different issues before the House. I listened to the eloquent plea of my colleague for Surrey-White Rock-North Delta (Mr. Friesen) about mandatory leave and other problems in the administration of Justice. 1 want to speak on something that is perhaps appropriate because of the season, and that is the blood money that could flow to the murderer who tries to profit from his books.
In the restricted time allotted to me I extend the olive branch of fellowship and/or goodwill of the season to the very harassed Solicitor General. I believe he feels the same compassion as 1 and other Members of the House and, indeed, all Canadians do for the tremendous problem regarding the civil liberties of the individual as opposed to the collective decency of the community, when a confessed murderer comes on national television and speaks of his crime. When someone says, as I heard and saw "Oh yes, I killed but 1 killed sincerely because of a political cause".
I do not try to ignore the problems involved in resolving this issue. The reason 1 take the time of the House on this adjournment debate tonight to bring this subject up is that no matter how much the Solicitor General and others share my compassion and believe that there is something to be said for the defenceless community and the victims of the murderer, I believe it is wrong to have this confessed murderer come on the screen and say, "Yes, it is the Christmas season and we have to profit from the book sales and therefore we have a book to publish." I felt sick, seeing the reporters at that press conference go up and ask for an autographed copy of the book.
That is why I got myself very directly involved in the first question that was asked about the specific case of Simard, the confessed FLQ killer, coming on the screens of the land less than two or three weeks ago at a press conference in Montreal. Those paragons of virtue, the press gallery, the fourth estate, exhibited no morals whatsoever, going up for their autographed copy. That part is not within the purview of the Solicitor General.
I am trying to bring to the attention of the Solicitor General tonight, in as calm a way as 1 can, what frankly is a new phenomenon, certainly in the western world and perhaps in Canada. We no longer have capital punishment. Therefore a lot of people, a lot of killers, walk the streets who would not have walked the streets had capital punishment been in place. We have the phenomenon of television through which one can
December 13, 1982

become an instant celebrity. Then we have the fact that a political crime is not supposed to be a crime. Therefore, there are nuances; a person can come on the screen and insult the collective decency of the community by a statement such as, "Oh, yes, I killed, but I killed sincerely". I do not believe-and frankly I think the Solicitor General may share some of my views-that the people behind him have the sense of urgency and immediacy which this phenomenon deserves.
Olson, that sickness of smut, killed a lot of young Canadians and is still taking the administration of justice into perversion by getting flyaway trips to Vancouver and/or Victoria in search of a new grave. It is a sickness beyond comprehension that we all share, in terms of the horror of the thing. Then we had Simard come on the public screens not too long ago. Those two incidents alone demand more action in the offices of the Solicitor General and the Minister of Justice (Mr. Mac-Guigan) than we have frankly seen heretofore.
1 say to the Solicitor General that the United States has been faced with this because of a so-called Bill of Rights. They appreciate the fact that there is freedom of speech and the fact that I, in speaking tonight, might trespass on that right. But there is no absolute freedom of speech which allows the absolute insult of the dignity of the community at large, and which allows an absolute assault on the collective decency of Canadians. This has been proven in the Supreme Court of the United States. There are 28 states in the United States that have linked with them in their statutes compensation to victims and a prohibition, in respect of publication.
I must say that, in my emotional reaction to the press conference, when I first asked the question I was all for prohibition-take away the rights of the pen from anybody in the prison. I think 1 went too far, but this is not beyond the ingenuity of the law officers of the Crown and/or the compassion of the Attorney General. I have never asked a question in this House which has evoked more of a spontaneous response than the question about the murderer not profiting from his murder.
In conclusion, may I suggest that continual pressure should be kept on the Minister, he should not give me the slough-off by saying that law officers are studying it. Let us have a white paper, or a green paper; let us have the Law Reform Commission do something. Something has to be done now because Canadians are speaking out that a murderer should not be able to profit from his crime, whether this is done by establishing trust fund for victims, by impoundment of the profit in the right of the state or any one of a number of things. If we can have an embargo on External Affairs documents and documents of state for 20 or 30 years to save the sensitive egos of public servants, surely to "Lord liftin'' we can have some type of embargo from the Attorney General and/or the Minister of Justice on a murderer insulting and committing another crime against the sensitivity of the victims and/or Canadians by coming on the screen and suggesting that he will profit from his crime.
Adjournment Debate


Robert Phillip Kaplan: Mr. Speaker, the Hon. Member has generated a lot of heat on a subject about which 1 too have very strong feelings. Like the Member, I consider it to be unacceptable for a criminal to be able to profit from the sensationalizing of his crime through the writing of a book or the giving of interviews. While the Hon. Member has generated a considerable amount of heat, I would rather that he generated some light as well.


