1983-03-03

GOVERNMENT ORDERS


[Stage Direction]
House in Committee of the Whole on Bill C-139, an Act to amend the statute law relating to Income Tax (No. 2)-Mr. Lalonde-Mr. Blaker in the chair.
Mr. Lewis:: Mr. Chairman, I rise on a point of order concerning the procedural acceptability of certain Clauses of Bill C-139. It is our contention that the Government, in at least two instances, has attempted to exceed the authority granted to it in the Ways and Means motion. With your indulgence, Mr. Chairman, I would like to spend a few moments explaining my case, and then if you feel that the argument is valid, I suggest we postpone consideration of the affected Clauses until such time as the deficiencies can be corrected.
Mr. Chairman, I would like to draw your attention to Citation 518 of Beauchesne's Fifth Edition, which forms the basis of the procedural argument. Citation 518 states:
(1)	A bill, related to a Ways and Means resolution, must be based on, but need not be identical with, the resolution. The taxing power of the Crown is limited by such resolutions, but relatively minor widening of exemptions from taxation may be allowed.
(2)	The most desirable practice is for the Bill to adhere strictly to the provisions of the resolution, and departures if any, ought to be subject to the strictest interpretation.
We contend that in Clause 1 and Clause 109 the Government has attempted to extend its taxing power beyond that which is authorized in paragraphs 1 and 151 of the income tax motion. In a 1974 ruling, to which reference is given in Citation 518(1) of Beauchesne, Mr. Speaker Jerome outlined the five basic principles which apply to the question of how closely an income tax Bill should conform to the Ways and Means motion on which it is based.
With your permission, Mr. Chairman, I will review those five principles which may be found at page 224 of the Journals for December 18, 1974. Mr. Speaker Jerome's ruling reads in part as follows:
First, that the Ways and Means motions which follow the budget presentation are by virtue of time honoured practice and tradition, the very expression of the financial initiative of the Crown and therefore a most important aspect of our procedure.
Second, S.O. 60(11) establishes the relationship between the Ways and Means motion and the bills which follow. "The adoption of any Ways and Means motion shall be an order to bring in a bill or bills based on the provisions of any such motion."
Third, the critical words are "based on". It must be assumed that if it was intended that the bills be required to be identical to the motion, the rule would say so.
Fourth, I am further unable to find any support, either in the Minutes of the Procedure Committee of 1968 which recommended the rule changes, the debates on those new rules, or even in analogous precedents, for the proposition that the bills must be identical to the Ways and Means motions.
It is equally clear that the taxing power of the Crown is limited by the Ways and Means motion, and any bill which sought to extend such power beyond the provisions of the Ways and Means motion would be out of order.
There can be no doubt, Mr. Chairman, as to the meaning of this ruling. The provisions of the income tax Bill must fall within the four corners of the Ways and Means motion. Mr. Speaker Jerome reiterated this position on subsequent occasions, including July 14, 1975 at page 707 of the Journals and May 19, 1978, at pages 784 and 786 of the Journals.
In rising on this point of order, I noted that there are at least two Clauses in the Bill which are before us today which do not appear to fulfil the requirements laid down by Mr. Speaker Jerome and by Beauchesne. The first instance in which the Bill exceeds the taxation authority granted to the Government may be found-and this is unfortunate-in Clause 1 of the Bill, in the provisions relating to the automobile standby charge. Paragraph (1) of the income tax motion reads as follows:
(1) That for the 1982 and subsequent taxation years, the provisions of the Act relating to the monthly standby charge for an automobile made available by an employer, a person related to the employer, or a corporation
(a)	be applicable in any case where an employee or a shareholder or a person
related to the employee or shareholder made personal use of the automobile,
and
(b)	be modified to increase the minimum monthly standby charge to 2 per cent
of the automobile's capital cost or 2/3 of its leasing costs, as the case may be,
except that, where it is established in prescribed form that the number of kilometres that the automobile was driven in the year for personal purposes is less than 1,000 kilometres per month, the amount that would otherwise be determined under subparagraph (b) be proportionately reduced.
That is paragraph (1) of the Ways and Means motion and 1 submit that accounting firms and others looked at the standby charge only. For example, in Thorne Riddell's review of the 1981 budget, under "Use of Company Automobiles" it states, and I quote:
The present law requires a taxpayer to include at least a "minimum standby charge" in income which is 12 per cent of the cost of the car if owned by the employer or one-third of its lease cost.

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Starting in 1982, the budget proposes to increase this minimum charge to 2'h per cent per month or five-sixths of the leasing costs, and to apply it in all cases where personal use is made of a company car.
Coopers & Lybrand made the same interpretation of what the Government was trying to do in the budget, and I quote from their budget report on page 16:
Where any personal use is made of a company car by an employee or someone related to him the minimum taxable benefit after 1981 will be either 30 per cent of the automobile's cost (where owned) or 5/6ths of its leasing cost.
When the Bill came down and the explanatory notes came out, Thorne Riddell, Coopers & Lybrand and other experts, and also the Canadian people, found that the Canadian Government went further than that, because page 1 of the explanatory notes to a Bill amending the Income Tax Act said that paragraph 6(l)(e)(iii) clarifies that the operating costs of an automobile used for personal purposes, which are paid by the employer, must be included in income.
As I pointed out, up until now what we have been dealing with is a Ways and Means motion referring to standby cost which is a fixed percentage of either the capital cost of the automobile or the lease cost. That is the motion. When the Act was brought in, it sought to extend the taxing power to the operating costs. In Section 1 the Government seeks to tax the benefits received by a person as it relates to the operation of an automobile, and nowhere is that found in the income tax motion on which the Bill, as 1 pointed out, is supposed to be based. The income tax motion modifies the application of the standby charge. It does not propose, as the Government has proposed in this Act, to tax the Canadian people on the operating costs of a company car. Furthermore, Clause 1(4) increases the standby charge for automobile sales persons, although no mention is made of this tax increase in the income tax motion.
This charge, I suggest, is particularly curious. It not only increases the tax rate for automobile sales persons, but it makes a substantive change in the Income Tax Act by changing the standby charge for automobile sales persons from three-quarters of 1 per cent to one and one half percent of the automobile's capital cost. Although the charge for sales persons remains in the same ratio to the general charge, for the first time it becomes a set charge rather than a percentage of the general automobile standby charge. We submit authority for these changes cannot be found in the income tax motion.
The second case that I refer to is the corporate distributions tax, Part II, which is found in Clause 109 of the Bill and relates to paragraph 151 of the income tax motion. As noted at page 5 of the January 11, 1983 edition of "The Canadian Taxpayer", this tax will "penalize companies in provinces where the tax rate is more than 10 per cent, but will give a bonus in Provinces where the tax is lower". The publication goes on to note that the anomaly results from the fact that the preferred earnings amount, PEA, to the measure of income to which the tax is applied is structured on a norm of a combined 25 per cent federal and provincial tax. Where the actual rate varies from this norm, the formula does not work accurately. If
the rate is higher than 25 per cent, the preferred earnings amount cannot be eliminated by paying out all active business income. This in turn means that the 12.5 per cent tax will be levied on other income of the company, such as investment income when dividends are paid.
While the federal Government may in fact apply taxes differently across the country, and although a minor widening of exemptions from taxes may be allowed, according to Mr. Speaker Jerome's 1974 ruling the Government does not have the specific authority to increase taxation for corporations operating in Newfoundland beyond the level of taxation that is imposed as a result of the calculation of the preferred earnings amount of corporations operating in other Provinces. No provision for such an increase can be found, we submit, in paragraph 151 of the income tax motion.
The remedy that is suggested to the problem which we have posed-that is, the inadequacy of the relationship between the ways and means motion and the income tax Bill-is to postpone consideration of Clauses 1 and 109 until those Clauses can be amended so as to satisfy our objections, or until a Ways and Means resolution can be passed to permit the Bill as written to be passed. We submit that this remedy is consistent with the rulings delivered by Mr. Speaker Jerome in 1974, 1975 and 1978, as noted in Citation 519 of Beauchesne's Fifth Edition, and I quote:
If any of the provisions of the Bill should be found to go beyond the Ways and Means resolutions as agreed to by the House:
(a)	a further motion must be passed by the House before those provisions in
the Bill are considered in committee;
(b)	or the Bill must be amended so as to conform to the motions to which the
House has agreed.


Mr. Cosgrove:: Mr. Chairman, I rise on the same point of order. I am somewhat disappointed that I did not have prior knowledge of the technical objection raised by the Hon. House Leader for the Loyal Opposition.
The Bill and the Act have been available to Hon. Members of the House and to the public for quite some time. As a matter of fact, the Hon. House Leader, in support of his argument, has used an analysis of the Bill by two firms of chartered accountants and, therefore, obviously many people in the country have had some time to consider this matter. I would have hoped, Mr. Chairman, if the Hon. Member felt that there was such deficiency in the motion tabled before the House, that for the sake of expediting consideration of this Bill, which all Hon. Members in discussion on second reading have considered to be important to Canadians, this could have been brought to the Government's attention for analysis months ago. I am, as I said, somewhat surprised that this technical objection to the first Clause would be raised at this point.
I am prepared to argue, on the basis of the authorities quoted by my hon. friend and as stated by the Hon. James Jerome, a former Speaker of this House, and the test which he did apply in the case cited, that in fact Clause 1, which is
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really the only Clause we have dealt with thus far, although my hon. friend has dealt with Clause 1 and Clause 109, really does meet those tests. The gist of my submission to the Chair is that, if we accepted the argument of the Elouse Leader of the Official Opposition, we would be meeting the test which says that the Bill and the motion have to be identical. That really is the logical extension of what is argued by the Hon. House Leader for the Opposition. He makes reference to the substantial change in the tax, but admitted that that was a technical matter, the difference between the increased rate for sales persons, and then admitted that that was a small matter.
On his second point, he argued that because of a variation in tax rate and the calculations of rates which are used in the calculation of tax in so far as it applies to the standby is different in different Provinces. In my respectful submission, that is a matter which is dealt with in those Sections dealing with the calculation of tax from the different Provinces and does not bear directly upon the adequacy of the Bill; and it is parallel to the motion.
As the explanatory notes indicate, Mr. Chairman, Section 6(l)(a)(iii) is a clarification. It has always been the case under Section 6 of the Act that, except for explicit exceptions, all benefits from employment are treated as income for tax purposes. The amendments stipulating that automobile operating expenses paid for by an employer are benefits simply confirm and clarify, in my respectful submission, what the law has been for many years.
Therefore, I argue in rebuttal that the variation between the Bill and the motion in effect argues a rule which Speaker Jerome said did not apply, that is, that the two had to be identical.
In so far as automobile salesmen are concerned, Mr. Chairman, the amendment increases their standby charge rate to V/2 per cent from 3/4 per cent. This motion says 2 per cent. Therefore, the amendment is clearly within the motion. I have argued that it is a technical matter to begin with, that the variation is not great but because it is less than the amount, it is included. That is the thrust of my argument.
The position of the Government is that a careful reading of the four standards applied by Speaker Jerome would lead you to the conclusion that although there are minuscule differences in the formula for calculation of the standby charge as it affects people generally, or salesmen specifically raised in the example of the House Leader, the motion meets the three other tests and is sufficient to have the matter proceed. I would suggest, Mr. Chairman, that consideration of Clause 1 is validly before the House and reflects the provisions of the Bill.


Mr. Pinard:: Mr. Chairman, it would be difficult to add to the excellent points made by the Minister. In fact, I do not intend to continue in the same vein, because it seems to me that he has covered the subject quite adequately and that there are sufficient grounds for you to deny the Hon. Member's
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point of order. However, I would like to point out to the Chair that the Notice of Ways and Means Motion was not opposed at the second reading stage, which would have been the appropriate time to do so. Since the House has adopted the second reading stage, I submit that there is no case for raising a point of order again at this time, since it should have been done before, when the Notice of Ways and Means Motion was tabled and the House was considering the second reading stage. Since the second reading stage has been passed, I do not think a point of order of this kind can be raised now, and even if the Chair were to conclude that it still can be done, and we disagree, the Minister has submitted sufficient grounds to justify the Chair's denying the point of order.


Mr. Lambert:: Mr. Chairman, I am not aware whether at second reading this point was raised. If it was raised, when did the Chair deal with it? I suggest to you, Mr. Chairman, that the Government must still clean up its act.


Mr. McDermid:: That is impossible.


Marcel Joseph Aimé Lambert: The Standing Order indicates clearly that a Bill will be introduced based on a notice of Ways and Means. The Minister says the amendments cited by my colleague were merely technical. I suggest to the Minister that he is applying his interpretation of "technical" much the same way as his colleagues were applying their, shall we say, elastic consciences to guidelines on conflict of interest during the past ten days of debate in this House.
On this particular point, a change of rate is not a technical change. There is only one tolerance allowed, I suggest to you. I refer back to the ruling of Speaker Lamoureux at the time I raised objection to the Bill that was tabled following the Ways and Means motion in the budget of 1970, which was a tax reform. There were 39 changes, some of them of the nature to which the Minister and my colleague adverted. The Chair disclaims any responsibility and I agree. It is not up to the Chair to "comb" the relative Ways and Means motions and the Bill. The Chair will insist that the Government keep its act clean. This is not a matter of tolerant interpretation.
As far as the Bill is concerned, we are not going to hold up the business of the House while the Government files a Ways and Means motion. The Government can do that later. It can substitute the Ways and Means motion to conform wth the Bill since the Bill represents the final decision. During the time when the Ways and Means motion is approved by the Department of Finance and the Cabinet Committee and the Bill is drafted, all sorts of differences can occur. There has been plenty of time between December 7 and calling the Bill for second reading for debate. People in the tax Department have admitted to me privately that many of these sections are totally incomprehensible. The Government can claim that Members should have noted all the inconsistencies between the Ways and Means motion and the Bill by the time second

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reading debate commenced. If my memory serves me correctly, that was for one day prior to Christmas. It was then abandoned until recently.
To use a popular expression, the Minister is "out to lunch" on that point. This is the time to say that the Minister and the Government must file an amended Ways and Means motion to conform with the Bill or reprint the Bill to conform with the Ways and Means motion.
We are not going to hold up proceedings, Mr. Chairman, but the Government must keep its act clean.


Mr. Gamble:: Mr. Chairman, the significance of this deficiency in the Bill in failing to conform to the provisions of the Ways and Means motion lies in the fact that the Ways and Means motion made no reference to the additional tax to be imposed upon automobile salesmen as a result of the standby charge changes that are now in the Bill before us. It is not a matter of a technical change; it is a matter directly related to the imposition of an additional tax.
I draw to your attention that while the former provisions of the Act dealing with standby charges in connection with automobiles referred to the imposition of a standby charge which would be at least equivalent to the amount determined under this rather complex section, the Bill now provides that that standby charge, the reasonable amount thereof, is the amount definitely determined under the provisions of Clause 3.
The difficulty that confronts taxpayers generally is that this Bill in its entirety, and more particularly as it deals with standby charges, applies to the entire 1982 tax year. We are talking about individual taxpayers, so it applies to the period from January 1 to December 31, 1982, at which time, if you should have reference to the nature of the compliance in prescribed form referred to for the keeping of accurate records of automobile use, it will immediately become apparent that this Clause will have the effect of obliging people to maintain in prescribed form records of automobile use-on the basis of kilometres-from the beginning of January to the end of December.
There was no knowledge in the general community that automobile salesmen would be required to maintain those records. How can we now properly impose a new tax that did not exist in the form it will take now upon those people when they were not aware that such would be the case, having regard to the fact that the Bill was introduced on December 7, 1982, during the last month of the taxation year of the individuals covered by the provision.
The Minister refers to this as a technical change. If there was a circumstance where basic inequity is built into the imposition of a tax, it is certainly the case here. It is for this specific reason that the rule with respect to the compliance of Bills directly with the provisions of the Ways and Means motion becomes most critical. This is the imposition of an additional tax upon taxpayers. That tax can only be applied in the way provided in the Ways and Means motion.


Douglas Grinslade Lewis: Mr. Chairman, in reply to my colleagues on the Government side, I would say that perhaps a Government which operates without notice should not always expect to receive notice.
When I referred to Thorne Riddell and Coopers & Lybrand's interpretation of the standby charge, it was as set forth in the original budget and the original Ways and Means motion, not as set forth in the Bill.
I suggest that debate on second reading is on the principle of the Bill. That is fair. We are now dealing with technicalities and suggesting that it is up to the Government to draft the Bill in accordance with the Ways and Means motion.
Citation 518(2) of Beauchesne reads as follows:
The most desirable practice is for the bill to adhere strictly to the provisions of the resolution, and departures, if any, ought to be subject to the strictest interpretation.
We are not suggesting that an increase in tax is merely clarification or that we should go home, quit for the day or scrap the entire Bill. We are just suggesting that we have made a point regarding Clauses 1 and 109 and that consideration should be stood until the Government can draft a Ways and Means motion which adheres to the Bill, or vice versa.


Mr. Fisher:: Mr. Chairman, there seem to be two specific points here. The first is whether automobile salesmen have not been properly informed about a change of practice. The second is an over-all issue dealing with the operating cost of automobiles. I should like to argue that both of those things are clarifications of existing practice; they are not new principles.
The Act shows that since 1972 automobile salesmen have known that they will pay 75 per cent of the standby charge of every other salesman. It seems to me that what we are doing here is simply clarifying, as a consequence of other changes, the circumstances that apply to them. That follows directly from the 1972 law under the same Section 6 of the Income Tax Act which provides that all employee benefits are taxable. We are now clarifying what we mean in the area of automobile standby charges and operating costs. We are defining the circumstances for the taxpayer so that he will know precisely what his liabilities are.
The Hon. Member for York North had a great deal to say about record keeping. Again, that is not the case. People have had to keep records about the operation of their automobiles for as long as I can remember, certainly back to 1972. I think the current situation does not change that at all. I ask Hon. Members to see this simply as a clarification of what is an employee benefit and, following from that, a consequential change for automobile salesmen which is already in the law. It is not something brand-new.


