1983-03-17

GOVERNMENT ORDERS


[Stage Direction]
The House resumed from Tuesday, March 15, 1983, consideration in Committee of Bill C-139, to amend the statute law relating to income tax (No. 2)-Mr. Lalonde-Mr. Blaker in the chair.
The Deputy Chairman:: Order. When the Committee rose on Tuesday, March 15, Clauses 8, 9 and 128(12) of the Bill were under consideration. The Hon. Member for Lethbridge-Foothills (Mr. Thacker) had the floor.
On Clauses 8, 9 and 128(12):


Mr. Thacker:: Mr. Chairman, as I recall, we were in the midst of asking the Minister questions as to why the bond would not go beyond 1984. I wonder if he would pick it up there and inform the Committee why they would not make that provision open-ended or at least give them a couple of years beyond 1984?


Mr. Cosgrove:: Mr. Chairman, I will direct my attention to the question of the Hon. Member. However, on two occasions previously in the proceedings, there had been some discussion about the question of work-in-progress which has been dealt with. The issue whether notaries in the Province of Quebec would be included as an exemption in that Section has been raised. I notice that the Hon. Member for Mississauga South raised that issue in a public forum by way of a press communique. It appears that he is of the opinion that the Government does not intend to move to have notaries in the exempt category.
To begin with this morning, I would like to advise the Committee that the Government has always been prepared to introduce amendments either to 124, the definition Section of a lawyer, to include or, as requested by the Hon. Member for Mississauga South, to amend the provisions of Clause 16 so as specifically to designate notaries in the Province of Quebec in the exempt category. The Government is prepared to do that this morning. I make that suggestion before we begin with Clauses 8 and 9. I would be interested in hearing the views of Hon. Members on that subject.


Mr. Blenkarn:: Mr. Chairman, I rise on a point of order. The Hon. Member for Lethbridge-Foothills has the floor and is asking the Minister questions regarding Clauses 8 and 9 of the Bill in connection with the Small Business Bond and the Small Business Development Bond. This Committee has dealt with Clause 16. The Minister knows that if he wants to make certain arrangements with us concerning the Bill, he can do that. He also knows that we are not very agreeable in view of the fact that closure has been imposed on this Committee.
In any event, the Minister is totally out of order in dealing with questions respecting Clause 16 because that Clause has been dealt with. The Hon. Member for Lethbridge-Foothills has the floor on Clauses 8 and 9. That is what we are dealing with. It is imperative that the Chair call the Minister to order for not staying with the issue.
U5)


Roderick Blaker: The Table Officer seems to have the same information I have, to the effect that Clause 16 has not yet been carried. Are we incorrect?


Donald Alex Blenkarn: If you take a look at the records of the Committee, the vote on Clause 3 was grouped with a vote on Clause 16 as one vote, and that took place two or three days ago. That matter has been disposed of. The Committee has dealt in full with Clauses 3 and 16.


Roderick Blaker: I believe the Hon. Member-


Donald Alex Blenkarn: It dealt with a number of other Clauses, too.


Roderick Blaker: The Hon. Member may be satisfied if I indicate that I must do a little research and check whether or not that Clause has been carried. I will attend to the matter as debate continues, if we can handle it that way.


Paul James Cosgrove: Mr. Chairman, I might add that yes, my recollection is the same as the Hon. Member for Mississauga South, that Clause 16 was dealt with together with Clause 3. The only reason I raised it this morning was in the context of seeking the unanimous consent of Hon. Members and, obviously, that is not forthcoming from the Hon. Member for Mississauga South. I did it because I interpreted the news release as a request for the Government to introduce an amendment, but obviously the Hon. Member has indicated that he does not wish to deal with it at this time.


Blaine Allen Thacker: Mr. Chairman, I rise on a point of order as well. I would ask that you not apply the last five minutes of debate, which was on an entirely separate point raised by the Minister, toward my 20-minute time on Clauses 8 and 9.

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Mr. Deans:: I am sorry to interrupt, Mr. Chairman, but I do not want to pass without having pointed out that, although the Minister may have been considering the possibility of asking for unanimous consent, he did not do so. I would not want him to assume that it was not forthcoming without the question being asked. It may well be that the Hon. Member for Mississauga South is not of a mind to grant unanimous consent, but I think he should be required to indicate that, rather than it just being assumed that is the case.


Paul James Cosgrove: Mr. Chairman, I would, for the record, formally request consent of all Hon. Members to reopen Clause 16 to deal with the amendment.


Donald Alex Blenkarn: Mr. Chairman, we are dealing with Clauses 8 and 9. There have been a number of suggestions with respect to what the Minister may or may not do because the Minister, in his damnable effort to force this Bill through this House in an unrealistic time-frame, decided to force votes and then made fun of the fact that he won those votes. He then decided to force closure on this Bill. There is an opportunity, perhaps later in the discussion today, to talk about the matter, and there certainly is an opportunity in the other House of Parliament for the Government to bring in that amendment.
The Government has suggested that lawyers be defined as "notaries" or notaries be defined as "lawyers". I have had an opportunity to discuss that matter with the Canadian Bar Association, with my own Bar Association, and they are horrified that this Government would try to define lawyers as notaries. That was the first proposition.
With respect to the other propositions, we have a countervailing proposition for the Government. It knows that proposition. If it wants to deal realistically with this matter, it can do it; but I want to advise the Government at this time, through you, sir, that a Government which thinks it is a dictator can think it is a dictator, but somewhere along the line it will have to obey the rules of its Parliament.


Roderick Blaker: I have a proposal put forward by the Minister of State for Finance to the Committee of the Whole for unanimous consent to permit the Committee of the Whole to consider Clause 16.1 must take it that the Hon. Member for Mississauga South by his words has indicated he is refusing unanimous consent.
At this point, unless some other Hon. Member wishes to rise on a point of order, the Chair will recognize again the Hon. Member for Lethbridge-Foothills. I will give some thought to this matter of time taken out of the Hon. Member's allotment of time in view of the points of order raised.


Blaine Allen Thacker: Mr. Chairman, perhaps the Minister would rise and answer the question why the Bill would have a time limitation now of 1984, which is just a few short months away. Up until now many individuals have not been able to get the applications in place and the financial institutions have not been able to agree because of the general state of uncertainty.
Will the Minister indicate now that the Government's policy is to run that on at least, say, until 1985 or even 1986?


Paul James Cosgrove: Mr. Chairman, I could not, as Government policy, indicate that the Government's plan was to extend the program as requested by the Hon. Member. I reiterate that the plan has only been in place for a few years. In that time the Government has, after analysis of what has happened under the plan, come forward with the amendment before us to target aid to those most in need. As I indicated to the Hon. Member for Parry Sound-Muskoka, the Government will monitor the plan and, if warranted, we would conceivably come in with amendments or extensions. We feel we need some more experience. Although the Hon. Member feels the year is fast moving by, we do have nine months remaining and therefore we want that time for experience.


Blaine Allen Thacker: Mr. Chairman, with great respect I find that unacceptable because we know under the original provision that there was $2 billion advanced, and under the Government's amendment in 1981 there has only been $200 million advanced. We are only nine months from the end of the whole program and, as I indicated, many people have had problems applying because the proper election forms were not available to them in the financial institutions. As well, the Minister knows full well that the next budget is going to be perhaps in April. That will take months and months to be passed, the year will have expired and we will be into a new year and the chances of this being put into a new budget and being passed are small. So we are going to continue this incredible process of uncertainty. While it might be fine for us to sit here in this peculiar fairyland, this ivory tower, it is really totally unsatisfactory to the people who are living and working in this country and producing wealth that we sit here and so readily redistribute and waste what they have produced. So I urge the Minister to reconsider that.
I would like to take the Minister to Clause 9(e) where it points out that the bond must be issued in cases of financial difficulty. That is causing great difficulties as well at the grass roots, practical level for the small-businessman, rancher or farmer trying to take advantage of it. Would the Minister stand and make a definitive statement as to what the Government means by financial difficulties?


Paul James Cosgrove: Mr. Chairman, I am advised by my officials that, contrary to the opinion of the Hon. Member, the definition of that Section and its practical application are well known. Section 15.1 (3)(b) of the Income Tax Act reads as follows:
(iv) the obligation is issued by the corporation
(A)	as part of a proposal to, or an arrangement with, its creditors that has
been approved by a court under the Bankruptcy Act
(B)	at a time when all or substantially all of its assets are under the control of
a receiver, receiver-manager, sequestrator or trustee in bankruptcy, or
(C)	at a time when, by reason of financial difficulty, the corporation is in
default, or could reasonably be expected to default, on a debt held by a person
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with whom the corporation was dealing at arm's length and it is issued, in whole or in part, directly or indirectly in exchange or substitution for that debt;


Blaine Allen Thacker: Mr. Chairman, you can see how complicated the Bills are when the Minister has to refer to Section 15.1 (3)(iv). It is just absurd. It is also clear that a person virtually has to have been petitioned into bankruptcy or to have voluntarily signed an assigment into bankruptcy before the Section can be used. That is why it has gone from $2 billion down to $200 million. We are not helping the genuine farmer who has been able to stave off this assignment but is virtually on the verge of tipping in. That is why I believe the Government has to look genuinely at this provision again. Why would we want to force people to have to take that incredible risk voluntarily to go into bankruptcy and then apply for relief under this Section? If they do not get it from the banks, they are into bankruptcy. Their assets can be sold off and they can be turned off their land. Surely that is not what a humane and caring Government would want to do.
I believe the Government should look at that again. Because a new budget speech will be coming shortly, it is possible that if the Minister of State for Finance can see how illogical the Section is as it stands, perhaps he could convince the Minister of Finance of this.
I believe those are all the questions I have on Clauses 8 and 9 Mr. Chairman.


Paul James Cosgrove: Mr. Chairman, the Hon. Member has put his finger on a very difficult point. Irrespective of political philosophies, the Act has to respond to changing economic conditions. It has also to be interpreted and used by the business world. It was for that reason that the Government of the Party to which the Hon. Member belongs introduced Section 15.1 (3)(Z?)(iv) which he has criticized as being too technical. Farmers, bankers and business need some guidance, but his Government introduced the Section he is now criticizing. Revenue Canada, which administers the Act, provides a lot of assistance on a case by case basis to people who inquire whether they qualify under the Section.


Blaine Allen Thacker: Mr. Chairman, under the Section introduced by the PC Government $2 billion was advanced, and after the changes made by the Liberal Government some $200 million has been advanced. That shows which Party genuinely cares for the man on the land.


Mr. Riis:: Mr. Chairman, I should like to take a few moments to direct a number of questions to the Minister regarding Clauses 8 and 9 of the Bill. In my estimation these are very critical Clauses.
One begins to appreciate more than ever the plight of small businesses in Canada. I want to focus on the most positive aspect of the small business community. It is the part of the community that is most interested in expansion and development at this time. Could the Minister explain why the term "development" is included in the title of the Small Business Development Bond? What is the point of that?
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Paul James Cosgrove: Mr. Chairman, it is probably historical. When originally introduced, the Clause was directed toward expansion. The amendment now directs funding toward, should I say, survival-those who are desperately in need of assistance. As I have indicated, the Section is fairly recent, it was amended recently. We are reluctant to remove from it the potential for offering the Section at some time in the future for development. Of course, we would all wish that no assistance would be required from the Government at all for the small business sector if the economy were stronger.


Nelson Andrew Riis: Mr. Chairman, I appreciate the point which the Minister made that at one time there was a real development component in the Small Business Development Bond. It became a familiar tool with a considerable number of small businesses in Canada using it to their advantage to expand and use the tax system in order to access lower than usual interest rates.
I want to direct a question to the Minister regarding the Small Business Development Bond and the Small Business Bond and ask him to give me some idea of the numbers involved, so that we have an idea of the usage of these two very important assistance programs for small business. Could he give me some idea of the numbers involved over the last 12 months, or whatever would be an appropriate period of time for which he would have statistics?


Paul James Cosgrove: Mr. Chairman, the only way in which I could respond at this time is, of course, to draw the attention of the Hon. Member to the amounts that have been taken down- over $2 billion under the Section as originally designed and a further $200 million under the Section proposed to be amended.


Nelson Andrew Riis: I seek a point of clarification. Is the Minister saying that $2 billion has been allocated under the Small Business Development Bond and $200 million under the Small Business Bond?


Paul James Cosgrove: No, Mr. Chairman. What I was pointing out was that historically, since the unamended Section has been in place, over $2 billion was drawn through the Small Business Bond by small businesses. Since the amendment directing and targeting toward those businesses in difficulty, the amount taken down in that period of six months has been, roughly, an additional $200 billion.


Nelson Andrew Riis: I thank the Minister for those figures. They certainly point out that the Development Bond was put to good use. I want to direct a specific question to the Minister regarding the Small Business Bond. Does he have any indication he could provide Hon. Members of the use to which the Small Business Bond has been put?


Paul James Cosgrove: A colleague of the Hon. Member made reference to a study conducted by one of the accounting firms, an analysis of the use, which I did not have at hand. The contention was that the majority of the funds had been used by

March 17, 1983
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farmers and fishermen. Our subsequent research would confirm that it breaks down to something like 60-40; that is, 60 per cent by the farming and fishing communities and 40 per cent by other categories.


Nelson Andrew Riis: Again I thank the Minister, because it gives an idea of the breakdown of category. Is it possible to obtain any idea of the number of Small Business Bonds which have been allocated or, if that is impossible, at least the amount of money attached to the Small Business Bond?


Paul James Cosgrove: No, we do not have the numbers. The numbers are not up to date; that is, the number of users or the number of people who have applied and actually been candidates for the bond. The figures I have just given the Hon. Member indicate that under the proposal, as amended, it has been over $200 million; we know that. Prior to that it was somewhere over $2 billion that was used under the Section before its amendment.


Nelson Andrew Riis: Mr. Chairman, perhaps I have lost track of where we are in this, and I apologize for my inability to follow the Minister's description. I understood him to say that the Small Business Development Bond had issued $2 billion worth of funds before it was amended, before the development portion of it was taken out of it, and that since then it has been $200 million. That is one thing.
My question was: What amount of money has been allocated out into the small business community under the Small Business Bond? In a sense we have now moved to Clause 9, referring to the Small Business Bond only.


Paul James Cosgrove: I am advised by my officials that the significance of Clause 9 was really the introduction of the application of the Section to unincorporated businesses as opposed to incorporated businesses. Again we do not have a breakdown as to how many unincorporated businesses have taken it up as a percentage of the users of the $200 million since the amendment was introduced. But the import and significance of Clause 9 was really a result of representations from constituents of Hon. Members on both sides of the House that the bond be available to unincorporated businesses. Also I am advised that the Section has only been in place for six months and we do not have the figures broken down as yet.


Nelson Andrew Riis: Mr. Chairman, I appreciate that we do not have any figures in terms of the moneys allocated. Another question I want to put to the Minister concerns something about which I have been informed as a Member of Parliament on a variety of occasions. When a small-businessman in trouble has approached chartered banks and said: "I am on the verge of bankruptcy; I would like to obtain a loan under the Small Business Bond", the response of bankers has been essentially to laugh at the individual. For example, bankers have said that they are not in the business of lending out money to businesses in financial difficulty. Considering that the banks through their own admission-and I do not necessarily agree-have indicated that they are interested in supporting only viable small businesses as they define them, businessman after businessman has approached the bank only to be turned away.
They have come to my offices and said: "You told me that there was something called a Small Business Bond in place to assist small businesses in financial difficulty", as the Minister himself has defined. Yet when these individuals went to the banks, they were rejected outright and told: "We are not interested in that program for a variety of reasons". Does the Minister believe that the banks of Canada are co-operating with the Government of Canada on the issuance of Small Business Bonds at this time?


Paul James Cosgrove: Part of the response would be to remind the Hon. Member that our figures indicate that over $200 million has been used under this bond provision since the amendment was proposed. We know it has been effective to assist people in the small business category to that extent during this period of time, which is the last six months. Some Hon. Members have said yes but the Section as unamended, that is, the development provision of the Section when it was first introduced a couple of years ago, had a takedown of over $2 billion. I pointed out on the six-month experience that it is difficult to compare those two figures because we do not have that much experience.
The Minister of Finance has reviewed representations such as the one made by the Hon. Member. My recollection is that it was a matter raised by him when he met with representatives of the Bankers' Association just recently in preparation for his budget. He raised the point, brought it to the attention of the senior executives of the Bankers' Association and asked if they would alert their officials to apply whatever discretion they are permitted under the bond so as to make it available whenever and wherever possible.


Nelson Andrew Riis: Mr. Chairman, could I ask you to give me some indication of how much time I have left?


Roderick Blaker: I am advised the Hon. Member for Kamloops-Shuswap has eight minutes remaining.


Nelson Andrew Riis: Mr. Chairman, I want to pursue one aspect. I thought the Minister told me in answer to my previous question that the Government had no figures on the amount of money loaned out under the Small Business Bond. Yet the Minister has now indicated $200 million was the amount loaned under the Small Business Bond.
I want to pursue this line of questioning for clarification because it is important to the small business community. I want to approach the question in three parts. Will the Minister tell me the amount of money loaned out under the Small Business Bond when the development component was a reality?


Paul James Cosgrove: Yes, Mr. Chairman. That was the original figure I mentioned of somewhat just over $2 billion. The $200 million figure I gave in response is a combination of Clauses 8 and 9. The amendment did two things. It made the bond available to unincorporated entities and also targeted it toward
March 17, 1983

those small-businessmen who applied for it because of financial difficulty. On the basis of that six-month experience, with the kind of information we have, we have not been able to determine whether it was the unincorporated entities which used the $200 million of the corporations. But the $200 million figure indicates the amount of take-downs under the combination of Clauses 8 and 9 since the amendment was flagged some six months ago.


Nelson Andrew Riis: Mr. Chairman, is the Minister saying that for all intents and purposes the Small Business Bond and the Small Business Development Bond in its revised form are essentially the same thing?


Paul James Cosgrove: Yes, Mr. Chairman, and available now to unincorporated small businesses as well as to incorporated small businesses.


Nelson Andrew Riis: Mr. Chairman, would the Minister agree that one of the problems facing the small business community today is the difficulty of building up equity in a small business? If that is a problem the Minister recognizes, would it be in the Government's interest to assist the small corporation in building equity?


Paul James Cosgrove: Mr. Chairman, one of the amendments with respect to that Section, in response to the difficulty identified by the Hon. Member, is to make the bond provisions available to small businesses but in greater scope, so that in effect the bond is available not only in the original amounts as set out in Clause 8 as introduced, but also permitting small businesses to take advantage of the small business rate and qualifying for a larger amount of business with a larger base.


Nelson Andrew Riis: Mr. Chairman, one of the ways the small business sector had of building equity was to use the taxable dividends to its shareholders as a way of putting off the time when accumulated earnings would be in excess of $1 million under the new definition of small business. This then allowed the small business, if you like, to use the taxable dividends to reinvest in the company. In other words, to build equity and at the same time enable the small business to hold off the date of being classified as a large business, and therefore entering a higher tax bracket.
My question is really two-fold. What is it that is so magical when accumulated earnings one day reach $1 million and the next day the tax rate essentially doubles for that small business? Could the Minister explain the logic behind that definition or it is totally arbitrary? Why has the Minister decided that he will not now allow the taxable dividends to be used as a reduction in the definition of a small business?


Paul James Cosgrove: Mr. Chairman, I would be happy to respond to the Hon. Member's question when the Clause pertinent to his question is before the Committee, which is Clause 86. It would be the intention of the Government to introduce some amendments to Clause 86 but we are not there yet. I do not think it would be proper for me to go into the item now unless
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we have consent of all Members, and the Hon. Member for Mississauga South is indicating that he does not consent.


Nelson Andrew Riis: Mr. Chairman, could I ask the Minister to clarify whether he was referring me to Clause 86 regarding the definition of the taxable dividend that is being removed as an option for the small business?


Paul James Cosgrove: Mr. Chairman, I was referring to Clause 86 which deals with tax rates, and also Clause 109 which deals with dividends.


Nelson Andrew Riis: Mr. Chairman, I would ask the Minister a general question rather than refer specifically to the content of those two Clauses. We are talking about small business in Canada. We are talking about bonds and development bonds to assist that sector. That sector is defined in this particular Clause as a company that would end its definition of a small business after accumulated earnings had reached $1 million. What is the rationale for that definition? What is it that changes in the small manufacturing shop or the small business the day after the accumulated earnings reach $1 million?


Paul James Cosgrove: Mr. Chairman, that relates to two Clauses, one of which is Clause 109, the definition section. The Hon. Member poses the difficulty I have in trying to respond to a Clause which involves a combination of two, which is part of the difficulty in introducing material. If we only discuss them in chronological order, it prevents us from logically dealing with this issue.
I see that the Hon. Member for Mississauga South is chuckling as he recognizes that that is a difficulty.


Donald Alex Blenkarn: I rise on a point of order. The question is very relevant. This particular Clause deals, in fact, with the small business limit of $75,000 and amends it to increase it to $1 million. My friend the Hon. Member for Kamloops-Shuswap is absolutely right. To try to avoid answering the question on the basis that the Minister would like to play around with the Bill a bit is just wrong. The Minister is here to answer questions and that is a vital part of this Clause.


Nelson Andrew Riis: Mr. Chairman-


Roderick Blaker: The time allotted to the Hon. Member for Kamloops-Shuswap has now expired. He will, of course, be able to speak after the intervention of another Hon. Member.


Mr. Schellenberger:: Mr. Chairman, I want to follow along the lines of the questioning of the Hon. Member for Kamloops-Shuswap because, as a Member, I deal with issues in my constituency involving small businesses in financial trouble due to high interest rates. The Small Business Development Bond and then the Small Business Bond became very important to those people. They found that when their Member consulted with the Government as to what assistance was available to

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them when they did find themselves in some financial difficulty due to high interest rates, the Government continued to say: "We have the Small Business Bond, the Small Business Development Bond, and then the other bond to assist those businesses". However, they found that when they went to the banks to ask for the use of the bond, the banks would consider their financial statements and say: "Well, you are having difficulty; you are in financial trouble and we are the ones who must take the risk. Therefore, we do not feel that we can lend the money to you." It became a bit of a farce, because when the businesses were in trouble and looking for assistance, they went to the banks thinking they could use the bond but found that the banks said: "Sorry, you are a risk and we cannot provide that assistance to you".
I placed a question on the Order Paper as to how much money had been given out. The answer was provided in the millions of dollars. I believe the figure given by the Minister was correct, some $2 billion, and it was broken down into Provinces.


Donald Alex Blenkarn: That was the Development Bond, not the Small Business Bond.


Stanley Kenneth Schellenberger: It was the Development Bond. However, there was nothing which indicated to the Member of Parliament whether or not the Development Bond was used to assist businesses which were in financial difficulty due to interest rates, or whether it was just given to the businesses which were in reasonable financial shape. With some assistance through the bond, the banks were really taking no risk at all; they were just putting the businesses in a little better financial position.
At that time I wondered whether the Government had any ability to monitor a program which it announced and was bragging about to the people across this country. I wanted to see whether the banks were in fact assisting businesses which were in some financial difficulty or whether they were in fact just lending to the businesses which were really good risks anyway and which, by using the bond, the banks could make even that much better risks. That question has never been answered.
1 want to ask the Minister whether this was just another program thrown out for public relations purposes and to assist some businesses, but with really no mechanism in place to determine whether it was in fact doing some of the work that it was intended to do, concerning which Ministers have responded to me that this was to help businesses in trouble.
After I pursued that matter a little bit, I found that there was in fact an organization in a building here in Ottawa, on Metcalfe Street, called the corporate rulings division which was available to small businesses if they found they were turned away from banks and really had no other place to go but perhaps into bankruptcy. This organization was prepared to consider their financial picture and make some rulings as to whether the banks were in error and should provide the bond or whether it should not be given.
Therefore, I presented a typical case in my constituency before the organization and after about eight or ten weeks the response came back, and I was very interested in it. The
response was: "It looks like you ought to be able to apply for the bond but we would like to know from you whether you have any relative from whom you could borrow money or any assets which you could sell off to come up with some money", and it went on and on. There was a long list of suggestions which I am sure any business in financial difficulty would have already pursued. Therefore, that was not of any assistance either.
I guess that what I am saying in my little address to the Minister is that when such programs are brought forth, there ought to be some ability to monitor them to see whether they are in fact doing the job. Ministers respond: "Look, you are in financial difficulty and you can use this bond". We, as Members, sit down and say: "Great". I can tell my constituents that a program is available to them. However, when we return to our ridings, we find that when these people go through the process it is not, in fact, of any assistance to them at all. If there is any monitoring ability, I would like to know about it. I do not suspect there is.
When a program is brought forth, why is the fact not announced that there is a division called the corporate rulings division which can assist businesses which have made applications but have been turned down and have thrown up their hands, not knowing where to go? Why is that information not also made available to assist them in these cases?