John Patrick (Pat) Nowlan: Twenty eight states have got it. What are you doing?


Robert Phillip Kaplan: Twenty eight states have got it, and that suggests it is not federal legislation in the United States.


John Patrick (Pat) Nowlan: The Americans have states.


Robert Phillip Kaplan: We have provinces in this country and our provinces have considerably more power than the states do in the United States. I do not mean by that to suggest there is not a federal solution. There may well be a federal solution. We are pursuing one, but 1 have not heard one from the Hon. Member opposite.


John Patrick (Pat) Nowlan: I could have given them to you.


Robert Phillip Kaplan: A private Member's Bill was proposed by someone on his side of the House.


John Patrick (Pat) Nowlan: The Hon. Member for Crowfoot (Mr. Malone).


Robert Phillip Kaplan: It is a Bill worth putting forward, but it is probably not a bill that would create valid federal legislation.
I myself have proposed two ideas, one to which the Hon. Member referred, and the other being simply making it a crime to write a book like that. I proposed my ideas to the country for some thought. The provincial Attorneys General, by and large, replied. They are also very concerned about the problem and they feel concerned about the solutions I proposed. They indicated, without giving me any ideas about what to do, that I should do something other than the two suggestions I had proposed. I am giving the matter a great deal more thought. I am working with officials on it.
We have made suggestions to the law officers of the Crown. We have kept in mind the constitutional issue, because no one will be served if we bring forward a bill that Clifford Olson can take to the Supreme Court or to a lower level court and have struck down as being valid provincial legislation, but not valid federal legislation. I might add that a couple of Attorneys General who wrote me rejected the option of provincial action, and suggested that this is a problem that only the federal Government can solve.


John Patrick (Pat) Nowlan: Publish them all.


Robert Phillip Kaplan: 1 take that responsibility very seriously. I am working on this problem and 1 am putting a lot of time into it. I hope that very shortly I will be able to share the results of my work with members opposite and, indeed, with all Members of

December 13, 1982
Adjournment Debate
the House. I think it is a very urgent matter because Canadians, perhaps as never before-maybe this kind of book is unprecedented-are scandalized by this book, as 1 am. They resent very much the kind of opportunities which the mass media and mass publication, and so on, provide for an individual who really is beneath contempt and who should not be allowed to profit from his crime.
1 would only suggest that this is a country with a great respect for the rule of law. No one will be served by having some half-baked solution that results in frustrating the Canadian people even more than they are now at the prospect of a man like Clifford Robert Olson making a substantial profit from the publication of such a book.


NATIONAL SECURITY-CASE OF CANADIAN PROFESSOR-APPLICATION OF OFFICIAL SECRETS ACT. (B) TIMING OF DECISION TO PROSECUTE IN GREAT BRITAIN
Ramon John Hnatyshyn: Mr. Speaker, the Solicitor General (Mr. Kaplan) continues to hide from his responsibilities in the Hambleton spy matter. This evening 1 want to discuss some of the issues in this matter.
The Government has avoided prosecuting the spy Hambleton. It claims the April 25, 1980, legal opinion provided by the Department of Justice, determined that a prosecution would not be successful. The Government had already determined at that point that Hambleton should be prosecuted. The Government was simply without what it considered to be sufficient evidence.
What did the security service do at that point? It went back to Mr. Hambleton and told him of the decision of the Department of Justice, and he began to tell his story. The Solicitor General says that no prosecution could be undertaken thereafter because these confessions were taken without a caution being given to Mr. Hambleton. 1 ask the Solicitor General where in Canadian law is it mandatory that a caution be given to make a statement voluntary? The only requirement is that when a statement is made to a person in authority, it be made without fear of prejudice or hope of advantage. The Boudreau case in 1949 established that to be the law in this country.
In any case, the Solicitor General did not even bother to return to the Department of Justice to get a second opinion. One has to ask why did he not return?
The Minister hides behind the claim of lack of evidence, and behind a legal excuse as to why Hambleton was never prosecuted', yet he did not bother to go to the Department of Justice to see if his judgment held any water whatsoever. He says there was no direct evidence other than that supplied by Hambleton. Yet, when my colleague, the Hon. Member for Durham Northumberland (Mr. Lawrence), asked whether the Canadian Government knew that direct evidence was available that Colonel Rudolph Hermann passed United States secret classified information to Hambleton on Canadian soil, the Solicitor General of Canada refused to answer for reasons of so-called national security.
Again, why could the Solicitor General not give us this information? I submit that the answers can be found in many of his responses to questions in the last two weeks. The Solicitor General says that after Hambleton was told of the Department's decision not to prosecute, all of a sudden he began to talk. The Solicitor General said:
We learned a great deal more about his activities after the Security Service informed him of the decision.
The heavens opened and the sun came out. The Minister says that there was no inducement; he was simply advised of the legal opinion. Why, may we ask, was this spy so forthcoming?
Let us dig a little deeper. On December 1, 1982, as reported at page 21172 of Hansard, the Solicitor General said:
The Hon. Member has to recognize that the Security Service is not primarily in the business of catching crooks, seeing them tried, and seeing them punished. The objectives of the Security Service are much broader. They are to protect the national security of the country.
On December 8, 1982, as reported at page 21393 of Hansard, the same Minister said the following:
That Service was quite satisfied to be running a very successful counterespionage operation which was very productive. Hambleton was giving the Service information, which information the Service was sharing with the other friendly intelligence services, including M15.
What we have here is a situation in which the Minister responsible for the Security Service made the political decision not to prosecute Hugh Hambleton. He says that he did not have the evidence. Yet after April 25, 1980, he never returned to the Department of Justice for another legal opinion. He has said that he does not have the legislation, yet our Official Secrets Act is broader than Britain's. He has hinted vaguely at the true story, that he and the Security Service simply decided that Hambleton should be used for the information he could provide and that a prosecution would go by the boards. This was probably effected through a deal with Hambleton. I suggest it is inconceivable that Hambleton would talk without some kind of deal. One thing is certain; the Government wanted Hambleton to think that he had a deal.
On this issue the Government cannot have it both ways. Either it admits that it induced Hambleton to provide his statement, or it admits that it should have prosecuted, for without inducement there was no obvious bar to prosecution. Why does the Solicitor General not come clean with the House and with the Canadian people? Why does he not tell us the whole story? Is it because he knows his handling of this entire affair has been appalling and he seeks to cover up his role?
Some may ask if there is anything wrong with using Hambleton for information. Why should spies be prosecuted? I say to those people that this man has committed crimes of a very serious nature. He has undercut the defences of our country and of our allies. By giving this man immunity we send messages to his patrons. They know how Canada treats its spies. Spies have nothing to fear in this country under this Government.
On that side of the House we have, as Solicitor General, Hugh Hambleton's aider and abbetor. 1 am asking a simple
December 13, 1982