Mr. Blenkarn:: Mr. Chairman, specifically what we have here is Clause I which substantially complies with the Ways and Means motion, but two particular provisions that impose particular taxes are not in the Ways and Means motion. Therefore, our contention is that while the Bill has received
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approval in principle, these particular provisions cannot be put to the House at this point in Committee. They have to be deleted from the Bill.
The Bill is not properly before us with respect to these particular provisions because the law is pretty clear that if the Government wants to levy a tax, it has to have a Ways and Means motion and a direction from the Crown. That is the reason we as ordinary Members cannot introduce taxing Bills. The Government cannot do that either unless it has specific authority from the Crown. The Government does not have this specific authority with respect to two parts of Clause 1. On that basis, those two parts of Clause 1 cannot be considered; they have to be ruled out. If the Government wants to come back with another statute and another Ways and Means motion, it can do that; it has all sorts of ways of doing it. But these particular provisions must be ruled out.
It is a very simple matter. I do not think there is anything else which should be done. We are not asking for the whole Income Tax Act to be thrown out. It was approved by the House and it substantially complies with the Ways and Means motion. But to the extent that there is an imposition of a levy which does not specifically comply with the Ways and Means motion, the Government does not have the right to introduce those provisions. It does not have royal authority, and it has to obtain that authority, the same as any other Member.


Paul James Cosgrove: Mr. Chairman, I want to capsulize briefly the position of the Government on this item. I cannot do better than begin by drawing to your attention the opening comments of the Hon. Member for Mississauga South who has just spoken. He indicated that the Government has substantially complied with the Ways and Means motion in the legislation which is before the House. That is the first test referred to by Mr. Speaker Jerome in his judgment, that if there is substantial compliance, there need not be verbatim, word by word, comma by comma, crossed "t" by crossed "t" submissions. That is my argument.
The explanation is that what we have in the Bill is really a clarification of the provisions which have always existed under Section 6 of the Act, that except for certain explicit exceptions, all benefits from employment are treated as income for tax purposes. This amendment stipulates that automobile operating expenses paid for by an employer are a benefit. This confirms and clarifies what has been the law and practice for many years.
On the second Clause, the House Leader of the Opposition complained that the Bill does not reflect the motion. I would reiterate for the consideration of the Chair that although the Government can draw another Ways and Means motion, if we did that every time Hon. Members opposite complained that there was some provision in some tax Act of some Province which was affected by legislation introduced in the House, we would have found the answer to the problem with the forest industry. What we would be doing is manufacturing paper, and that is all we would be doing.
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I do not think it follows at all, with respect, that because there is an implication flowing from amendments before the House which affect different provinces differently, that is cause for complaint that the Bill does not comply with the Ways and Means motion.
1 suspect that the Chair probably wants an opportunity to consider Clause 1 and Clause 109 and the point raised by the Opposition House Leader. At this point it may or may not be germane to draw to the attention of the Chair that I had hoped to begin my comments on the Act and on Clause 1 of the Bill before us by drawing to the attention of Members opposite and of the Chair the Government's intention to make two technical amendments to the Section. I do not believe they are germane or pertinent to the point raised by the Hon. Member but, in fairness, if we are to consider the Clause, I think all Members and the Chair should be apprised of these technical amendments.


John Horton McDermid: Why did you not give us notice?


Paul James Cosgrove: I did not have an apportunity to do so. The Opposition House Leader was the first person on his feet. It was my intention to bring these two technical amendments to the attention of the House and to seek the assistance of the Chair and Hon. Members opposite on how to deal with technical amendments to the Act. Because there are two technical amendments dealing with Clause 1 and other technical amendments, I feel I should now place them before the Chair and seek the advice of Members opposite.
I might add that I am advised that when there were substantial amendments to the Act in 1971, technical amendments were received, considered to be moved and thereby offered notice to Hon. Members opposite of technical changes which by and large were relieving changes to subsequent Sections of the Act. It will give Hon. Members opposite the opportunity to look at them as we deal with Subsection (1) and further Sections.
Before the Chair makes its decision on the point raised by the Opposition House Leader, I would like to offer to produce to the House the technical amendments, not only to Clause 1 but to other Clauses. It would be helpful as I table the amendments that they be deemed to have been moved and that they be printed as an appendix to today's debates. Then they would be available to all Hon. Members on both sides to consider as we go along. But I would like the advice of the Chair and the House on that point.


Marcel Joseph Aimé Lambert: Mr. Chairman, 1 do not know what the extent of the amendments might be or what is the interpretation of "technical". Since I was in charge of the Opposition's team with regard to the income tax debate in 1970, let me indicate that there were substantive changes and technical changes, 39 of them, on the first Bill that was printed following the Ways and Means motion. The Government was given permission to substitute a new Ways and Means motion. Perhaps technical changes consist of forgetting to put in additional reference to a

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subclause or simply crossing the t's. The alteration of a rate of tax is not a technical change in any way.
I have suggested that there is a way of making changes. Further changes could be incorporated into a new Ways and Means motion or into the Bill. I take it that it is the Bill which the Government wants. If the Minister is now filing further notices of amendments to the Bill, of course, that is a further derogation from the Ways and Means motion.
The Minister is correct that amendments may be introduced in the Committee of the Whole. Elowever, in case there is the idea that we had every opportunity to examine the Bill when even the Government's advisers did not know what was in the Bill, let me remind Hon. Members that first reading permission was given on Tuesday, December 7. The earliest time that Members received that information was December 9 due to the complex printing and so forth. Second reading was on Monday, December 13. Therefore, I suggest that almost no one had an opportunity to examine the Bill. One could almost suggest that an attempt was made to slide it under the door and have it passed. It would then be too late for any argument. This is a type of fast shuffle that has been known to happen.
I draw to the attention of the Chair that even the President of the Privy Council suggested that we had plenty of time to look at the Bill between first and second reading. He does not even understand it. He does not understand when the Bill was brought in or when it was delivered to Members so they could study this complex Bill of over 200 pages. I suggest that those responsible for tax policy in the Department of Finance have not yet fully explained a couple of Sections in the Bill.
I repeat my suggestion that the best way to proceed is to withdraw the Ways and Means motion with the permission of the House. There is no problem there. That can be withdrawn and a proper Ways and Means motion can be introduced. The President of the Privy Council is the one who insists that we follow the rules. On this occasion he would be the first to agree that the House should follow the rules as they are laid down.


Paul James Cosgrove: Mr. Chairman, in order to give a format for the resolution of the point raised by the House Leader of the Opposition, could I propose for his consideration that the amendments to the Bill, which I submit are technical, be tabled and that the Committee agree that the amendments be deemed to have been moved. If Hon. Members opposite argue, as they have this morning on the first item, that the Bill does not comply with the motion, they can raise that point with the Chair as soon as they see those technical amendments to Clause 1 or any other Clause. Therefore, we do not derogate in any way from their right to raise that matter, as they have done on the first Clause.
The point that I wanted to make was that I did not think it was fair for you or Members opposite to be talking about Subsection (1) even before I had the opportunity to introduce
technical changes to that Section. For all I know, Hon. Members opposite may have a different view from mine that the changes are technical in nature.
What I am suggesting is that in order for the House to deal with the Section, we have to have the Section before the House as proposed by the Government. Therefore, I propose that we lay before the House all of the changes which we say are relieving and technical. Members opposite will have an opportunity to analyze and consider them as we debate the issue. Your Honour will have the opportunity specifically to consider, as far as the first motion is concerned, whether the objection raised by the Opposition, with the amendments I am proposing on the first Section, do violate the rules and would require a separate Ways and Means motion.


Douglas Grinslade Lewis: Mr. Chairman, I have no objection to receiving notice of these amendments, but it would seem to me that we are now dealing with a point of order. I would query whether you can table and make motions when speaking to a point of order. We have no objection to receiving the information but I just wonder if it can be done that way.


The Deputy Chairman:: The Chair has delayed consideration of the point of order raised by the Hon. Member for Simcoe North in order to give other Hon. Members the opportunity to comment on it. I agree that the issue of the deemed moving of the Minister's amendments has now slipped into that discussion. I have recognized that because there may be a further technicality in that if the Committee decides to accept the Minister's proposal, I want to keep in mind that under that proposal the amendments to Clause 1 which the Minister has referred to would also be acceptable even if Clause 1 may be stood for the purpose of taking under consideration the objections raised by the Hon. Member for Simcoe North.
If the Committee is agreeable, I suggest the best way to proceed is to put the question to the Committee as to whether the proposal by the Hon. Minister of State for Finance that certain amendments be deemed moved and made available to the House would be acceptable and could then be attached to today's Hansard. We might consider that issue first. Is it the wish of the Committee to accept the proposal made by the Minister of State in that regard?


Marcel Joseph Aimé Lambert: Mr. Chairman, I think we are quite disposed to receive the notice of the Minister as mere notice. At the appropriate time he will have one of his colleagues move the amendments properly, as should be the practice of the House. We thank the Minister for offering to give us notice of the amendments at this time. We will take them under advisement and decide whether we will accept the essence of them.
However, with respect to the procedure, he should follow the proper procedure and have one of his colleagues move the amendment at the appropriate time, as we normally do. There is nothing difficult about that.
With respect to standing Clause 1 on an amending Bill, I do not know how Clause 1 could be stood.
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Paul James Cosgrove: Mr. Chairman, with respect, we are back to the difficulty I was faced with upon commencement of the proceedings this morning. The Opposition rose on a point of order dealing with Clause 1 before I had an opportunity to bring the technical amendments which the Government intended to introduce to the attention of the House. How can we assess those amendments without the Government having the opportunity of formally introducing them? I have offered that as the formal process, that the matter may be considered by the House, based on precedents of the House.
I am therefore somewhat surprised, again, that Hon. Members opposite would not, as an expeditious matter, consent to having all of the material formally placed by motion before the House in the next few moments, rather than moving motion upon motion-


Mr. Kempling:: Do it the right way.


Paul James Cosgrove: -and technical amendments, which would necessitate further consideration by Hon. Members as to their appropriateness.


Donald Alex Blenkarn: Mr. Chairman, the suggestion of the Minister is not acceptable. We think the proper way of handling it, and the way it is handled in most committees when the Government has a series of technical amendments to a Bill before the committee, would be for the Government, as a matter of courtesy, to table with the Opposition, other Parties and other Members at the committee meeting copies of all its proposed amendments to the Bill, all the way through. Then as individual clauses of the Bill are considered, each particular Clause would be moved by the Minister or a representative from the Government side on behalf of the Minister, and an amendment made to the Clause at the time the Clause is under consideration.
To attempt to move all of these changes now is totally unfair to us. The procedure is to deal with the Bill Clause by Clause and we are prepared to do that.
Our initial objection, and I think Your Honour has properly understood it, concerns particular provisions in Clause 1 which do not comply with the Ways and Means motion. I think, Mr. Chairman, you have decided that Clause 1 should be stood down for the time being and that we should proceed to Clause 2. Presumably, you will stand down Clause 109 as well because of the same objection. Then you, as Chairman, would have an opportunity to consider past rulings and practices and come back later today or perhaps on another day for consideration of the matter before the Committee and make your ruling. 1 think that is a proper way to proceed.
If the Minister, as a matter of courtesy to the House, would like to table his proposed amendments, they should then be affixed as an addendum to Hansard of today. The amendments should not be moved but, rather, should simply be tabled and affixed to Hansard, and that would be fine. However, let it be understood that we do not accept an amendment or a motion at this point because we are not dealing with
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Clauses in general; we are dealing with each Clause individually. As the Clauses are presented, Clause by Clause, so should the amendments be presented, individually.


Paul James Cosgrove: Mr. Chairman, it is quite obvious that my proposal to the House to try to expedite the business is not acceptable to the Opposition. I would therefore propose a second method, and I am in Your Honour's hands. If your Honour thinks it inappropriate that I make this motion, I will be content that you draw it to my attention.
I propose to move two technical amendments to Clause 1, on which you are considering a matter of substance raised by the House Leader of the Opposition. At this time I am reluctant to indicate that it is the Government's intention to introduce further technical amendments. However, I must do that for two reasons, one which I have already indicated to Your Honour. My information from officials and from our research of practice in the House is that it has been done the other way, and that in order to expedite matters and so Hon. Members may see the interrelation of the Clauses-and there are presently some 195 Clauses-it only makes sense that the Government's intention, in so far as technical amendments are concerned, be placed before the House at one time. It is one Bill, interrelated.
Second, if we must spend an hour or more on each technical amendment proposed by the Government, I would have to consider the implications in so far as expediting consideration of the Bill before the House is concerned. In terms of expediting the Government's business, I might have to consider that I, indeed, might not propose some of the technical amendments which, in effect, amount to commas, words, crossing of t's and the like. Therefore, in order to assist Your Honour in dealing with the substantive motion in relation to Clause 1, I propose to move the technical amendments to the first Clause for consideration with the motion before the Chair.


Roderick Blaker: I want to indicate to the House, as I did earlier, that pursuant to the points of order raised by various Hon. Members, the Chair will be taking the points of order under consideration and I propose to the Committee that it stand Clause 1 until such time as the Chair can provide a ruling. However, there is still a proposal on the floor made by the Minister of State for Finance, which has two problems attached to it.
First, as the Chair is about to stand Clause 1, it would be a little difficult to amend it. Second, the Minister is proposing two amendments to Clause 1, which will require unanimous consent; because in the ordinary course we cannot accept a second amendment until we have disposed of the first amendment. 1 do not have the sense of the Committee and I do not know whether all Hon. Members are prepared to accept the Minister's proposal.
It would be easiest if I were to put the question in front of the House. The Minister now proposes and will seek unanimous consent to place two amendments on Clause 1, with the

March 3, 1983
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understanding that the Chair will be standing Clause 1 in order to consider points raised by Hon. Members.


Mr. Deans:: Mr. Chairman, I suggest that it might be inappropriate for the Minister to move amendments to a Clause, the authenticity or appropriateness of which is in dispute, requiring a ruling of the Chair in order to clarify the question which has been raised before you. 1 would like to suggest that the most appropriate move at this point in time would be the one which the Chair has proposed, to stand the Clause and to proceed with the balance of the Bill.
If, indeed, the Chair were to rule in favour of the Government's position, the amendments could then be proposed. If the Chair were to rule that the Government has not properly followed the Ways and Means motion, or has not provided a Ways and Means motion which is appropriate, then we could not proceed with that particular Clause, amended or otherwise. Therefore, I frankly believe that the most intelligent way to deal with it is the way proposed by the Chair, which does not surprise me.


Some Hon. Members:: Oh, oh!


Ian Deans: The Chair should simply stand the Clause and proceed with whatever Clauses in the Bill are not in dispute.


Roderick Blaker: I think the Hon. Member for Hamilton Mountain has made it clear that there is not unanimous consent to proposing two amendments to Clause 1. Therefore, I do not need to hear any further discussion on that subject.
I will now proceed to the ruling on the points of order. If the Hon. Member for Calgary West will give me a moment, I will just make it clear that the Chair has obviously accepted taking the points of order under advisement as to the acceptability of Clause 1. In the ordinary course I would now deal with Clause 2. However, I see the Hon. Member for Calgary West rising, perhaps on a point of order or to enter the debate.


Mr. Hawkes:: I am just rising to make a momentary comment, Mr. Chairman. If the Minister is interested in expediting the work of the House, he should know that the sooner he shares amendments in an informal way with the Opposition, and the more time we have to consider them, the more likely we will be able to expeditiously deal with some which we believe to have wisdom.


Yvon Pinard: Promises, promises.


Frederick James (Jim) Hawkes: However, trying to circumvent the normal system of the House is really guaranteed to block and not to expedite.


Yvon Pinard: Don't waste your time.


Frederick James (Jim) Hawkes: That is really what was at issue.


Yvon Pinard: Nice try.


Roderick Blaker: I think we have reached the point in the proceedings at which the committee may wish to consider Clause 2.
On Clause 2-Salary reimbursement


Mr. Riis:: Mr. Chairman, in the same vein, would it be appropriate for you to ask the Minister to circulate those amendments? We would like to expedite this whole mission and that would certainly facilitate matters.


Roderick Blaker: I think it is appropriate for the Hon. Member to inquire whether the Minister may wish to do so, but I do not feel that the Chair ought to be put in that position.


Donald Alex Blenkarn: Mr. Chairman, we see no major objection to Clause 2 and would be prepared, on this side, to carry Clause 2 and indicate to the Minister how co-operative we can really be.


[Stage Direction]
Clause agreed to.
On Clause 3-Fair market value
Donald Alex Blenkarn: Clause 3 has something to do with Clause 16 which deals to some extent with work in progress of professionals. May we suggest to the Minister that Clause 3 either be considered with Clause 16 or, in the alternative, that Clause 3 be stood down until we come to Clause 16?


Paul James Cosgrove: Mr. Chairman, I am, of course, agreeable that we deal with Clause 3 now, since members of the Opposition have indicated that they want to deal with the Clauses in order. I have no objection to Clause 16 being dealt with at the same time, that is immediately following Clause 3, or, if I am not in breach of the procedure of the House, in conjunction with Clause 3.


Roderick Blaker: Is it agreed that Clauses 3 and 16 be considered together?