Paul James Cosgrove: Mr. Chairman, I have already indicated that the Section, as amended, has only been in force for a few months. I am advised that Revenue Canada is a Department which administers and reviews the elections. I cannot indicate whether there is a sophisticated system in place for monitoring applications under the Section in the way in which I believe the Hon. Member is asking that it be done. I would think that the experience under the bond is so new that it probably is not the case. However, we have heard representations. The Minister has heard representations such as those made by the Hon. Member and other Hon. Members and has raised that concern, as I recall it, with the Bankers' Association. Certainly it is something which we can continue to flag and bring to the attention of the banks.
However, I would also point out that there are other remedies and programs available as well to the very person I suspect the Hon. Member uses as an example. The Small Businesses Loans Act is another way in which the funding is made available at a reduced rate. Legislation concerning the program will shortly, I understand, be before Hon. Members. With the assistance of Hon. Members from both sides of the House, yet another program can be made available to people in the small business sector who are looking for assistance at this time.


Stanley Kenneth Schellenberger: Mr. Chairman, I know about the small business loans program. In most cases it is 1 per cent above prime.


Donald Alex Blenkarn: That's what it is.
March 17, 1983


Mr. Fisher:: That's not true. Why do so many people use it?


Stanley Kenneth Schellenberger: It does not assist businesses, particularly farms with large capital outlays, in order to purchase equipment, to place crops in the ground or whatever. When interest rates rise as they did in the last few years, the only way that most of these businesses which are capital-intensive can continue to exist, especially if they are at the mercy of the whims of nature, such as those in a farm position, is with assistance on the interest. That is why the Small Business Development Bond is so attractive. It did lower the interest rate and allowed those businesses in relatively short-term difficulty due to interest rates to use it as a good way of getting over the hump of a rapid rise in interest for a year or two.
That is why this was such an excellent program and why it was so important that it be monitored to see that the banks were in fact giving bonds to those businesses which really needed them in the short-term, rather than to businesses which perhaps could have made it through but which, by giving them the bond, just made them that much better of a risk.
I guess the other question which was not answered is the use of the corporate rulings branch. Why did we not get information provided to us about this branch which is an alternative for small businesses to go to when banks turn them down? It has been my experience that if one is turned down by one bank on a bond or a loan and one goes to another bank, the information is generally there. The banker says: "Well, you do not deal with us; why are you coming here?" Unless one is not going to tell the truth, the answer has to be: "Well, I have been turned down by my bank and I am looking for a bank that is more amenable to my terms". That generally does not work. Probably only one bank in a thousand would look at these types of things.
So the corporate rulings division, I think, is a very important aspect. I was not aware of it, as a Member, for a number of months until I got into two or three cases intensively.


Paul James Cosgrove: Mr. Chairman, the corporate rulings division should be the Section that does provide answers to small businesses, proprietorships or corporations. Its mandate is to assist this sector of the economy. I agree with the Hon. Member that ten weeks would be very frustrating to someone who is looking at problems of meeting weekly payrolls and the like. On the other hand, I wonder if because there are a number of requests the division has backed up. If it is backed up, of course, that is good and bad. It means it is serving its mandate, but it also means, unfortunately, that a large number of people are looking for assistance and signalling their need for assistance.


Stanley Kenneth Schellenberger: I will just conclude my remarks by saying that I know the bond is something that we should build on. It has a lot of ability to assist small businesses, particularly the farm community, through difficult times. Due to a rapid high interest increase in the country or some pestilence of nature that hurts a farm, farmers may require a low interest
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rate for a few years to get over this difficulty. We ought to build upon it and set up a monitoring system so we can see that our financial lending institutions are providing the kind of requirements that we, as politicians, see these bonds offering, rather than just a tool to assist those businesses that are fairly viable and would be just that much more viable if they used the bond. The figure of $2 billion looks impressive. My concern is as to whether it really assisted those businesses that were in dire need or not.


Mr. Rompkey:: Mr. Chairman, I just wanted to make some comments apropos of what the Hon. Member was saying about small business. I heard the last part of his speech. I understood that what he wanted was support and help for small businesses.
I wanted to remind him that if he is serious, and I know that he is, about giving that help and support, he might want to consider talking to his House Leader and to his Leader about the passage in the House of three important items for small business.
The Small Businesses Loans Act is due to expire at the end of March and the Rural Development Incentives Act needs renewal. The small business investment grant is presently before the House. At the end of March-


Roderick Blaker: Order, please. The Hon. Member for Calgary West on a point of order.


Mr. Hawkes:: Mr. Chairman, I understand it is a requirement of the Chair that the Chair rule on relevancy. How on earth is this revelant to the Clause under discussion? In fact, it is an attempt to mislead the House. We have not seen that legislation brought before the House. It is the duty of the Government House Leader to bring legislation before the House so that we can debate it. It is not brought forward but Government Members stand up and talk about it while we are dealing with another Clause.


Roderick Blaker: The Chair is having some difficulty. I was noting the Minister's remarks and wondering where his comments were going. Perhaps he could point out where he is going, so we can ascertain if that is relevant at the moment.


Bill Rompkey: Mr. Chairman, as I understood the main point-


Donald Alex Blenkarn: A point of order, Mr. Chairman.


Roderick Blaker: I want to tell the Hon. Member for Mississauga South that if he is going to raise a point of order he should be making a point of order and not enter into the debate. I have yet to hear the Hon. Minister of State for Small Business in order to determine whether the comments he is making are relevant to the Bill, and I have to hear him before I can make that decision.
The Hon. Member for Mississauga South on a point of order.


Donald Alex Blenkarn: Mr. Chairman, my point of order is exactly that. This is Committee of the Whole House. The Minister of

March 17, 1983
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State for Small Business is a Member of the Government. Is the Minister being recognized as a private Member, or is he being recognized as the Minister for the Government replying to questions? Because the question really is that we have before us the Minister of State, who is the witness before this Committee, answering the questions of the Committee. Now we have a situation where another Member of the Government stands up, without any jurisdiction to handle this piece of legislation, and proceeds to become involved in it.
My point of order is this. We have to know from where he comes. Does he come as an ordinary Member? My position is that he is not entitled to be recognized in the Committee as an ordinary Member unless he is allowed to cross-examine his Cabinet colleague on the floor of the House, and I do not think that is right. Or is he being recognized as the Minister responding to a question, in which case it is not his portfolio? In neither case has this Minister the right to interfere in this debate at this point.


Bill Rompkey: Mr. Chairman, on a point of order-


Roderick Blaker: Order, please. I want to resolve one issue at a time, if I may. The Minister has every right to participate in debate of the Committee of the Whole. We may do so as any other other Hon. Member does.
That matter is settled, but I was having some difficulty as to the relationship of the Small Businesses Loans Act and the Rural Development Incentives Act to which the Minister was referring, so I simply point out to him that there remains in issue whether or not the Minister's comments are relevant to the Bill before us.
If he would now care to take the floor, obviously it would be helpful if he could point out how these matters are relevant to the Bill and to the Clause, and then we could all proceed.


Bill Rompkey: Mr. Chairman, I thank you for recognizing my rights as a Member of Parliament. I do not hold it against the Hon. Member because he happens to be a Member of the Opposition. I fully support his position as a Member of the Opposition and I hope he stays a Member of the Opposition for a long, long while. On the other hand, he should not discriminate against me because I happen to be a Member of the Government. I have a right to speak on behalf of farmers and fishermen who are going to be hurt at the end of March unless certain legislation is passed. These are small businessmen. They are helped by the Income Tax Act. They are also helped by complementary Acts such as the Rural Development Incentives Act and the Small Businesses Loans Act. These are tax measures too, in a way, and that is the relevance, Mr. Chairman.
We are talking about support across the board that this Government and this Parliament provides for small business. That is the point that he is making. I am saying to the Hon. Member and to the Opposition that, if they are serious about giving that help, they will pass without any debate the Small Businesses Loans Act which expires at the end of March; they will pass without debate the Rural Development Incentives
Act; they will pass without debate the small business investment grant. If that legislation is not passed by the end of March, there will be no further help of that kind for small businessmen, including farmers and fishermen. That is the point.


Roderick Blaker: Clause 8 in this Bill does have reference to the Small Business Development Bond, but I find that when I take the Minister's words at large, to me they do not seem to address themselves to Clauses 8, 9 or 128(12). However, we have arrived at the pont where in any event the Minister appears to have completed his remarks. If someone wants me to rule, in fact, my inclination would be to rule that that was not quite in order.


Frederick James (Jim) Hawkes: Mr. Chairman, we will try to get back to Clause 8 and 9, but it would be nice to be able to ask the Minister of State for Small Business why, with three such important pieces of legislation on his personal plate as Minister, his House Leader is bringing in a betting Bill on Friday and a take-over-the-agricultural-industry Bill on Monday. Why is the Government priority in that direction when small businesses are hurting? It would be nice to ask him that question in light of his out of order intervention.
I come back to Clauses 8 and 9. Do we see this legislation and this particular Clause before us today because the Minister could not find assistance for the farm community, and could not get something passed through Cabinet? Are we bending this in the direction of farms because the Minister of Agriculture is falling down on the job?


Paul James Cosgrove: No, Mr. Chairman. I am surprised that the Hon. Member, with his experience in the House, would not know that he will have an opportunity in a very few minutes to raise any question he wishes of either the Minister responsible for small business or the Minister of Agriculture. The Hon. Member really is blowing hot and cold. He is speaking out of both sides of his mouth at the same time. He criticizes the Minister for making a statement and then raises a question about another Minister, knowing full well that the time to do that is in Question Period, not now when I am looking Clauses 8 and 9 perforce.


Frederick James (Jim) Hawkes: Mr. Chairman, the Minister has gone out of his way to indicate that the change in the law is to allow unincorporated businesses to participate in the Small Business Bond. Can the Minister confirm that about 90 or 95 per cent of the take-out by unincorporated business is by farmers in trouble? Is that where the money is going?


Paul James Cosgrove: Mr. Chairman, I hope the Hon. Member will raise that question with the Minister of Agriculture so that he can use the hour in Question Period to deal with the numbers of different types of programs and assistance that the Government provides to the agriculture sector, including small farmers. It might be constructive.
March 17, 1983

In response to the Hon. Member's question, I am very pleased that this is yet another example of assistance by the Government of Canada available to the farming community. No, I do not confirm the figures used by the Hon. Member. Had he been here when that question was asked by one of his colleagues earlier in today's proceedings, he would realize that the best information we have is that his 90 per cent figure is way out of line.


Frederick James (Jim) Hawkes: Mr. Chairman, I am just dealing with unincorporated businesses which take up the Small Business Bond. If that figure is way out of line, what is the figure? What proportion of this take-out by unincorporated businesses deals with farming?


Paul James Cosgrove: Mr. Chairman, we indicated earlier that as far as the amended Clause is concerned, that is the $200 million that has been used under the amended Clause, which for the first time makes the bond available to unincorporated businesses and which targets aid to those in need, the breakdown is something like 60 per cent to the farm-fishing community-I do not know whether we have broken those two down-and 40 per cent to other categories.


Frederick James (Jim) Hawkes: Mr. Chairman, one of my colleagues the other day, at the beginning of this debate, tried to get an indication from the Government and was not very successful. We are moving from a development bond to, in the Minister's own words, a survival bond. Is it the Government's opinion that development is no longer needed in the country?


Paul James Cosgrove: Mr. Chairman, I have responded to that question posed in different ways not only by Members of the Conservative Party but the New Democratic Party. The Government, faced with objections by the Hon. Member and his colleagues that we should attempt to retain Government expenditures at reasonable levels and in our borrowing practices and deficit financing attempt to keep reasonable support measures in force, at the same time takes into account that we have automatic programs which have increased our deficit requirements. There are a limited number of dollars to be shared in various sectors in support programs. We estimate this particular program will cost an additional $25 million in foregone revenues to the Government. That is a significant amount of assistance toward the farming-small business sector. I suppose we wish we had the support of Hon. Members to increase the deficit and expand the programs to make them available to everyone who expresses a need; but surely the Hon. Member cannot criticize the Government on one hand for having too high a deficit and then make the representation he just made that we expand the deficit so as to help people in the small business sector.


Frederick James (Jim) Hawkes: Mr. Chairman, it is most annoying for the Minister to stand up-and the Parliamentary Secretary did this yesterday-and keep putting words in my mouth that I did not utter, and put ideas on the floor as if they were mine when I never made them. I have never in the several days of debate suggested that the Government expand its deficit.
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I have a suggestion for the Government. The Government gives $1 billion each year to a corporation in this country called Petro-Canada. It could take that $1 billion and lend it to small businesses. That would do a lot more for the Canadian economy and our world-wide reputation. That is not an expansion of the deficit; it is a conscious public policy decision on how to spend funds. Our quarrel on this side of the Chamber is consistently with the Government's decision on how to spend funds.
To get back to the essence of the Clause and the shift from development to survival, is it the Government's opinion that a small Canadian business in trouble is more likely to survive with a low-cost loan as opposed to a guarantee? Are small businesses in trouble more likely to benefit from loan guarantees or low interest rates?


Paul James Cosgrove: Mr. Chairman, I suppose that is a decision for individual businesses, whether it be a sole proprietorship, a fisherman, small manufacturer, salesman, or someone providing personal services. Individuals will have to decide what Government programs or assistance are most suited to their needs. If the Government were pressed to make the hard choice that the Hon. Member puts to us, either Petro-Canada or small businesses, or small business having either a program of guarantees or an interest reduction, whether the Hon. Member agrees or not he is, in effect, placing the Government in the position of decision-maker when that should be the individual in the community.
That is one of the differences between the approach which the Government takes and that urged by the Members opposite. The situation is not black and white. We would not want to interfere in the economy to a greater extent than necessary. As a policy, we believe it is important to offer a choice to people whose situation, even in the same types of business, must be difficult. If we do not, Mr. Chairman, then I believe we are, philosophically, becoming big brothers. I am surprised that that would be a philosophical point which the Hon. Member would use in approaching problems in light of the many statements which come from his colleagues about Government getting out of the business sector. The Government's approach is to provide programs which offer choice and to leave the choice up to the individual operator, whether it be a corporation or a sole proprietorship, a person just starting out and doing his own thing.


Frederick James (Jim) Hawkes: Mr. Chairman, you would almost think the Minister would be embarrassed as we get into the issue of choice. Tomorrow his Government intends to bring forward to the House a new form of taxation of the poor. It is voluntary, but it is taxation of the poor, and this Government is moving that to a priority when in fact the Canadian economy is in deep trouble. I fail to see the logic of a Government policy to increase taxes on the poor of this country, even if it is voluntary.
Coming back to the Bill, these particular Clauses were developed by a previous Government which had a record of

March 17, 1983
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creating 30,000 to 35,000 jobs a month on average in the Canadian economy. That was what the Development Bond did. The theory was that small business would respond and expand and create jobs and activities if you had a "carrot" called lower interest rates. That is where this whole discussion of these clauses comes from. It is a carrot to expand and develop.
We have a piece of legislation now, however, which amends that original carrot and says: "We will give a low interest rate to a business which is bankrupt, which is functionally bankrupt". If you move around the business community and talk to the owners of small businesses which are in that kind of economic difficulty, or close to it, they will tell you that the secret to their survival, if survival is possible, is an infusion of cash. They are less worried about the cost of the cash, although it is a concern; their big problem is that they cannot get cash. The traditional lenders in Canadian society will not give them the money to stave off bankruptcy.
We have had a lot of answers from the Minister, Mr. Chairman, which indicate to us that the take-up rate is very slow. May I suggest to the Minister that the reason for the slow take-up rate is that the program is inappropriate to the problem. To step into a bankruptcy situation and provide an infusion of cash which will increase the probability of survival, what you need are loan guarantees. In order to get the money lent to those companies, you need loan guarantees. You could put the money in at lower interest rates, as was tried with the bonds, but it is the guarantee nature of it which is really critical.
If the Minister looks at the take-up rates for this program, he will find a common characteristic in the bulk of the businesses which receive this kind of money, and that is that they have tangible take-over assets such as land and vehicles. Lenders will only lend with the thought that they will be able to take those assets away from people if in fact the business goes belly up. Those businesses which have intangible assets, such as service, customers and so on, are not very successful, yet they are the high employers in this country. We have 1,600,000 unemployed people and the small business sector is our potential salvation. Some parts of that sector are much more employment-intensive than other parts, and it is the employment-intensive parts of that sector which are not helped at all by the survival program. It is the employment-intensive parts which were helped by the Small Business Development Bond. It was that kind of business which was encouraged to expand with the development aspect. May I suggest to the Minister that we have in these Clauses a distortion of a good idea to an inappropriate situation. Can the Minister stand up and indicate whether or not it is Government's opinion that my logic is faulty?
I own a small business, Mr. Chairman. I belong to those organizations. I am in contact on a daily basis with businesses which are in considerable trouble in my city of Calgary. In that city the economy has deteriorated so rapidly it is difficult to comprehend, from two-tenths of 1 per cent of a vacancy rate to over 12 per cent in less than 12 months. 9We have a city which people are leaving in droves and all the small businesses in that city are in trouble. Their markets have dropped by half
in a 12-month period. The difficulty for them, Mr. Chairman, is not obtaining a bankruptcy loan at low interest rates; it is getting a loan in the first place. That is where the difficulty is, and the only way they are going to be able to hold on is by loan guarantees.
Will the Minister consider changes in the direction I propose?


Douglas Glenn Fisher: Mr. Chairman, the Hon. Member has raised the whole question of developing small business and he has focused the debate on bailouts, on the one hand, versus growth, on the other hand. He has posed his question as if they were opposites rather than part of a smooth spectrum, and I would like to put the whole problem back into focus.
We talked about this situation at great length in the Committee on Finance, Trade and Economic Affairs. We talked about small business relief and small business taxation for almost a whole month through September, and we came to some very useful conclusions which I believe I should point out to the Hon. Member. If tradition follows, and if Hon. Members' behaviour follows through, then perhaps the Hon. Member from Kamloops might also find the comments I have to make about small business could help him. I look forward to any comments he might like to make in the future.
The Hon. Member opened the issue of development, and I would like to put that into perspective for him. 1 would like the Hon. Member to remember that the Small Business Bond which we are talking about now has been broadened to new groups of people, to unincorporated businessmen such as the professionals he was describing a few days ago, and to farmers. It has been focused more on helping those people in genuinely desperate situations. It was not intended from the time of that focusing onward that this measure should help everyone. It was intended as special targeting for those people who really needed that targeting the most. The Minister of State for Finance has very clearly pointed out that at a time when resources are scarce, when help is badly needed, you go first to those who need help the most. That is precisely the attempt which we are making here, to focus in on farmers, on unincorporated businessmen and on incorporated businessmen, who need help the most.
In this Bill there are other measures which the Hon. Member refuses to acknowledge. In fact, when the Minister of State for Small Business rose to ask about these measures and to comment on them, the Hon. Member said that he was talking irrelevancy. He wants to deny that these measures exist. He does not want debate on the broader issues. Well, I am going to raise them because he has asked about development and I want to answer him. He would not let the Minister of State for Small Business do it so I will, and let us see if he wants to interrupt me. If he does we will continue on with a bunch of silly procedural points instead of telling taxpayers where they can get some help.
First of all, the Hon. Member refuses to acknowledge that every small business in this country has the opportunity under this Bill to retain an extra $250,000 at the small business tax
March 17, 1983

rate. The Hon. Member wants to know about equity and operating funds. The fact is that every small business in this country can keep another $250,000 at the small business rate instead of the big business rate. That money is taxed at a lower rate and the money stays in the hands of the business for its use. According to the testimony we received in Committee, that was a significant piece of help.
Secondly, every one of these businesses is eligible for a small business loan under the Small Businesses Loans Act. They are also eligible for a grant under another Act. These are not general assistance programs; they are targeted to develop exactly the results the Hon. Member is describing.
Finally, the Hon. Member asks again, as if there were a dichotomy, why do we help a large corporation instead of a small corporation? Why do we give money to PetroCan or Chrysler or some of these other large corporations? I turn the question back to him. I want to know from him why small-businessmen write in and tell us to do this. Does he think that there was only one large company which benefited when we helped Chrysler? If so, why did scores of dealers across the country write to us and tell us as independent businessmen that they did not want us to forget the help for Chrysler because they, as small-businessmen, depended on the help we were giving to big business. Suppliers, exploration companies and all kinds of small businesses all across the Hon. Member's Province of Alberta benefit whenever we help PetroCan or any other large company. Why does he not go to those people and tell them that he wants to cut off this help and cut off their lifeline through that larger corporation? Small-businessmen are not stupid, they understand the implications of what he is saying. They know that if we cut off aid to large business, that will in turn cut off their source of revenue and their livelihood. They know that and they do not endorse what he is saying.
Now, Mr. Chairman, the Hon. Member asked us about how do we help to develop small business? I agree that is a legitimate question but I do not think he should put it as though it were a dichotomy. He should not be saying that it is "either or". He should recognize that scarce resources should go to those who need it most in times of great despair, the way the Small Business Bond does it. I am astonished, Mr. Chairman, to hear the criticism considering that in the great Conservative tradition we have left tax dollars with the businessmen by lifting the small business tax rate ceiling from $150,000 to $200,000. Instead of $750,000 retained surplus, it is a full million. Those are measures of relief for small business. They help small business.
Then there are the other measures both I and the Minister of State for Small Business had mentioned, and I think that instead of getting into a lot of procedural stuff, the next time the Minister wants to stand up and exercise his rights as a Member and tell us what he is doing, we should listen so we can inform our constituents a little better the next time the opportunity arises.