question, as are the people of Canada. Why does the Solicitor General not stand in his place? Why does the Minister of Justice (Mr. MacGuigan) not stand in his place and make a complete and full report to the Canadian people on the method and the manner in which this matter was handled? We can only draw one conclusion from their reluctance. This is the result either of incompetence or, which is of more concern, they have something to hide.


Mr. Al MacBain (Parliamentary Secretary to Minister of Justice and Attorney General of Canada):: Mr. Speaker, it is my pleasure as Parliamentary Secretary to the Minister of Justice (Mr. MacGuigan) to rise in reply to the intervention of the Hon. Member for Saskatoon West (Mr. Hnatyshyn). I do not propose to deal in detail with the Hambleton case. I think it would be more worthwhile if I traced the history of the Official Secrets Act of Canada in comparison with that of the Official Secrets Act of Great Britain.
The Official Secrets Act in Canada is modelled on a statute enacted by the Parliament of the United Kingdom. Because the Canadian law is an outgrowth of the United Kingdom's statute, it is desirable to set out briefly, in a few principal milestones, the development of the United Kingdom law in this area.
The first Official Secrets Act was passed by the United Kingdom in 1889 as the result of continuing leaks of Government information. The provisions were aimed at dealing with "espionage as well as the leakage of Government information, the disclosure of which would not be quoted in the interest of
Adjournment Debate
the state, or otherwise, in the public interest". In 1911, the United Kingdom's statute was amended.
When the amending Bill was introduced to the House, the Government announced that the amendments were intended to strengthen defence against espionage activities. However, the Bill also made it an offence for any Government information to be disclosed without authorization, whether or not the information was secret, and whether or not the disclosure would adversely affect the interests of the state. Owing to the deteriorating international situation, no questions were asked and the Bill was passed without substantial debate. The scope of the leakage offence was thus widened without any apparent public discussion of what had transpired.
The United Kingdom's statute was further amended in 1920, but those amendments were not intended to modify the leakage provision in any important way. The United Kingdom statute thus deals with two distinct offences, espionage and leakage of Government information.
The first Canadian OSA was passed in 1890 at the request of the Government of the United Kingdom. Its provisions were transferred to the Canadian Criminal Code when it was enacted in 1892. 1 see, Mr. Speaker-


Ramon John Hnatyshyn: Carry on. I'm fascinated.


Arthur Allister MacBain: 1 can understand that.


The Acting Speaker (Mr. Blaker):: 1 am sorry to interrupt the Hon. Member, but the time allotted for the adjournment motion has expired.
At 10.32 p.m. the House adjourned, without question put, pursuant to Standing Order.

Tuesday, December 14, 1982