Some Hon. Members:: Agreed.
On Clause 16-Professional business


Donald Alex Blenkarn: Mr. Chairman, Clauses 3 and 16 deal with work in progress. Clause 3 is the basic taxing clause that says that work in progress of a professional is part of his earnings during the year, and the consequence is that it is bringing into income work in progress of the professional in general.
Clause 16 goes on to exempt certain professionals, lawyers, doctors, chiropractors and so on, but it misses some professionals completely. Therefore, some professionals are caught in the basic charging section in Clause 3 and are not exempt in Clause 16.
First of all, dealing with the professionals we are talking about, Clause 16 exempts, as I said, dentists, lawyers, medical doctors, veterinarians and chiropractors, but for some strange reason notaries in the Province of Quebec are to be taxed on their work in progress as it goes along.
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Mr. Chairman, you will know that in the Province of Quebec a great deal of the legal business is done by people called notaries. They are not lawyers; they belong to the honoured profession of notaries. Indeed, in the rest of the country there are a number of places where notaries do the conveyancing, the wills and estate work. To leave that particular profession hanging out to dry seems to us to be totally inappropriate, but that is what the Minister has done in the Bill.
We seem to be getting more professions all the time. I was told that there were people who look after your feet, podiatrists, who are a profession. They are out to lunch too because they are not doctors in the sense that they are not medical doctors, but they are a profession and run a properly licensed profession.
What we have is a situation where, for example, optometrists are not included. I wonder why engineers are not included or draftsmen who are running a drafting office of some kind. It strikes us that the way of handling this matter has been totally without any real thought as to how the economy works. These people do work for clients or customers who come to them to get their professional service. Then what happens? They cannot get paid unless they complete their work. How can an optometrist charge someone for half an examination? No one is going to pay an optometrist until they receive their glasses, but he may have done some work before that. How is he going to get paid if he does not complete the work?
With respect to an architect's drawings, the plans for a building, the architect is usually paid a fee for completing the plans. No one is going to pay him for half a plan. As was explained when lawyers were given the exemption, no one is going to pay for half a lawsuit. There is really no reason for this mealy-mouthed way of operating by the Government. I want to ask the Minister, how much revenue does the Government hope to collect by taxing the work in progress of notaries in the Province of Quebec? How much extra revenue does the Government hope to collect for that?


Paul James Cosgrove: Mr. Chairman, apropos the point raised by the Hon. Member for Mississauga South, he has touched upon a matter that the Government was certainly alert to even before the Hon. Member raised it in the Question Period in the House some months ago. The Minister of Finance indicated the intention of the Government, in response to the Hon. Member's question, to look at his representation. One of the amendments of clarification which I referred to is indeed an amendment to Section 128 of Bill C-139, which is designed to include notaries in the Province of Quebec.
Without formally moving the motion lest I be out of order, I want to indicate in response to the question that the Minister indicated his intention to amend so as to clarify the inclusion of notaries for the reasons given by the Hon. Member, and at the appropriate time I will rise to move that amendment and make it available to Members opposite and to the Chair.
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I might, before resuming my place, indicate that the Government has specified a number of professions that are exempt, but those occupations, some of which were touched upon by the Hon. Member for Mississauga South, that are not included do have the advantage of other provisions of the Act which are of significant benefit to them in the carrying out of their business and their occupations. For example, some of the occupations talked about have the full benefit of the small business rate. Secondly, they have the benefit of incorporation as a business whereas indeed some of the professions that are exempted in this particular Section are by law in some Provinces prohibited from incorporating, thereby having the advantage not only of preferred rates of tax in the income tax but of the legal advantages which have pecuniary value in the protection of the incorporation.
Therefore, in an attempt to find some common basis for equity and treatment of these small "professional operations", we attempted to bring some equity to those who could not take advantage of the existing provisions of the Act or other Acts of Canada.


Donald Alex Blenkarn: Mr. Chairman, I do not want to take up a great deal more time because my colleagues also want to get into this. I raised the question of notaries. I now raise the question of optometrists. How much does the Minister intend to get from taxing the work in progress of optometrists? While he is at it, will he advise how much he expects to get from taxing work in progress of unincorporated architects? In some places architects cannot incorporate. How much does he expect to get from taxing work in progress of people selling computer services as unincorporated individuals? At the same time, perhaps the Minister could tell us what is the big deal about incorporation? How can he say there is a great tax advantage, after looking at some of the things which the Minister has done in this Statute to rip and tear apart the small business community.


Paul James Cosgrove: Mr. Chairman, of course any answer that I gave to a breakdown of various professions would be hypothetical for the very reasons raised by the Hon. Member. Some bill in different ways, some carry on their practices in different ways. It was not the intention of the Government to go through each individual profession. My answer indicated that for those professions that were exempted, it was done on the rationale that there were benefits available to ones not excluded that flow, as I indicated, either from the incorporation, which is not in the Income Tax Act, but it does have benefits, or, second, businesses which have the advantage of the small business rate available to them.


Nelson Andrew Riis: Mr. Chairman, I want to direct a question to the Minister to pursue this point a little further. I suspect there are going to be a great many professions, when they learn of this Clause and the new way of billing, that will be very interested

March 3, 1983
Income Tax
in finding out why a handful of professions have been exempted. I realize the Minister has made some effort to clarify that. Keeping in mind such professions as planners, engineers and architects, will the Minister explain carefully so that any professional will understand why accountants, dentists, lawyers, medical doctors, veterinarians and chiropractors have been singled out specifically, as opposed to all the other professions? Why have they been singled out specifically as exempt? I say this in all sincerity because I believe that in the spirit of equity and fairness this question must be answered and answered in depth.


Paul James Cosgrove: Mr. Chairman, the Hon. Member prefaced his remarks by saying that a number of people will be surprised by the Bill and the provisions before the House. In fact, this provision was introduced in the November, 1981 budget. Further, people affected have the opportunity of making submissions to the Standing Committee on Finance, Trade and Economic Affairs. In fact, groups did make representations to the Committee. The rationale is the one that I have given to the Hon. Member for Mississauga South. I would like to have the Parliamentary Secretary to the Minister of Finance, who sat through the Committee hearings, comment on that.


Douglas Glenn Fisher: Mr. Chairman, I did indeed have the opportunity to work in the Finance Committee through September. At that time we had submissions from various groups of lawyers and accountants from across Canada. I argued with these people. I asked them very directly why they should have a tax deferral that I as a small-businessman did not get.
I refer the Hon. Member to the minutes of those meetings because there were some convincing answers given to us by the professions which we have exempted. What those professionals were able to show us was that they would encounter huge difficulties with paper work. They would have to keep track of the enormous accounting problems. Their customers would end up paying for those difficulties and the extra paper work. Really, the Government would not benefit substantially by the tax revenue that it gained. We in effect were going to tighten up the tax payments on a one-time basis, but at enormous expense to these professions.
At the same time we were told, and I became convinced personally, that other people could handle this problem very effectively. Many of the professions that he has referred to have become professions by virtue of recent court rulings. These people have had to follow other business practices previously. They are already in a position to pay their taxes much closer to the date of billing. They are accustomed to treating unpaid bills or work in progress on an inventory basis rather than in the fashion that lawyers have traditionally.
As the Hon. Member for Mississauga South pointed out, there is a problem for lawyers to figure out how to bill on a divorce case that is half finished. There is not quite the same problem for someone who has already developed a professional practice which allows for billing at various stages; so much in advance, so much on completion of rough drawings, so much for the start of the project and so much after. Many of these professions already have that kind of professional practice.
It really boiled down to a two-fold question. First, by going after some professions like lawyers and the others that have been exempted, we were creating a lot of unnecessary paper work and big difficulties that the customer was eventually going to pay for and which had no real benefit. Second, the other people who are not exempted have business practices that already allow them to pay these taxes without those difficulties and without that paper work. They also have benefits like the small business rate which lawyers, and so on, are not always able to take advantage of.


Nelson Andrew Riis: Mr. Chairman, that is about the lightest-weight response that I have heard in a long time. To suggest that to be in this work in progress stipulation you had to appear as a lobby group during the month of September before the Committee on Finance, Trade and Economic Affairs is completely unacceptable, if that is the kind of rationale used. I suspect there are many professional groups across the country that probably were not even aware there was a sitting. They were probably struggling to keep alive in their profession and simply could not see themselves in a position to go to Ottawa and lobby. They thought that the sophistication of decision-making would be a little more than that. They expected more sophistication on these exemptions than simply those who had the loudest voice or the most political contacts on the Government side.
Quite frankly, I would ask the Minister, or in this case the Parliamentary Secretary to the Minister of Finance, to explain specifically how a chiropractor would differ in terms of the red tape, and so on, that he or she would experience as opposed to an architect or community planner.


Douglas Glenn Fisher: Mr. Chairman, the Hon. Member says that to qualify for an exemption you had to appear as a lobby group in front of the Finance Committee. I would venture to say that we will not be giving him any exemptions in the future because he chose very deliberately not to appear at the committee. In fact, his record shows he has a lot of opinions about our tax laws but has not put forward anything but slogans.


Nelson Andrew Riis: Mr. Chairman, I would like to suggest that these are the kind of discussions we should not be entering into every time I raise a critical question. I remind the Hon. Member that I cannot be everywhere at once in my capacity as Finance critic for the New Democratic Party, so I am going to be criticized for not doing my job. Frankly, I think it is a low and cheap comment and I am surprised that he would deliver it.


Douglas Glenn Fisher: I believe it is an important point to make, Mr. Chairman, because we are dealing with a complex consideration here which involves more than just the surface question which the Hon. Member has asked. If he had been at the committee he would have heard about these difficult considerations. For example, he has asked me about-


Nelson Andrew Riis: On a point of order, Mr. Chairman, I take exception to the comment of the Hon. Member. There is something
March 3, 1983

called Hansard in this House. There are briefs which were presented by every representative to the standing committee. I read every brief carefully. I read the verbatim comments in Hansard of that committee carefully. To suggest I have not done my homework, to suggest that I have not followed the deliberations which went on during the month of September, is quite unacceptable, and if that is the kind of response which is going to be given, perhaps this whole debate will turn into a farce.


Douglas Glenn Fisher: Mr. Chairman, if the Hon. Member had done his homework, he would know that chiropractors do not receive the small business rate, neither do most lawyers, whereas the planners, architects and people he referred to do take advantage of that provision. So we in effect have straightened out that kind of inequity. The kind of complexity involved here was discussed in great detail.
I reject the Hon. Member's argument that you had to be a well-heeled lobbyist and come to that committee in order to get your way. In fact, most Members of the committee and most observers have said that the work done by Hon. Members who did show up was very productive and was in fact a considerable contribution towards the progress of the debate on this Bill.
I would answer his question regarding chiropractors in a two-stage way. First, I am told by our officials that they believe that most chiropractors do not have work in progress; they bill immediately after a session is finished. Second, even so, they are not subject to the small business rate; therefore, this exception straightens out that inequity.


John Horton McDermid: Mr. Chairman, I would just like to ask a few questions covering this particular section of the Bill, Clause 3 and Clause 16. What kind of additional yield does the Government feel it is going to get from this particular tax? I am not talking about specific, individual ones as mentioned by my colleague, the Hon. Member for Mississauga South, but what kind of a one-time shot is it where you are going to get additional income which you do not already have?


Paul James Cosgrove: The rough analysis done by the Department, Mr. Chairman, as we separated "corporate" from "individuals" under this section, showed a generation of income when the section is fully in place, fully implemented and returns are based on full implementation of the section, of $20 million on the corporate side and $20 million on the individual side.


John Horton McDermid: Mr. Chairman, $20 million is a lot of money to me and it is a lot of money to individuals. Twenty million dollars plus $20 million is $40 million. That is a nice round figure, and very convenient-


Donald Alex Blenkarn: On a point of order, Mr. Chairman, the Government in its original submission on taxing work in progress in the budget of the former Minister of Finance of November 12 gave the total amount which could conceivably be taken from work in progress for all professions as $75 million. We have now been advised that, having removed a great number of professionals, lawyers, accountants and
Income Tax
doctors and all those professional people, they still have $40 million. That was not the evidence before the committee and I would like this off the top of the head figure to be shown and proven before this House.


Roderick Blaker: Nothing of what the Hon. Member has said strikes me as a point of order. It seems to me to be a point of debate.


John Horton McDermid: It may not be a point of order, Mr. Chairman, but it was a damn good point. I would like to ask the Minister or the Parliamentary Secretary if these changes, in their opinion, will not complicate the field of taxation even more, provide those who are not exempt with more overhead and expand supervisory bureaucracy in order to keep an eye on this matter? Is the change, first of all, fair? Second, do you not believe it is going to complicate the field of taxation for small-business people and for professionals who are already very badly confused, as are our people in the Department who cannot even give answers? It depends on who you talk to in the Department as to what interpretation you receive. Do you not feel that it is going to complicate matters further for those business people who are affected?


Paul James Cosgrove: Mr. Chairman, I am told, although I did not participate in the committee deliberations, that there were tests applied, and a great amount of discussion and conversation was had in looking at the exemptions, for example identifying the legal profession as one of the exemptions. One of the tests used by the committee in deciding which profession would be unduly affected by this new provision, and which assisted the Government in looking at those operations which would be exempt, is the first question, Mr. Chairman, which I expected to be raised and could be raised with respect to any Section in the Act: does it complicate the Act? Second, is it fair? With amendments to the Act, even though the objective may be to simplify, necessary procedures engage the House, engage public debate and participation, and people come to committee. Therefore, yes, initially there are some problems of initial complication. However, there are some Sections of the Act which we hope, when finally in place, will simplify operations for certain segments of the financial and business community.
Second, is it fair? Fair to whom? Is the method of raising money fair? We argue that it is fair, Mr. Chairman. It is fair because the underlying principle of the Act is taxation of income; that income from whatever source is the basis for taxation. Taxation must be applied on an equitable basis. Those people who derive income on some equitable basis should make a contribution towards meeting expenditures of the Government. Whatever areas have called upon the Government to offer, as I indicated, advantages through the small business bond or a small business exemption under the Act, whether or not it is a direct expenditure of the Government. All income, large and small, goes towards meeting general Government operations. Generally speaking, the rule to be applied, we hope with equity, is that those who receive income

March 3, 1983
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should be taxed on income. The Government and Parliament, in using those resources, should as well disburse those resources with equity. So the question is, is it fair? Fair to whom? When you ask a question about fairness, you have to expand the question. Is it fair to whom? To all Canadians.


John Horton McDermid: Mr. Chairman, I find that very interesting. People are taxed on income they do not have. It makes one wonder if that is fair. It is much like the situation of our senior citizens who have to file income tax quarterly when they receive income on a yearly basis or half-yearly basis. They still have to pay their income tax before they receive their income. That is what is happening in this instance as well.
Let me remind the Minister and the Parliamentary Secretary, who was critical of those who did not attend the committee hearings, that I did not attend them either. I am sure many of my colleagues did not. The Minister did not.


Douglas Glenn Fisher: Your whole Party did not.


John Horton McDermid: The Minister just said he did not, but, that is a red herring. Let us forget it. Let me read into the record what the Standing Committee on Finance, Trade and Economic Affairs were presented with on Wednesday, August 4, 1982:
Some professionals such as trial lawyers, engineers and architects do not charge for their service on a time basis, but rather on a contingency basis where the calculation of fees for service rendered is feasible only when the service has been completed with a reasonable degree of success. If the outcome is unsuccessful, the firm may not be able to collect any fees from its client. Although taxes will have been paid with respect to work in progress, it would not be of any value to the firm since it is highly unlikely that specific professional service can be sold to another client.
If professional work in progress is to be taxed in a similar manner as that of other business, some noted that the 3 per cent inventory allowance conferred to other business should also apply to professionals.
That is what was said in the committee.
There is a question that has not been answered either by the Minister or the Parliamentary Secretary. What happens if work in progress is taxed but is not completed? What happens to the individual who pays the tax and the work does not get completed, or it does get completed but he does not get paid for it?


Douglas Glenn Fisher: Mr. Chairman, may I apologize to Hon. Members for my earlier partisan rudeness. I think the comments made were quite right. I do not want to pursue things in that vein. I have found some of the questions to be very useful.


John Horton McDermid: We accept those apologies.


Douglas Glenn Fisher: I own my own business. In my business I have to declare my inventory as an asset and then in the coming year write it off as an expense. What we are asking of people who experience this situation is to come into line with the tax practices of hundreds and thousands of other small businesses across the country. We would treat that debt in the same way we would treat bad debts in my business. I ask the Hon. Member to use that as a yardstick. If hundreds and thousands
of small businesses across this country have inventory regulations and have write-off opportunities, then in the same way we are asking some professionals to treat their work in progress as if it were inventory.
We have had very clear indications from most of these people that they can handle this kind of thing. There were problems with lawyers who told us about having drawers upon drawers of files. Lawyers have relationships with clients. Often some of their cases are not billed successfully. Sometimes advice is given on a free basis and sometimes a fee is adjusted according to a client's income, and so on. There is a very personal relationship between lawyers and clients.
But let us look at the situation of a doctor, for example, in Ontario. If a doctor does a certain amount of work for a patient, the doctor can immediately at least bill OHIP or use the OHIP fee schedule. A doctor does not have any work in progress; a doctor has constant billing. Because of the safety net of the Ontario Government, he has some assurance of being paid.
When we looked at the difference between lawyers and small businesses or lawyers and doctors, or between architects and small businesses, during the committee hearings we found there were some parallels between some of these professions and other small businesses. But it was very clearly drawn out that some professionals really would be faced with a punitive burden if they had to go through all their hundreds of files right from the beginning to try to put a monetary value on a lot of work that often was not billed at all. All this unproductive work would have to be billed against clients in future. A kind of compromise was drawn up. On a tax basis the compromise matches the opportunities given those people who have a small business rate and those people who did not.