Donald Alex Blenkarn: Mr. Chairman, the position we take on the Small Business Development Bond is that these amendments have effectively gutted it. In effect, it terminated at the end of December, 1981, and it is our feeling that the SBDB which
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made money available to small business for expansion and growth should be carried on. I remind you, sir, that the period of March to December 31, 1981 was the only period of time when the legislation was really in effect. Even though it was backdated to December 11, 1979, the Bill was not passed by the House until March of 1981. From then until the end of 1981 $2 billion was advanced to small business and a great deal of the prosperity that we enjoyed through that time was a result of the advantages of that bond. Our view is that the SBDB in its original form should be a permanent piece of the income tax legislation of this country, allowing small business the opportunity to continue to negotiate advances under that concept.
With respect to the Small Business Bonds, that is essentially a bailout concept. We see nothing wrong with that, but we have already made many points about it before this Committee. The bailout bond is cosmetically attractive, but as a practical matter it does not work. Indeed, many have described it as a "bailout the bank bond". That is really what it is because the only time a bank will lend money on a bailout bond is when the bank is really stuck on a loan to the customer in the first place. You owe your banker $200,000 and he has you tied in at two over prime and finds you cannot pay that. He then determines you are in financial difficulties and rewrites the loan as a bailout bond at one half of prime plus one. He has not done anything for you, he has done something for himself. That is the only time these bonds are ever used, but they do form a bailout system and make it possible for people to bail themselves out. Therefore, I move:
That Subclauses 8(3), (4), and (5), and 9(3) of Bill C-139, an Act to amend the statute law relating to income tax (No. 2), be amended as follows:
1(1 )(a) by striking line 41 on page 26 and substituting the following "December 11, 1979",
(b)	by striking line 2 on page 27 and substituting the following "issuance of'
(c)	by striking line 6 on page 27 and substituting the following "1979"
(d)	by striking lines 13 and 14 on page 27 and substituting the following "11, 1979 in respect of scientific research"
(e)	by striking line 35 on page 27 and substituting the following "by a Canadian-controlled"
(f)	by striking lines 39 and 40 on page 27, and substituting the following "after its issue date, or"
(2) and by striking line 12 on page 31 and substituting the following
"198i"
Essentially, the amendments would make small business financing a permanent part of financing in Canada and available to small business. There has been a lot of argument to the effect that this is a tax expenditure that costs the Government money. The Canadian Federation of Independent Business has done a lot of study on the subject of Small Business Development Bonds and has concluded that, in terms of additional tax revenue, the bonds more than paid for themselves. The effect is that the Small Business Development Bond program did not cost the Government anything in lost revenue and, therefore, should be a permanent part of our tax

March 17, 1983
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financing. What we are really doing is making sure that money flows into new investment. When there is new investment there are new jobs. The money is being made available in this fashion at a lower rate for new investment and new jobs.
The whole concept of income bonds, or whatever one wants to call them, made it possible for the Government originally to buy Pacific Petroleum for Petro-Canada. It was on the basis of allowing relatively cheap financing that that transaction could take place. That has been abandoned in the area of large business and perhaps that is quite proper. In the small business area, however, there is no reason to abandon it. Small businesses should be able to expand and borrow expansion money on an after-tax basis. This type of after-tax financing makes sense.
The Government has a number of programs for small business. When John Bulloch appeared before the Finance Committee to speak on the programs that Government offer for small business, he indicated that there are about 1,000 programs and most of them could be scrapped. He said that small business wants tax incentives. This is a tax incentive, Mr. Chairman. If the Government wanted to do something for small business it would get rid of a host of other programs. That is why we have introduced this amendment.
Small Business Development Bonds have proven to be a superb way to stimulate the economy and to give small business a break on financing. It is far better than the Small Businesses Loans Act ever was and is far better than small business grants are. A lot of money would be saved if we did things this way. Things would get moving and businesses could take advantage of the provisions and get people back to work.
I should like to ask the Minister why the Government does not take advantage of a scheme that has proved itself so that the economy can be stimulated. Why does the Government introduce all sorts of other bureaucratic schemes when the small business community has said it does not want any more programs but just some straightforward tax incentives such as that offered by the Small Business Development Bond?


Paul James Cosgrove: Mr. Chairman, we are ready to vote on the Hon. Member's motion. We cannot support the amendment because we think the effect would be to increase the deficit, ignoring the scarce resources of the Government at this time. It would not help the people who are in need and it ignores the other programs that are available to the small business sector. We are ready to vote and to indicate that we cannot support the motion at this time.


Nelson Andrew Riis: Mr. Chairman, I support the amendment in principle. I do not believe the Minister was listening carefully when he said that it would result in an increased deficit. The Hon. Member for Mississauga South indicated that the revenue gained from the Small Business Development Bond in fact offsets the cost.
I should like to mention one of my concerns regarding the Small Business Development Bond in its past state as well as in its present state. In order to work, it has to be to the tax
advantage of the banks before they are interested in welcoming small businesses that approach them for tax relief. When I read the financial statements of the Royal Bank of Canada and the Bank of Montreal and see that in 1982 they paid no income tax, I do not think they are going to be at all interested in the Small Business Development Bond or in the Small Business Bond. There is no advantage to them in the programs.
I congratulate the Hon. Member for Mississauga South for his wise observations. As he said, one of the major beneficiaries is the banking system itself. Someone seeking a Small Business Bond is obviously in financial difficulty. If they go around from bank to bank asking for support at a time when the bank is not paying any income tax at all and is not interested in providing welfare assistance to the business community, I do not think they will get a good reception.
In principle I will support the Hon. Member's amendment. Because it requires the co-operation of the banks, knowing what their tax situation is at the moment, I cannot imagine that they would be interested in co-operating with either the Small Business Bond or the Small Business Development Bond.


Paul James Cosgrove: Mr. Chairman, the difficulty with the representation made by the Hon. Member is that it is not factual. If the amendment was so great that it would increase Government revenues, surely the Government could confirm that and say that the use of the $2 billion which has already gone into the fund has ballooned Government revenues, and so we do not need to ask Parliament for increased borrowing authority.
The only difficulty with his analysis is that it does not accord with the facts. Things do not happen that way in the real world. In the two years the program has been in place it has not increased Government revenue. The pressure for the bonds still continues and the ripple effect has not appeared in the economy over these two years. We are not optimistic that the proposal should be accepted on that basis.


Nelson Andrew Riis: Mr. Chairman, I want to pursue that point. We understand that under the Small Business Development Bond $2 billion had been loaned out. What was the direct cost to the federal Government of that $2 billion loan?


Paul James Cosgrove: Mr. Chairman, $125 million was foregone in revenue.


Frederick James (Jim) Hawkes: Mr. Chairman, that is the gross on the tax expenditure side as calculated by the Department of Finance. What was the net income derived from that?


Paul James Cosgrove: It is very difficult to put a handle on that because certain assumptions have to be made. The assumption might be that the $2 billion, the amount of the loans, for example, was generating new economic activity. We really cannot confirm that. We cannot confirm that new employees were hired, or that new demands or requests were stimulated from that source.
March 17, 1983


Frederick James (Jim) Hawkes: Mr. Chairman, if we make a couple of assumptions, that there was a $60 billion tax revenue in a $300 billion GNP and that revenue is about one-fifth of GNP, it would take us to $400 million on a $2 billion investment in the Canadian economy and would put us in a net positive position. Does the Minister find some flaw in that logic?


Paul James Cosgrove: I guess the analysis depends upon whether the person who took the loan was intending to move to expansion, to retain people or to bring new people on. We do not know that. It could be that the effect of the bond was just to assist the entrepreneur, or I suppose the corporation because we are talking about the $2 billion period. The corporation might have improved its balance sheet as a result of using the loan.


Roderick Blaker: Order. Before we continue, it is not clear whether the comments of the Hon. Member for Calgary West relate to the Clause at large or whether they are specifically related to the amendment proposed by the Hon. Member for Mississauga South. I am not informed as to whether or not the House wishes me to put the question on the amendment. Perhaps the Hon. Member for Calgary West could indicate which way we are going.


Frederick James (Jim) Hawkes: Before backbenchers on the other side vote for or against the amendment simply on the orders of the Minister, I think it might be wise to explore whether or not it is a wise amendment and whether or not it is a wise Clause. Hopefully an informed voter population will reach a different decision than the Minister would like us to reach. There is no sense of confidence, but I have hope.
The Minister indicated that there was a cost to the Small Business Development Bond Program and that it took certain assumptions to obtain any sense of the income which came from that expansion and development. Could the Minister indicate whether or not it sort of misleads Canadian taxpayers to put out just the cost side without the income side?


Paul James Cosgrove: No, Mr. Chairman. I think I have attempted to answer the specifics which led up to that question.


Frederick James (Jim) Hawkes: Is it a matter of Government policy that we just look at the cost side of any program, that there is no attempt by the Government of Canada to stimulate tax revenue and that the stimulation of revenue is not a concern to taxpayers?


Paul James Cosgrove: I have already indicated that we are quite aware of how much money was taken down, how much of this bond was released into the economy. We know the period of time during which that occurred and that it was a significant amount of money. I would argue that $2 billion in this one sector alone, which the Government of Canada directed toward assisting economic activity in the area of small business, is significant. The result of that would be easily ascertained if it provided the kinds of results urged by the amendment of the Hon. Member.
Income Tax
I am sure that whoever is giving the Hon. Member assistance in preparing for questions in the House and his analysis of the amendment to the present legislation knows that those companies have had ample opportunity of analysis. I would be very surprised if the results of the performance in the small business sector over the last 18 to 24 months would comfort the Hon. Member for Calgary West in urging that we should increase it by a further $2 billion or even higher, apart from the fact, as I indicated, that it puts pressure on the deficit unless the Government can find some other sector in the economy from which it can withdraw or remove funds. It bears on the finding of the over-all balance sheet of the Government attempting to meet legitimate demands, not only in the small business sector but in many other areas of the economy.
I believe the answer to the question would be most apparent and that the experience in the small business sector probably follows the general experience in the economy. No doubt the Hon. Member through his resources has probably identified that that is the case. If it is not and he has information to the contrary, I am sure the Minister of Finance would be interested in those representations and submissions. After all, in the last month the Minister has met with organizations representing the small business sector. For example, he met with the Federation of Independent Business and with the Chamber of Commerce. He has asked for representations and suggestions as to how else he could be supportive of the small business sector. If the Hon. Member has, through his experience or through people advising him, some other suggestions or research to show the relationship to the $2 billion that has already gone into the bond, no doubt the Minister would be quite responsive to receiving them.


Frederick James (Jim) Hawkes: It would certainly give us a lot of comfort if we had a slight inkling that the Government did studies of this kind, that the Government looked not only at the foregone revenue but the revenue generated, that it looked at the tax expenditure side and the tax gain side of the equation.
The Parliamentary Secretary in an earlier intervention indicated that I should not draw a contrast between the Development Bond and the survival bond. If the House passes this Clause, the Development Bond disappears and we are left with a survival bond. It is an either/or situation. It is not our choice; it is the Government's choice. It wants to kill development and replace it with survival.
I ask the Minister to check with his Department of Finance officials and to tell us whether the tax revenue, the increase in revenue for the Government, is likely to be greater if the take-up is in Development Bonds. Let us take $2 billion in development versus $2 billion in survival versus $2 billion in subsidy to one company called Petro-Canada. Which expenditure of Government in which form generates the most tax revenue? The Minister has finance officials; they are supposed to model things for the economy. Which of those three produces the most tax revenue for the people of Canada?


Douglas Glenn Fisher: Mr. Chairman, in the minute remaining before lunch, I just want to remind the Hon. Member that small

March 17, 1983
businesses have had their tax rate extended in this Bill. Previously people got the big business rate at $150,000 profit and now it is $200,000. This is a big addition to their treasuries.
The retained surpluses have expanded from $750,000 to $1 million. Again that is a lot of elbow room in which these businesses can operate. We have targeted help through the Small Business Bond, but we have left healthy small businesses more money at a lower rate to develop and to grow with. The two go hand in hand.


Roderick Blaker: Order, please. It being one o'clock, it is my duty to rise, report progress and request leave to consider the Bill later this day.
Progress reported.


The Acting Speaker (Mr. Blaker):: It being one o'clock, I do now leave the chair until two o'clock this afternoon. Have a good lunch.
At 1 p.m. the House took recess.


[Stage Direction]
AFTER RECESS

The House resumed at 2 p.m.


Mr. Marcel Dionne (Chicoutimi):: Madam Speaker, after consulting some military authorities here in Ottawa, I would like to reassure the people of Bagotville, Chicoutimi and the Saguenay-Lac-St-Jean area in general about the plans of the Department of National Defence for setting up a firing range in our area. First of all, a similar range has been in use in Alberta, at Primrose Lake, for a number of years. According to my information, every precaution is taken to prevent any risk to the general public and especially to people living near the site. I was given the assurance that Base Command in Bagotville will be in touch with municipal councils and other representatives of the public to provide all the necessary information on the activities that take place around such facilities.
I have been told that there will be a genuine information and consultation process, on a continuing basis. Actually, the Department of National Defence has always made a point of being part of and protecting, the communities living near its bases. The Department may be said to have been successful in
discharging its responsibilities in this regard. We are therefore anxious to get an answer from the Province of Quebec.



EXTERNAL AFFAIRS


Mr. Dave Nickerson (Western Arctic):: Madam Speaker, in order to avoid unnecessary and aggravating lineups at ports of entry, as well as to utilize customs personnel more efficiently, it is reported that a number of countries plan to introduce computerized passport scanners at principal customs points. For the system to work effectively it will require that passports be machine readable and contain the requisite computer coded information.
The United States reportedly already issues passports readable in both the conventional manner and by computer scanners, and expects all its passports will be machine readable by 1985. Many other countries plan to follow suit. Therefore, in order to facilitate international travel, might it be possible for Canada to co-ordinate its efforts with those of other countries to adopt an internationally compatible system of computerized passport control and, as soon as possible, initiate the issuance of machine readable passports?



EFFECT OF HIGH RETAIL PRICE OF GASOLINE ON SAGUENAY-LAC-SAINT-JEAN REGION OF QUEBEC

Mr. Pierre  Gimai@: Madam Speaker, I wish to take advantage of the few seconds at my disposal to speak to an ever-worsening problem in my area, namely, the price of gas at the pump. During the last three years, the Canadian Government has established a policy of security of oil supplies for our country, and I think we can say this policy has been an unqualified success. Unfortunately, the Canadian Government has no jurisdiction over indirect taxes on gas. I want to appeal to the goodwill of my fellow Members, both on the Opposition and on the Government side, since it is clear that as far as gas retail sales are concerned in Canada, we have a real problem on our hands, because the Provinces are extremely uncooperative. After the latest tax increase ordered by the Quebec Government and Mr. Parizeau, people in my area are paying about $1.20 for a gallon of gas, which is absolutely exorbitant for people who have to buy gas to travel and to transport what they need, and the extra 40 per cent or 24 cents a litre in provincial tax is putting a very heavy burden on the entire economy in the Saguenay-Lac-St-Jean area.
March 17, 1983

I would therefore ask the Canadian Government, with the support of the parties in this House, to take the lead in the energy area, especially with respect to retail sales. I think that the Provinces generally do what the government of the country allows them to do, and if they are unable to make a satisfactory and democratic use of their taxation rights and-


Madam Speaker:: Order, please.



HARBOURS


Mr. Lloyd R. Crouse (South Shore):: Madam Speaker, the Government's policies and priorities as they relate to small craft harbours and their development in Nova Scotia are appalling. I say this because I have written repeatedly to the Minister responsible about the need for dredging and repairs to be carried out to a number of harbours in my constituency, all to no avail. This situation is true throughout my entire riding, and I mention today three areas in Shelburne County, namely, Ingomar, Gunning Cove, and Sandy Point, which have been referred to the Government for action on numerous occasions. To date no action is forthcoming.
At Sandy Point, in particular, deterioration of the wharf is so severe that it is now dangerous to fishermen and mariners who are required to use this harbour.
At Ingomar and Gunning Cove repairs are required to the wharves, and the fishermen in this area need additional space because of the general increase in the size and number of boats used by them. I, therefore, urge the Government to make a concerted effort on behalf of these Canadians, who desperately need recognition of their problems and some positive action taken to alleviate the present deplorable situation.
If a policy of annual inspections by Government officials of all facilities under its jurisdiction were carried out, with current repairs made as required, over-all costs would be lower and our harbours and wharves could be used at all times by our mariners.



HUMAN RIGHTS


Mr. Bob Ogle (Saskatoon East):: Madam Speaker, today I would like to denounce the killers of Marianella Garcia Villas, President of the El Salvador Human Rights Commission and a Vice-President of the International Federation of Rights of Man.
Marianella Garcia Villas was a profound Christian, a worker for the poor, and a lawyer. She had been a Member of Congress in El Salvador in the early 1970s. She belonged to the Christian Democratic Party, and later belonged to the Social Christian Party.
She went into exile from El Salvador in 1980 as a result of a death threat. She recently returned to El Salvador with Sister Luz Maria Hernandes, also of the Human Rights Commission of El Salvador. They entered the country through the airport. Marianella Garcia Villas had returned to El Salvador to investigate charges that chemical warfare had been used against civilians there.
She was killed in the presence of 20 unarmed peasants, by the military. It was first announced by the Armed Forces that she was a foreign journalist and had been killed in crossfire. After finding out who she was, they denounced her as having fought with the FMLN. Her body is now lying at la Piedosa Funeral Home in San Salvador. Her body was identified by the church authorities of that city.
Once more I want to denounce the killing of this person, the killing of all other activists who plead for human rights in that country, and the previous killing of four women in religion. As yet no trial has been held to prove who killed them.



HOUSING


Mr. Gaston Gourde (Levis):: Madam Speaker, under the Canadian Homeownership stimulation Plan, the Federal Government is offering a $3,000 grant to Canadians purchasing their first home, provided the foundations are finished by the end of April, 1983. There is a very real possibility that a number of taxpayers in Quebec and in the riding of Levis will be unable to take advantage of this program, because regional municipalities in the country, as a result of administrative procedures, may freeze new construction till the middle of April, leaving future owners only two weeks to get a building permit and find a contractor they can hire right away to do the excavation and build the foundations.
Madam Speaker, I want to ask the authorities at all decision-making levels, and especially the Quebec Minister of Municipal Affairs, to help taxpayers who are eligible for the grant to take advantage of this offer. I suggest that steps be taken immediately in order to facilitate access to the New Home Construction Plan. Since there has been no response from the municipal authorities, I ask the Canada Mortgage and Housing Corporation and the Canadian Government to provide mechanisms to help the taxpayer get out of this administrative trap. Madam Speaker, we must have action now.

March 17, 1983



IMPACT OF GASOLINE TAX ON TOURISM

Mr. Stan Darling (Parry Sound-Muskoka):: Madam Speaker, the Minister of Energy, Mines and Resources has given us all a long song and dance about the made in Canada price of gas and how it is at 75 per cent of world price. Only the Liberal Party of Canada could, at a time like this, argue about how many angels can dance on the head of a pin, because that is what the Liberals are doing. The so-called world price could not matter less to the Canadian man on the street. What he is interested in is the price at the pump, not some hypothetical price which comes to far less than half that amount, and which does nothing but serve as a shelf upon which Governments can stack tax upon tax.
The fact is that at the present time, in many parts of the country, Canadians are paying twice as much for gas as are their American neighbours.
The fact is that when I put in just ten gallons-if Hon. Members will forgive the expression-of gas in my car, I am paying $8 directly to the federal Government in the form of one tax or another.


An Hon. Member:: What are you driving?


Stan Darling: The fact is that, because of the unconscionable tax load imposed upon all that it sells, the tourist industry, our second largest employer, is looking forward to a year of unparalleled disaster. The fact is that the Government could breathe new life into the tourist industry, and thus, millions and millions of dollars into the economy, just by cutting back on its unconscionable tax take.


Some Hon. Members:: Hear, hear!
* *
*



ABORIGINAL RIGHTS


[Stage Direction]
Minister (Mr. Trudeau) and the Cabinet deliberately downplayed these talks. The Liberal Government failed to use its position to work toward an acceptable agreement on aboriginal rights and self-government for native Canadians. In contrast, the New Democratic Party Government of Manitoba prepared and defended these concepts by presenting arguments for a statement of principles and a model framework agreement. These Manitoban documents not only discussed self-government, aboriginal rights, land claims, equality, and the need for consent by the natives for changes affecting them, but they also provided the direction for future talks.
By refusing the role of leadership, the federal Government has allowed the minority of Provinces, represented by the Governments of B.C., Saskatchewan, and Alberta, to derail a possible agreement.
Madam Speaker:: Order, please.



UNION REPORT ON HOSPITAL VIDEO DISPLAY TERMINAL OPERATORS

Mr. Benno Friesen (Surrey-White Rock-North Delta):: Madam Speaker, earlier this week the Hon. Member for Churchill (Mr. Murphy) presented a statement to the House with regard to the so-called harmful affects of VDTs on the employees using those machines. His statement was the following, in part:
Sharma found an abnormally low rate of pregnancies among the women of child-bearing age and, of the 14 VDT operators who became pregnant over the past year, ten had miscarriages or gave birth to babies with defects.
The Hospital Employees Union used Surrey Memorial Hospital as the basis for its study. It submitted its report to the federal task force on July 5. I would like to say for the record that at no time did it consult with the medical staff of the hospital and, to this day, even though it has been requested by the medical staff of the hospital to provide evidence to substantiate its report, it has not submitted any findings to the medical staff.


Mr. Rod Murphy (Churchill):: Madam Speaker, in the last few days Canadians have watched the historic meetings between the First Ministers and the leaders of aboriginal Canadians. Canadians are pleased that there was an agreement to continue the process with a guarantee of future discussions. Canadians were also happy to see the strong and forthright statements made by the native leaders. Canadians hope that, in future talks, Government representatives will be able to come to agreement upon issues which profoundly affect and concern native people.
As New Democrats our concern centres on the fact that the federal Government did not provide the leadership which should have been present at the Conference. The Prime
Presumably, the medical staff has at least some kind of passing interest in the health of the people who work there. It seems to me that, as part of their profession, they would care about their employees. If the union is so interested in the health of its members, why does it not co-operate with the medical staff to provide that evidence so that the medical staff can provide help to its employees?
The union leader, although he has been requested to provide that evidence, refuses to give it because he says it is privileged information. Three independant studies have been done in that hospital on this matter, all have indicated there is no problem.


Madam Speaker:: Order.
March 17, 1983



ORAL QUESTION PERIOD


Mr. Pat Nowlan (Annapolis Valley-Hants):: Madam Speaker, I had a question to ask the Minister of Energy, Mines and Resources, or the Minister of Transport, or the Minister of Finance. Perhaps, in honour of the day, there may be an Irish wake somewhere, although it is a little early.


Mr. Hnatyshyn:: Here comes the Minister of Finance.


John Patrick (Pat) Nowlan: Here is the Minister of Finance.


Some Hon. Members:: Hear, hear!


John Patrick (Pat) Nowlan: I wish that I could welcome the Minister in Gaelic, but my question really was to be directed to the Minister of Energy, Mines and Resources. In light of his absence, I would like to ask the Prime Minister a very short simple question which will hopefully invoke a very short reply. As world prices come down, why do Canadian prices go up?


Right Hon. P. E. Trudeau (Prime Minister):: Madam Speaker, the Hon. Member has not understood what has been happening in the past ten years. We have always had prices below world prices. World prices are tending to come down, but ours were so far below world prices that they could still continue to rise and still be below world prices. It is very simple, but the Hon. Member seems not to have understood.


Some Hon. Members:: Hear, hear!


John Patrick (Pat) Nowlan: Madam Speaker, I am very glad to have had an economic lesson from the Prime Minister, so I will now turn to the Minister of Finance.


GASOLINE TAXES
John Patrick (Pat) Nowlan: Since the Minister of Energy, Mines and Resources is apparently to negotiate the price of crude, which is one-eighth the cost of a gallon at the pump, is the Minister of Finance prepared to take care of the taxes which amount to two-thirds of the cost of a gallon at the pump, in his forthcoming budget?


Hon. Marc Lalonde (Minister of Finance):: Madam Speaker, as the Hon. Member knows, depending on the Province, a large share of that difference is under provincial control-


Ramon John Hnatyshyn: How about Saskatchewan?


Marc Lalonde: -either in the form of royalties for the Government of Alberta or provincial sales tax, such as in my own Province of Quebec, which is about 40 per cent; and it is quite substantial in the Province of Nova Scotia as well. Surely he knows that there is nothing I can do about that.
Oral Questions
As far as the federal taxes are concerned, I will examine this issue in the context of the budget, and I would be very happy to hear the Hon. Member's views.


FUEL IMPORT COMPENSATION TAX
John Patrick (Pat) Nowlan: Madam Speaker, having set up the two preliminary questions, I now come to the crunch.


Some Hon. Members:: Oh, oh!


John Patrick (Pat) Nowlan: This is completely within the control of the Minister of Finance. Has the Minister received representations from his colleague, the Minister of Transport, to eliminate the fuel compensation tax which was imposed to stop Americans from coming to Canada to top off here and going back to the States, because our gas was a little cheaper than it is now? Does he intend to do something about that fuel compensation tax, which is solely federal, in his forthcoming budget, or even in Bill C-139? I am sure that with discussion between House leaders we would agree to eliminate that facet of Bill C-139 so that those involved in the aviation industry and the marine industry would not be at an unfair disadvantage with regard to their competitors, who are basically American.


Marc Lalonde: Madam Speaker, considering the type of so-called co-operation by the Opposition on Bill C-139, I would not expect too much from any discussions with regard to that matter. However, I can tell the Hon. Member that I always listen very carefully to the representations of my colleague, the Minister of Transport. I can assure him that any representations he may have made, and even those coming from the Hon. Member, will be very carefully examined.


PRICE OF GASOLINE
Mr. Mel Gass (Malpeque):: Madam Speaker, my question is directed to the Minister of Energy, Mines and Resources. During the 1980 election campaign the Government ridiculed a tax of 18 cents per gallon. Today the federal Government tax amounts to 67 cents per gallon. Tourism in Canada has suffered because of the high price of gasoline. Canadians were advised that, as the world price of gas went up, the price in Canada must go up. Now that the world price is coming down, why is the price in Canada not coming down?


Hon. Jean Chretien (Minister of Energy, Mines and Resources):: Madam Speaker, we have an agreement with the producing Provinces and have fixed the price as of January 1. We will have another decision to make in July, a determination of the price for the second part of the year. I am glad to see that the Conservative Party does not agree with Premier Lougheed to the effect that we should not roll back the prices. I will take the opinion of the Official Opposition into consideration when I make my views known.

March 17, 1983
Oral Questions


REQUEST FOR REDUCTION IN FEDERAL TAX
Melbourne Alexander Gass: My supplementary question is directed to the same Minister. The Minister of Finance said that part of the tax on gasoline, and the reason for the high cost of gasoline, are because of provincial taxation. We all know that the provincial tax is an ad valorem tax which is based on the price of gasoline as determined by the federal Government. If the federal Government wants to reduce the provincial tax the first thing it should do is reduce its own tax, and the provincial tax will automatically go down.


Some Hon. Members:: Hear, hear!


Melbourne Alexander Gass: When is the Government going to take the first step to reduce the price of gasoline in Canada to Canadians by reducing the tax it has on gasoline, so that the Provinces will automatically follow with a lower tax?


Joseph Jacques Jean Chrétien: Madam Speaker, I think the Hon. Member should know that these ad valorem taxes that were put in place were put in place after there was an agreement between the producing Provinces and the federal Government to make sure that Canadian consumers were to have prices lower than the international prices. The break that the agreement was providing for the consumers was not given to the consumer because the Provinces stepped in, put an ad valorem tax on, and did not give the break to the consumers provided for in the energy agreement.


THE ECONOMY
Hon. Edward Broadbent (Oshawa):: Madam Speaker, I have a question for the Prime Minister who met recently with the Premiers of the Provinces to discuss the economy. Data released just the other day from Statistics Canada indicated that investment intentions in Canada for the coming year are going to be down some $2.5 billion compared to last year. That means the loss of thousands of jobs.
My question concerns the expression of concern that came to the Prime Minister from the Premiers of at least three parts of Canada, Atlantic Canada, central Canada, and western Canada, which all had Premiers who urged the Prime Minister to bring in stimulus now to create some badly needed jobs in the Canadian economy.
I want to ask the Prime Minister, following urging of that kind from this Party on this side of the House in recent months, having just heard from Premiers from three parts of Canada, will he indicate that he is serious about job creation, and promise major stimulus?


Pierre Elliott Trudeau: Madam Speaker, the Hon. Member is a victim of somebody's complete fabrication. Nothing of that nature was discussed.


DISCUSSIONS AT FIRST MINISTERS' CONFERENCE
John Edward Broadbent: Madam Speaker, I want to say bluntly to the Prime Minister, either he is misinforming the House, or two Premiers in direct conversations with me in terms of positions they took-


Some Hon. Members:: Oh, oh!


John Edward Broadbent: -are misinforming. To be perfectly blunt, given what has taken place in recent days in this House, I will put my faith on the side of the Premiers.


Some Hon. Members:: Oh, oh!


John Edward Broadbent: I would like the Prime Minister to clarify that. Is he telling the House that no Premiers at the meeting that he had with them recently urged the Government of Canada to bring forward some major stimulus in the economy to produce jobs?


Pierre Elliott Trudeau: Madam Speaker, as usual, some of the Provinces were asking the federal Government to give them money so they could spend it. That is the extent of their urging for the federal Government to spend more money to create jobs.
I told them that since the last budget, and I tell the Hon. Member, that since the last June budget we have put more than $2 billion into programs to create jobs. We do not have to give it to the Provinces so that they can spend it. They can spend their own money. They have their own taxes. Even the two Premiers whom the Hon. Member talked to should know that, and the Hon. Member should have told them, if they do not.


Some Hon. Members:: Hear, hear!


John Edward Broadbent: Madam Speaker, we have seen that remarkable demonstration of the Prime Minister's sensitivity to the truth. In that last answer, no Premiers did it. In the second answer, he is now saying that some Premiers did it.


Some Hon. Members:: Oh, oh!


John Edward Broadbent: Quiet over there on the backbench side.


Joseph Jacques Jean Chrétien: All in your head.


John Edward Broadbent: I will put it quietly but clearly. I would like to ask the Prime Minister to make a vow this year that, for the rest of 1983, he will do his best to tell the truth in the House of Commons.


Some Hon. Members:: Oh, oh!


John Edward Broadbent: The sooner the better for the-
March 17, 1983


Some Hon. Members:: Oh, oh!


Madam Speaker:: Order.


PLEA FOR STIMULUS
John Edward Broadbent: Madam Speaker, I would like to direct another question to the Prime Minister. I repeat, Premiers from western Canada, from central Canada and from the Atlantic region are sensitive to the human cares of Canadians. For example, for the first time in its history, the city of Toronto is going to have to respond with an emergency food depot because of concern for unemployment. The Premiers are concerned. I want to ask the Prime Minister will he promise us there will be stimulus of the economy to give Canadians what they want, which is jobs, not welfare.


Pierre Elliott Trudeau: Madam Speaker, I think the Leader of the New Democratic Party is engaging in a political game of the nature in which he always engages. The Premiers were here; we spent about three hours talking about the economy. He is not quoting what the Premiers said publicly about the meeting or, indeed, what I said publicly about it. He is talking about some secret information that the Premiers gave to him-


John Edward Broadbent: It is not secret; they said it publicly.


Pierre Elliott Trudeau: -of matters that did not take place. If the Hon. Member wants to quote the Premiers, I would suggest that the Premiers can talk for themselves. If he has a case to make, he should be able to make it in the House without inventing things that did not happen at our economic discussion.
The Hon. Member suggests that I make vows to the end of 1983. Let him make a vow to stick a little closer to the truth, not to fabricate, not until the end of 1983-we do not ask that-but just until the end of Lent.


Some Hon. Members:: Hear, hear!


MINES AND MINING
Mr. Thomas Siddon (Richmond-South Delta):: Madam Speaker, in the absence of the Minister for Indian Affairs and Northern Development my question will be directed to the Minister of Finance. The people of Yukon have been waiting for almost six months for a decision by the Government which would salvage the economy of Yukon. Would the Minister tell this House and the people of Yukon whether the cabinet has made a decision on the detailed proposal for saving the Cyprus Anvil Mine, a proposal which was presented to him and his colleagues on March 2 by a widely representative group from the Yukon? Has a decision been reached, and what is it?
Oral Questions


Marc Lalonde: Madam Speaker, various meetings were held on this issue among representatives of the organizations concerned, the unions, the company and spokesmen for the Yukon authorities. There have been multilateral and bilateral meetings. However, no decision has been made yet, and the proposals are still being considered, and I am referring particularly to those that are the responsibility of my colleague, the Minister of Indian Affairs and Northern Development.


GOVERNMENT POSITION
Thomas Edward Siddon: Madam Speaker, the delegation from Yukon presented a carefully prepared proposal and told the Minister that this proposal offered the final hope for the Cyprus Anvil Mine and the town of Faro. Is the Minister telling the House today that the Government is prepared to witness the death of this important northern mine, which contributes 40 per cent to the Yukon economy, and watch that town and that community close down permanently, with the railway to Skagway already being shut down at great cost? If not, what assistance plan does the Minister find acceptable? Will he at least consider assisting work on the restoration and the improvement of infra-structure, railway and power projects, so that the mine can be restored to economic viability and be able once again to compete on world markets?


Marc Lalonde: Madam Speaker, I indicated that as soon as decisions were made by the Government in this respect, they would be duly announced, but in any case, I have pointed out to the parties concerned that both the company and the bank had responsibilities, that it was wrong to assume that the Federal Government was alone in having a role to play and that both the company and the bank had to do their share and discharge their responsibilities.


TRANSPORT
Mr. Doug Lewis (Simcoe North):: Madam Speaker, my question is directed to the Minister of Industry, Trade and Commerce. I am seeking clarification with respect to questions asked earlier this week. Last summer the Government bailed out Maislin Transport with an unprecedented $34 million loan guarantee. Can the Minister tell the House whether or not all the terms of the loan agreement have been met to the satisfaction of the Government and, specifically, the term in the agreement which stated that the shareholders would have to
23874

March 17, 1983
Oral Questions
provide $2.5 million of fresh money? Was that fresh shareholder's equity actually provided, or did Maislin simply sell off the pension fund of Gateway Transport and use those funds as the supposed fresh money?
[DOT] (M30)


Hon. Ed Lumley (Minister of Industry, Trade and Commerce and Minister of Regional Economic Expansion):: Madam Speaker, if I am not mistaken, all but one of the conditions was undertaken by Maislin. The other condition was the requirement of the Government to find a suitable director to sit on the board. That is the only condition that has not been fulfilled to date, and, yes, the infusion of money came from the liquidation of Gateway's pension plan in the United States.


NATURE OF INVESTMENT MONEY
Douglas Grinslade Lewis: Madam Speaker, if Maislin owned Gateway Transport it would seem to make sense that they owned all the assets of Gateway Transport, including the right to sell off the pension fund. If they in fact sold off the pension fund, how can that be fresh money provided by shareholders of Maislin, rather than just simply the sale of an asset owned by a subsidiary of Maislin?


Edward C. Lumley: Madam Speaker, the undertaking was that they would provide an infusion of capital. How that infusion of equity was going to be obtained was a decision made by the company. That was a decision for them to take. I reiterate, it was a pension fund in the United States that liquidated, not one in Canada.


APPLICATION OF LOAN GUIDELINES
Hon. Erik Nielsen (Leader of the Opposition):: Madam Speaker, I wish to direct a supplementary question to the same Minister. When the President of the Treasury Board held the portfolio now encompassing his responsibilities, he enlarged the guidelines for loans made to bail out industrial producers to include operations such as Maislin in order to accommodate the Government decision on that $34 million loan. Is the Minister still following those enlarged guidelines so as to accommodate other similar applications, such as that of Maislin?


Edward C. Lumley: Madam Speaker, perhaps the Leader of the Opposition could be more explicit with regard to the enlargement of the guidelines. I am not aware of any enlarging of the guidelines that was to be undertaken with respect to that particular industry.


INQUIRY RESPECTING FUTURE FUNDING FOR MAISLIN
Erik Nielsen: Madam Speaker, the Minister was sitting in the House at the same
time I was, when the now President of the Treasury Board declared in this House that those guidelines would be enlarged to accommodate such loans. Since he is unprepared to be specific in his answer as to whether or not he is continuing to follow those enlarged guidelines, perhaps he will inform the House whether he has any information that Maislin will require any additional funds in order to continue to be viable up to and following June of this year?


Edward C. Lumley: Madam Speaker, the new president will be preparing a revised set of financial statements which I imagine will be ready by the end of March or the first of April. At the present time I have no indication from the Company whether additional capital will be required. Thus, at this point in time I have no recommendations for my colleagues in this regard.


Madam Speaker:: The Hon. Member for Kindersley-Lloyd-minster.


Mr. Forrestall:: We know who has favour around here, don't we?


Some Hon. Members:: Hear, hear!


Mr. McKnight:: It is the day, Madam Speaker.


REQUIREMENT THAT COMPANY SUBMIT FIVE-YEAR BUSINESS PLAN
William Hunter (Bill) McKnight: Madam Speaker, I have a question for the Minister of Industry, Trade and Commerce. It is supplementary to the question asked by the Leader of the Opposition. The Minister stated that all criteria for supporting the $34 million loan guarantee given by the Government had been met. Was the criterion that a five-year business plan be submitted by December 31, 1982, met, and in that plan was it indicated that Maislin would continue to lose in excess of $1 million a month in operating costs alone?


Edward C. Lumley: In
response to the teacher's pet, as my colleague says, yes, there was a five-year plan presented by December 31, but upon taking office the new president of the company did not feel that that five-year plan was adequate. He is now in the process of preparing another one for the Government officials to have a look at.


COMPANY LOSSES
William Hunter (Bill) McKnight: 1 will ask the question again, Madam Speaker. In the five-year plan presented by Maislin to the Government, if it was presented, did it indicate that Maislin would continue to lose in excess of $1 million a month in operating costs?
March 17, 1983


Edward C. Lumley: Madam Speaker, that was three months ago. I am sorry, I cannot remember the specific details. 1 will look into it and get back to the Hon. Member.


RELATIONSHIP OF MAISL1N AND GATEWAY COMPANIES
Hon. Bill Jarvis (Perth):: Madam Speaker, my question is for the same Minster. What is, or was the relationship between Gateway and Maislin? Was Gateway in fact a subsidiary, an associate company and, if not, what if any relationship existed between the two companies?


Edward C. Lumley: am not mistaken, Madam Speaker, I think that it was a subsidiary company, but I will check the details and get back to the Hon. Member.


Erik Nielsen: You had better brief yourself for tomorrow.


NATURE OF INVESTMENT OF CAPITAL
William Herbert Jarvis: Madam Speaker, will the Minister explain how on earth anyone could consider the sale or disposal of a subsidiary's asset as an infusion of fresh capital into the parent company under any accounting or moral principle whatsoever?


Edward C. Lumley: Madam Speaker, perhaps the Hon. Member would like to address that question to the company. What we required from the company was an additional infusion of equity capital, which the company provided.


REQUEST FOR OIL PRICE ROLLBACK
Mr. Ray Skelly (Comox-Powell River):: Madam Speaker, yesterday the Minister of Energy, Mines and Resources indicated that he wanted to talk to the Premier of Alberta prior to considering an energy rollback. In fact he admitted that the energy policy was in a state of chaos and that he would like to talk to all the provincial Premiers. We would like to know when this hamburger Government is going to recognize that its energy policy is in complete chaos? Does the Minister realize that we deserve a break today, and that the Canadian economy needs the kind of stimulus that would come from a rollback in the price of energy?


Joseph Jacques Jean Chrétien: Madam Speaker, I am not impressed with the
Oral Questions
argument of the Hon. Member. When we have a problem with the Provinces, the thing to do is talk to the Provinces. If I were to act alone today, tomorrow the Hon. Member would be on his feet asking why I did not consult. I will do the right thing. I will consult. I will not bother too much with the Hon. Member.


BENEFICIARIES OF CURRENT PRICES
Raymond John Skelly: Madam Speaker, I guess we are going to leave it to Macdonald to fix up this beaten economy, and the hamburger helper will straighten it out later with Lougheed. Does the Minister recognize that if we do not roll back the price of oil in this country, the beneficiaries will be Imperial Oil and Texaco? Imperial controls one billion barrels of conventional crude and Texaco one half billion barrels. Will the Minister admit to this House that the only beneficiaries of not rolling back the price of oil will be the multinationals?


Joseph Jacques Jean Chrétien: No, Madam Speaker, I do not accept that at all. When a barrel of oil is sold, about 40 per cent goes to the producers. The majority of the balance goes to the provincial Governments and the rest to the federal Government.


EMPLOYMENT
Mr. Jean-Robert Gauthier (Ottawa-Vanier):: Madam
Speaker, my question is for the Minister of Employment and Immigration and relates to the National Training Act. For some time now negotiations have been going on between his Department and several high-technology Firms in the Ottawa area. Can the Minister confirm that he recently approved a grant of $10,000 to a non-profit computer consortium to develop and implement an industrial training program within the high-technology industry?


Hon. Lloyd Axworthy (Minister of Employment and Immigration):: Madam Speaker, I can verify that we have been working very closely with representatives of a number of hi-tech firms in the Ottawa area to undertake an innovative approach toward the development of new training programs in that very vital industry. We have now gone ahead and developed an agreement with them so that they could put forward a proposal under the Skills Growth Fund to establish an industry-sponsored training centre to allow their employees to develop unique and special skills in the hi-tech area. I believe that this really is a definition of a very good example of how we can change the whole training program in this country to respond to hi-tech needs.

March 17, 1983
Oral Questions
[ Translation]


TRANSPORT
Hon. Roch La Salle (Joliette):: Madam Speaker, my question is directed to the Minister of Agriculture. The Minister must be aware of the fierce opposition of the sectors concerned to the grain transportation policy announced recently by the Minister of Transport. The changes it contains are a major source of concern to the agricultural industry and some financial sectors in Quebec. Since the coalition movement is convinced that studies of the consequences of this new policy have been clearly inadequate, could the Minister, who is surely seeking a fair solution for all Provinces as far as agriculture is concerned, could the Minister inform the House that he will ask his colleague to put this project on hold, until such time as the guarantees demanded by the Quebec coalition movement are announced?


Hon. E. F. Whelan (Minister of Agriculture):: Madam Speaker, I am sure the Hon. Member is aware of what I said in the House before, that 1 support my colleague, the Minister of Transport, in the proposal which he has put forward to this country on the Crowsnest Pass rate, the recommendations and changes in an obsolete type of legislation. It is to be changed. We know there is going to be some resentment. We never said there would not be some rejection of what the Crowsnest Pass rates are going to do. I would ask the Hon. Member to read the documentation which we have prepared. If he would like any more information or any more studies, we can show him that, for instance, it is going to be for the betterment of agriculture in Canada, not for its detriment.


Roch La Salle: Madam Speaker, it is clear from the Minister's answer that the agricultural industry in Quebec does not have much to expect from the Minister, and especially not his sympathy. Would the Minister perhaps care to explain why he decided to spend $350,000 to shove this plan down our throats before consideration by Parliament and before it is implemented, and does the Minister expect Quebecers to trust him if he has to spend $350,000 to explain a policy on which not enough information is available and not enough studies have been done?


Eugene Whelan: Madam Speaker, I will try with even more purpose, because it is such a great day, March 17, St. Patrick's Day, to be as nice as I can to the Hon. Member, through you, Madam Speaker. He knows very well why the ads were put in the papers. It was especially because of the ads which the Government of Quebec put in which we thought were misleading, wrong, and false. We put these ads in to state the facts as
they should be stated. The Hon. Member only dreams that he, even as a native of Quebec, would have the respect of the farmers that I do in the Province of Quebec. He would love to have that kind of respect.


Some Hon. Members:: Hear, hear!


Eugene Whelan: I say to him, Madam Speaker, study the facts, study what we are doing, and study the past history of this Minister of Agriculture and of this Government, and if he finds it has not been beneficial for agriculture, I would be very surprised, because the agricultural industry in Canada is the healthiest agricultural industry probably in the whole world. And that is not because of what we have not done, Madam Speaker. It is because of what we have done.


ENVIRONMENTAL AFFAIRS
Hon. Bud Cullen (Sarnia-Lambton):: Madam Speaker, my question is directed to the Minister of the Environment. The Minister has recently given us the indication that he may phase out the use of lead in gasoline and that people who are objecting to this proposal have only 60 days to respond, and must respond to his particular Department. I wonder if the Minister would consider having an independent tribunal make this determination because, after all we are dealing here with one expert opinion on the one side, and expert opinions on the other. It would seem to me to be a little fairer to have someone other than environmental officials make this determination.


Hon. John Roberts (Minister of the Environment):: Madam Speaker, while I appreciate the concern of the Hon. Member and would like to salute his concerns and the energy which he has displayed in relation to this question, I must say that we are acting on the basis of the recommendations which come from the medical experts in the Department of National Health and Welfare. I do not believe there is any reason to doubt their objectivity in the matter, nor do I have any reason to doubt that my own officials will bring an objective disposition to it. Therefore, I would not, unfortunately be able to accede to his suggestion that we proceed with some sort of inquiry or review outside of the presently envisaged arrangement.


MARINE TRANSPORT
J. Michael Forrestall: Madam Speaker, my question is supplementary to a question asked earlier today by the Hon. Member for Annapolis Valley-Hants. Last year the Great Lakes Shipping Association was down about 30 per cent in its capacity. That involves some 300
March 17, 1983

to 400 men collecting benefits at current rates of unemployment insurance. The money which will be collected from that iniquitous fuel compensation tax will be used up within a month. Would the Minister not reconsider now, before the Seaway opens, and before he comes down with his budget, declare that iniquitous tax redundant and abolish it?


Marc Lalonde: Madam Speaker, I am very pleased to receive a representation from the Hon. Member in this regard. I said to his colleague that I would study whatever representations may be made by the Minister of Transport, whatever representations he may have made. As far as the substance of the question is concerned, however, I would like to point out to the Hon. Member that this tax only brings the cost of fuel in line with the cost which the lakers have to pay for American fuel. Also, in effect, the Canadian lakers are operating under a substantial advantage as compared to the American lakers since their wage rates are in Canadian dollars and, right from the start, they have a 20 per cent advantage over American wage settlements. In terms of competition versus American lake companies, the decline in lake shipping has been the result of a general decline in the North American economy and the lack of trade, particularly with regard to iron ore, over the last year. Obviously these factors have nothing to do with any particular tax.


POSITION OF CANADIAN INDUSTRY
J. Michael Forrestall: Madam Speaker, my question is a little less general than that. We have already lost 2,000 to 3,000 jobs in that industry because the Seaway is too expensive for our American neighbours to the south to use. The moneys which are paid out alone in unemployment insurance are used up within a week in terms of the amount of money which is recovered. Drop your fuel tax and you might very well put another 1,000 Canadian seamen back to work and recoup the loss. The Government is not going to make any money out of it, in any event, but it is putting them at a competitive disadvantage.


Marc Lalonde: Madam Speaker, the Hon. Member will have to explain why eliminating the tax will convince lake shipowners to travel without any cargo.


INCOME TAX
Mr. W. C. Scott (Victoria-Haliburton):: Madam Speaker, my question is directed to the Minister of National Revenue. Senior citizens across the country are asking if they have to file income tax returns. Will the Minister please tell the House if the recipients of Old Age Security pensions, Guaranteed Income Supplement and Canada Pension Plan benefits must file an income tax return?
Oral Questions


Hon. Pierre Bussieres (Minister of National Revenue):: Madam Speaker, all Canadian citizens who have an income must file an income tax return. Although in the case of Canadians who are sixty-five or over, deductions are much higher than for other workers, nevertheless, anyone who has an income, whatever the source, must report it and file an income tax return.


COMPLEXITY OF FORMS
William C. Scott: Madam Speaker, my supplementary question is directed to the same Minister. Many senior citizens have been penalized for not paying income tax quarterly. When will the Minister put out an income tax form which is understandable to our senior citizens, and mail it to all of those who are in receipt of old age pensions, the Guaranteed Income Supplement and Canada Pension Plan benefits? Please, Mr. Minister, send them something which they can understand and have knowledge of!


Pierre Bussières: Madam Speaker, I agree with the Hon. Member and many other Members of this House that there may be a problem in this respect for some senior citizens-first of all in connection with quarterly payments of income tax, that is, if their income is above the minimum amount, and second, the income tax form itself. It is a problem that must be given consideration, and I can assure the Hon. Member and other Members of the this House that I will be giving special attention to this point.


MEDICAL CARE
Mr. Bill Blaikie (Winnipeg-Birds Hill):: Madam Speaker, my question is directed to the Minister of National Health and Welfare. The Minister will know that this month has been declared National Save Medicare Month by the Canadian Health Coalition. She will also know that many people are writing to their Members of Parliament concerning the Canada Health Act and their desire that any Act which might be forthcoming should reinforce, clarify, and strengthen the five basic principles of medicare.
Will the Minister bring the House up to date on the status of the Canada Health Act? Can we expect that she will soon be going back to the provincial Ministers of Health with a proposal regarding extra billing better than the one she went with the last time? Will she be tabling a proposal in the House of Commons? Will she be putting before the Canadian people something they can relate to other than the mystery document

March 17, 1983
Oral Questions
around which the Canadian Medical Association is conducting its campaign? I think it would be very helpful if we could have some update from the Minister on this matter.