Marcel Joseph Aimé Lambert: Mr. Chairman, what I am going to say now is nothing new to the Parliamentary Secretary. This is a shabby, disreputable remmant of rejected Carter that has been left lying around the floor for the past decade.


John Horton McDermid: That is right. It was turned down in 19691970.


Marcel Joseph Aimé Lambert: There is no need for it. One of the chief complaints in the committee hearings, which the Minister did not attend but the Parliamentary Secretary and the officials did, contained in brief after brief and which witness after witness complained about, was the cost of compliance with the Income Tax Act. This is just more piling it on and there is no need for it. The Crown will get its tax.
A compromise was made in 1970 that billings were to be taken in as income for the professions as a whole. They agreed to it, albeit reluctantly, but that compromise has been there. But why now toss in work in progress? It is not the tax officials who have been in the habit of evaluating business. With all due respect to the Parliamentary Secretary, if he will listen-


Douglas Glenn Fisher: Yes.


Marcel Joseph Aimé Lambert: The Parliamentary Secretary claims he is in business and has an inventory. The professionals in this
March 3, 1983

particular case are not manufacturers of widgets. He thinks they are, or at least he would like to equate them with the manufacturers of widgets. But if we had reached-and this is a plea right from the bottom of my heart on behalf of taxpayers as a whole-the limits of the cost of compliance, this is something of which National Revenue officials and Finance officials have no conception. They have been told about it but they ignore it. Therefore, I will repeat it and repeat it.
1 have a number of friends in business in Edmonton who at one time were officials of National Revenue. If you talk to officials at National Revenue off the record, they say it is a shame about the wasted economic effort in this country in having to comply with this Income Tax Act which is, remember, Mr. Chairman, self-assessment. We get verbal garbage. That is all it is. Neither tax officials nor the best tax lawyers and accountants in the country can understand it.
Just the other day my colleague, the Hon. Member for Hamilton-Wentworth, pointed out that some Clauses, like Clause 39, run to pages and pages with hundreds of commas. One sentence even has 774 words. How can anyone understand that? The ordinary citizen or small businessman cannot take the Act to a chartered accountant and pay $500 or $1,000 to have his tax done. If he goes to a tax lawyer he will have to add a few zeros to that.
I am not talking about the man who runs three trucks. I am talking about the man who employs 20 or 25 people and has to maintain records for the deduction of income tax, Unemployment Insurance-with immediate remittal-for Canada Pension Plan and so on. The Government makes the small-businessman its bookkeeper. If the small-businessman is not incorporated, even though he has 20 or 25 employees, he is self-employed and will have to prepay his tax quarterly or face interest penalties.
Tax program officials admitted in evidence that writing up dividends, with the tax at 12.5 per cent, brings the small-businessman's rate of taxation to about the same as that of his employee. In other words, the man who runs a small business with 75 or 100 employees, with the attendant worry and pressure and the initiative that he displays, and all of the complications of being an owner and operator, is merely entitled to a salary taxed at the same rate as that of his employees. If he works 16 hours a day and his employees work eight hours a day, it makes no difference; his entitlement is the same.
When the committee sat during the summer, Mr. Chairman, the Hon. Member for Kamloops-Shuswap was the only one who had to travel some distance to attend. I live in Ottawa and I was there, as was my colleague from Mississauga South. The Chairman was the Hon. Member for Ottawa Centre and the other two Members of the Liberal Party were from the London area. No one else turned up for the hearings, not even one
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Member from the Province of Quebec. I guess for those who did attend it was just convenient and, as I say, I live here.
We all want to see justice done in regard to income tax and I make the strongest plea that I can for that. The cost of complying with the Act is high, Mr. Chairman. I wonder how much it costs the farmer who runs a couple of hundred acres with beef or dairy cattle in a profitable operation to comply with the Income Tax Act. He has the same responsibilities provincially, of course.
I have opposed work in progress as a concept ever since it was introduced. We agreed to it in 1970 in exchange for something else but now it is not a bargainable point. I think the Government is wrong-pigheadedly wrong. My colleagues are unalterably opposed to this provision and I advise the House to vote against it.


Frederick James (Jim) Hawkes: Mr. Chairman, I have some questions. The Parliamentary Secretary indicated that he is a small-businessman and is interested in fairness. There is a contradiction in that; he never talks about fairness but about sameness. Am I correct in assuming that he wants to make the situation the same for these professional groups as for those engaged in small business? Is he talking about sameness rather than fairness?


Douglas Glenn Fisher: Mr. Chairman, that is a good question. I should point out to the Hon. Member that many people now claiming professional status were previously small-business people. They enjoy the new status as a result of expanded and more liberal court rulings. Our officials tell us that millions and millions of dollars in the computer software industry are involved where people have been able to defer income by using the work in progress provision. They were previously treated as small business; now they have accounting systems set up and they take advantage of the small business tax rate.
We are not trying to turn everyone into the lowest common denominator. We have a group of people who have an opportunity to take advantage of the work in progress provisions. According to the Minister's comments it has become a $40 million industry. A $40 million allowance is quite a big chunk and we should take that into consideration.


Roderick Blaker: It being one o'clock, it is my duty to rise, report progress and request leave to consider the Bill again later this day. Is that agreed?


Some Hon. Members:: Agreed.
Progress reported.


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


[Stage Direction]
AFTER RECESS

The House resumed at 2 p.m.
[Stage Direction]
March 3, 1983


Mr. Jean-Guy Dubois (Lotbiniere):: Madam Speaker, with respect to the new grain transportation policy, not long ago, a telegram was sent by members of the Quebec coalition requesting a meeting with the federal authorities responsible for implementing the new policy.
Madam Speaker, today it is with great pleasure that I can inform the House, and all Quebec farmers as well, that the Federal Government has responded favourably to this request and that yesterday, the Minister of Transport (Mr. Pepin) sent a telex to Mr. Jacques Proulx, General President of the FPU, in which he said, on behalf of his colleagues, that he was agreeable to meeting spokesmen of the groups that have a special interest in this matter, namely, the FPU, the Cooperative federee du Quebec, the Association professionnelle des meuniers du Quebec, the Association des negotiants en cereales du Quebec and the Order of Agronomists. Now, Madam Speaker, and I think my constituents and Quebec farmers ought to know this, representatives for the parties concerned will have to agree on a date. Perhaps it would be advisable to have economists on both sides meet to discuss the various figures being mentioned by politicians and critics, in order to make this meeting a productive one and to find the best possible solution for further developing the agro-food industry in Quebec and not merely ensuring its survival.



AGRICULTURE


Hon. Roch La Salle (Joliette):: Madam Speaker, on the same subject, I would like to take advantage of this opportunity to add to the statement made by the Member for Lotbiniere (Mr. Dubois) and say that this morning, I was speaking to representatives of the FPU who were still concerned about the proposals made by the Minister of Transport (Mr. Pepin) with respect to grain transportation. In the circumstances, I understand the Hon. Member's invitation and his optimism, but I would like to ask all Members from Quebec to tell Quebec farmers that nothing will be done until an agreement has been reached with representatives of the major groups mentioned earlier by the Hon. Member for Lotbiniere, including the Cooperative federee and the FPU, and in fact with all farmers and those involved in farm-related industries.
I honestly hope that on the Government side, Hon. Members will see to it that no legislation is tabled until there has been a concerted effort to respond satisfactorily to the expectations of
people across Canada. Quebec is of course affected by this question and has every reason to be concerned. I also hope that Government Members will make sure that Quebec's interests are not jeopardized, because it is now clear that there is not enough information to warrant going any further with the policy being proposed by the Minister of Transport.




Mr. Louis Duclos (Montmorency-Orleans):: Madam
Speaker, I would like to bring to the attention of the House, and especially of the Minister of Agriculture (Mr. Whelan), that apple growers in Eastern Canada and especially in Quebec, are in very serious financial difficulty. As a result of severe weather conditions during the winter of 1980-81, more than 300,000 apple trees, in other words, one third of the total number in Quebec, were lost. To illustrate the extent of this disaster, I may point out that normally, apples represent more than 70 per cent of the total value of fruit sales in Quebec. Furthermore, the Quebec apple industry's annual turnover has dropped to $12 million from an annual $22 million before nature struck so mercilessly.
I therefore urge the Minister of Agriculture to take a look at the policy followed by the Government in helping apple growers in British Columbia, in the 60's and farmers in the Prairie Provinces when they were struck by drought in 1980, and to meet the request for financial compensation submitted by Quebec apple growers, whose losses have been estimated at $62 million. Since it has been three months since the Department of Agriculture received all the necessary data to make a decision in this case, a decision is indeed long overdue, and one that will be in the best interests of apple growers in Eastern Canada.



INCOME TAX


Donald Alex Blenkarn: Madam Speaker, in his literally mad endeavour to ensure that every nickel of possible income tax is paid, the Minister of National Revenue (Mr. Bussieres) has created a horror show in Form T-2219. This particular form demands that an investor who has borrowed money to make an investment specifically set out the exact relationship between the borrowed money and the investment, balancing each borrowing against each investment.
March 3, 1983

The very concepts of the demand in Form T-2219 are playing havoc with brokers in the stock exchanges, particularly with respect to those investing on a margin account. The amount of accounting requited is anti-productive and militates against disclosure of investment activity and will, if carried on, totally destroy the self-assessment principles in the Income Tax Act.
The form was concocted when the Government set out to limit the amount of interest a person could deduct when borrowings were made for investment activity. The Form makes little, if any, sense and is causing untold problems. The accounting costs to complete the Form alone represent an undue burden on the taxpayer. The Minister should forthwith withdraw the Form. It is a bureaucratic bungle.



THE CONSTITUTION


Mr. Dan Heap (Spadina):: Madam Speaker, I wish to bring to the attention of the Prime Minister (Mr. Trudeau) and the Secretary of State for External Affairs (Mr. MacEachen) the case of two Canadian citizens who are being held against their will in a foreign country, with no charges laid against them. I argue that the Government has a duty to defend their right under Section 6(1) of the Charter to re-enter Canada.
The children of the Ahlawat family, Rishi, aged 11, and Muni, aged 8, were born in Toronto of East Indian parents who are naturalized Canadians. The father went to Jordan in 1978 to teach, and the family followed. The father, who had a long history of violence toward his wife, kept the boys and refused to return to Canada or let them return. The mother returned to Canada, obtained a custody order, and returned to Jordan, but the father then converted to Islam, obtained an Islamic custody order, and seized their passports. The mother has interceded with King Hussein, but to no avail. These are Canadian citizens with the right under the Charter to return to Canada to a Canadian court which gave custody to the mother.
I ask that the Government negotiate with Jordan to ensure the return of the children and the father so that the matter of custody can be resolved in a court of the country of Canada, of which they are citizens.



UNEMPLOYMENT INSURANCE


Mr. Jack Burghardt (Parliamentary Secretary to Minister of Communications):: Madam Speaker, I would like to bring to your attention a Section of the Unemployment Insurance Act which 1 believe is unjust and requires amendment. I am referring to Section 30(1) of the Unemployment Insurance Act which requires that an applicant for maternity benefits
"should prove her pregnancy". This Section, as currently written, effectively denies adoptive mothers the receipt of maternity benefits.
As I am sure we are all aware, the general need for maternal care of the adopted newborn is as great as that required for the biological newborn.
In the case of non-infant adopted children, dealing with the problems of parental or guardian transition can also require thorough parental attention. Immediate parental supervision in adoption cases is deemed so essential that many family service agencies make a six-month home stay a mandatory provision. I believe that the distinction between adoptive parents and natural or biological parents is unnecessary.
Inasmuch as the current unemployment insurance policy with respect to maternity benefits reflects the need of the mother to be with the new child, as well as reflecting the physical inability to work, I feel that Section 30(1) of the Unemployment Insurance Act should be amended in order to provide a form of maternity benefits to adoptive mothers as well as to natural mothers.



AGRICULTURE


Mr. Gordon Towers (Red Deer):: Madam Speaker, the vacillation of the Minister of Agriculture concerning the very important issue of stabilization for the beef livestock industry is a matter of grave importance to producers. Producers have been promised a policy "within months", "by the end of the summer", "within a week", and "before Christmas". When is it to be, Madam Speaker? In delaying, the Minister is at crosspurposes with the Provinces and the producers. He stands alone in his reluctance to act. Before even reading the provincial suggestions, for him to say that his proposals of a marketing board concept are better than the provincial suggestions is insulting.
Red meat producers can ill afford to wait for a federal Minister of Agriculture who needs weeks, months, even years, to make up his mind. It is hard enough for them to carry him on their backs, especially when he is dragging the one foot he does not have in his mouth.



AIR CANADA


Mrs. Ursula Appolloni (York South-Weston):: Madam Speaker, Canada and the United States have in the past followed an unwritten rule not to link issues when certain problems arise between the two countries. This practice has been broken by the United States Government which has
23408

March 3, 1983
refused all passengers of Air Canada who purchased bargain weekend flight tickets to take advantage of the discount fare and travel to their destinations. The U.S. Government has linked this issue to the negotiations involving Continental Airlines of Los Angeles to enable it to compete with C.P. Air of Vancouver and Quantas of Australia for passenger business between Canada and Australia. As well, the American Government is seeking total deregulation of cross border air travel.
These cases are totally unrelated to air discount fares, and therefore it is difficult to understand why the U.S. would reject one hundred thousand Canadian toursits. Must innocent individuals suffer because "Life With Uncle" continues to be fraught with difficulties?



CONDEMNATION OF UNITED STATES POSITION ON FLIGHTS TO ORIENT

Mr. Les Benjamin (Regina West):: Madam Speaker, I would like to make a statement concerning the same issue.
The travel plans of thousands of Canadians are in limbo because the United States has cancelled Air Canada's seat sale air fares on a pretext involving totally separate issues of air fares to Australia and other parts of the Pacific. The United States Government is taking Canadian tourists hostage to try to win a point it was unable to win in negotiations for a new agreement between Canada and the United States.
The United States Government wants us to violate our air agreement with Australia in order to let Continental Airlines, a company which does not even fly to Canada, to siphon Canadian air passengers through Los Angeles. We do not tell the United States to violate its agreements with other countries. We must not let the United States meddle in our relations with other countries. If our country gives in to demands of the United Sates, the survival of Canadian airlines would be threatened. If we let the United States siphon off Canadian traffic to the Orient, it would only be a matter of time before American airlines would siphon off Canadian traffic to Europe. Eventually, transcontinental traffic between Canadian cities would be routed through large U.S. Airports.
The question is whether Canada wants to have a national airline system. Are we to be an independent and sovereign nation north of the 49th parallel, or are we to be just an appendage of the United States' transportation system and economy? We call upon the Government of Canada to send a strongly worded protest to the United States administration to let it know that, if it persists in this additional attack on friendly relations, there are reciprocal actions which Canada can take-


Madam Speaker:: Order.



MACDONALD COMMISSION


Mr. Girve Fretz (Erie):: Madam Speaker, 1 want to read a letter sent to me by the Regional Municipality of Niagara. It states:
The following resolution of the Regional Finance Committee, approved and adopted by the Council of the Regional Municipality of Niagara February 17, 1983, is referred to you, as directed, for appropriate action:
'That the Council of the Regional Municipality of Niagara objects to the $800 per day payment being made to the Chairman of the commission examining the Canadian economy, recently appointed by the federal Government, on the grounds that the payment is considered exorbitant and not in the spirit of restraint presently being suggested by all levels of Government.
That this objection be lodged with all federal Members of Parliament who attend the Tri-Level Government meetings in Niagara.'



ORAL QUESTION PERIOD


Hon. Erik Nielsen (Leader of the Opposition):: Madam Speaker, my question is directed to the Deputy Prime Minister, in the absence of the Prime Minister, and relates to the response of Premier Buchanan to the invitation of the Prime Minister with respect to discussion of the economy of the country. Speaking on behalf of the Premiers, he suggested a full-scale summit between the federal Government and the provincial Premiers on the disastrous state of the Canadian economy.
Can the Deputy Prime Minister inform the House whether the Prime Minister is giving favourable consideration to this proposal of the Premiers, rather than the Prime Minister's suggestion that the economy be discussed somewhere between the entree and dessert at 24 Sussex?


Hon. Allan J. MacEachen (Deputy Prime Minister and Secretary of State for External Affairs):: Madam Speaker, the Prime Minister has received the message from Premier Buchanan-


Mr. Epp:: Good. What's he doing with it?


Allan Joseph MacEachen: -and is about to send a reply to the Premier indicating that it would not be feasible, because of other arrangements which have been made with respect to the constitutional conference, to have the type of meeting that Premier Buchanan has suggested at that particular time, but that it will be possible for the Premiers to meet with the Prime Minister on the evening after the constitutional conference and, if necessary, as has already been indicated, to meet again the following morning, at which time they would be able to consider the medium term objectives of all the Governments
1 - [DOT] - ' *[DOT]
March 3, 1983

and discuss the possibility of holding a conference on the economy at some future date.


Erik Nielsen: May I suggest to the Deputy Prime Minister that the suggestion of the Premiers that an agenda be set for a full scale summit on the economy has considerable merit and should be considered favourably by the Prime Minister and the Government.


PLIGHT OF UNEMPLOYED
Erik Nielsen: Madam Speaker, 1 ask the Minister, in his capacity as Deputy Prime Minister, whether he can give the House and the country, and particularly the two million unemployed, the assurance that the tragedy of their situation will be placed high on the agenda of such federal-provincial discussions concerning the tragic state of the Canadian economy, rather than being placed somewhere in between the vichyssoise and the filet mignon?