Hon. Monique Begin (Minister of National Health and Welfare):: Can I first say on this special day, Madam Speaker, that my counterpart in the NDP is obviously far more elegant than the CMA. I am talking, of course, about his appearance.
It is a fact that the CMA has launched quite a questionable campaign on medicare, and I really appreciate the work done by many groups in the country toward saving medicare. The Member wants to know if we are working on this. The Department of Justice is drafting a document, the purpose of which is to strengthen the medicare we have always known, which is so liked and has so well served Canadians. I cannot say as much as I would like in the few minutes I have to answer in the House, but I will present that draft first to the provincial Ministers, of course, and there will be, as usual, ample opportunity for discussion. The purpose of the Act is to strengthen medicare, not to change the basic rules of the game as we have always known them. In that respect, the fears being spread around are not founded at all.


DRAFTING OF LEGISLATION
William Alexander (Bill) Blaikie: Madam Speaker, the groups who are writing to Members of Parliament and the Minister are doing their job to save medicare. However, we have the continuing problem of extra billing. Because of unemployment we have people losing their health insurance, particularly in Ontario where they still charge premiums. We still have portability problems. Can the Minister give us some kind of deadline as to when she will be going to the provincial Ministers of Health? When does she expect that Canadians will be able to respond to an actual draft of the Canada Health Act? It is getting urgent because we have had this crisis in medicare on our hands for four or five years.


Monique Bégin: Madam Speaker, I said yesterday, and I will repeat it, that you do not lightly go about regulating $8.5 billion, which is the federal share of medicare paid to the Provinces. I think it is important to take the time needed to get an Act better than the one we have. The consensus around this House is that we want to strengthen the Act and clarify, once and for all, the problem of extra billing in particular. It is not true, however, that extra billing is increasing. We are monitoring that constantly and it is at a stable level right now.
I have never heard that people in Ontario were losing their medicare because they cannot afford their premiums. If a Member knows of even one case of that happening, they should report it to me and I will be immediately in contact with Larry Grossman, my Ontario counterpart.


HAZARDOUS PRODUCTS
Mr. Geoff Scott (Hamilton-Wentworth):: Madam Speaker, my question is for the Minister of Consumer and Corporate Affairs, notice of which I gave him about two months ago. The Minister will know that pediatricians across the country are alarmed about an epidemic of serious accidents happening to children who wander around in little doughnut-shaped walkers. They are falling down stairs and being paralysed. Because of their new-found height, they eat plants, pull pots of scalding water down on themselves, and so on. It is hard to imagine finding your kid at the bottom of the stairs half paralysed, but that is what happened just recently in Ottawa.
What method can the Minister's hazardous products division use to make young parents aware that they cannot leave children unattended in these walkers, in effect using them as babysitters, and giving freedom to a child which he or she is incapable of handling?


Hon. Andre Ouellet (Minister of Consumer and Corporate Affairs):: Madam Speaker, I want to thank the Hon. Member for giving me notice of his question well in advance, which means that I was able to make enquiries. In fact, my own Department, in collaboration with the American Consumer Product Safety Commission and the American Society for Testing of Materials, is now working on performance criteria for these walkers, in order to correct manufacturing defects and design problems that are a hazard to child safety. I believe that tests carried out by hospitals in recent months have clearly demonstrated that a hazard does exist for children, and the manufacturers, in consultation with the Canadian and American authorities, are prepared to correct the manufacturing defects of these walkers.


WARNING TO PARENTS
Geoffrey Douglas Scott: Madam Speaker, I am aware of the very real value of getting the manufacturers, in particular, to co-operate, but I really wonder whether they are going to mess up a nicely coloured product by stamping on it some sort of ominous warning to parents. Will the Minister consider authorizing the funding of filmstrips or videotapes which could be distributed to pre-natal classes and hospitals to warn young mothers about safeguarding their children against these walkers and other hazards?


André Ouellet: Madam Speaker, the Hon. Member is aware that my Department's advertising budget is very limited. However, I shall certainly find out what can be done. I am very pleased to hear a Member of the Official Opposition urging us to do some
March 17, 1983

advertising. More often than not, Opposition Members complain when the Government uses television or newspaper ads to inform the public.
* *
*


REQUEST FOR GASOLINE TAX REDUCTION
Hon. Don Mazankowski (Vegreville):: Madam Speaker, my question is for the Minister of Energy who should know, and he should tell the House and the people of Canada, that domestic crude oil is being provided to the refiner at a level of 75 per cent or less of the world price, while at the same time the retail price exceeds the world level. This is primarily because of the onerous federal tax of 14.4 cents per litre, or about 65 cents a gallon. The price of gasoline to the consumer could come down if the federal Government reduced its take. Why does the Minister not get in step with world reality and recommend to his Cabinet colleagues a reduction in the onerous federal taxes on the price of energy so that consumers in Canada will get a break?


Joseph Jacques Jean Chrétien: Madam Speaker, I made that argument many times. In our agreement with the Government of Alberta in September, 1981, it was provided that Canadians were to have a price lower than the world price. That was the agreement, and the goal the Government was seeking at that time.
After we had an agreement with the Government of Alberta and the producing Provinces, the provincial Governments stepped in to add on a very big ad valorem tax which took away the advantage the energy program was to provide to Canadian consumers. I say publicly that I have a lot of sympathy for the argument of Premier Lougheed because, at that time, he made an agreement between the federal Government, the producing Provinces, and the provincial Governments on the take from a barrel of oil. But later on, the consuming Provinces added a very big ad valorem tax, so big in Quebec that the Quebec provincial Government is getting much more money from oil coming from Alberta than the Government of Alberta. There is a valid point there and I want to discuss that with Mr. Lougheed. But at the same time the agreement provided for increases and decreases in prices according to the world market price, and that is the point we are debating at this time with Alberta.


GOVERNMENT POSITION
Donald Frank Mazankowski: Madam Speaker, the Minister of Energy, Mines and Resources is refusing to recognize that the federal Government is getting about 65 cents per gallon in the form of taxes and, therefore, the consumer of oil and gasoline in Canada is not receiving the benefit of the oil pricing arrangement with the Province of Alberta. Why does the Minister not come clean and explain to
Business of the House
the Canadian people why the Government refuses to reduce the federal tax to be commensurate with the world market place?


Joseph Jacques Jean Chrétien: Madam Speaker, for every litre of gasoline sold in Ontario at the present time the federal Government receives about 21 per cent of the price; 30 per cent goes to the Government of Ontario; some goes to the Government of Alberta; some to the producer, and a good part of it goes to the distributor and refiner. So 21 per cent of the cost of a litre of gasoline in Ontario goes to the federal Government; that is 9 per cent less that goes to the provincial Government of Ontario which has nothing to do with this agreement.


BUSINESS OF THE HOUSE
Douglas Grinslade Lewis: Madam Speaker, this being Thursday, I would ask the Government House Leader to give us some indication of the business of the House for the balance of the week and for next week.


Mr. Pinard:: First of all, Madam Speaker, to deal with tomorrow, under the Electoral Boundaries Readjustment Act, Section 20, we have to start debate within a certain period of time on objections to reports made by different commissions. Tomorrow we have no choice but to allow that to happen. The first item of business tomorrow will be to take up the consideration of the four objections that appear on the Order Paper, as I indicated to my colleagues yesterday, for a maximum of one hour. At the end of one hour, if debate has not been completed, we on this side will agree to continue debate at a further date which will be determined later.
You will recall that in 1976 there was agreement among the Parties to start debate for five minutes and then adjourn it until later, but failing such an accord this year we have no choice but to start debate. We want that debate to last one hour and then at the end of the hour debate will be adjourned until a later time that will be agreed between the Parties.
At the expiry of that hour we will call a Bill which is to be introduced today and which we hope to get through all stages, the Small Businesses Loans Act which will allow small business to get loans after March 30. If we approve that Bill before the end of the day, the back-up Bill will be Bill C-136 at report stage, which is a budget Bill.

Madam Speaker, as far as the business of the House next week is concerned, I may point out that Monday will be an Opposition day-the last day in this supply period. This is in response to the wishes of the Parliamentary House Leader of the Progressive Conservative Party who did not want it to be next Friday. I am certainly willing to accommodate him, as a courtesy, and thus designate Monday as an Opposition day. In addition, there will be one or more votes at the end of the day

March 17, 1983
Business of the House
on Monday. On Tuesday, we shall consider the report stage of Bill C-143, which is to be reported back to the House in a few moments, and which concerns the borrowing authority requested by the Government. Wednesday, as usual, will be reserved for Private Members' Business. Thursday, we shall resume debate on Bill C-139 concerning the Income Tax Act, to consider the third reading stage, and if we do not finish on Thursday, I hope we shall be able to do so on Friday of next week. All of this is of course subject to change on reasonable notice.


Douglas Grinslade Lewis: Madam Speaker, I should like to thank the Government House Leader for listening to our objections with respect to allotted days.
With respect to the reports of the Electoral Boundaries Commission, has the Government sought legal advice on the suggestion that all three reports be considered at one time? On this side we feel that the Government may be in violation of the letter of the law, if not the spirit of the law, in not allowing full debate to take place under Section 20 of the Act.
We suggest the purpose of the deadline set out in the Act is that the House and Members may consider the report and the objection and then they may be dealt with by way of a motion and sent back to the Electoral Boundaries Commission. Then they can be dealt with in each Province finally, and at a time when views on the Electoral Boundaries Commission are current, and there can be a final disposition made of the boundaries in each Province. Has the Minister sought that legal advice?


Yvon Pinard: Madam Speaker, my understanding of Section 20 of the Electoral Boundaries Readjustment Act is that we have to start debate on the objections within 15 days following the 30 days in which notice of the objection must be given. There is nothing in Section 20 that says that debate has to be completed within 15 days, however; that is not clear at all. That is why in 1976 the House Leaders thought it wise to come to an agreement. We were not able to come to such an agreement this time and so we have at least to start debate during the 15 days. Tomorrow is the first day within the 15 days following the 30 days in which the four objections have been made. That is why tomorrow can be used to start debate on the four objections.
What I am saying is not that we will limit debate to one hour on four objections; I am saying we will start debate and we will want to resume debate, if necessary, at a later time that we will agree to together later on.


Frederick James (Jim) Hawkes: Madam Speaker, on House business I would like to indicate to the Government House Leader that the Minister of National Health and Welfare, in a press interview and in Question Period today, signalled the fact that the Government no longer intends to bring in a Canada Health Act in a big hurry. Does that indicate that the Governement is prepared to refer the subject matter to the standing committee so that we might call witnesses and engage Canadians in the
dialogue about health care before the Act is actually written? If it has not yet been written and circulated, is it the Government's intention to use the parliamentary committee in that fashion?


Yvon Pinard: Madam Speaker, I will consider the request of the Hon. Member and most likely raise it with the Minister of National Health and Welfare.


Rodney Edward Murphy: Madam Speaker, my question is also directed to the Government House Leader. Yesterday the Prime Minister, along with nine Premiers and the Leaders of the Aboriginal People, signed an Accord. Will the Government House Leader be setting aside time for the Prime Minister to make a statement in the House? It is my understanding that a number of Premiers will be returning to their provincial legislatures to explain what happened in the last two days and the positions of their provincial Governments. Will the Government of Canada make a statement in the House explaining its position and its future plans?


Yvon Pinard: Madam Speaker, I intend to table in a few minutes the documents and the Accord to which the Hon. Member refers. Following that tabling and after he has read them, if there is something he does not understand, I am sure we will be pleased to try to explain it to him.


PRIVILEGE
Erik Nielsen: Madam Speaker, yesterday the Hon. Member for Lincoln (Mr. Mack-asey) raised a question of privilege. At that time I said I wanted 24 hours to consider the matter and to respond.
We started from the basic premise that when a Member raises a question of privilege based upon what that Member considers to be an infringement of his personal privileges, he should be given every opportunity to obtain redress through the House or its Committees in a proper and normal fashion. I have considered this and obtained advice with respect to the three areas of concern that I expressed yesterday. I must say at the outset the Hon. Member for Lincoln has been kind enough to assist me in obtaining the facts and I have also received other advice.
I think the Chair has some problems here. In one area there are the civil proceedings that may be taken and there are certain limitations in the Province of Quebec that may affect the commencement of those proceedings, and consequently the life of any work that the Standing Committee may undertake, should the Chair find a question of privilege present and should the motion be accepted by the House, may be affected.
The second area of concern is the ongoing bankruptcy proceedings. My advice, which the Hon. Member for Lincoln has co-operated in obtaining for me, is that these proceedings
March 17, 1983

are ongoing. I understand that they are proceedings under the Bankruptcy Act, that they are judicial proceedings and, in effect, court proceedings. That involves precedents with respect to the propriety of this House or any of its Committees taking proceedings parallel to any matter that is before the courts. That is a consideration that the Chair has to come to grips with.
The final area of concern is whether there are any other investigations which might be ongoing and which might be prejudiced by the work of the Standing Committee, should the matter reach that stage.
Those concerns are still outstanding. We not only still have them but they have become perhaps more emphasized. We believe this is a matter for the Chair to consider, and after obtaining advice, and quite apart from the decision on the question of privilege, determine whether at this point the House has the capacity at all to make the reference requested by the Hon. Member.
We would like to assist in his desire, but I think we would also have a primary responsibility with respect to the House and its committees operating within established traditions and practices and certainly within established precedents. There are those problems; we point them out now. We are certainly prepared to abide by the decision of the Chair after considering the matter.
We suggest that while our own inquiries and considerations have been confined to the time lapse between yesterday and now, it may well require more in-depth research and consideration, perhaps even to the extent of carrying the matter over the weekend until the Chair comes to a correct conclusion.


MR. BROADBENT-NOTICE OF POSSIBLE QUESTION TO BE RAISED
John Edward Broadbent: Madam Speaker, I rise on a question of privilege. Our House Leader will deal with the matter that has just been discussed, but I am pressed by time and I hope the House will listen briefly to the matter of privilege to which I want to refer.
The "blues" have not yet been sent to Hon. Members, but I want to serve notice that in light of what the Prime Minister (Mr. Trudeau) said in the House earlier today, and subject to checking the "blues", I will quite possibly be raising a question of privilege later.
Committee Reports



ROUTINE PROCEEDINGS

[Stage Direction]
[ Translation]

Mr. Jim Peterson (Parliamentary Secretary to Minister of State for Economic Development and Minister of State for Science and Technology):: Madam Speaker, I have the honour of tabling the Twentieth Report of the Standing Committee on Finance, Trade and Economic Affairs.
[Editor's Note: For above report, see today's Votes and Proceedings. ]


Mr. Lambert:: Madam Speaker, I rise on a point of order. If this is the report dealing with Bill C-143, I would ask whether it includes a transcript of all evidence taken by the Committee to date. There is no way that the House can accept a report which is deficient in the evidence that was taken. Otherwise the report is meaningless. Amendments in the House must be based upon evidence. Unless it is included in this package, it is out of order for the Vice-Chairman of the Committee to file that report.


James Scott (Jim) Peterson: Madam Speaker, I would humbly suggest to the Hon. Member for Edmonton West (Mr. Lambert), that there is ample precedent in the Chamber. I could refer to the matter at length should it be a matter of dispute. Therefore, I do not accept the premise he stated, but I would like to say that 1 have been informed that the entire evidence has been placed before the House. I must say that this has been at great expense to the people who have done the work. That Committee sat until two o'clock on Wednesday morning. It sat again this morning for an hour and a half. We all owe a great debt of thanks to those people who worked expeditiously to ensure that this evidence was before the House.


Madam Speaker:: In answer to that point of order, I advise the House that we have had the statement of the Hon. Member for Willowdale (Mr. Peterson). I may say that the House is simply receiving the report. Unless the Hon. Member for Willowdale presents the complete evidence that must accompany the report, the Chair has no way of knowing that the report is complete. 1 point out to the Hon. Member for Edmonton West (Mr. Lambert) that the House is simply receiving the report. I believe the objection of the Hon. Member refers to proceeding with a Bill without all the evidence being produced so that Members may consult it. But certainly the House may receive the report; I see no objection to receiving it today.


Marcel Joseph Aimé Lambert: Madam Speaker, I have ascertained that in so far as obtaining printed copies of Committee hearings are concerned, they are taking anywhere from four or five days to seven days to reach Hon. Members. In this particular case, the report having been filed now, it would be within our power to

March 17, 1983
Tabling of Documents
start the business on Monday; but if the evidence is not within the hands of Hon. Members, I would say that the administration is delinquent in not providing it for Members-


Some Hon. Members:: Oh, oh!


Marcel Joseph Aimé Lambert: -or the proceedings are meaningless. I say to the Chair that when these timetables were worked out, the clear indication was that Hon. Members would have all material available to them so that they could avail themselves of the 24 hours requirement to file any amendments at report stage.
I am dealing here with a report-back on a Bill which has been referred to Committee. If Hon. members do not have that evidence before them-other than having to go scurrying downstairs to the Journals branch to obtain photocopies and that sort of thing-it is not good enough. It is up to the administration either to ascertain that the evidence will be available almost immediately, whatever steps it may take, or for the Chair to assure itself that Members have the material. Otherwise it is a pure contempt of the rights of Members to proceed with legislation.


Madam Speaker:: If the administration were delinquent, I would say that it was contempt. I want to tell the Hon. Member that the administration is good enough and that we have not been in neglect of producing the documents necessary to proceed with the Bill. If the Bill is proceeded with on Monday, I assure the Hon. Member that the documentation in question will be printed and ready for Hon. Members to consult. At the present time the Hon. Member may consult these documents since they have been tabled.
Documents have always been ready on time. In the time I have been here I have only heard of one occasion where the documents, although ready at the back of the chair, were not produced several hours ahead of time. The administration is not delinquent. I would be grateful if the Hon. Member would wait until the administration is delinquent before accusing it of being delinquent.


James Scott (Jim) Peterson: Madam Speaker, I rise on a point of order. I take tremendous exception to the remarks of the Hon. Member for Edmonton West. The people on that Committee worked right through the night. They were working on a five-minute basis in order to have those documents here. I hope the Hon. Member will take home those pages and read every one of them; there are six inches of them. We owe a great debt of thanks for the work our Committee personnel have done.


ABORIGINAL RIGHTS
Yvon Pinard: Madam Speaker, pursuant to the provisions of Standing Order 41(2), I wish to table copies in both official languages of the
1983 Constitutional Accord on Aboriginal Rights reached at the First Ministers' Conference on Aboriginal constitutional matters in Ottawa, March 15 and 16, 1983.


PETITIONS
Mr. Doug Neil (Moose Jaw):: Madam Speaker, I have the honour to present to the Honourable the House of Commons in Parliament assembled a petition pursuant to the provision of Standing Order 71, which in brief prays that this House reject the Pepin proposal and retain the present Crow rate. The petition attached bears the signatures of 141 electors and was sent to me in my capacity as Member of Parliament for Moose Jaw for transmittal to the honourable the House of Commons in Parliament assembled. If the petition is found to be in order, Madam Speaker, I pray it will be referred to an appropriate committee of the House of Commons.


Mr. Gus Mitges (Grey-Simcoe):: Madam Speaker, I have to present a petition from concerned insurance brokers from my riding who are very upset regarding the present definition of a "letter" and how this definition is detrimental to the welfare of their business and to the public which they serve. According to the brokers, the public interest requires the insurance industry to maintain fast and dependable service to their clients to deliver correspondence within the insurance industry, and the only way this can be maintained is to retain the use of couriers to deliver its internal mailings. This service provides speedy, reliable delivery of time-sensitive items at minimum cost. The insurance industry would like to maintain this system which has proved so efficient.


Bill Rompkey: for leave to introduce Bill C-144, an Act to amend the Small Businesses Loans Act (No. 4).


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

[Stage Direction]
(Questions answered orally are indicated by an asterisk.)
March 17, 1983
James Scott (Jim) Peterson: Madam Speaker, the following questions will be answered today: Nos. 4,662 and 4,669.


Mr. MacKay: 1.	Is the new civilian security agency now engaged in hiring staff?
2.	Is it the policy of the agency to hire staff from among unsolicited applicants and, if so, what precautions are taken to protect the Agency from penetration by foreign agents?
3.	Is it the policy of the agency to administer so-called lie detector tests to all employees of the agency?
4.	On what date will the new agency become operational?


Hon. Bob Kaplan (Solicitor General of Canada):: 1. Since the new agency does not yet exist, no action is being taken to hire staff. Applications for employment with the agency, once established, are being acknowledged by the Security Intelligence Transitional Group.
When in a position to hire, the agency will endeavour to seek qualified personnel from inside and outside of Government. It will, through exacting security screening and staffing procedures, ensure to the greatest degree possible, that the agency is staffed by individuals whose loyalty to Canada is beyond doubt.
3.	There is no policy to administer lie detector tests to agency employees. However, the use of such tests is being studied so that decisions may be taken on whether to incorporate it as part of the over-all agency security screening process.
4.	A date has yet to be fixed for the new agency to become operational.
EM & R-SURVEY OF ENERGY CONSUMPTION


Mr. Mazankowski: Was a survey to determine the energy consumption of various commercial, industrial and institutional buildings in Canada conducted for the Department of Energy, Mines and Resources and, if so (a) how many buildings were included in the survey (b) was a comparison done between government-owned or occupied buildings and privately-run buildings (c) what was the cost of the study and what were the major expense items (d) who performed the study?


Mr. Dave Dingwall (Parliamentary Secretary to Minister of Energy, Mines and Resources):: The Department of Energy, Mines and Resources reports as follows: No. (a)-(d) Not applicable.


James Scott (Jim) Peterson: I ask, Madam Speaker, that the remaining questions be allowed to stand.


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


Madam Speaker:: Pursuant to the provisions of Standing Order 58, I do now leave the chair for the House to go into Committee of the Whole.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed consideration in Committee of Bill C-139, to amend the statute law relating to income tax (No. 2)- Mr. Lalonde-Mr. Blaker in the chair.
On Clauses 8, 9 and 128(12):
Paul James Cosgrove: Mr. Chairman, I rise on a point of order to request whether there is unanimous consent of Members to permit notaries in the Province of Quebec to be added as exempt professions from the requirement of reporting work in progress. I am advised that this will be met with agreement by the profession.


Roderick Blaker: The Committee has heard the proposal made by the Minister of State (Finance) seeking unanimous consent for the suggestion to which he has referred. Is there unanimous consent?


Donald Alex Blenkarn: Mr. Chairman, there will be ample time for this Parliament to deal with the amendment required. Therefore, at this time-


Roderick Blaker: Order, please. There is only one issue and that is whether or not there is unanimous consent.


Donald Alex Blenkarn: At this point, Mr. Chairman, there is not unanimous consent. There will be ample time in this Parliament to deal with that matter.


Roderick Blaker: The Hon. Member for Calgary West had the floor prior to the luncheon break.


Frederick James (Jim) Hawkes: Mr. Chairman, I thank the Hon. Member for Mississauga South for trying to keep this Bill on track and Members on the subject.
Prior to lunch I had asked the Minister a question. Unfortunately, there was not enough time for a response, so I will repeat it. If we were to put $2 billion into Small Business Development Bonds, or put $2 billion into the survival type bonds with which we are dealing today, or put $2 billion into Petro-Canada, which of these three types of public expenditure would lead to the most tax revenue for the Government of Canada?


Paul James Cosgrove: Mr. Chairman, if I accept the Hon. Member's admonishment, with which he began his remarks,

March 17, 1983
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that we should confine the business before this House to the Clauses which are before us, his question, of course, is not in order.


Frederick James (Jim) Hawkes: Mr. Chairman, I am quite willing to submit that question for your adjudication as to whether it is right on for the Bill. As I understand this piece of legislation, the Minister intends to get rid of the Development Bond and replace it with a survival bond. He tells us at the same time that it is because there is a limited amount of money. Right at the heart of this Bill lies the issue as to whether or not the money is better spent on development or on survival. One way of adjudicating that is whether or not the Development Bond produces increased revenue for the Government compared to the survival bond. Which way of spending this money, the old way or the new way which the Minister is proposing, produces maximum revenue for the Government of Canada? It is right central to this issue.


Paul James Cosgrove: Mr. Chairman, the Hon. Member has not repeated his request for information about Petro-Canada. It is that aspect of his original question which I thought was somewhat incongruous in light of the legislation before the House.
1 would remind the Hon. Member of the response of the Parliamentary Secretary before the break. The legislation before the House accomplishes two things. It expands the amount of income that is available to be treated under this Clause. On the one hand, it addresses the issue of economic expansion-increased economic activity-through the small business sector and at the same time it also addresses those most in need by targeting assistance under the amendment to those firms in serious financial difficulty.
Moreover, I would remind the Hon. Member that the description of the bond has not changed. The Government, in taking a look at the Small Business Development Bond, was quite impressed with its performance for the first few months of operation. The Government will continue to monitor the Section to see what impact it has on the small business sector and whether it is conceivable to have adjustments or alternatives in the operation of these two Sections in the future.


Frederick James (Jim) Hawkes: The Minister has not answered my question. Is that because the Government does not have that information?


Paul James Cosgrove: I am sorry, Mr. Chairman, but I thought I had answered the question.


Frederick James (Jim) Hawkes: I think the "blues" will show that perhaps the Minister did not. In any case, if the Minister did, would he repeat the ansewr? Which way of spending the money, either on development bonds or on survival-type bonds, produces the most tax revenue for the Government of Canada?


Paul James Cosgrove: Mr. Chairman, I indicated that the provisions of Section 8 and 9 do both. I indicated before the break
at lunch that it is not possible, without going into very hypothetical economic performance assumptions, to come up with a very meaningful analysis of the question raised by the Hon. Member.


Frederick James (Jim) Hawkes: Can I take it then that the Government has not done such an analysis, and that that is why we do not receive the information?


Paul James Cosgrove: No, Mr. Chairman. The answer could, I suppose, be analyzed by considering the Government's studies in terms of economic performance over the last two years. Depending on what assumptions are made, I suppose, conclusions could be drawn from such analyses. The analyses are done. What I am saying is that one would have to make an awful lot of assumptions. They would be purely hypothetical studies. The information is there, but the officials advised that they would be strictly that, hypothetical analyses, and based on assumptions which would probably vary from economist to economist.


Frederick James (Jim) Hawkes: I believe the Minister is now saying that the studies have been done but that he will not share them with us. If they will not be before the House, will we as Members be able to receive written copies of those analyses which have been done?


Paul James Cosgrove: No, Mr. Chairman, what I am saying is that the information which is available to the Department of Finance and the Government is probably the same information that is being used by the firm of chartered accountants which is advising the Hon. Member in his preparation for questions. It is information on the economic performance of the Canadian economy which is available to all Canadians.
What I am saying is that the conclusions of the analyses are not too meaningful when one attempts to address the narrow issue which the Hon. Member has addressed.


Frederick James (Jim) Hawkes: The Minister will be aware that the Canadian Federation of Independent Business conducted such an analysis and indicated that money spent on Small Business Development Bonds produced more revenue than it cost. Could the Minister comment on the validity of that study? Is it accepted by his officials?


Paul James Cosgrove: It is one opinion, Mr. Chairman, which was made available to the Department, as I have indicated.


Frederick James (Jim) Hawkes: If the Government were to accept it, would that not indicate that it might be a wise expenditure of public funds? If it produces more than it costs, in private sector terms, it makes a profit. Does the Minister reject the notion of making a profit in this fashion, or does the Minister quarrel with the methodology or the conclusion of the study?


Paul James Cosgrove: What I am saying is that it is only one opinion and one study on the subject.


Frederick James (Jim) Hawkes: May I refer to the simpler part? Does the Minister believe in a tax policy which would produce more revenue than it costs? Is that a good idea for the taxpayer?
March 17, 1983


Paul James Cosgrove: That would be a major thesis, Mr. Chairman, for the Government providing any stimulus in the economy. Probably the best example of which I am aware, in terms of ministerial responsibility, concerned some of the housing programs which returned almost three to one, in terms of what was put into the economy and what we saw generated directly and indirectly as a result of the expenditures of funds. Government employs that theory in many of its programs.


Frederick James (Jim) Hawkes: If the Government employs that theory, and uses it, I must then conclude that the study done by the Canadian Federation of Independent Business is not being followed through as a piece of advice because the Minister has contrary advice. May I ask the Minister whether the contrary advice is coming from his Department of Finance officials?


Paul James Cosgrove: Mr. Chairman, I should probably add that the study done, for example, by the Canadian Federation of Independent Business did not assume that any of the activity which occurred would have occurred without the bonds. That is the point I raised before the break at lunch. I do not know how economists or even practical business people can make those kinds of assumptions or, conversely, how figures can be determined as to what percentage of economic activity did result from the bonds or from the initiative taken by the Government. We know that tax programs have leakages. We know from practical experience that some things which would have been done by small businessmen would have been done by people taking advantage of programs of the Government, but we cannot quantify it.


Frederick James (Jim) Hawkes: What is the data base on which the Minister is making the decision to transfer the money from development to survival? If it is not rational choice, if it is not based on data, does it amount to darts in a dartboard? Is it political judgment? On what basis is money being taken away from development and directed over to the side of survival? Do we have any idea as to whether it will help or hurt the Canadian economy, the one kind of expenditure versus the other?


Roderick Blaker: This will be a final exchange, if I may indicate, because the time allotted to the Hon. Member for Calgary West has now expired.


Paul James Cosgrove: Mr. Chairman, as I have indicated, it is not an "either or" proposition.


Frederick James (Jim) Hawkes: It is. The Bill is "either or".


Paul James Cosgrove: The effect of clause 9 is to expand the operation of the clause to unincorporated small business persons. In addition, it is to target it toward people who are in specific and very desperate need of this type of assistance. Therefore, the provision is, first, expansionary, second, it is sensitive, I thought, to the plight of small businessmen. Certainly Hon. Members on this side of the House have been alerted. We have received representtion that this type of assistance would be welcome to people in very difficult circumstances.
I think for example of the representations made by colleagues of the Hon. Member addressing the plight of farmers,
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for example. There has been a request for Government action to assist that community. We know that the bond, as amended, has been used by the farming community in the majority of cases. What we are attempting to do, not only as politicians but as people sensitive to the plight of other Canadians as well, is to help and direct that assistance to Canadians who need help.
I do not know why the Hon. Member would disagree with the Government when his own colleagues feel that the farming community is deserving of this type of help.


Nelson Andrew Riis: Mr. Chairman, I wanted to raise a few last questions with regard to the Small Business Bond and Small Business Development Bond and then, hopefully, to move on to other Clauses shortly.
I want to clarify two or three points which have been made. One was raised by the Parliamentary Secretary to the Minister of Finance just before we broke for lunch, when he was speaking at some length about the great gift given by the federal Government to small business by increasing the maximum of accumulated earnings which would enable a small business to qualify for the small business tax rate, moving from $750,000 up to $1 million, as though this was some great gift. It must be stated that this was simply a recognition that the upward ceiling has not been altered over the last number of years and, with inflation carrying it, it was only sensible that this should be increased to recognize the realities of inflation in Canada in the last few years. On the other hand, he also went on at some length to try to say that the Government was trying to assist small businesses in their efforts by this bail-out bond, that was in the best interests of Canada, and that he did not understand why various Members opposite were going on about the money that the Government could find to assist Dome Petroleum, Chrysler, Maislin and Massey-Ferguson, and so on, when we could not find any money for small business. The Hon. Member went on to say that the Government has had a number of representations from the small business community saying that this was a good, progressive step that was going to assist Canadians. I would agree that a strong case can be made that way, but it need not be one or the other. What we are saying, Mr. Chairman, through you to the Minister, is that if we are prepared to go out on a limb for hundreds of millions of dollars for some large corporations, why are we not prepared to do the same for small businesses across Canada, farms, small ranches and fishermen, that kind of entrepreneurial endeavour? There seems to be a bias in the choice of those whom we assist and those whom we do not.
If the Minister believes, as he sits here today and reacts to the questions that Hon. Members have put forth, that the Small Business Bond is in force and is being used by all kinds of small businesses across Canada, that is simply not true, in my estimation.

March 17, 1983
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I want to address this question to the Minister. Is he aware of any particular regional breakdown of the use of the SBBs? The question I am putting is whether there is not a regional bias in the granting of the Small Business Bond. When I made an inquiry to a number of the smaller branches of Canada's chartered banks, I find bank managers who say that they are not prepared to consider the Small Business Bond at this time, that they are not using it and that it is not part of their operation. That is either because they do not know anything about it, or because it is simply bank policy not to pursue this.
I have read statements, in fact, where bankers have said that the Small Business Bond is not a program that they are actively supporting at this time. I am wondering whether the Small Business Bond Program has found its use perhaps in some of the larger metropolitan centres, whereas some of the smaller communities or the rural areas of Canada have been left out of this bond program. Could the Minister clarify whether there is any truth to that assumption?


Douglas Glenn Fisher: Mr. Chairman, I am in an unusual spot; I was down here talking to the Chair when the question came along.
I would like to make a couple of comments to the Hon. Member about his preamble. I understand this morning that there were some facts given to the House about the split on the Small Business Bond between farms, unincorporated and incorporated businesses. I would hope that our officials could get these facts again for us so we can pass them along. That at least would indicate to the Hon. Member that not all of these bonds have been used in large metropolitan areas, as he says. A good portion of them have been used by farms. The Hon. Member will recall that the bonds themselves have been changed in this Bill in order to take into account the requests of people in agriculture who have wanted to have access to those bonds, and who have enjoyed considerable use of them since the measure was introduced.
I again object to the negative description of the bonds provided by the Hon. Member. He says that it is a bail-out bond. Let us remember that that negative description is his, not ours. It may be easy to scorn people who need help, who are in difficulty. Perhaps in his position, with all the resources of a wealthy Parliamentarian, he does not understand the needs of people who are trying to rescue their businesses and working hard trying to keep themselves afloat. Those people, I am sure, appreciate the help, whether he calls it a bail-out or some other negative name. I reject that.
I also point out to him that there is indeed a considerable amount of development money left in the hands of small businesses as a consequence of the increase in the ceilings of retained profit and of annual profit.
Finally, I would reiterate to him that assistance to companies like Chrysler is also assistance to hundreds and hundreds of small businesses in the form of suppliers, dealers and other small businesses involved with such a large organization. I think that we have no need to apologize to small business for having helped one large corporation. The collapse of a large corporation would inevitably drag down hundreds of people in
smaller outfits who would not thank the Hon. Member for opposing this kind of help.


Roderick Blaker: Before 1 recognize the Hon. Member for Kamloops-Shuswap again, I think it is a proper courtesy to the Hon. Member for Mississauga South to indicate to him that it is his amendment which is on the floor for debate. I think I would want to recognize the Hon. Member for Mississauga South at any time that he indicated that he would want to bring the matter to a vote. I think perhaps the Chair is well off in leaving that in the hands of the Hon. Member to indicate his preferences in that regard.


Nelson Andrew Riis: Mr. Chairman, as the Parliamentary Secretary to the Minister of Finance indicated that he was speaking to you when I was making my delivery, it became very obvious, in his reaction, because he obviously did not hear a thing that I said.
I said that indeed I agreed with the support given to some of the major corporations. There was an obvious, positive ripple effect to the small business sector of Canada. I stated that. I cannot imagine how on earth else I could say it. I could try to simplify it for him, but I do not think that he needs that.
I also said that indeed it was a bail-out bond, and I am prepared to stick by that. I would say that I could provide a list of hundreds of small businesses in Canada that have been turned down by the chartered banks, because the chartered banks are simply not offering Small Business Bonds any longer. I stand by that. There might be the old isolated case, but by and large that is not the information I have.
As the Hon. Member for Mississauga South has indicated, the only time that the banks are enthusiastic about the Small Business Bond is when they have to save their own necks. They are not interested in the particular small business involved, but when a small business comes to them that is obviously going bankrupt, and perhaps the bank has not totally covered itself in terms of its security, they can then bring in the loan and renegotiate it under the Small Business Bond in an effort to save the bank's money, not so much to save the small business.
I think it has been a real oversight that the Government has put so much faith into the banks in terms of their willingness and enthusiasm to implement this program. As I stated at the beginning of today's session, the only reason that the banks will support this program is that there may be a tax incentive for them to do so, but we have given the banks so many tax incentives that now they are not interested in pursuing this Small Business Development Bond Program.
I want to direct a question to the Minister regarding the definition of the Small Business Bond Program. It is called the Small Business Development Bond or the Small Business Bond. I want to ask the Parliamentary Secretary to the Minister of Finance to respond to this. The question is why $ 1 million has been identified as the ceiling, after which the small business becomes a large business. It becomes a large business when its retained earnings are in excess of $1 million, and automatically it jumps from the small business tax bracket to the corporation tax bracket.
March 17, 1983

Will the Parliamentary Secretary explain why this particular figure was selected? Is it totally arbitrary or is there some rationale behind it?


Paul James Cosgrove: Mr. Chairman, I suppose anything in the Income Tax Act is discretionary, but that is the amount that is used throughout the Act in relation to a number of other provisions that apply to small business. An example is the low rate for small businesses and the amount that can be used for retained earnings. There can be many arguments, but that amount was used because it was thought to be reasonable and that it related to a good cross-section of small businesses. It was moved up to $1 million in this Clause as well.


Nelson Andrew Riis: I thank the Minister for that explanation. I now want to ask him a question regarding taxable dividends. Over the years they allowed a small business to develop an equity base so that the small-business person would not have to go to the banks or other financial institutions to borrow money at very high interest rates. That has now been removed from the small entrepreneur. Can the Minister explain why?


Paul James Cosgrove: Mr. Chairman, I believe the Hon. Member's question pertains to Clause 109. At this point we are not even addressing Clause 9. We are addressing amendments introduced by the Hon. Member for Mississauga South. 1 think the Hon. Member has strayed quite a bit.


Nelson Andrew Riis: Mr. Chairman, I will direct a question that deals directly with the amendment introduced by the Hon. Member for Mississauga South. It goes back essentially to the meaning of development of a Small Business Development Bond. 1 remind the Minister of what he said to the Committee earlier today. He said that it cost the Government of Canada $125 million to provide $2 billion of borrowing to the small business sector as a result of the bond program. As the Minister will know, these investments under the Small Business Development Bond were intended for new plant, equipment, buildings, expansion purposes. In other words, when a business was thriving and there was an opportunity to expand, the Government saw fit to enable that entrepreneur to borrow under the Small Business Development Bond program, which 1 applaud. It was a positive step. It was a good program until it was gutted. By definition, the small business person could expand his or her operation.
Surely when a business expands with a new plant, new facilities or a new line of product, that results in increased sales tax for the federal Government, increased personal taxes as a result of employees added to the operation, and as a result of increased salaries or returns to the federal Government in terms of revenues from corporate taxes resulting from the expansion.
Can the Minister provide the Committee with the net cost to the federal Government as a result of the $25 million paid out after the additional funds have found their way back into federal Government coffers? If these figures are not available, will the Minister hazard a ballpark guess, or will he simply
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indicate there is no way to determine the net return to the federal Government as a result of moneys invested in the bond program?


Paul James Cosgrove: Mr. Chairman, that is a repetition of a question asked before the lunch break. I indicated that it is very difficult for the Government to give a hard and fast figure with regard to returns to Government coffers. I made the general observation that the $2 billion addressed to this sector of the economy would improve that sector. I said that if the Government was going to be assisted by that expenditure of $2 billion, it would have been assisted in managing its debt portfolio with that perceived income coming in, but the fact is that it did not. Government revenues did not increase. That is the major reason why the Minister of Finance indicated, when he introduced Bill C-143, that the Government had to seek further borrowing authority. The revenues were not there.
Another general way of testing that is the lack of performance as reflected in the poor numbers in terms of failures in this sector. That has not been very encouraging. 1 do not have a specific number, but the general activity in the economy, either in the health of the sector or the returns to Government, might have reflected all of those increased revenues coming to the Government. However, they have not materialized.


Nelson Andrew Riis: Mr. Chairman, just for clarification, is the Minister saying that that $2 billion of investment in the small business sector in terms of productive capacity resulted in absolutely no tax return to the federal Government in terms of sales, personal or corporate taxes?


Paul James Cosgrove: No, Mr. Chairman, I am saying it did not result in a remarkable bulge, that is, in economic activity. That would lead to the conclusion that it was a very successful way of stimulating the economy. My officials remind me that one of the reasons is that some people in the private small business sector who took advantage of the bond may have already been planning those kinds of expansion, purchases and economic activity. What we did was assist them in the financing of those operations. Those plans may have been on the shelf for that sector in any event.


Nelson Andrew Riis: I agree wholeheartedly with the Minister. I do not think that because of the Small Business Development Bond many small businesses decided at that point to expand. I suspect it was part of their corporate decision making. That comes as no surprise.
The logic that the Minister is using is open to some question. He is saying that because there was no appreciable corporate tax return increase, no significant increase in personal or sales tax return to the federal Government, that $2 billion stimulus to the small business sector was questionable in terms of value. Presumably the Minister has not been able to factor out the impact of this stimulus to the small business sector. Earlier today he said it cost the Government $125 million for this program. When the Hon. Member for Mississauga South introduced his amendment, he said that his information

March 17, 1983
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indicated there was a trade-off, that while the federal Government invested $125 million, the returns as a result of that investment offset it. In a sense the Minister was not providing us with the full picture. Will he agree that the $125 million for these two programs which it cost the taxpayers of Canada to implement resulted in some return as well, and that the $125 million cost would be reduced as a result of that net return?


Paul James Cosgrove: There would have been some improvement, some trade-off, that is revenues generated as a result of the plan. We are not as optimistic as the Hon. Member for Mississauga South that the trade-off is equal or, as he intimated, that the bond became an investment and there is, in a sense, a profit. We do not accept that. Nothing in our experience would lead us to be that optimistic.
The other point, and I am repeating it from this morning's session, is that for some period of time, at least two years, there have been extra claims on Government revenues, such as our automatic social programs and the Unemployment Insurance program. They require significant infusion by the Government of resources toward automatic social stabilizers. As a result of this pressure on the total Government financial position, the Government, for example, has come to Parliament and asked for increases in authority to borrow. The Government is under extreme pressure because of that very poor experience in the economy in the last two years. Faced with that prospect, and the prospect of searching for even additional funds to serve social programs which are necessary, we find that we cannot offer the same kind of funding to serve expansion. At the present time we feel that under the circumstances our first obligation should be to those people who need help the most. That is the rationale behind that part of the amendment which directs the funds, first of all, to those corporations which are on the brink of very difficult financial positions.


Roderick Blaker: I should advise the Hon. Member for Kamloops-Shuswap that his time has expired. Of course, he can come back after a further intervention by another Hon. Member.


Mr. Collenette:: Mr. Chairman, I really have one question and I believe this is an appropriate Clause in which to raise the question to the Minister. In discussion of the Small Business Bonds, the matter of interest rates on these bonds and other Government-related issues comes into play. It is my understanding that the Small Business Bond, and the interest rate thereon, and other interest rates, are based on something which is known as a prescribed rate, and since January 1982, this prescribed rate has been calculated quarterly in order to keep people up to date with the fluctuations in the interest rate market. It seems to me, however, that with the wide fluctuations of interest rates, especially in the last year, a quarterly revision does not seem to be appropriate enough. Businessmen have come to me asking for my explanation of the Government's calculation of this prescribed interest rate for these bonds. Other constituents have also come to me similarly concerned about other calculations based on the prescribed
rate. I will give you an example of this, Mr. Speaker. As you know, employees of chartered banks, who are given a preferential mortgage interest rate by the banks, are now liable, I understand, to have the difference between their subsidized mortgage interest rate and the prescribed Government of Canada rate taxable at their marginal income tax rate.
I certainly support this provision in the 1981 budget, but I am curious about the benchmark, because if we look at the last three months of 1982, the prescribed rate was 16 per cent while comparable mortgage rates were around 13.5 per cent. The prime rate, of course, was somewhat lower.


Nelson Andrew Riis: I rise on a point of order, Mr. Chairman. I have been listening very carefully to the Hon. Member make his presentation. I do not see how it relates to Clauses 8 or 9 of the Bill. Perhaps he could explain now.


David Michael Collenette: Mr. Chairman, if the Hon. Member had been listening carefully he would heard my explanation. I was very carefuly not to stray too far from the Clause at hand. May I continue, Mr. Chairman, since you obviously were satisfied with my line of questioning? In this particular case, my constituent bought a house in November, 1982 and received a 3 per cent mortgage from a bank. He is now to be taxed on the difference between 3 per cent and the prescribed rate of 16 per cent. This in effect will mean he will be penalized more than if he had gone to any other chartered bank where he could have got, perhaps, a five-year mortgage at 13.5 per cent.


Nelson Andrew Riis: Mr. Chairman, I rise on a point of order. We are anxious to deal with this Bill and to move on to other Clauses. I realize that by not stopping the Hon. Member, you presumably have agreed that this has direct relevance, but I must register my concern, as one who wants to see this Bill proceeded with as quickly as possible, that I must listen to what I consider to be an irrelevant discussion on this particular Clause. I believe it is quite out of order.


Roderick Blaker: It is rather difficult for the Chair because the complexity of the Bill is such that it is very demanding to attempt to determine relevance. This is the second time that the Hon. Member for Kamloops-Shuswap has raised the point of relevance, and it is the duty of the Chair to examine that issue. In the circumstances, I believe the best way to proceed is to ask the Hon. Member for York East to continue, and the Chair will pay the attention which is required in order to determine whether or not the Hon. Member's remarks are in fact relevant.


David Michael Collenette: Mr. Chairman, I thank you for your generosity. I must say that the Hon. Member for Kamloops-Shuswap is dealing in tautologies in that he answered his own objection by saying that the Chair did not correct me earlier because obviously it was satisfied with my line of approach.
I have already made my point, Mr. Chairman, and it relates directly to the Clause at hand, in terms of the interest rates on the Small Business Bond and the prescribed Government of
March 17, 1983

Canada rates. In any event, Mr. Chairman, I would not want to upset my friend from the New Democratic Party. I understand that he has been a participant in this debate and has himself used a lot of time, and I am sure he would not want to deny me, a humble backbencher on the Government side, a few minutes of redress to approach one of our Hon. Ministers.
I thank the Hon. Member for not objecting even further after the Chair had supported me in my line of questioning. I have made my point and I welcome the Minister's answer.


Paul James Cosgrove: Perhaps, Mr. Chairman, I could respond by observing that the rate is not set. The rate is negotiated between the bank and the small businessman. It is really something which flows from the application by the small businessman to the bank. I am having difficulty, Mr. Chairman, concentrating on my recollection of the question before the Hon. Member was interrupted by the Hon. Member for Kamloops-Shuswap. But in so far as the setting of the general bank rate is concerned, Mr. Chairman, as you know, since January, 1982 this rate is revised quarterly and takes into account fluctuations in interest rates on the capital markets. The rate used for a given quarter is obtained by taking the arithmetic mean of the accepted weekly three-month Treasury bill tender rates for the first month of the preceding quarter. Consequently, for example, the prescribed rate of 16 per cent, which applied in October to December, 1982, was based on July, 1982, data.
I will conclude by saying, on the other hand, in the case of dropping interest rates, the prescribed rate is slightly higher than it should be. The opposite occurs when these rates go up. The recent drop in interest rates has lowered the prescribed interest rate, which is 12 per cent for the present quarter of 1983.


David Michael Collenette: Mr. Chairman, as you can see, the Hon. Member for Kamloops-Shuswap has come over to me for further clarification and we are discussing this matter. I am very glad that he now understands my position fully. I would like to ask the Minister in conclusion, given his answer, would the Government, in view of these fluctuations, help small businessmen and bank employees such as I have described by perhaps being a bit more flexible on the compilation of this rate? The argument that it takes three months to gear up computers and inform people in the field as to changes in the rate, is certainly a hard one to accept, given the great efficiency of Government organization in general, and especially of Revenue Canada.