Some Hon. Members:: Hear, hear!


Allan Joseph MacEachen: Madam Speaker, the Hon. Member is aware that the Minister of Finance has already met with his counterparts in December and he will be meeting again with them in Toronto next month.


Mr. Crosbie:: He does not have any counterpart. There is only one of him.


Allan Joseph MacEachen: At the same time, the Minister of State for Economic Development has been meeting with his counterparts, as has the Minister of Industry, Trade and Commerce. Therefore, at the forefront of the ongoing consultations between the Governments at the ministerial level has been the economic situation existing in the country. These consultations will continue.
What the Prime Minister is stating to the Premiers is that, after the constitutional conference, in the evening, and the following morning if necessary, he is prepared to discuss with the Premiers the question of the economy and, in the context of the consultations which have already taken place, to consider the possibility at some future date of holding a First Ministers' Conference on the economy. Therefore I assure the Hon. Member that the economic situation is at the forefront of these discussions and will continue at the forefront. However, I am sure that the Leader of the Opposition would not want to have a repeat of the First Ministers' Conference on the economy which was held just about a year ago.


Arthur Jacob (Jake) Epp: It was honest. Take a look at the policy.


Erik Nielsen: We are not discussing anything other than the initiative of the Prime Minister in extending an invitation to the Premiers to discuss the economy. The disappointment of the Premiers lies in the fact that they are being expected to discuss the tragic proportions of that problem between the vichyssoise and the filet mignon.


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


Erik Nielsen: I ask the Deputy Prime Minister, with all of that background of experience that he has not only as a parliamentarian and as a Minister, but given the expertise that he has accumulated as Finance Minister, whether he does not consider it fit and proper at this time that this immense, tragic problem of unemployment should receive top priority in a federal-provincial conference of the Prime Minister and the Premiers? Does he not think that such a conference should be held at the earliest possible moment and, if necessary, take one or two or three days to bring about some solutions to the problem? Does he not think that the problem is important enough to warrant that kind of focus?


Some Hon. Members:: Hear, hear!


Allan Joseph MacEachen: Madam Speaker, I think the Hon. Member is seriously underestimating the state of mind of the Premiers who, he thinks, would be put off simply by the appearance of filet mignon on the table at 24 Sussex Drive.
What the Prime Minister has suggested is to have a meeting at 24 Sussex Drive, over dinner, on the night after the First Ministers' Conference on the Constitution, to have a review of the economic situation, and if in the view of the Premiers a further discussion is necessary the following morning-


Erik Nielsen: Is there any doubt?


Allan Joseph MacEachen: -then that will take place. The Premiers were already notified as to the possibility of continuing the discussion the following morning at 24 Sussex Drive. That will give the Prime Minister and the Premiers an opportunity to conduct a rather intense examination of the economic situation in private, rather than being distracted at a public television ceremony, which is often intended to impress the electorate rather than deal with the economic problems facing the country.


AGRICULTURE
Mr. G. M. Gurbin (Bruce-Grey):: Madam Speaker, my question is directed to the Minister of Agriculture. He will know that in the absence of any federal leadership the Ministers of Agriculture of the Provinces have named a task force that will look at a national program for income stabilization in support of beef and other agricultural commodities. I would like to ask the Minister if he is prepared to support that task force, if he will name his representative to it, and if he will put the resources of the federal Government behind the findings of that task force.


Hon. E. F. Whelan (Minister of Agriculture):: Madam Speaker, I am very much aware that a meeting took place in

March 3, 1983
Oral Questions
Toronto this past Tuesday between the provincial Ministers of Agriculture, and the reason it took place this past Tuesday is that not all of them could be there next week, I am told, because some of them are going on vacation.
The presentation that was made is not dissimilar to what I made to them in 1978. You say there was not leadership given, but in 1978 I offered them practically the same thing that they are suggesting now. I have been patient in waiting for them to come around. I do not know how far they are going to go. For instance, they did not say that they were going to accept the Quebec plan which would cost $450 million, or they did not say that they were going to accept the Saskatchewan plan which has a $30 million deficit, or they did not say that they were going to accept the Alberta plan on which they have spent over $140 million in the last year.


Some Hon. Members:: Oh, oh!


Eugene Whelan: They did not say what plan they were going to accept. They did not say whether they were going to have equity in the plan, or anything else. That is the kind of plan it has to be, as far as I am concerned, and that is what I proposed in 1978. If they had followed my plan in 1978-


Some Hon. Members:: Oh, oh!


Eugene Whelan: -there would not be any bankruptcies now, as there are.


Some Hon. Members:: Hear, hear!


MINISTER'S POSITION
Gary Michael Gurbin: Madam Speaker, my supplementary question is directed to the Minister of Agriculture. The Minister of Agriculture will know, or should know, that the situation in 1978 was much different from the situation now, and the GM100 plan that was proposed then would not accommodate the difficulties that are present now.
The Minister of Agriculture has been conning agriculture for the last two years at least, and he has been telling farmers to wait for his plan. I would like to ask him if he really does have a plan and, if so, when it will be made public? Or is he leading the Ministers of Agriculture of the Provinces on so that he can act in a unilateral fashion? Meanwhile, farms are dying and there are bankruptcies at the rate of one a day, while he is doing nothing.


Some Hon. Members:: Hear, hear!


Eugene Whelan: Madam Speaker, the Hon. Member refuses to recognize reality in what I had proposed in 1978, and had Government approval for, and which his Government withdrew in 1979 because it said that my plan was too rich. His Government withdrew that when they were in power in 1979. The Hon. Member said I was fronting. I was not fronting, and I had Government approval of that plan. The provincial Ministers said they were going to come forward with a plan.


Some Hon. Members:: Oh, oh!


Eugene Whelan: Where in Heaven's name is their plan, Madam Speaker? If they had a plan, where is it? Why did they not get together and present me with a plan?


Some Hon. Members:: Oh, oh!


Eugene Whelan: They presented nothing as far as I am concerned. All they did was present an old thing that I had proposed before. Madam Speaker, I have a 1983 model right now.


Some Hon. Members:: Hear, hear!


Some Hon. Members:: Oh, oh!


REQUEST FOR ASSISTANCE TO FARMERS FACING BANKRUPTCY
Nelson Andrew Riis: Madam Speaker, what I have to say does not have anything to do with filet mignon and vichyssoise but has a great deal to do with meat and potatoes. I too want to direct a question to the Minister of Agriculture.


Some Hon. Members:: No, no!


Madam Speaker:: Order. 1 do not know if anyone understands what is going on in the House, but the Chair certainly does not.


Nelson Andrew Riis: Madam Speaker, the Minister will know that the Royal Bank of Canada recently announced its new policy of feudalism for farmers who were unable to make their payments in the past year as a result of punitive interest rates. He will also be well aware that last year there were record farm bankruptcies with a total liability of approximately $90 million. The Minister will also know that his Government helped to bail out and renegotiate loans to its friends, $200 million to Chrysler, $500 million to Dome, $125 million to Massey Ferguson, $125 million to Consolidated Computers, and on and on, to the tune of about $3 billion. Will the Minister of Agriculture explain why his Government will not spend one-thirtieth of what it spent on bailing out these major corporations, to enable farmers to stay on their own land and own their own farms?


Eugene Whelan: Madam Speaker, the Hon. Member uses figures pretty loosely. I would ask him to check the record. In the fiscal year 1982/83 we will have provided nearly $500 million to farmers interest-free. We will have provided them on special loans, I would think by the first of April, with probably $140 million at nine and one-quarter per cent interest subsidized. Even the loans that we gave them before, which should amount to probably $700 million this year, were subsidized at about five points below the average cost of long-term money from any other place.
I ask the Hon. Member to check some of the things that are going on. For instance, in crop insurance we pay 50 per cent of the premium. In Saskatchewan what we put into the Crop
March 3, 1983

Insurance Plan amounts to more than the Saskatchewan Government's total budget. So when they say that we are not doing anything, just let them face the facts of how many things we are doing.
The way that the Farm Credit Corporation is working, we have just moved into the market and borrowed $50 million on the private money market that we will be loaning into the different areas, and the arrangement with the Saskatchewan Government is that they are subsidizing that themselves to the tune of down to eight per cent. In co-operation with the Province of Saskatchewan, we are doing that kind of thing.


Nelson Andrew Riis: Madam Speaker, he huffs and he puffs, and I think he blew his own house down after all of that.


ROYAL BANK PROPOSAL TO SEIZE FARMS
Nelson Andrew Riis: Madam Speaker, let me put my question very specifically. The Minister knows that the Royal Bank has a policy in place where it is going to take over farmland and lease it back to farmers. That is the kind of move that will introduce sharecropping into Canada in the 1980s.
I want to ask the Minister why he does not stop that immediately by bringing forward his backbencher's version of the Farmers' Creditors Arrangement Act which will prohibit banks from foreclosing on farmers and enable family farmers to stay on their own land and continue with food production during these difficult times.


Some Hon. Members:: Hear, hear!


Eugene Whelan: Madam Speaker, I would hope that the Hon. Member would also check some of the things that the Farm Credit Corporation has done, working with the private lending institutions in making special arrangements with many farmers. In some instances they have not made a payment for three and going on four years, and we have not taken over their property.
Under the Bank Act, the Royal Bank can only hold a piece of property for so long. It cannot, as the Hon. Member says, be the landlord in perpetuity. It can only hold the land for a certain length of time, and then it has to be turned back into the private market so that someone can buy it if they wish. The Royal Bank admits that 5 per cent of its rural customers are in a real rough economic position. The Bill drafted by my colleague from Lambton-Middlesex is worthy of consideration. It is receiving deep and concerned consideration at the present time. The principle of that Bill was used once before in the history of this country. The principle is very good.
Oral Questions
[Translation)


AIR CANADA
Jean-Guy Dubois: Madam Speaker, my question is directed to the Minister of Transport. In view of the dispute between the Canadian Government and the United States Government concerning discount rates for passengers booking Air Canada flights to the United States, perhaps the Minister of Transport could inform the House about the outcome of his discussions with the U.S. Government and what chances or assurances Canadians who purchased seat-sale tickets have of travelling via Air Canada this week-end.


Hon. Jean-Luc Pepin (Minister of Transport):: Madam Speaker, yesterday and the day before, we talked for several hours, on the spot in Washington and on the telephone, about Canada's proposal. We left our proposal on the negotiating table, and it has not been accepted by the Americans. The situation is therefore as follows: people who are very realistic about the matter have obtained a refund or have decided to go elsewhere in Canada, patriotic Canadians have decided to go elsewhere in Canada, the more adventurous have decided to wait because Air Canada representatives are considering the possibility of offering discount rates to other places where there is sun too, and the real optimists hope that the court injunction that Air Canada is going to try to obtain today will be successful or that the Americans, after thinking it over, will come up with some new ideas with respect to the proposal we made yesterday. I think it was a good proposal, and they should have accepted it many hours ago.


INQUIRY WHETHER MINISTER TALKED TO UNITED STATES COUNTERPART
Mr. Pat Nowlan (Annapolis Valley-Hants):: Madam Speaker, on Tuesday, as reported at page 23330 of Hansard, the Minister said that the system of sales and discount sales "is a predictable system". Will the Minister tell the House how the 100,000 Canadians who are directly affected by the regulatory fight between Canada and the United States can predict anything and make plans with certainty? In seriousness, has the Minister yet talked to his counterpart, the U.S. Secretary of Transportation, Elizabeth Dole, and not some flunky with the CAB? If he has talked to her, what has been her answer to this prohibition of CAB on an issue where the CTC is left out to dry, and so are innocent Canadian people?


Jean-Luc Pepin: Madam Speaker, there are two aspects to the question. One is with respect to the modus operandi in cases of special discount sales. I repeat what I said to my friend yesterday. The formula is first you advertise, second you file, and third, you sell the seats. With that I think he agrees. The subject of linkages is one that we find not acceptable. Is that what my hon. friend wants to know?

March 3, 1983
Oral Questions


John Patrick (Pat) Nowlan: Have you spoken to Elizabeth yet?


Jean-Luc Pepin: With respect to Elizabeth, I said yesterday that I was a gentleman. Being a gentleman, I did not ask where she was. It is not gentlemanly for a man to ask where a lady is. One thing is sure. On the first day of the negotiations, which was seven or eight days ago, I was informed that Mrs. Dole was not present and that Mr. Trent would negotiate with me.


John Patrick (Pat) Nowlan: Who is he?


Jean-Luc Pepin: Mr. Trent is an Under-Secretary of Transportation.


Mr. Hnatyshyn:: He is also Elizabeth's chauffeur.


Jean-Luc Pepin: He is a very important man. I have been in almost constant touch with him since. I call it eyeball to eyeball, nose to nose, and belly button to belly button-


Some Hon. Members:: Oh, oh!


Jean-Luc Pepin: You could not get any closer to a person, over the telephone.


Some Hon. Members:: Oh, oh!


John Patrick (Pat) Nowlan: No wonder you didn't get to Elizabeth.


Jean-Luc Pepin: It has been a very good discussion. The Americans have moved quite a lot, but they have not moved enough to satisfy the primary concern of the federal Government of Canada, which is the maintenance of the route between Canada and Australia.


REQUEST FOR TOP LEVEL DISCUSSIONS
John Patrick (Pat) Nowlan: Madam Speaker, there are many supplementaries I would like to address to the Minister. I certainly know now why he did not get to Elizabeth. Be that as it may, this is very serious. I am asking a very serious question.
Is the reason the Minister has been engaged in eyeball to eyeball conversation with an errand boy of the CAB because most of the CTC, especially Mr. Armstrong, the Chairman of the Air Transport Committee, is himself on holiday until April 14, and there is no one talking to Mr. MacKinnon, the Chairman of the CAB? Why does the Minister not go to the top instead of fooling around with the office boys?


Jean-Luc Pepin: Madam Speaker, we have really been negotiating at the top. Mr. Armstrong was in touch with Mr. MacKinnon a number of times-


John Patrick (Pat) Nowlan: He is on vacation.


Jean-Luc Pepin: -before he went on vacation, if he is on vacation now. Mr. Harman, the Canadian chief air negotiator, has been in Washington for the last three days. I have constantly been in touch with Mr. Trent. The Ambassador has been in touch with the State Department. My hon. friend is familiar
with some of the difficulties in negotiating with the Americans. We have been present in all the Government board rooms in the United States in recent hours. Mr. Shultz is aware of that negotiation. The President of the United States was informed of that. As a matter of fact, he signed the piece of paper which led to the whole debate.


AGRICULTURE
Mr. J. R. Ellis (Prince Edward-Hastings):: Madam Speaker, my question is directed to the Minister of Agriculture. After the $500 million and the red meat problem, it should be very easy. The Minister will be aware of the severe problems being experienced by the tomato processing industry, especially in Ontario. I want him to keep the pressure on his colleagues to speed up the countervail action against Italian subsidized imports. However, there is another problem that is part of the same over-all problem.
There are still many products on store shelves in Canada which do not meet the labelling and grade requirements which the Canadian industry has to meet. Will the Minister indicate what action his Department is taking to ensure that all imported canned tomatoes, regardless of country of origin, meet Canadian labelling and grading requirements?


Eugene Whelan: Madam Speaker, we are all very much aware of what the Hon. Member speaks of in the industry and the problems they face because of tomato imports. I want to make it very clear that those tomato imports did not walk here by themselves. Some good corporate citizen in Canada imported them into this country, and this is causing depressed prices for Canadian tomato products in this country. Does the Hon. Member have evidence that these products which have been brought in do not meet our standards? We have done some checking through our own Department and other Government Departments. So far I have not seen a report which states that they do not meet our standards. If the Hon. Member has evidence of that, I would be only too willing to look at it. If it is clear and plain, I will take appropriate action.


REQUEST THAT LABELS CLEARLY SHOW COUNTRY OF ORIGIN
John Raymond Ellis: Madam Speaker, the Minister well knows that Government Departments have proven the subsidy in Italy, and there is now a countervail action against that. What I want the Minister to ensure is that all packages are clearly labelled so that Canadians have a choice. The majority of Canadians would buy Canadian, given the opportunity, but his Department has been very, very lax. There are products coming in and you cannot tell where they are coming from. They are marked as Canada Grade A, No. 1,
March 3, 1983

and they may well be, but they were produced in Italy, Spain, Taiwan, or some other country such as that.


Eugene Whelan: Madam Speaker, all I can say is that if they meet the standards set by the Department of Consumer and Corporate Affairs, and the standards which my Department works with, there is very little that anyone can do. There have been representations made about them not quite meeting our standards according to the processing guidelines which they have to follow. For instance, tomatoes in Canada must be packed in tomato juice. We are told if tomatoes are shipped from other countries they can pack them in water. That is being checked, but I have no report on it at this time.


EMPLOYMENT
Mrs. Margaret Mitchell (Vancouver East):: Madam Speaker, in the absence of the Prime Minister my question is directed to the Deputy Prime Minister. Next Tuesday will be a very gloomy International Women's Day in Canada. The recession, Government restraints, and the technological revolution have greatly increased discrimination against women in the work force. Experts have said that the only solution to ensure equal rights in the work place is mandatory affirmative action. Would the Deputy Prime Minister say what his position is on the important question of mandatory affirmative action?


Hon. Judy Erola (Minister of State (Mines)):: Madam Speaker, I would like to answer that question and point out to the Hon. Member that, under federal jurisdiction, only 10 per cent of the work force is covered. I would suggest to the Hon. Member that she address her problem to those areas where no action has been taken, at the provincial and municipal Government's levels, where there is no affirmative action, and no such thing as equal pay for work of equal value, as there is under federal jurisdiction.