Paul James Cosgrove: In conclusion, Mr. Chairman, the experience prior to the last six months was of interest rates climbing. I am advised by my officials that the quarterly averaging device has assisted small business and its customers in that situation. Now, since interest rates have been dropping-and of course they have gone down a lot faster than they went up-possibly the averaging may not have been quite so attractive. But it was a device which was of great help to people, such as in the small business sector, who were borrowing money during that period of time.
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Mr. Rose:: Mr. Chairman, I was very interested in what the Minister had to say about how the money from the Small Business Development Bond went directly to the banks rather than back to the Government, because that is a view I hold. If I have not paraphrased him properly, I apologize. But I think he did say, in response to the Hon. Member for Mississauga South, that it was not offsetting, not reciprocal, and the fact is that the effective interest rates were larger for small companies than they were for large companies. I think what we need to do is not to look at the tax rates themselves but rather at the real, effective interest rates.
Has the Minister any current figures on the effective interest rates as applied to different classifications of people? If you have an inflation rate of, say, 12 per cent and an interest rate somewhere in excess of 20 per cent-I know we are not there now, but I wonder if he has any up-to-date figures. The real after-tax interest rates discriminate against small companies, which the Government, through its Small Business Bond, is attempting to help. Consequently, the people who get the help, the stimulus, are not in fact the small businesses, or the Government in terms of revenue, but the people who are lending the money and charging the interest rates.
I will just give you the figures I have from about a year ago. The effective after-tax interest rates for homeowners is 9.5 per cent; for small manufacturers, 4.7 per cent; and for large manufacturers, 3 per cent. I would like to know from the Minister whether or not this has changed. We have found that in the personal income tax system we are really loading the system against the poor and low income groups. Is the same thing true where we are loading the corporate tax system against small-businessmen instead of the large retailer and manufacturer? Does he have any up-to-date figures on the real after-tax cost, because the tax rate is frequently meaningless?


Paul James Cosgrove: Mr. Chairman, the tax system generally in the corporate sector is the exact opposite of what the Hon. Member has just said to the House. For example, I think the small business manfuacturer has a rate somewhere around 10 per cent as compared to the larger corporation which pays around 35 per cent, 36 per cent. So the Act is tilted or biased, as the Hon. Member says, in exactly the opposite way from what he has just indicated. Now, there may be some lending practices involving the rate that a bank charges different customers or different classifications in the business sector, but that has nothing to do with the Income Tax where we have biased our rates toward the small business sector. That has been traditional and I think well known. This section, I think, is just a further example of that. How can the Hon. Member say that we are not biased in favour of the small businesss person, incorporated or unincorporated, when the effective rate of a person taking advantage of this bond is half prime plus 2 per cent to 3 per cent? This is available to small business, not to the giant corporation.


Mark Willson Rose: Mr. Chairman, the point I was making is that while the tax system is biased in favour of the small-business-

March 17, 1983
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man, the real after-tax cost of borrowing, assuming a uniform interest rate, is biased in favour of the large retailer and manufacturer. It is asserted by some that we should index the interest income and expenses so that in fact the system would not be loaded against the homeowner and small manufacturer who do not have the same provisions to write off their debt charges.


Paul James Cosgrove: Mr. Chairman, I can do nothing further than repeat that the effect of the bond and the provision we are looking at, which I am reminded is the pertinent business before the House, is to provide a bias in favour of those people who would qualify for the bond. This is a remarkable advantage and, we think number one, an incentive, and number two, assistance to those small business people, incorporated or sole proprietorships, who want to take advantage of this preferred rate.


Mark Willson Rose: The point I was making is that your efforts will be ineffective if the real interest rate on debt charges is biased against the small borrower, the small-businessman, the homeowner. That is the assertion I make.


Paul James Cosgrove: I think I understand now the Hon. Member's point, but surely that bias is not offered in this legislation, which is one half prime. I agree there may be some difference in the way in which banks treat different categories of borrowers, but not to the extent of the interest rate reduction offered through this bond.


Donald Alex Blenkarn: Mr. Chairman, reference was made by my colleague with respect to a study done for the Federation of Independent Business. That study indicates that there was a very positive effect on Government revenues because of the Small Business Development Bond. In fact, the figures indicate that Government revenues increased over the time of the bond by $120 million, and Government revenues will increase over expenditures in the period 1980 to 1984 by another $75 million. That study went over the net cost to the Government. I went over the incremental problem because obviously some people who would have borrowed anyway took advantage of the Small Business Development Bond and the tax break therein. There were studies done on the matter here in Ottawa, and I am wondering what studies the Minister did, bearing in mind that the report was tabled in February of 1981. Are those studies available? If so, why have they not been released to the public? Can the Minister explain what is wrong with this particular study? Why has the Small Business Development Bond been gutted, bearing in mind that, according to all of the information we have, it yielded a positive tax return to the Government?


Paul James Cosgrove: Mr. Chairman, I dealt with this question earlier. It is quite useful to have these economic models like Informetrica. It is quite useful to have set pieces theoretically gauge what has or has not happened in the economy. The difficulty lies in the interpretation of those studies. Our officials did not agree with the assumptions which are used to
identify the surpluses that the Hon. Member has referred to, for example.


Donald Alex Blenkarn: If the people of Canada have paid for these studies, why are they not available? Will the Minister produce them now? The study was made at the expense of the Canadian Federation of Independent Business. It was produced by Don R. Allen and Associates Consultants Limited and indicated that the Small Business Development Bond Program actually had a positive cash return in terms of tax. The Government has said that it studied the report but that it made false assumptions. If the Government has studied the report, where is its study? We have paid for it and would like to know where it is.


Paul James Cosgrove: The Hon. Member is asking me to produce a study that he is reading from. Of course we have copies of it, Mr. Chairman, but our interpretation is not the same as his. In his statement on September 27, 1982 the Minister indicated that he had looked at the same period and the same performance in the economy. Informetrica would have been just one of the things the Minister would have examined in coming to his conclusions about the performance of the economy and whether we could accept that the performance was as set out in the Informetrica report.


Donald Alex Blenkarn: The Minister has not understood this particular study at all. This is the first time reference has been made to the study in the House of Commons. It is brought up now because we are dealing with the Small Business Development Bond Program. The Government says it has looked at the Allen study and has concluded that Mr. Allen is wrong.
Let us see how the Government comes to that conclusion. Will the Government release its own finance studies to indicate where Don R. Allen and Associates is wrong? The business community believes that this was a first-class program and that the Government made a profit on it. If the study is not correct, we would like to see the data to indicate that.


Paul James Cosgrove: Mr. Chairman, the answer would be that it is in the many other studies the Government has looked at that cover the same period of time; the advice that officials in the Department have given to the Minister; the interpretation that the officials have made of that particular document, and finally, the performance of the Government's bank account. I am not sure what amount the Hon. Member for Mississauga South says the Government has benefited by, but we believe that the performance of the accounts receivable sections of the Government of Canada do not reflect the generation of that kind of economic activity.


Donald Alex Blenkarn: Mr. Chairman, the Government's economic performance has been abysmal. In the November, 1981 budget, the Government forecast for the current fiscal year that it would receive $80.3 billion in revenue. It will receive $66 billion, so revenues are off by 17 per cent. A good deal of that is due to the inept financial performance of the Government, and to tax laws that bleed the country dry and drive
March 17, 1983

business out. One good program was the Small Business Development Bond, but it was thrown out because it did not comply with the Government concept of paternalism. It worked. It gave a positive tax return and economic growth, but it did not comply with socialism.
We are ready to vote, Mr. Chairman.


Paul James Cosgrove: Apart from the rhetoric of the Hon. Member for Mississauga South, Mr. Chairman, the figures he has used make the point that I have hit upon. The original projections were for revenue of $80.3 billion; the actual performance turned out to be $66 billion. That is my point. The performance in the economy does not reflect the receipt of increased revenues which the report that the Hon. Member is flashing around claims. He cannot see the logic of that because he is using rhetoric. We do not accept the amendments of the Hon. Member. They do not support the thesis. We are ready to vote on them.


Roderick Blaker: Is the House ready for the question? Is the Hon. Member for Winnipeg North rising to speak in the debate?


Mr. Orlikow:: Yes, Mr. Chairman. I should like to take a few moments to speak. In spite of the Hon. Member for Mississauga South saying that he was ready to vote, he did not speak for me.
I should like to raise again a matter which I raised in debate last week. I was in committee this morning and could not be here. The point has been raised before by the Canadian Federation of Independent Business, that the change from the Small Business Development Bond to the Small Business Bond was a big mistake and has been a deterrent to small business. This view has not just cropped up after the change. The point was made when the Bill was brought to the House by the Minister. An article in the Financial Post on January 30, 1981 carries the heading "Small firms say new bond just won't do", and I should like to read a few paragraphs from that article as follows;
-the Small Business Bond, is drawing fire from small businessmen and lenders and may be short lived.
The consensus, in short, is that Ottawa's bond program has changed from a useful job-creation and business expansion tool in a period of high interest rates to one that offers only restricted stop-gap financial aid.
When the Small Business Development Bond ... program began in 1980, a small-business corporation could get low-interest loans for new fixed-asset acquisition, research and development or in the case of financial hardship.
It continued by indicating that in the November 12, 1981 budget:
-the development aspect of the program was dropped and SBDBs became simply Small Business Bonds-
Then it went on to indicate:
-after January 31, when the SBDB program ends, the new SBBs become available only in narrowly defined cases of financial difficulty.
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Also it indicated:
-potential borrowers with strong expansion plans will be barred from the program. In addition, the new financial-hardship guidelines may prove so restrictive that few ailing firms will qualify for the bonds.
I will not take the time of the House to quote a spokesman of the Canadian Imperial Bank of Commerce or Philip Walton, regional vice-president of RoyNat, who said the same thing.
We attempted to obtain some figures from the Minister last week. He indicated that he did not have them and that the argument in any case was invalid. We have some figures which I would like to put on the record. They come from the Canadian Bankers' Association and indicate that as of December 31, 1982, measuring from the start of the program, $2,966 million had been authorized under both the Small Business Development Bond and the Small Business Bond. Also they indicate that in the last year since the development aspect was dropped, only $578 million was lent, in comparison with the $2,388 million lent in the previous year and a half. In other words, when the Government got rid of the Small Business Development Bond and switched to the Small Business Bond, loans dropped to a third or a quarter of what they had been previously.
What we were saying last week and what other Members have been saying today was not only true after the fact. The result was predicted a long time ago, when the Government first brought forward the proposal to take the development aspect out of the Small Business Development Bond and to restrict it to companies with extreme financial difficulties.
I could go on, but that is the situation as we see it. We know, following the lead of organizations such as the Canadian Federation of Independent Business, that the Government made a very serious mistake making the change incorporated in these amendments.


Paul James Cosgrove: If there was anything new in the position of the Hon. Member, I would be motivated to try to add to the debate with the Government's response to his two points. The fact of the matter is that he has really repeated the submissions made by the House Leader of his Party earlier today on a couple of occasions. Also he repeated the position put by the Hon. Member for Mississauga South. If the Government had buckets full of money and did not have the deficit it is managing now because of a general downturn in revenues and increased expenditures for committed social programs such as Unemployment Insurance, it would be wonderful to provide expansionary benefits to all sectors of the economy.
We cannot do that, especially when Hon. Members opposite criticize the Government when it comes to the House to indicate its present deficit position. We are subject to criticism by Hon. Members opposite that the deficit is too high, even with programs targeted toward people in need.
I am sure Canadian taxpayers who are looking for refunds of some $6 billion must be frustrated when this afternoon the Hon. Member's House Leader berated this side for taking the time of the House. We asked for a vote, and the Hon. Member

March 17, 1983
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rose and repeated a question which had been answered four times in the House. Is that ever frustrating! It must be frustrating for Canadians who are looking for refunds when they look at the nonsense which has been going on in the House this afternoon.


Nelson Andrew Riis: On that side.


David Orlikow: I do not want to prolong the debate, but I do not appreciate a lecture from the Minister when I have probably taken in this entire debate 15 minutes last week and five or ten minutes today. First I say to the Minister that Hon. Members of my Party have not criticized and will not criticize the Government because the deficit is too large. If the deficit is used to improve production and to provide employment, we will not say that it is too large.
Second, just because the Minister answered the point put forward by us with an argument that we do not accept does not mean that if he repeats it once, twice, four times or 20 times we will accept it.
Finally, if the Minister says that he cannot do more because of the deficit, I find it a very strange argument. When the loans went to companies that wanted to expand their production or to develop new projects, these firms were succeeding and would pay back their loans. I do not think we have to worry about a larger deficit by lending money to such companies. When we lend money to companies which are in real financial difficulty-and I am not saying we should not-in all likelihood a substantial percentage of them will not succeed even with the loans. In that event there is a very good chance that the Government will lose money, that loans will not be repaid, and that indeed the deficit will be larger. I do not understand the Minister at all and I am sure that small-businessmen who need assistance by way of Development Bonds do not understand him either.


Paul James Cosgrove: Question, Mr. Chairman.


Nelson Andrew Riis: Mr. Chairman, I have two quick questions. The Hon. Minister should be less prone to tirades about how terrible the Opposition criticism is. However, we do not find it surprising because if this Bill were brought in by anyone, it would receive the same criticism. What supportive correspondence did the Minister receive from tax accountants and tax lawyers indicating that the Bill was needed at this time and that it was a good Bill? I would be surprised if he received much mail of that nature. My question is really twofold. Has the Minister or his departmental officials conducted any analysis to indicate who are the major beneficiaries of the Small Business Development Bond Program in terms of who benefits most from the tax holiday and from assistance going directly to small business?
My understanding is that once interest rates reach a particular level, the main beneficiaries unquestionably are banks in terms of tax advantages accruing from the bond. Can the Minister confirm or deny that?


Paul James Cosgrove: Our analysis is different, Mr. Chairman. Our analysis is that it is the borrower under the new Clause or the amendment before us, by and large the take-up has been used 60 per cent by farmers and fishermen and the balance has been used by the small-business sector. Any interest rate projections done by the Department show that the borrower is the greater beneficiary.


Nelson Andrew Riis: My last question to the Minister is: of the $2 billion lent out under the Small Business Development Bond Program, what was the financial gain to the banks of Canada in terms of the taxes they were not required to pay as a result of the bond?


Paul James Cosgrove: Mr. Chairman, I am advised it is not a large amount.


Nelson Andrew Riis: Mr. Chairman, in closing I want to register a very strong concern about a program which obviously benefits the chartered banks of Canada, either to a greater or a lesser degree, depending on what one wants to admit or what one wants to calculate, and for the Minister to say there are no figures available with regard to a Government program subsidized by the taxpayers of Canada, that he has no idea to what extent the banks of Canada have benefited by this program, I think indicates some very, very loose fiscal practices. It is certainly the kind of question the taxpayers of Canada would want to know, that is, to what extent are they subsidizing the chartered banks?


Paul James Cosgrove: Mr. Chairman, I have indicated that I do not have those figures at hand. I would make them available to the Hon. Member, but who are we kidding? We know the Hon. Member is sore at banks. We know the Hon. Member's Party would not participate in an analysis of the banks and their profits last year, which was conducted by the Standing Committee on Finance, Trade and Economic Affairs.


Mr. Young:: That is not correct.


Paul James Cosgrove: Representatives of the Hon. Member's Party left during the study. We know where the Hon. Member comes from. I can provide him with those figures. I can indicate to the Hon. Member that the main beneficiary under the analysis was the user. I will give him the figures as to what advantages the banks did enjoy. But it was only part of the larger study done by Hon. Members, except for those in his Party who left. I will make those figures available.


Nelson Andrew Riis: Mr. Chairman, I want to make it perfectly clear to the Minister that he did not participate in any aspects of the inquiry into bank profits while Members of the New Democratic Party participated throughout the entire analysis. It was just when the final report was being drafted that it became perfectly clear that Members of the Progressive Conservative Party and Members of the Liberal Party, acting literally as spokespersons for the banks of Canada, were prepared to engage in a complete and total whitewash, and what we said
March 17, 1983

was going to happen has now happened. The banks said their profits were an anomaly, they were an error, that the profits were a little blip on the progress screen of the banks. For the first quarter of 1983 when every single sector of our economy is being hammered, we notice that one sector's profits are up 41 per cent, that of the banks. In other words, the whitewash, the scam, that we could call that inquiry, turned out to be just that. If the Minister is to cast any aspersions on this side, maybe he should reflect on where he was when that inquiry was taking place and get his facts straight before he starts levying any criticisms.


Some Hon. Members:: Question.


Roderick Blaker: The question is on the amendment to Subclauses 8(3), (4), (5) and Subclause 9(3).
Is it the pleasure of the House to adopt the motion?


Some Hon. Members:: Yea.


Some Hon. Members:: Nay.


Roderick Blaker: In my opinion the nays have it.


Some Hon. Members:: On division.


Roderick Blaker: I declare the amendment negatived.
If no other Member seeks the floor I will put a group of Clauses, which the Committee decided to put together for purposes of debate, namely Clauses 8, 9 and 128(12).
Shall Clauses 8, 9 and 128(12) carry? All those in favour will please say yea.


Some Hon. Members:: Yea.


Roderick Blaker: All those opposed will please say nay.


Some Hon. Members:: Nay.


Roderick Blaker: In my opinion the nays have it.
And more than five Members having risen:
Clauses 8, 9 and 128(12) agreed to: Yeas, 27; Nays, 11.


Roderick Blaker: I declare the Clauses agreed to.
Clause 10 has already been carried. Unless Members want to group some Clauses together, I will proceed to put the question on Clause 11.


Donald Alex Blenkarn: Mr. Chairman, we would be prepared to carry Clause 11(1), (2), (3). We have some difficulty with Subclause (4) which deals with soft costs.


Paul James Cosgrove: Mr. Chairman, I rise on a point of order. For our part we are willing to accept Subclauses (1), (2) and (3) as carried.


Roderick Blaker: Agreed and so ordered.
Clause 11(1), (2) and (3) agreed to.
On Clause 11 (4)-Costs relating to construction of building or ownership of land
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Miss Carney:: Mr. Chairman, Clause 11, Subclause (4), as has already been indicated, deals with the subject of soft costs, which has caused the construction industry many problems. Basically, it means that soft costs incurred in the construction, renovation or alteration of buildings and respective ownership of land will be capitalized rather than deducted on a current basis. This has proved to be very injurious to the construction industry. As a matter of fact, one of the first effects of the 1981 budget, if I could have the Minister's attention, in the original changes in soft costs was to close down construction on much on-site work in progress and caused the immediate layoffs of many people. While some changes have been made in this area, there is still very clear concern about the effect of the soft costs. I have some questions for the Minister relating to specific parts of the Clause. First, the Bill does not make any differentiation between investor taxpayers and persons who construct buildings said to be used for their own personal operation. Since one of the original purposes of this measure was to encourage investor taxpayers in this area, can the Minister explain why there is no differentiation?


Paul James Cosgrove: Mr. Chairman, the officials advise me that the intention of the Section initially did not distinguish between people or the motivations of people or categorization of people who took advantage of this provision. No doubt it would be used by people for different reasons, perhaps investors. Some people would have taken very generous advantage of the Section for their own financial portfolio, presumably for retirement, assistance or estate purposes. But the Income Tax Act by itself does not distinguish between the reasons why people would use a Section in a particular way. For example, I do know, in connection with the housing industry, that the original provisions were of course part and parcel of the MURB Program.
The Government, for different reasons, that is reasons having to do with objectives addressed to the provision of housing of different types-to market such required affordable housing-decided to approach those kinds of needs. Admittedly, they were originally served by this provision. However, they should be approached using a different financing vehicle. For example, even though the Government removed the MURB provision and, as well, this general provision affecting soft costs, requiring the costs to be capitalized, it was done for a particular social reason, being the provision of certain kinds of housing directed toward a certain sector of the population looking for housing at a moderate cost. The Governement allocated up-front money. As I recall, in the 1981 budget, $300 million was directed toward serving that need.
What I am saying is that, yes, the original purposes of the Section did assist with the provision of housing, for example. The Government decided that there were other ways in which it could go about meeting those objectives. It felt, as a general

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rule, that it was more appropriate that the soft costs be capitalized and carried over a number of years.


Pat Carney: Mr. Chairman, I followed the rationale, without necessarily accepting it, with regard to the particular soft costs which affected the MURBs. I know that in many urban areas, and my own riding is an example, the result of that provision has been that there are still large holes in the ground. Projects were not completed and cannot be completed even with the changes which have been introduced. However, we are also concerned with the effect of this measure on large capital projects.
For instance, we have been advised that major construction projects, such as the construction of a large pulp and paper mill or a hydro dam, projects of that magnitude, the capitalization of soft costs will be a major cost item. Since there are other measures in the various budgets, such as the measures relating to the CCAs, which have adversely affected the construction industry, could he explain how this measure will impact on the cost structure of large capital projects?


Donald Alex Blenkarn: It increases the price by 25 per cent. That's how it will impact.


Paul James Cosgrove: Mr. Chairman, some of the representations or examples given by the Hon. Member involve public projects. Hydro projects would not be private sector developments. Therefore, I would submit that the Section is really not pertinent insofar as-


Donald Alex Blenkarn: The tar sands plant might be an example.


Paul James Cosgrove: -they are concerned. The Hon. Member has made the statement that projects have been stopped because of this provision. We would be happy to hear any specific examples of which the Hon. Member is aware, because our information is that that is not the case, and that the drop, the remarkable reduction in interest rates over the last half year, has permitted construction to carry on in a number of areas.
We have been told by the Edmonton Construction Association, in reference to large firms, and the Hon. Member was referring to large projects, not very small ones, that they have the financial ability to move their accounting procedures to take into account the capitalization of the interest, rather than the reduction which was previously available under the designation of soft costs.


Pat Carney: Mr. Chairman, the Minister raises a number of points in that answer. I will try to deal with them one at a time. His suggestion that the provision relating to soft costs on the MURBs did not have adverse results and did not result in the cancellation of projects is truly absurd, since these holes in the ground and the impact of those measures were widely publicized. There were pictures in every newspaper of blocks of holes in the ground filled with water which had to be fenced off. There were cities which had to pass bylaws to force people to put up protective fences. For the Minister to suggest that this impact did not occur indicates that he and his officials are
wildly out of touch with reality when they propose such measures.
However, specifically in relation to the construction of private projects, "private" meaning pulp and paper mills, mines, et cetera, which are not financed with public money, does the Minister agree that capitalizing the soft costs for these private projects is more expensive than expensing them out?


Paul James Cosgrove: Mr. Chairman, of course the theory behind the capitalization of the interest is that it is interest on an investment which is an improvement to a capital project. The pulp mill example used by the Hon. Member is an enhancement of a capital asset, and the Government has taken the position that the reduction in interest rate-


Donald Alex Blenkarn: The interest isn't deductible.


Paul James Cosgrove: -is really a method of contributing toward the expansion, the enlargement, of the capital assets of the pulp company. Therefore, the whole transaction, the whole project, results in a capital feature which is enjoyed by the company over a period of years. For that reason, the Government felt that all of the cost, including interest charged on financing of that project, is properly set off against the asset resulting from the project development by a particular company.
Returning to the Hon. Member's first comments, I agree with her. Yes, there were some projects which were stopped within days of the initial announcement of the budget in November, but-


Donald Alex Blenkarn: Hours.


Paul James Cosgrove: -because of the amendments, that is, the provision that if the projects were commenced by the end of the year, which was extended to April, and finally, with the indication that there had to be evidence of intention, to proceed, the result was that people went back to work on projects. I believe that was the reference of the Hon. Member when she mentioned pictures in the paper. That probably would have occurred in November or December of 1981.
Yes, I know that there are some projects which have not proceeded, particularly in the residential construction area. Again, if the Hon. Member checks, I think she will find that, by and large, the complaints arose as a result of the introduction of this Section in relation to large residential projects. The Hon. Member must remember that vacancy rates for these large condominiums or rental projects in many of the major metropolitan areas have dramatically changed in the last nine months. As a matter of fact, I believe the Hon. Member for Calgary South indicated this morning that in his city the vacancy rates had changed in that period from less than 1 per cent to somewhere around 12 per cent.
Obviously, people are motivated to proceed with some of these projects based on whether they can market their product, whether they can put people in these projects and whether they will derive any income. Similarly I would say, insofar as mines
March 17, 1983

or pulp mills are concerned, there are other factors of which 1 believe Elon. Members are all too painfully aware, and that is the lack of market for some of these major industries. That as well has an impact on finance decisions, not just the method under which companies contemplating expansion can finance those expansions.