GOVERNMENT POLICY
Margaret Anne Mitchell: Madam Speaker, not only did I not get an answer from the Deputy Prime Minister, but I did not get an answer to my question from the woman responsible for women.
Many reports indicate that the Government program to encourage voluntary affirmative action in the private sector has been a dismal failure. This time 1 would appreciate an answer from the Deputy Prime Minister on what steps his Government will take to require mandatory affirmative action in the whole government regulated sector, and also contract
Oral Questions
compliance with all firms which do business with the Government? This is essential in order for women to have equal opportunity.


Judith A. Erola: Madam Speaker, I would point out to the Hon. Member that this Government has done more in the area of affirmative action than any other Government or the private sector. We have affirmative action programs in place in Government. I would ask the Hon. Member to look at the latest Treasury Board settlements to see just what is happening. This Government has a record to be proud of, much prouder than any other firm or any other Government in Canada.


NATIONAL DEFENCE
Hon. Allan B. McKinnon (Victoria):: Madam Speaker, my question is directed to the Minister of National Defence. A few days ago the Secretary of State for External Affairs told a reporter, "We don't have nuclear weapons." Would the Minister tell the House just when the nuclear weapons were removed from Comox?


Hon. J. Gilles Lamontagne (Minister of National Defence):: Madam Speaker, I am very surprised at the question of the exMinister of National Defence. He should know the answer as well as the policy which we have. We neither confirm nor deny the possibility that we have nuclear heads for the armaments on some of our planes, which are not possessed by Canadians but are under American procurement and scrutiny. The Hon. Member should know, with the F-18 coming onstream very shortly, all this will be past history. He should know that better than I.


Mr. Beatty:: He knows everything better than you.


DEPUTY PRIME MINISTER'S STATEMENT
Allan Bruce McKinnon: Madam Speaker, I would like to quote from the Daily Colonist in Victoria, a reliable journal, which said that the Prime Minister said at a news conference, and I quote:
... that Canada would finally be clear of nuclear weapons when new fighter planes were delivered to the armed forces in two years.
Would the Secretary of State for External Affairs tell the House, when the Minister told the reporter two weeks ago that, "we don't have nuclear weapons", was he hoping to mislead the reporter and the public, or did he really not know about the nuclear weapons at Comox?


Allan Joseph MacEachen: Madam Speaker, the Minister of National Defence very lucidly explained what was meant in that context, and I am surprised it escaped the Hon. Member because it was so clearly explained by the Minister of National Defence.

March 3, 1983
Oral Questions THE ADMINISTRATION


CAPE BRETON COAL AGREEMENT-DEPUTY PRIME MINISTER'S AWARENESS OF PROJECT
Ramon John Hnatyshyn: Madam Speaker, in the absence of the Prime Minister I would like to address my question to the Acting Prime Minister. With respect to the Gillespie scam, I wonder if the Acting Prime Minister would inform the House of the first time the Deputy Prime Minister became aware of Mr. Gillespie's involvement in getting together a consortium for the coal liquefaction project in Nova Scotia.


Allan Joseph MacEachen: Madam Speaker, that question was raised yesterday, and I indicated to the House, I believe it was Monday of last week, that I knew about this facility before the announcement which was made in April. I knew that it was being considered by the Department of Energy, Mines and Resources, and it was explained yesterday by the Minister of Finance in reply to another question-


Erik Nielsen: You tell us.


Allan Joseph MacEachen: -but to the best of my recollection I first heard about Mr. Gillespie's interest in the possibility of a facility for coal liquefaction in Cape Breton in June, 1980. That is almost a year before the announcement was made. It is not surprising that I would know about it at that time because Mr. Gillespie had been in consultation in May with the Province of Nova Scotia about the matter, with the Premier, and with the relevant Minister in that Province. Therefore, it was quite natural that I should know about it almost as quickly as the Premier of the Province.


ROLE OF DEPUTY PRIME MINISTER
Ramon John Hnatyshyn: Madam Speaker, I thank the Acting Prime Minister for clarifying one aspect of the Deputy Prime Minister's knowledge of this matter. However, I would like to ask him if he will undertake to obtain from the Deputy Prime Minister a letter outlining the details of the Deputy Prime Minister's involvement in this matter, including all contact which the Deputy Prime Minister had with the Minister of Energy, Mines and Resources, and departmental officials, with respect to this project? Will he undertake to have a letter delivered to the Prime Minister from the Deputy Prime Minister outlining the Deputy Prime Minister's involvement in this matter, including telephone conversations?


Allan Joseph MacEachen: Madam Speaker, it will be unnecessary for the Acting Prime Minister to get in touch with the Deputy Prime Minister.


Some Hon. Members:: Hear, hear!


Allan Joseph MacEachen: I have answered questions on this point on two occasions, and I can answer the Hon. Member's question
very quickly by saying that there were no discussions, telephone conversations, or letters between myself and the then Minister of Energy, Mines and Resources, nor were there any discussions with departmental officials at any time on this particular matter. All the documents from the Department have been laid out. The Hon. Member must have examined them. If he finds any correspondence from me, I wish he would draw it to my attention.


AGRICULTURE
Mr. S. J. Korchinski (Mackenzie):: Madam Speaker, my question is directed to the Minister of Agriculture. In the absence of plant breeders' rights, but more particularly, because of the Pepin proposal which suggests taking hundreds of millions of dollars from western Canada, which revenue either will have to be made up by increased production or by different varieties which are frost free, and so on, does the Minister still intend to deprive western Canada at the end of this month of researchers who will be needed in order to produce this type of income which is going to satisfy the Pepin proposal? And for what reason are some of them being transferred to eastern Canada?


Eugene Whelan: There are some 14 positions which they talk so much about and how bad it is that they are going to be transferred to eastern Canada. When I transferred 70 people to western Canada from eastern Canada, no one said a word about it. The Easterners did not complain and the Westerners did not say thank you for it. 1 feel that is not bad for Canada, Madam Speaker, as far as that goes. Then someone reports they are releasing 14 positions, but they are not changing one person from western Canada to eastern Canada under that proposal. We are concentrating in the area of food processing and that type of thing.
The Hon. Member made a statement about the Pepin plan. If he is talking about that long awaited and needed change in the Crow rate, I can tell him that lam 100 per cent behind the Minister of Transport on that program. It is one of the best things that ever happened. The Hon. Member might want to study and learn about it.


Some Hon. Members:: Hear, hear!


DEPLOYMENT OF RESEARCHERS
Stanley James Korchinski: Madam Speaker, western Canada has 80 per cent of the cultivated land in Canada and there is one researcher for 250,000 acres in western Canada. There is one researcher for 106,000 acres in Ontario, and one researcher for 76,000 acres in Quebec. Why
March 3, 1983

are processing and packaging so important at this time? Can private industries not undertake this research? Does this have anything to do with the Minister's plans for Canagrex through which he and the government will go into business?


Eugene Whelan: Madam Speaker, the Hon. Member knows full well that all the scientific and technical knowledge we have at our fingertips at present is used right now in western Canada. And within two years, as a result, you could increase grain production 30 per cent; that is with the knowledge that we have at the present time, and if the Provinces were using their authority under the Constitution, to provide proper education for the farmers. We developed the knowledge for them which is not being transferred to the farmers in the way it should be. I am almost tempted to interfere in the Constitution and become an educator for the farmers.


Some Hon. Members:: Hear, hear!


THE ADMINISTRATION
Ian Deans: Madam Speaker, I have a question for the Deputy Prime Minister. It has now become apparent from the record that, starting in May, 1980, when Mr. Gillespie first approached the Deputy Minister of Energy, Mines and Resources, through June, 1980, when the Deputy Prime Minister became aware of Mr. Gillespie's involvement, through to the budget of October 28, 1980 a series of discussions took place between Mr. Gillespie and representatives of the Minister of Energy, Mines and Resources and indirectly at least, representatives of the Ministry of Finance.
On the day immediately after the budget Mr. Gillespie went ahead and formed a consortium based on the provisions contained in the budget.
Does the Deputy Prime Minister not think that there is just too much of a coincidence in all of these events to lead anyone other than to the conclusion that there was information available to Mr. Gillespie from somewhere that would lead him to know that the Government intended to provide funding for his particular project, and that all of his lobbying-and I use the term advisedly-was bound to be successful?


Allan Joseph MacEachen: Madam Speaker, if the situation were as described by the Hon. Member, then one might possibly reach the conclusions which he has reached. But it is not true, as he has alleged, that this particular project was carried forward on the basis of provisions in the budget. That is absolutely untrue. The Hon. Member can search the budget from top to bottom and he will not find any reference to this particular project. The project itself in fact did not go
Oral Questions
forward on any provision found in the budget. Therefore, the Hon. Member really has to examine the facts before he draws these very false conclusions.


REFERENCE IN NATIONAL ENERGY PROGRAM
Ian Deans: Madam Speaker, I am sure the Deputy Prime Minister knows that I have examined the facts. Given that on page 84 of the National Energy Program, which was very closely tied into, if not an integral part of the budget-


Leslie Gordon Benjamin: Lalonde said it was.


Ian Deans: -there was quite clear reference to a coal liquefaction program in Cape Breton, is that not evidence enough that Mr. Gillespie's overtures to both the Energy and Finance Ministries met with success, and is that not reason enough to ask that there be further inquiries into this matter?


Allan Joseph MacEachen: Madam Speaker, you know the Hon. Member should read the reference in the National Energy Program which was tabled as a separate document on budget night by myself on behalf of the Minister of Energy, Mines and Resources. A sentence in this very large document simply states:
Alternative means to use coal in the production of liquid fuels will also be actively pursued.


Arthur Jacob (Jake) Epp: It sure was too. Tell us about the active pursuit.


Allan Joseph MacEachen: If the Hon. Member had followed the history of the coal industry as closely as I have followed it in the years since I have come to sit in the House of Commons, he would know that the question of coal liquefaction and its possibility did not originate in June, 1980, or in May, 1980.


Douglas Grinslade Lewis: Before that?


Allan Joseph MacEachen: It is a concept that has been in the literature for some time. It seems to me that it would be a glaring omission from the National Energy Program statement, which was intended to be a comprehensive statement of energy possibilities in Canada, if it had ignored and had not made reference to the possibility of converting coal into liquefied form. It is so natural that it would appear there because it is a concept that was brought up from time to time.


Ian Deans: Address yourself to the question. Gillespie knew to form his consortium on the day after the budget announcement of provisions for coal liquefaction.


Allan Joseph MacEachen: That is quite clear that this is a general reference to a concept that had been in place for some time, and the Hon. Member is trying to draw the conclusion, a false conclusion, that because coal liquefaction was mentioned, somehow it was a budget leak and somehow Mr. Gillespie had some prior knowledge. All of that is very unjustified conjecture.


John Patrick (Pat) Nowlan: You are as crooked as a colliery.

March 3, 1983
Oral Questions NATIONAL DEFENCE


CHEMICAL CANISTER CONTRACT
Mr. Simon de Jong (Regina East):: Madam Speaker, my question is directed to the Minister of National Defence, In response to my questions earlier this week concerning the testing of chemical and biological warfare weapons in Canada, the Minister stated, first, that this was past history and, second, that those tests were for defensive purposes. If that is so, can the Minister explain why, for example, during the thirteenth Tripartite Conference on Toxicological Warfare which was held in Canada, the three countries agreed, and I quote:
To concentrate on research for incapacitating and new type lethal agents.
If this is history, can the Minister explain to the House why in February, through the Department of Supply and Services, the Army was contracting for $250,000 worth of chemical canisters to be used for chemical warfare games?


J. Gilles Lamontagne: Madam Speaker, I think I will be repeating what I have said before, that is, that the only chemical warfare, as the Hon. Member calls it, or chemical experience we had was strictly for our defensive and protective requirements. It is strictly for that.


An Hon. Member:: That is not true.


Mr. Lamontagne:: When I said it was history I was, of course, referring to some of the tests in previous years in the 1950s and 1960s. I still reaffirm that Canada is involved only in defensive testing. We do not stockpile and we do not possess in any way any amount of chemical products which can be used for other than protective and defensive purposes.


THE ADMINISTRATION
Miss Flora MacDonald (Kingston and the Islands):: Madam Speaker, my question is supplementary to those asked by the Hon. Member for Saskatoon West of the Deputy Prime Minister. The Deputy Prime Minister indicated that he first knew about the Gillespie project in June, 1980. Is he really asking the House to believe that he, a senior Member of the Cabinet, did not have any discussions with the then Minister of Energy, another senior Member of the Cabinet, for a period of some eight months about a major project which came under the jurisdiction of his colleague, or was it that he was asking Mr. Gillespie to act as his conduit with regard to those discussions?


Allan Joseph MacEachen: Madam Speaker, the fact of the matter is as is evidenced in the documentation that has been tabled, that this particular project was dealt with at the official level and was carried through by officials of the Department of Energy, Mines and Resources. It was carried
through by a management committee composed of federal officials and provincial officials. We all know that the Premier of Nova Scotia was solidly behind this project. He reconfirmed his support and belief in this project, I understand, in the Legislature this very week.
Because of the merits of the program, because it fitted within the objectives of the Department, it was carried forward at the official level. It was not necessary at any time for me to speak to the Minister in order to urge him to put forward this program. It was not necessary at any time for me to ask the Premier of Nova Scotia if he would put his funds behind the program.
I ask the Hon. Member to believe that, because those are the facts. If they were otherwise they would be revealed in the documentation. Let me tell the Hon. Member that if I had spoken to the Hon. Minister of Energy, Mines and Resources, if I had written letters, I would be very pleased to reveal that. There would be no reason why I would conceal a representation which I might have made to the Minister on a project which might occur in the Province of Nova Scotia and might benefit my constituency. If that had happened, I would reveal it quite clearly because I think it would be quite in conformity with my responsibilities as a Member of Parliament.


PETITION
Madam Speaker:: I have the honour to inform the House that the petition presented by the Hon. Member for Comox-Powell River (Mr. Skelly) on Wednesday, March 2, 1983, has been examined and it has been found that it meets the requirements of the Standing Orders as to form.


PRIVILEGE
Douglas Grinslade Lewis: 
Madam Speaker:: I am sorry, I let the Hon. Member go on for a while because I was not sure whether he was discussing matters that had taken place in the House today. However, he is raising a question that relates to a matter that was discussed previously. If he wants to raise those questions and he feels he has a question of privilege concerning them he must give me notice. The little note he sent me did not have the proper delay to it.
I will hear the Hon. Member tomorrow if he feels he has something to bring up.


BUSINESS OF THE HOUSE
Douglas Grinslade Lewis: Madam Speaker, I would like to ask the Government House Leader about the business for tomorrow and as much of next week as possible.


Yvon Pinard: Madam Speaker, today we are in Committee of the Whole dealing with Bill C-139, the Income Tax Act. Tomorrow we will resume debate on second reading of Bill C-143, the borrowing authority.

As for next week's business, Madam Speaker, I intend to designate Monday as the sixth opposition day for the present supply period. Next Tuesday, we shall resume debate in Committee of the Whole on Bill C-139, an Act to amend the Statute Law relating to Income Tax (No. 2) and as usual, Wednesday, the House will consider Private Members' Business. Next Thursday, if we do not finish tomorrow, we shall resume debate on second reading of Bill C-143, to authorize the Government to borrow certain sums of money.
Madam Speaker, that was, in brief, the order of business for next week.



ROUTINE PROCEEDINGS


Hon. Walter Baker (Nepean-Carleton):: Madam Speaker, with the consent of and on behalf of the Hon. Member for Pontiac-Gatineau-Labelle (Mr. Lefebvre), Chairman of the Special Committee on Standing Orders and Procedure, I have the honour to present the fifth report of the Special Committee, in both official languages.
[Editor's Note: For above report, see today's Votes and Proceedings.]
Order Paper Questions THE ADMINISTRATION


CAPE BRETON COAL AGREEMENT-TABLING OF CORRESPONDENCE
Hon. Jean Chretien (Minister of Energy, Mines and Resources):: Madam Speaker, in response to a letter from the Hon. Member for Calgary Centre (Mr. Andre), and in the spirit of the Access to Information Act, I wish to table the following documents. First, my response to this letter; second, minutes of the January 12, 1981 meeting of the Management Committee of the Canada-Nova Scotia Agreement on Oil Substitution and Conservation, with the permission of Premier Buchanan; third, relevant material from Petro-Canada's correspondence files; and fourth, in addition, I am including correspondence between Mr. Gillespie and Premier Buchanan, with their permission.
One of the documents requested by the Hon. Member for Calgary Centre-the directive of the then Minister of Energy, Mines and Resources of July 9, 1981-does not exist because the directive was given verbally.


PETITION
Mr. Jim Fulton (Skeena):: Madam Speaker, I have the honour today to table another 2,500 signatures calling for a full public inquiry into the Amax operation in British Columbia. These 2,500 petitioners are responding to a petition that was originally circulated by the Community Forum on Shared Responsibility. This group represents the religious community, primarily the Catholic church, although many of the signatories among the 2,500 who have signed are from across Canada, the majority from Ontario.
I think the tabling of this petition today is particularly timely in that the Ombudsman of British Columbia has added his voice to that of the seven major churches in Canada, the B.C. Medical Association and 50 other major groups across Canada.


QUESTIONS ON THE ORDER PAPER
[Stage Direction]
(Questions answered orally are indicated by an asterisk.)
Mr. David Smith (Parliamentary Secretary to President of the Privy Council):: Madam Speaker, the following question will be answered today: No. 4,616.


Mr. Mitges: Was Canada cited as having fallen far behind the rest of the world in testing 1,500 older prescription drugs, introduced before 1963, which may prove

March 3, 1983
Income Tax
dangerous or useless and, if so, what is the Government doing to accelerate a testing program for this purpose?