Pat Carney: Mr. Chairman, I again would ask the Minister to address very simply the question I put to him. We have 1.5 million unemployed in this country. We have every investment survey being done indicating that investment intentions have plunged. We have companies all over the country whose biggest problem is cash flow and who are not in a position to finance necessary expansion or renovations which are required in order to create new job opportunities. We have the last few budget measures which have brought in measures related to the CCAs which have made it less attractive to invest in new capital equipment. I ask him, given all of these adverse factors, given the economic climate today, and given the need to promote new building, new construction, new expansion and renovation and new productivity measures, I ask him a very simple question: does this measure which forces companies to capitalize soft costs create a greater burden on those private companies than the previous measure whereby they could be deducted and expensed out? Is this measure going to create an added financial burden on the very companies to which we are looking to create new job opportunities by new investment?


Paul James Cosgrove: Mr. Chairman, the officials have brought to my attention that there is a grammatical error in Subclause 11(4) which is specifically the one that we are dealing with. I would like to move the following amendment to correct it. It is:
That subclause 11(4) of Bill C-139 be amended by striking out line 10 on page 38 and substituting the following:
"or a cost incurred during that period"
As regards the question put by the Hon. Member, in isolation, in a narrow sense, one would be tempted to be simplistic and to answer it by a yes or no. But we know that we are looking at a Bill that has 139 Clauses and that has relieving sections. For example, it has a section that reduces the general tax rate for certain people under the tax schedule. For example, for people who have children, it offers a tax benefit by increasing the $50 per child benefit.
There are many Clauses in this section, some of which would be more burdensome to some sectors in the economy and some which would lighten the financial problems faced by other sectors, and the Government has to balance those. If there is no balance the Government also has to take into account other programs that it has under other legislation such as programs under the Minister responsible for Regional Economic Expansion. There the Government is spending billions of dollars on grants toward, for example, some of the industries that the Hon. Member referred to, such as the pulp and paper industry.
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The Government has to look at the question in terms of its total resources, what advantages it offers to these industries, what are the total advantages that it offers to the industry, and it has to weigh what is the impact of this section.
We are dealing with the Income Tax Act. We thought that logic and fairness indicated a rationale that is defendable. The rationale is that the interest costs, because they are in association with development or enhancement of a capital item, should be capitalized together with all of the costs for that enlargement.


Pat Carney: Mr. Chairman, I would like to address to the Minister something which he may have addressed in his amendment, but in the 1982 draft legislation it was proposed to deny a deduction for soft costs relating to construction, renovations or alteration of a building or to the ownership of land. This Bill proposes a different test and denies deductibility wherever a cost is incurred during the period of construction, renovation or alteration of a building, provided it relates thereto.
We do not understand what the reason for this change is. It may be that it is designed to permit minor repairs to a building to be continued to be fully deductible. It may be that the intent is to allow minor repairs to be fully deductible. Could the Minister explain the apparent discrepancy in the wording, or whether his proposed amendment clarifies that?


Paul James Cosgrove: Mr. Chairman, the officials advise me that it was an attempt to clarify rather than to change, that it related to costs in association with land only during the time of construction.


Roderick Blaker: Order. Earlier in the debate the Minister moved an amendment. Is it the pleasure of the House to adopt the amendment?


Some Hon. Members:: Agreed.
Amendment (Mr. Cosgrove) agreed to.


Mr. King:: Mr. Chairman, I have seen my hon. friend for Mississauga North stand up and fulminate and fumigate and really say nothing. Then we get the Minister from Grand Falls-White Bay-Labrador standing up and criticizing the Opposition for failure to pass legislation that has not yet been presented to the House.


An Hon. Member:: Fisher's speech was brilliant.


Frederick John King: That is right. Fisher's speech was brilliant- which Fisher was that? Anyway, I missed the brilliant speech he made but I note that a great deal of time of the House has been occupied that could have been spent in valued debate, so I thought I should add something of value to make up for the time that has been spent by the Hon. Member for Mississauga North.
I want to talk a little bit about soft costs because I am confused by the whole matter of this tax Bill. We have heard much said in the House about the incomprehensibility of the tax Act. It seems to me that this Clause 11 dealing with soft costs adds a degree of confusion that we could well do without.

March 17, 1983
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The Elon. Member for Vancouver Centre, who just preceded me asked a number of questions that I thought should have been asked and that I would have liked to have asked myself, but as one who, 25 years ago, had trouble completing my income tax form when the Income Tax Act was reasonably prepared, by someone with sanity, I have a great deal of trouble with the new one, with some of these new inclusions.
We are told that Subclause 18(3)(1) requires soft costs incurred during the period of construction, renovation or alteration of a building to be capitalized rather than deducted on a current basis. We did not get a reasonable explanation as to why this was being done, at least not one that I could understand. I thought the most obvious answer would be that it would produce more revenue for the Government. That has been the reason for most changes in the tax law in the short time I have been here.
Interpretation Bulletin IT-3-41 R stated that you can avoid most of the impact of this Clause if you plan your expenditures properly. What is the value of creating a concentrated confusion if at the same time you state that you can get around this if you plan properly? Will this not be an added burden for those we rely upon to help us get out of the present economic circumstance? We should not be adding burdens or creating burdens for them.
Why do we say on one hand that people should capitalize these soft costs, and then send out an interpretation bulletin stating that they can get around most of them if they plan properly?


Douglas Glenn Fisher: Mr. Chairman, when the Hon. Member was referring to a crummy speech by the Hon. Member for Mississauga North, he was confused. It was the Hon. Member for Mississauga South who gave the crummy speech. When speeches come from the North, they are good; when they are crummy, they come from the South.
I must say that the Hon. Member was far too modest about his activities 25 years ago. I had occasion today to climb four fligths of stairs with him. It is obvious that 25 years ago he worked pretty hard because he is still fit after all that exercise. Therefore, we take his modesty about 25 years ago with a grain of salt. He is obviously a hard-working guy.
The Hon. Member asked why we created this confusion. I refer him to the working session in the Finance Committee over the September period when there was quite a bit of discussion about this. When the Hon. Member looks at that report, he will know that one of the concerns that developed there was the opening of a new and unjustifiable tax shelter for many people.
The amount of tax being avoided was getting rather high. It was not related to genuine activity. There was a real incentive to add on more and more costs and call them soft costs. Our officials were there and they can correct me, but we heard examples of people able to get up to 30 per cent of their project called soft costs. Obviously that was not the intention. If 30 per cent of a massive project can be called a soft cost and
written off so quickly, it is a real benefit that is not construction-related but rather is tax-related. The rest of us must pay for them. We are asking whether these are activities that are genuinely construction-related. If they are construction-related, they should be treated like all the other construction-related costs. If they are not construction-related, if you plan ahead and you find that you have some unusual costs, then perhaps it should be a deduction rather than a capital cost. I ask the Hon. Member to bear in mind our concern that perhaps the soft-cost category can become more of a tax shelter than a construction activity. As such, we have to be alert and try to deal with it.
Our good friend from York East raised an important question, and I would like to take the opportunity to answer it very quickly. He indicated that if somebody has an employer mortgage at 3 per cent and the deemed rate is 16 per cent, is the individual taxpayer stuck with a permanent 13 per cent benefit or a floating benefit that is adjusted whenever the prescribed rate floats? I would answer him that the taxpayer is not stuck with a permanent benefit. Rather, when the prescribed rate drops, the amount of the benefit will drop as well.
I refer the Hon. Member to the Income Tax Act, particularly subsections 8(4)(1) and (6), which indicate that when the prescribed rate goes up, the benefit does not go up, but when the prescribed rate goes down, the benefit does come down. We relieve taxes, but do not add on. All of this is described in lurid detail on page 74 of the explanatory notes published by the Minister.


Frederick John King: Mr. Chairman, I guess that is a good example of what I was talking about previously, a man using up half my time to answer someone else's question. I hope that will be charged to the time of the Hon. Member for Winnipeg North.
I want to pursue this a little further. There is a definition of when construction is completed, but no guidance as to when construction commences. Can the Minister explain in simple terms when costs commence, such as in land preparation or soil testing? At what point does construction commence under the definition of soft cost capitalization? We know when it ends, but when does it start?


Douglas Glenn Fisher: Mr. Chairman, the soft costs start when the charges start. For example, one of the largest costs usually categorized as a soft cost is interest. When you incur interest, you obviously incur a cost. For example, interest charges on concrete are incurred when you buy the concrete and owe the bill. Most of these costs in construction are very clearly defined by the people involved.


Frederick John King: Mr. Chairman, what about soil testing for construction purposes, and compaction tests? Do you take those into consideration? This might be done a year before the engineering, planning and when the architect begins his work.


Douglas Glenn Fisher: Mr. Chairman, I am sure the Hon. Member could give me a list of such expenses. I would be happy to pass them on to Revenue Canada for an interpretation. I do not
March 17, 1983

think it would be responsible for us to sit here now and try to define some of the activities of a construction project. We can assume that people on these projects know the difference and know when they incur soft costs. Revenue Canada will also be able to help out here.


Frederick John King: Mr. Chairman, I believe it is important because defining that period is the all-important part of the Clause about which we are talking. I have been advised that soft cost capitalization can create an undepreciated capital cost in excess of the actual market value, or the actual value, of the asset. Thus it could, theoretically, at least, contribute to a terminal loss situation for which one-half of the loss only could be used in a tax calculation. In this instance, the taxpayer would have been penalized at the beginning and at the end in the terminal loss situation. Is this correct?


Douglas Glenn Fisher: Mr. Chairman, I would like to know what kind of a businessman would deliberately set out to build a loser. What sort of an experience do we have here where someone incurs more expense than he can conceivably charge for? Can the Hon. Member give us some idea of where these builders live? I would like them to come and have a good time in my riding, too. We could cut the costs.


Frederick John King: I do not believe that there was any attempt by any entrepreneur or enterprise to reach this situation, but there has certainly been many of them pushed into this situation by the policies of the Government the Hon. Member represents, and it has created an economic circumstance in which it is impossible for the industrious person to create something of value and something that can sustain itself. Maybe the Hon. Member would like to comment on that? I believe the Government itself has created the circumstances where this can become a possibility. Nevertheless, I could talk for several days on soft fruit, but I have a little difficulty on soft costs, and I will turn the floor over to someone else.


Douglas Glenn Fisher: Mr. Chairman, the Hon. Member will know that if a builder or a contractor has a couple of years where he can get his depreciation, then he will not really be in a terminal loss situation. I would like to point out, and remind the Hon. Member, that what we have done here is to slow down the rate at which people can write off these costs. We have not disallowed the costs altogether. We are simply asking them to be treated in a separate category. People have previously shown us that these fast write-offs have been a temptation, and too much has been loaded into that category because of the temptation. We are simply trying to balance that out a bit. To say that this category now must as a whole be treated in a slower write-off fashion, that is the principle of what we are doing here. 1 take seriously the Hon. Member's concern about creating more expense and having a building which costs more than you can sell it for.
I would urge the Hon. Member to look particularly in the rental housing area, at some of the other programs which the Government has introduced to alleviate such a situation. The Minister of State for Finance, when he was responsible for CMHC, introduced many of these programs in recognition of
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such difficulties, particularly the difficulties for people building apartments for rental use. The Hon. Minister could probably take a couple of hours quite legitimately to describe to us the beneficial programs which he introduced when he was Minister responsible for CHMC.


Mr. Clarke:: Mr. Chairman, I do not know much about soft fruit, nor do I know an awful lot about soft costs, but I would like to ask the Minister about soft principles. I would like to know if the drafters of the legislation before us considered the generally acceptable accounting principles which would require that the interest which he is talking about disallowing as a write-off be capitalized, anyway, during construction by individuals who are constructing capital projects? Was consideration given to that principle?


Paul James Cosgrove: Mr. Chairman, the officials advise me that, yes, that was considered. Arguments were made on the point made by the Hon. Member, but I am told that the principle employed here, to relate the interest charges to the capital projects, is what is done in the majority of cases, even under established accounting practices.


William Hillary (Bill) Clarke: I agree with the Minister, Mr. Chairman, and that was the thrust of my question. In other words, previously, tax accounting and generally accepted accounting principles, had required the capitalization of interest during construction of the capital project. The MURB rules have changed that and allowed the interest to be written off so that the generally accepted principle was changed to accommodate the construction, or to encourage the construction of residential real estate.
1 believe that principle was applauded by most people. As far as I know it was a fairly successful program. Perhaps the Minister would like to comment on the success of the program. If so, I would like to hear it, but in the meantime that brings me to another soft principle, I call it: why then, in changing back to the proper accounting principles, that is forcing the investor to capitalize the interest incurred during construction, do they have one principle for individuals and some corporations, and yet exempt corporations whose principle business is the construction, development and leasing of real estate?


Paul James Cosgrove: Mr. Chairman, the answer to the last part of the question, in the example given by the Hon. Member, is that the asset is inventory rather than a capital asset. Therefore, the rules are different when you are looking at something that is retained for capital purposes or something that is rolled over. In so far as the application of soft costs is concerned as it pertains to the MURB program generally, I believe there is no question that the use of the Income Tax Act in conjunction with, or as a means of, assisting construction of multiple unit buildings, whether rental or condominium, was successful in generating construction of a lot of buildings. The difficulty was that the Government was not only concerned with the aspect of the generation of construction which carries with it employment for people, and also, obviously, living accommodation for certain types of people, but was under pressure at the same

March 17, 1983
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time to ensure that certain kinds of living accommodation was available to people. The Government is also under pressure, of course, to provide affordable accommodation.
The Minister responsible for Canada Mortgage and Housing in the last few days in Parliament has been under question by Hon. Members opposite about, for example, the non-profit program, which is a way of providing affordable accommodation to a certain income sector in the economy. That program is very expensive. It is a pay-down to 2 per cent. I do not believe there is a country in the world which can afford to provide living accommodation at the interest rate of 2 per cent for the general population. Therefore, the MURB program did generate construction, did generate housing, but it was by and large expensive, and there was a good part of it which was condominium, which did not address the rental sector and did not address those markets where the rental picture was very weak, where the vacancy rates were very low, and even though the MURB provision was in force, investors or builders were not taking advantage of it. For whatever their reasons, they did not want to build where there were demands. For that reason, of course, the Government supported the construction of modest rental accommodation by providing an up-front grant, which gave the Government the opportunity of selecting the location for these buildings and some control over the price, hence the rental charge. I must confess, Mr. Chairman, it was a trade-off.
As 1 have indicated, the MURB Program was really an adaptation of this portion of the Act by people involved in the construction of multiple units. A debate raged, and this Government was of two minds on some occasions. I submit that the Government of the Hon. Member, when it was in office, was also of two minds, because my recollection is that this provision was not continued for MURBs during the budget presentation of the Conservative Minister of Finance. It was a difficult issue. It depended on what the objectives were at the particular time and how the Government weighted those objectives.


William Hillary (Bill) Clarke: Mr. Chairman, I cannot help but smile when the Minister tells me that the Government was against the removal of the interest deduction in December, 1979, and now he is in favour of its removal.


Paul James Cosgrove: I could say the same thing about you.


William Hillary (Bill) Clarke: The Minister talked about inventory. I suggest that he look at page 39 of this Bill. Beside the word "Exceptions", it says:
(3.4) Subsection (3.1) does not apply to prohibit a deduction in a taxation year by
{a) a corporation whose principal business was throughout the year the
leasing, rental or sale, or the development for lease, rental or sale, or any
combination thereof, of real property owned by it to or for a person with whom
the corporation was dealing at arm's length;
I do not think I need to go beyond that to illustrate my point. Any corporation, or individual for that matter, who is
developing for lease any real estate does not enjoy an inventory position on the money he is investing or the property he is developing. It would be a depreciable asset in the hands of the corporation. I submit to the Minister and ask him to explain to the Committee how it would be that a corporation, whose principal business was such, should be differentiated from an individual whose principal business was such? Why do we have such contrary principles in a so-called tax Act?


Paul James Cosgrove: I think my response to that is that we are never quite sure, at the initiation of construction of a project, whether it is going to be used for condominium purposes or whether it is going to be rental. Some developers try to keep their options open as they go along. For example, in making submissions through the planning process developers will indicate that the project could be a free-hold project or it could be a rental project. I am not sure of all the factors that would go into that kind of decision, but obviously part of it depends on what market conditions are and whether the developer thinks he can sell or whether he should retain and rent. They do not make that decision right away. So they have a choice of retaining it for ownership purposes and sale at a later time, or maintaining it in a portfolio as an income-producing asset.


William Hillary (Bill) Clarke: Mr. Chairman, I would like to illustrate my problem and my complaint about this dual principle to the Minister. Let us take a corporation which has never sold any real estate. It has a long history, maybe ten or 20 years, of investing in real estate for rental or lease. Therefore, there can be no doubt under this Clause that its principal business throughout the year was the leasing of real property owned by it. Now, when it comes to a new project for leasing it will be allowed to deduct the interest cost incurred. However, if we take an identically situated individual in the same circumstances who comes along in 1983 to develop a property for lease, that individual will be denied the deduction of his interest costs during construction.
I would like to know how the tax Act can differentiate in that way between an individual and a corporation, both of whom are conducting exactly the same business?


Paul James Cosgrove: Mr. Chairman, my officials advise me that an analysis of those who applied to take advantage of this Section will show that the person or corporation who would qualify under Subclause 3(4) will have real estate as a principal business. They are not using the provision as a tax shelter. There are legitimate firms who are not looking to this Section as a tax dodge or tax relief provision, but are legitimately in that business. It is their only business, they have no other economic activities against which this deduction can be offset.


William Hillary (Bill) Clarke: Mr. Chairman, I hear the Minister explaining it again, but I am still not satisfied. I do not think I will pursue it with any further benefit to myself or the Committee, but I hear the Minister saying that an individual is being discriminated against because he is not a corporation even though he might be doing exactly the same thing. I say again that this is an example of soft principles on the part of the Government.
March 17, 1983

It has been for many decades a principle that any expense incurred in order to produce revenue was tax deductible. In this case an individual is denied the deductibility of interest. Can the Minister tell the Committee what the statistics are on the deduction of soft costs? On average, what did the Government envisage as the deduction from the cost of development of residential rental housing? How did that percentage meet the Government's expectations?


Paul James Cosgrove: Mr. Chairman, I do not have the tables showing the different levels of different activities where developers used this soft cost provision. The Parliamentary Secretary to the Minister of Finance has indicated that in some cases it was as high as 33 per cent of the total cost of the project. That led officials and fair-minded people to the conclusion that the provision was being used as a tax haven. People using the Section were motivated to construct buildings or the like as a way to shelter other areas of their portfolio. They were marshalling all the costs they could possibly get, into that project. It really did not reflect the original intention of the Section, which was to be of some assistance to people legitimately engaged in real estate development.


William Hillary (Bill) Clarke: That would lead one to ask the Minister whether following the rules resulted in an undesirable tax shelter. Is the Minister going to change the capital cost allowance rules in the next round? Compared to the 33 per cent of actual development cost, what level did the Government deem to be an acceptable deduction under the MURB program?


Paul James Cosgrove: I cannot say that the officials started out with a hard number. I am advised that we are talking about a provision to provide relief in the area of 5 per cent, rather than a one-third write-off of the project.


William Hillary (Bill) Clarke: I presume the Minister is referring to a 5 per cent write-off of soft cost. I suggest that officials were indicating to taxpayers that 20 per cent would have been acceptable. I understand the Government is now conducting a MURB hunt and is seeking to disallow many soft costs which were granted under the provisions of the original MURB rules. Does the Minister have any knowledge of that?


Paul James Cosgrove: Mr. Chairman, I am told that the whole application of soft costs in the real estate area, that is a joinder of MURB with capital cost allowance, was not something that the officials who were familiar with the Act felt had been done specifically. It was a way that enterprising tax specialists found of supporting a tax haven in conjunction with capital cost allowance and-


Roderick Blaker: Order, please. It being 5.45 p.m. pursuant to order made Tuesday, March 15, 1983, it is my duty to interrupt the proceedings and put forthwith without further debate or amendment, every question to
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dispose of the Committee of the Whole stage of the Bill now before the Committee.


Donald Alex Blenkarn: Mr. Chairman, I rise on a point of order. It appears that we have covered a great number of Clauses in this Bill. Had we had an opportunity for reasonable time, we would probably have disposed of them all in proper fashion. The order of the House is that all Clauses now be put. I therefore suggest, in line with the suggestion we made earlier to the Minister, that all of the Clauses that have not yet been passed, be grouped in one vote for consideration at this point.


Ian Deans: Mr. Chairman, that sounds reasonable, surprising though it is. I am certainly prepared to say, on behalf of my colleagues, that we would agree to that.


Yvon Pinard: Yes, Mr. Speaker, I think we can agree with this procedure. In fact, it was suggested to me by the House Leader for the Progressive Conservative Party (Mr. Lewis), which is certainly to his credit. However, I would like to make it quite clear that the vote that will be taken on all clauses that have not yet been passed will serve as the basis for the vote on each clause, so that at the end of the debate it can be said that each clause was approved separately under an agreement, with the same division applying to both individual clauses and grouped clauses.


Paul James Cosgrove: Mr. Chairman, earlier this afternoon the Hon. Member for Mississauga South indicated that, in regard to the amendment I had proposed with respect to notaries in Quebec, it would be dealt with later in Parliament. I am anxious to know whether he is agreeable to including that amendment in the omnibus vote. He knows the Government's intention with respect to either Clause 16 or Clause 125.


Donald Alex Blenkarn: I am in your hands, Mr. Chairman. I should like to accept it but you appreciate that we are under a House order that was imposed by closure. We would be delighted if the Government would withdraw closure, and in that case we would be prepared to carry on. We do not want this iniquitous Bill that is being imposed on the people of Canada and forced down our throats-


Roderick Blaker: Order, please. Would the Hon. Member please resume his seat. This is no time for debate. There not being unanimous consent, we will not consider the Minister's proposal.


Donald Alex Blenkarn: Mr. Chairman, it is not a question of consent, it is a question of the House order. I would point out to the Minister that Parliament does not exist entirely in the House of Commons; there is another House of Parliament, another branch of this Parliament, which is the Senate of Canada. The Government has ample opportunity to present the other amendments at the next reading of the Bill as it proceeds through Parliament.

March 17, 1983
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Roderick Blaker: The House has heard the proposal made earlier. The Chair will now seek unanimous consent to proceed with that proposal. Is there unanimous consent?


Some Hon. Members:: Agreed.


Roderick Blaker: Shall all remaining Clauses carry?


Some Hon. Members:: Agreed.


Some Hon. Members:: No.
Clause 11 (as amended) agreed to.
Clauses 12 to 15 inclusive agreed to.
Clauses 17 to 46 inclusive agreed to.
Clause 48 to 65 inclusive agreed to.
Clauses 67 to 109 inclusive agreed to.
Clauses 111 to 134 inclusive agreed to.


[Stage Direction]
Title agreed to.
Bill reported (with amendments).
Paul James Cosgrove: that the Bill be concurred in.


The Acting Speaker (Mr. Corbin):: Is it the pleasure of the House to adopt the motion?


Some Hon. Members:: Agreed.


Some Hon. Members:: No.


The Acting Speaker (Mr. Corbin):: All those in favour of the motion will please say yea.


Some Hon. Members:: Yea.


The Acting Speaker (Mr. Corbin):: All those opposed will please say nay.


Some Hon. Members:: Nay.


The Acting Speaker (Mr. Corbin):: In my opinion, the yeas have it.
And more than five Members having risen:


The Acting Speaker (Mr. Corbin):: Call in the Members.


Madam Speaker:: The motion is carried.
When shall the Bill be read for the third time? At the next sitting of the House?


Some Hon. Members:: Agreed.
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Madam Speaker:: It being 6.22 p.m., this House stands adjourned until eleven o'clock tomorrow morning, pursuant to Standing Order.
At 6.22 p.m., the House adjourned, without question put, pursuant to Standing Order.

Friday, March 18, 1983