Hon. Monique Begin (Minister of National Health and Welfare):: Prescription drugs that were marketed before 1963 and which were not required to be supported by proof of efficacy before approval, are reviewed by the Department of National Health and Welfare: (a) whenever there is an indication of a safety problem arising from experience anywhere in the world; (b) These drugs are reviewed in collaboration with expert advisory committees whenever new drugs supersede them. This review is done with the aim of producing therapeutic monographs for both the old and new drug, so as to give an adequate description of their place in therapy.


Madam Speaker:: The questions enumerated by the Parliamentary Secretary have been answered.


James Ross Fulton: Madam Speaker, I wonder if the Parliamentary Secretary to the President of the Privy Council could inform the House when motions Nos. 109, 110 and 111 standing in my name on the Order Paper are likely to be tabled.


David P. Smith: Madam Speaker, I do not have any new news but I will be happy to look into that on behalf of the Hon. Member.


Madam Speaker:: Shall the remaining questions be allowed to stand?


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 a Committee of the Whole.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed consideration in Committee of the Whole of Bill C-139, to amend the statute law relating to Income Tax (No. 2)-Mr. Lalonde-Mr. Blaker in the chair.
On Clause 3-Fair Market Value On Clause 16-Professional business
Roderick Blaker: At one o'clock when the House rose, the Hon. Member for Calgary West had the floor.


Frederick James (Jim) Hawkes: Mr. Chairman, prior to one o'clock the Parliamentary Secretary had indicated that, in terms of "work in progress" for professionals, the Government's mindset was
to take work in progress into inventory. Could the Parliamentary Secretary give us the Government's definition of the difference between inventory and accounts receivable?


Douglas Glenn Fisher: Mr. Chairman, I am told that the differences here have to do with the deductions on cost. Thinking back to my own experience, the differences between accounts receivable and inventory are fairly obvious. Accounts receivable are included in the incomes of businessmen or professionals for tax purposes. Inventory is listed as an asset, but it immediately becomes something which he can write off in the next year. If a businessman encounters a bad debt, he can write that off as well. The same would be true with a professional.


Frederick James (Jim) Hawkes: Mr. Chairman, could the Parliamentary Secretary tell us whether work in progress is classified under this proposed piece of legislation for tax purposes as inventory, or is it really more analogous to accounts receivable?


Douglas Glenn Fisher: I am sorry, could the Member repeat that?


Frederick James (Jim) Hawkes: The Parliamentary Secretary describes himself as a small-businessman. Earlier this day he suggested that this new tax Bill would classify work in progress as an inventory item. First, I am wondering whether he has read the legislation. Second, under this Bill as proposed and before us right now, is work in progress to be treated as accounts receivable or inventory?


Douglas Glenn Fisher: Inventory.


Frederick James (Jim) Hawkes: As I read the Bill, it is to be treated as a receivable. Inventory in a professional corporation is the cost of doing business. It may be wages paid out and so on. One is to treat this as an income item, not based on cost but cost plus profit. The Bill says that it is to be treated as an item for which one is putting in one's profit margins, and that is the rate at which one will bill.


Douglas Glenn Fisher: Mr. Chairman, our officials assure us that we can deal with these things on a cost basis.


Frederick James (Jim) Hawkes: Mr. Chairman, in my next go-round I will find the pertinent Clause and bring it to the attention of the Minister.
1 return to the original theme. Is it the Government's intention as these revisions are coming in to treat all taxpayers of all small businesses fairly or the same?


Douglas Glenn Fisher: Mr. Chairman, I would think that what we want all taxpayers to do is two-fold. We want them to be treated fairly and we want them to see themselves as being treated fairly. This is why those people who are currently in small businesses and cannot take advantage of a provision parallel to work in progress would like to know that the work in progress
March 3, 1983

provisions are in the Act so that they do not have to foot the bill for the $40 million costs that were described earlier.


Frederick James (Jim) Hawkes: Mr. Chairman, what they are taxing here is income which has not been received. It is income for which bills have not even been sent out. The estimate of the Minister is that the revenue for the Government in the first year will be $40 million. If we assume that $40 million to be even 25 per cent, which I think is a high number, then we are dealing with $160 million worth of unbilled income of which they get $40 million. People have to use their own resources or go to the bank to borrow in order to pay their tax bill for money which has not yet come in. If they have to borrow the whole $40 million, there will be a $6 million borrowing cost at 15 per cent interest. It is an enormous amount of money sitting out there in the universe which has not been collected, has not been billed, and the Government is collecting revenue on it.
If the Government is minded to treat people the same and treat them fairly, will we get a change in tax policy as it relates to farmers? Farmers are small-business people who plant crops in the spring and harvest in the fall. At the point at which they harvest and put the crop in their granaries, is it the Government's intention to treat it as if it were already sold, that the income is already in their hands and therefore they tax it? Is that the direction in which the Government is heading, to the small-business farmers?


Douglas Glenn Fisher: Mr. Chairman, first, I am happy to reassure the Hon. Member that there is no intention to change the provisions for farmers. Second, I would like to clear up two points which seem to be worrying him. I refer to Clause 3(2)(a) on page 6 which reads as follows:
-property (other than capital property) of a taxpayer that is work in progress of a business that is a profession, advertising or packaging material, parts or suppliers is, for greater certainty, inventory of the taxpayer;-
I hope that clears up that problem for him.
Also, he referred to $40 million coming in from this measure. May I correct any impression that I might have left. The $40 million figure is the one which we see ultimately. I believe that unincorporated businesses will have an opportunity to phase in rather than having to deal with the tax immediately. I think the first half of the income comes in in 1983 and then the full income comes in in 1984, so there is a phased-in procedure for professionals who are in unincorporated situations. The incorporated professional will deal with the whole load immediately.


Frederick James (Jim) Hawkes: Mr. Chairman, I return to the Minister on this one. Grain farmers in western Canada today harvest their crop, put their grain in granaries, even deliver it to elevators, and defer the income to a subsequent tax year. In other words, they have a commodity which is clearly in inventory but is not taxable. They deliver it to elevators. They are eligible for cash, but they have a provision in the tax law which allows them to defer the income to a subsequent tax year. I give the Minister that situation and his own thrust of policy, which is to treat people fairly and equitably and more the same.
Income Tax
Why is he doing this with work in progress? Bills are not even sent out. The work is not completed. The analogy would be like charging a farmer half-way through the crop year for income which he clearly has not received because he has not yet harvested the crop, let alone delivered it to market. How can the Minister talk on the one hand about fairness, on the other hand tell us that they will not treat farmers differently and then go ahead with work in progress, on the logic they are giving us? Where is the logic and where is the fairness in the system? Is not the Minister really intending to treat farmers down the road as small-business people and to start charging them on income for products produced which have not yet been sold?


Douglas Glenn Fisher: As I understand it, Mr. Chairman, there were previously two groups which we treated in this fashion- professionals and farmers. Today it will be only farmers. I remind the Hon. Member of two rationales which we have already discussed. The first is that we are seeing increasing classifications of professionals as a result of some court rulings. Larger and larger numbers of people who were previously businessmen are now considered professionals.
I was told the story that someone called himself a professional because he was a consultant for weddings. Whereas previously that individual would have been treated as a straightforward businessman, now he wanted to take advantage of the work in progress provisions. There are more and more categories of people who are seeking to take advantage of this provision for professions. Second, many of these people, or the overwhelming number of the ones who are exempted, are able to take advantage of the small business tax rate.
Therefore, in answer to the Hon. Member I first want to say that there were two categories before, farmers and professionals. Now there is only the category of farmers, and we have no intention of making changes which would affect them. Second, there were larger and larger numbers of people seeking the advantages which had previously been limited to a small number of professions.


Frederick James (Jim) Hawkes: Mr. Chairman, I guess, through experience, that we on this side of the House have learned to be very cautious about what the Government says on any given day.


Douglas Glenn Fisher: Thank you.


Frederick James (Jim) Hawkes: This is because the Government has a habit of saying one thing and doing another. If the Hon. Member wants to thank me for that comment, 1 would appreciate it.


Douglas Glenn Fisher: Sure.


Frederick James (Jim) Hawkes: He is ducking my question. Consider this example. A farmer plants a crop, it grows well, he harvests it and puts it in his granary. It is ready for market. We have a professional, an architect, who starts a building project. The end of the taxation year comes when he is three months into a nine-month project and the Government wants to tax him on

March 3, 1983
Income Tax
his first three months of work. He cannot even send out a bill and he has no income. That seems to be analogous to a farmer with grain in his granary. It has not yet been sold, so he should not be taxed. I think that is fair. The Government should not tax people before they have received income.
However, why should there be this double standard? Again, I ask whether the Government is intending to set a precedent concerning professionals called "work in progress" and, at a later day, to start to tax all the farmers of the nation, the minute their crops are harvested and before they are sold? That is our suspicion and words are not enough. If the Government does this to one group and it works, and it sets a precedent, we are suspicious that it will happen again.


Paul James Cosgrove: Mr. Chairman, the Parliamentary Secretary to the Minister has indicated that it is not the Government's intention to extend the provision so that it will affect farmers. The Hon. Member raised this as an example, in the context of drawing parallels. The Government has not raised this example. No officials of the Government have raised it. It is something concerning which the hon. gentleman, for reasons he has given, feels some anxiety. I would like to indicate that it is not being considered by the Government in so far as farmers are concerned. The question was raised in the context of treating taxpayers equitably, and of course this raises questions concerning whether people are treated the same.
The Parliamentary Secretary has indicated that considerations of equity motivated the Government to classify certain professions under this Section because, in equity, there were similar types of other small businesses, not farmers, which have become "professions" by legal definition. Some businesses which were not considered professions ten years ago are now being considered as such. When considering the issue of equity, the Government found, in comparing the tax treatment of small business, that some professions were able to take advantage of the small business rate under the Act as it now exists. Some were indeed able to take advantage of incorporation while others were not. For example, others are specifically prohibited from that type of legal protection and financial benefit by provincial statute.
Therefore, although equity does invite everyone to be treated equally, we know that that cannot be exactly the case in the real world. However, we do attempt, in equity, to give people somewhat the same advantage. For reasons I have given and for others given by the Parliamentary Secretary, the Clause was introduced so as to exclude work in progress. The Section would be amended to restrict its application to the named professions, for all the reasons submitted to the committee which moved it to exempt certain of those professions.


Frederick James (Jim) Hawkes: May I refer to page 6, Clause 3(4)(a). I will just read it into the record:
-work in progress at the end of the taxation year of a business that is a profession means the amount that can reasonably be expected to become receivable in respect thereof after the end of the year;-
I have a small business, an office coffee service. I buy my coffee for a certain amount of money from a wholesaler, I deliver it to a customer, and I give the customer a bill. That is a receivable. It includes my cost of purchasing the coffee, my delivery costs and hopefully some profit. That is the definition of a "receivable" in the normal business sense.
Earlier I asked the Parliamentary Secretary whether or not work in progress, in an accounting sense, would be judged, at a certain level, to be a receivable. If it is, and I think the clause makes it clear that it is, then the costs of doing the work, the overhead costs and profit, would be included.
When work is in progress, not only has one not sent out a bill, but one has not received the money either. However, through this Clause, the Government seeks to tax an inflated amount, more than one's expenses, presumed to include profit.


Douglas Glenn Fisher: Mr. Chairman, I can assure the Hon. Member for Calgary-


Frederick James (Jim) Hawkes: West.


Douglas Glenn Fisher: Calgary West. I extend my apologies for not knowing the name of the Hon. Member's riding. I can assure him that the professional will be required to value the work in progress in the same way as any other inventory, namely, at the lower of either its cost or its fair market value.


Frederick James (Jim) Hawkes: That is a refreshing set of words. Can the Parliamentary Secretary tell me where, in law, it is found that that will be the case? Where is the paragraph that states that, when Section 3(4)(a) states that work in progress means the amount "to become receivable in respect thereof after the end of the year"?


Douglas Glenn Fisher: I would refer the Hon. Member to the Income Tax Act, Part I, Section 10(1), with regard to evaluation of inventory property. I can read it for him if it is useful.


Frederick James (Jim) Hawkes: Please do.


Douglas Glenn Fisher: It states:
For the purpose of computing income from a business, the property described in an inventory should be valid at its cost to the taxpayer or its fair market value, whichever is lower, or in such other manner as may be permitted by regulation.
That is already in the Act.


Frederick James (Jim) Hawkes: Then may I ask the Minister why one part of the Bill, in relation to fair market value, states "expected to become receivable in respect thereof after the end of the year"? Why is that written in one place, with the taxpayers of the nation being forced to read another definition of inventory and then refer to a subsequent Section of the Bill? Why do we not have clarity? Can the Parliamentary Secretary really assure us that every one of those revenue agents from coast to coast who work for the civil service will read the Bill so thoroughly that every single one of those human beings will make the same decision in each individual tax case? Or will some read paragraph 4(a) and say: "You have not done it right", while other people read Section 10, which the Parliamentary Secretary has cited?
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Roderick Blaker: This will be the final answer. The twenty minutes allotted to the Elon. Member for Calgary West has expired.


Douglas Glenn Fisher: Section 10(4) defines fair market value for professionals, and it must therefore be included here because of the new additions elsewhere.
The Hon. Member has an interesting question about the complexity of the law as well, which I think is a very fair question. I would refer him to some of the discussions that we had in the Finance Committee about that. There are obviously two sides to that coin. He has raised one, very clearly, and I think properly. The other side of the coin is that those peole who are taking advantage of the complexities will tend to know the complexities. They may not be able to quote chapter and verse about each part of the law but they will know the provisions that apply to their own circumstances.
However, having said that, I certainly do not downplay the Hon. Member's concern about the complexity, but I think it is equally fair to say that peole tend to find out about the things that affect their own lives.
Furthermore, I would certainly think that the Revenue Canada officials would tend, if not to know the Act at first blush, they would certainly be able to take advantage of a document entitled "Explanatory Notes to a Bill Amending the Income Tax Act"-


Donald Alex Blenkarn: You know better than that.


Douglas Glenn Fisher: -and those explanatory notes will certainly be accessible to all the Revenue Canada people and will be learned by them.


Mr. Anguish:: Mr. Chairman, I just have one brief question-


Roderick Blaker: Order please. May 1 explain to the Hon. Member for Calgary West that as soon as another Member has spoken or there has been an intervention, then, under the Standing Orders the Hon. Member for Calgary West can be recognized again, but at the moment his time has expired.


Douglas Keith Anguish: Mr. Chairman, I just have one brief question, if the Member for Calgary West wants to come back to his line of questioning, and that has to do with the exemptions that are made for some named professionals set out in the Bill. I was wondering, what was the methodology that was set up. Why were certain specific professionals exempted from the work in progress rule and others did not qualify for the exemption?


Douglas Glenn Fisher: Mr. Chairman, I would refer the Hon. Member again to the debates of the Finance Committee. There were some very clear representations made along this line at their sittings since September. At that time we were able to draw out two important facts: first, that some professionals, like lawyers, were not going to make substantial contributions to
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Government revenue over a period of time, that it would be a one-time revenue, but that that one-time revenue would be extracted from them at great cost. It was not a practical tax to apply to them. I must say that I was a convert to that point of view. I believed in the concept of work in progress for lawyers.
I felt that lawyers should pay tax on their work in progress, but as a result of the representations made to me in the Finance Committee I changed my mind.
The problems are multifold. First of all, a lawyer with a small clientele often does not have access to sophisticated billing techniques, which would require the use of computers or a large staff and so on, and every year he would have to go through all his files to determine which ones had been fully billed and which ones only partially billed, and go through a lot of paperwork and a lot of red tape just to go through that reporting. To what end? In effect, so that the Government would collect its tax on a one-time basis. But at the same time all that expense and unproductive activity would have to be charged against someone, and that someone of course would be the lawyer's client. So sooner or later it would just be passed right down the line, in a very unproductive way.
On the other hand, there are groups of professionals who are relatively new professionals, either because their field is a brand new field or because they have been able to get that status as a result of court rulings. We found that these people were not going to go through that kind of unproductive behaviour. in the case of people who previously had small businesses, who wanted to become professionals because they could take advantage of work in progress, they had the accounting systems in place and they knew what was in place for a small business, previously. In addition, those people also benefited from the small business tax provisions. They were able to take advantage of the lower rates for small businesses. But lawyers and these other exempted professionals were not able to take advantage of those rates because, as the Minister pointed out, they are excluded from incorporation in various Provinces.
I guess the answer is twofold. One, it was not a productive thing to push it down the line with some professionals who are well established, whose collection techniques are vague, and who have not demonstrated a lot of tax avoidance. Second, there are groups of professionals who had other tax advantages, and also had the capacity to pay the tax without going through a lot of unproductive behaviour.


Douglas Keith Anguish: Mr. Chairman, I thank the Parliamentary Secretary for his examples but I am still looking for some kind of a methodology, if there is a methodology, in fact, in place. It seems to me that what you have told me is that this happened on a very ad hoc basis. If some professionals came before the Finance Committee and put forth their position quite strongly to the Committee, then they were exempted. 1 do not know that all professionals who will be affected by this will in fact be exempted, if they warrant some kind of an exemption. I think you can run into all kinds of problems with Bill C-139 unless

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there is some kind of set methodology there, not naming just professions but the methodology that exempts those certain groups from the provisions of work in progress rule.
What I am asking for is not for examples on an ad hoc basis but rather for the methodology whereby other professions can be deemed exempt from this provision.


Douglas Glenn Fisher: Mr. Chairman, the dividing line was the current law, those people who are now listed in the law as people not eligible for the small business tax. That was the basis on which we were able to draw the line.


Douglas Keith Anguish: Mr. Chairman, just for clarification, is the Hon. Member saying that if they are not eligible for the small business tax then they become exempt under this?


Douglas Glenn Fisher: That is the answer, Mr. Chairman.


John Albert Gamble: Mr. Chairman, I have listened to the comments made by the Minister who, in dealing with this proposed amendment as it affects the inclusion in income tax provisions of certain professionals, although not others, of an amount representing their work in progress of professionals. I was particularly intrigued by the remarks that he made with respect to fairness and equity, and I recall the same buzzwords being employed by the former Minister when he originally introduced the budget, giving rise to these inequitable provisions.
He also indicated, in talking about the Minister today, that what we were endeavouring to do in the House was to include income from whatever source. That of course leaves undecided the issue of what income is. What we should do in approaching this matter is not to adopt the position of the NDP, which has been to ask why certain professions are excluded from this change in the law, but rather to ask why the law is being changed.
Let us analyse what in fact is happening. We know that the concept of income tax is rooted in the belief that the Government is entitled to a portion of the income of taxpayers, be they individuals or corporations. It was not unreasonable, when this plan for taxing income was first conceived, that a portion of one's actual receipts in cash in the bank be allocated to Her Majesty in right of Canada, as represented by the Minister of National Revenue. It was not a very difficult task because the money was actually there. The Government decided that rather than wait until the cash is in the bank, it preferred to have its piece of the action before the cash was received. The method for extracting the pre-receipt tax was concocted and supported by the accrual method of taxation, the accrual of determining income, the basis thereby reflecting in the inclusion in income an account which had been rendered or in some cases an account that should have been rendered.
We have taken this matter a step further with this proposal. We have endeavoured to deal with professionals who, together with farmers, had been treated somewhat differently from the general small business community to which the Parliamentary
Secretary earlier made reference, identifying himself as one of those Members.
It is true that the small business community has been obliged to calculate its income not only on the accrual method which applies to professionals, but by including in the determination of income a valuation for inventory. In determining inventory, it was necessary to affix a value to that inventory. It was fixed at the lower of cost or market.
In most cases applicable to the non-professional small business, however, that inventory generally consisted of something which was tangible and saleable, not all the time but most of the time. If it was not tangible and saleable as the stock in trade of that business, it was an item which could readily be disposed of as part of the stock in trade of another business. Accordingly, it was appropriate to value that inventory including the work in progress. Let me give a simple illustration. A small manufacturing firm which qualified for the small business deduction to which the Parliamentary Secretary referred fabricated metal shields of some kind. Those metal shields may have been partially completed at the end of the fiscal period. A determination would be made of the value of those partially completed goods. That was part of the value of the inventory of the small business. That inventory, because of the accounting method that was adopted, was used for the purpose of determining the actual income as of that moment, which is the end of the fiscal period of the business.
However, when you pass on to deal with the position of professionals, there is no corresponding item of trade goods that can be readily sold and valued at the lower of either cost or market value. If I may, I should like to give an illustration of a professional who is in fact not excluded by the provisions to which reference has been made and, accordingly, subject to this onerous provision. An engineer may practise on his own. An architect may draw plans in his home in the evenings and then put them away. As many architects find, some of those plans are not subject to further use. However, time and effort has been spent on the drawings. The drawings consist of paper and pencil markings on them. They may have a total value of $10. There may have been 100 hours of his time spent which could conceivably have a value of $3,000 if they are sold. Architects generally extract the majority of their fees at the end of a project when they are given a supervision contract, which includes not only the preparation of the drawings but supervision of the project.
How much are those drawings worth at the end of the fiscal period of the architect who has received no commission? The Government will say nothing, and that it is a matter for valuation.
The whole process is ludicrous and should be scrapped. The Government has attempted to transpose fixed stock in trade inventories of a regular business and the concepts of inventory values arising therefrom to the area of the professional. I tell you this, Mr. Chairman, the whole process will be for naught. There is not one professional excluded from the protection that is granted by way of exemption under this Bill who will not
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make a determination of those values which he in his own mind, and he is the best judge of it, determines to be the very lowest price at which they can be fixed. The illustration I gave about the $10 value of a $3,010 item is the one that will constantly confront the Department of National Revenue in enforcing the provisions of this Act.
We have been told that $40 million is to be generated in revenues as a consequence of these provisions. Because of the way in which income, which would have been taxed had it been billed, will now be taxed before it is billed, when the work is done as work in progress as part of an inventory, that income will not be taxed again when the bills go out because the inventory will have been reduced. In other words, we are looking at a one-shot opportunity that will confront every professional in this country with an obligation to keep and maintain ludicrous forms that have absolutely nothing to do with the conduct of his business. The whole process is designed to accomplish one thing, that is, raise $40 million. If the Department of National Revenue and the Minister of Finance would like to make an offer to the professions in Canada to make them a donation of $40 million in order to avoid compliance with this ridiculous provision, they would get the money. There is no other reason why the Department of National Revenue and the Department of Finance want these provisions in this Bill other than to extract taxes before they should. I would like the Minister of State for Finance to comment very briefly on the remarks which I have made.


Paul James Cosgrove: Mr. Chairman, the Hon. Member did not really go to the basis and ask the germane question: Why the Section in the first place? Never mind the Subsections and explanations and distinctions between professions and the like, but why the Section in the first place? He asked that question in the context of a very difficult issue of equity. This amendment to the Income Tax Act is some 295 pages and contains over 100 clauses. It is difficult for the amendments to bring equity to the treatment of all people in all circumstances in a parallel if not identical way. It was out of consideration for equity that the Clause 3 was introduced. Prior to the introduction of the amendment, in computing income from a professional business, taxpayers were permitted to elect, under Section 34 of the Act, to exclude work in progress. The problem is that it only affected certain taxpayers and certain types of business. Under another Section of the Act they had already been given an advantage, preference or some assistance through the tax system in the operation of their business. Permitting them to take, so to speak, a second bite of the apple, that is what is unfair. It is inequitable. It is inequitable having people in somewhat the same circumstances in their business operations, some being given the advantage of our tax system, the preferred small business rate and, in addition to that, permitting them to deduct, before realizing income, the cost of work in progress. That is why, for example, we moved to identify those who fell into that category and to exclude them from the introduction of Clause 3, which was an attempt to achieve equity, that is, in a sense, to give some preferential treatment to small business in somewhat the same fashion.
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The Hon. Member uses the example of architects, but I believe he answered his own question because he was able to make reference to Section 10 and he was able to refer to the definition of the value of work in progress as being the lesser of the fair market value, and in those circumstances it is quite conceivable that the cost of the preparation of those plans would be a write-off. Therefore, the architect would not be caught by the Section in any event.


John Albert Gamble: Mr. Chairman, what I have said was that people would manipulate the provisions in the Act. The great trouble with the Income Tax Act very clearly, if the Minister would just put his ear to the ground and open his eyes, is that it has become not only so complex, but so unreasonable in its rigours that people are taking justice into their own hands. There is an underground economy which has developed in this country, and if the Minister would like to consult the Deputy Minister of National Revenue, he will find that studies have been made by the Department of National Revenue of just how much revenue is lost. Revenue is lost because people cheat. People cheat because they are being robbed. It is this kind of madness which just induces people to take steps which are completely unwarranted and which will create a cycle in this country which will undermine the general tendency of Canadians to be honest and to assess themselves in the fashion which the Income Tax Act demands.
We are dealing with a monstrous Act, amended in a monstrous way, to extract more revenue from the taxpayers of Canada. I wonder how far the Minister proposes to push the taxpayers of Canada before that underground economy, which is created as a result of that manoeuvre, will exceed the aboveboard recorded economy of Canadians? What we are talking about is a process which absolutely rejects reason. I dealt with the circumstances as they affect a small businessman who produces saleable stock in trade. There is no saleable stock in trade in the normal professions which are so identified, and we know the Minister has had no hesitation at all in going through a number of professions and exempting them. Why does the Minister not go through all the genuine professions, instead of the profession referred to by the Parliamentary Secretary to the Minister of Finance when he talked about wedding counsellors? Let him deal with the real professions. Let him deal with the determination of whether that work in progress consists of ideas on paper which are worthless to anyone but the person who put them there. Those are the real facts. But the trouble to which he is putting the taxpaying public, in particular the taxpaying public we are concerned with here, the professionals of Canada, is not warranted. It is a permanent, not temporary obligation imposed upon them for the purpose of giving to the Department of National Revenue a single one-time-I am sorry, not one-time because they programmed it over a couple of years-general tax burden. Is that in fact fair, equitable and is it reasonable, which is surely the question to which the Government must direct its attention?

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Paul James Cosgrove: Mr. Chairman, there was considerable debate in committee on, I believe, the two points raised by the Hon. Member. I am told that the consensus of the private accountants, that is, those people who made submissions to the Committee on Finance, was one that did not coincide with the opinion of the Hon. Member in so far as the underground economy was concerned. All I can do is to report that to the Hon. Member. This was a committee consisting of Hon. Members on both sides of the House which asked for input from the profession as to what they thought of the points raised by the Hon. Member. Obviously there are some people who will try to avoid paying tax, some people who will try to evade paying tax, and some people who will be outright dishonest. I suppose, in the final analysis, there are some people who will commit an immoral or criminal act in so far as Government regulations are concerned. But the consensus of opinion is not that which was expressed by the Hon. Member, that the underground economy is of the proportions of which the Hon. Member has tried to convince Hon. Members here this afternoon.
I thought I had answered the question of how you value ideas, or how ideas, transcribed on paper as in the case of architects, could be dealt with by the profession, and that is by valuation under Section 10. The architect is the best person qualified to put a value on that, and his valuation is one which will be, I submit, taken into account by the Revenue authorities.
The Hon. Member asks if this Section is reasonable. I argue that it is reasonable and it is equitable. As to the revenues which are generated, which the Hon. Member talked about, the $40 million, the Hon. Member might go back to my rationale as explained at the beginning, that is, that some small-businessmen have an advantage over other small-businessmen, and it is backing up to the extent of $40 million. If we permitted the same kind of advantage or parallel advantage to be granted to small-businessmen, and used that as an equitable basis, the general revenue fund of the Government of Canada would be increased by some $40 million. The Expenditures of the Government with its programs and the cost of providing services, are thereby enhanced by that $40 million on all counts. I believe it is reasonable, and it is just. The accountants who have made submissions have indicated that neither these amendments to the Act, nor the Act, are "on tilt" to the extent of which the Hon. Member has urged this afternoon.


Donald Alex Blenkarn: Mr. Chairman, the Minister will know, if he takes a look at the record of that committee and reads the testimony of Donald Huggett from Coopers & Lybrand, that a great discussion took place with respect to the underground economy, the extent to which the complications of the Act were increasing the size of the underground economy. In answer to my colleague, the Hon. Member for York North, the Minister referred to Section 10 and said something about the lower of either cost or market value. Does he not realize that the amendment which he is proposing in Clause 6(3) of this Bill amends Section 10(4) of the Act by making Clause 10(4)
with respect to work in progress mean the amount which can be reasonably expected to become a receivable thereof after the end of the year? In other words, rather than being the lower of cost or market value of the work, it is the value that is intended to be received. That is what the complaint is all about. Rather than treating professionals like the manufacturer who has half completed his work, there being no value attached to what he has done, what you have done is to treat a professional on the basis of what he may well be able to build when his work is completed. In other words, if he has done three-quarters of the work, he must bring three-quarters of the value of his bill into income. This does not make any sense in a profession because three-quarters of the value is determined after the work is totally done. It cannot be determined what the value of the work is when it is only three-quarters done. What you have is a nothing becoming a something. The something is only a something when it is completed. That is why professionals should not be charged for their work in progress. They have no asset that can be determined to be the lower of cost or market value. Thefore, it has no market value. That is the very reason this crazy amendment, this expropria-tory amendment is put into the Act. Will the Minister please withdraw that amendment? It makes no sense. It is totally unfair, and that is the reason for the complaint.


Douglas Glenn Fisher: Mr. Chairman, I do not know how appropriate it is, but I would like to congratulate you on the terrific job you are doing. You look marvellous in your new role. I now see the regular Chairman reappearing. He does not want you to continue because you may take over his job permanently.
The Hon. Member for Mississauga South is an acute analyst of the Income Tax Act. We had many differences of opinion in the committee hearings. Perhaps this question best clarifies the difference between us. I would like to point out that, as with inventory, a professional will pay the lowest cost.


Donald Alex Blenkarn: No, Sir. Not according to this.


Douglas Glenn Fisher: He will have to pay the lowest cost. There are times when a professional will not be able to bill for the full amount of his effort. He may discover that he has put too much time into the project and cannot bill for a full effort. Therefore, he will go out with a value on his item at its cost, for tax purposes, rather than cost plus profit. Or he might be a professional who is out of his depth. Perhaps when I start practising law everything will not be a profitable situation. Maybe people will not be willing to pay me for my advice.


Mr. Young:: Don't do it. You will wreck the profession.


Douglas Keith Anguish: Hear, hear!


Donald Alex Blenkarn: Mr. Chairman, I rise on a point of order. Rather than compliment me on my understanding of the Act, would the Parliamentary Secretary read Subclause 4? He will note that work in progress is specifically differentiated from the cost of advertising and packaging material. Advertising and packaging materials are dealt with in Subclause (b). In
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Subclause (a) work in progress is defined differently. The other says, " ... other than work in progress". Will the Parliamentary Secretary read the section and see that what he has been saying does not make sense at all?


Douglas Glenn Fisher: Mr. Chairman, the Hon. Member for Mississauga South is quite correct, I should stop complimenting him, although I find it tempting.
The Section 1 read before, Section 10(1) defines very clearly the fact that we take either the lower of costs or fair market value.


Donald Alex Blenkarn: Read the Bill.


Douglas Glenn Fisher: And then the Bill defines fair market value in the circumstance of professions. The previous Clause that I read gives you the general context, as I understand it. The professional, for some reason, who has found that the fair market value of his project is now lower than the cost would have to give that figure, but in other circumstances-let us hope it is all circumstances for all professionals-if they find the cost is lower than the fair market value, that is the amount they would use.
What I read to the Hon. Member previously which is already in the Act, sets out the general rule. This sets out the definition of fair market value for a particular professional.


Donald Alex Blenkarn: Mr. Chairman, fair market value is exactly what we are talking about with respect to professions as now set out in the new Clause 10(4) and the specific definition of work in progress has nothing to do with cost at all. It is what can reasonably be expected to become a receivable.


Douglas Glenn Fisher: Lower than the cost.


Donald Alex Blenkarn: No. It is what can be reasonably expected to become a receivable. Sure it could be lower than the cost. And it could be very very much more than the cost.


Douglas Glenn Fisher: In which case it would not be used.


Donald Alex Blenkarn: In other words, there is no cost value to it. What the Parliamentary Secretary and the Minister and his friends from the Department of Finance do not understand is that a professional is essentially selling ideas. He is not selling anything you can take hold of and walk to the grocery store with. It is ideas. It is doing something entirely different from performing a physical thing that you can actually put down and take away with you. You may say that you can take away the plans of an architect, but incomplete plans are nothing. They are waste paper. That is what they are. When you are talking about waste paper, and that is what this is, what is the cost? It may be the cost of the paper, it may be less than the cost of the paper. You can say it is worth nothing. In order to solve that, you decide to define work in progress as what can reasonably be expected to become a receivable.
To determine reasonableness you have to do it always after the event. It is always after the event, when you look back on the professional's return, that you say "Yes, but you were working on Mr. Smith's new home in November, 1982 and,
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therefore, when you bill Mr. Smith in February, 1983, you probably had half the work done by that time and you should have included that half in your 1982 return", but if you look at the situation at December 31 of 1982, you find the architect at that point had half a building designed. Now the design of half a building is not worth a tinker's damn. If the architect had died at that time and gone to heaven or gone to hell, he would not have got anything, not a thing. What you are saying four or six months after the event is, we will come back and look at the bill and say, "Yes, you got $2,000 for that work. Obviously, you had over half the work done prior to the year-end and obviously you should include half of what you eventually charged in your income for the year". That is what is wrong with what the Government is doing. I do not understand why the Minister and the Parliamentary Secretary cannot see that. Do they not realize for one moment that the work of a professional has absolutely no value, or very little value, until it is actually completed?


Douglas Glenn Fisher: I would like to go through the Act as I understand it and list the steps so the Hon. Member for Mississauga south can understand why I keep referring back to one simple principle.
Clause 10(5)(a) says work in progress is inventory. Section 10(1) of the current Act says that the value of inventory is either at the lesser of cost or at fair market value. It is not some speculative thing or some process that is worked backwards in time. If the professional finds, for example, that his fair market value is lower than the costs he has incurred, then he uses the fair market value. We heard the Hon. Member for York North give examples about $10 worth of paper versus a $3,000 fair market value. In that cause the $10 is written off. That is the amount that is involved in the cancellation.
If the Hon. Member would find it useful, I would be happy to read those references to the Act again.


Donald Alex Blenkarn: Mr. Chairman, I would appreciate it if the Parliamentary Secretary would read Subsection 10(4) of the Act as it stands at the moment and tell me where there is any reference to work in progress in it.


Douglas Glenn Fisher: There is not.


Donald Alex Blenkarn: The fact is that the whole of Subsection 10 makes no reference to the work in progress of a professional. This amendment brings the work in progress of professionals into the Act, however.


Douglas Glenn Fisher: Right.


Donald Alex Blenkarn: And how the value of that work in progress is defined, is contained in the amendment. The amendment has nothing do to with the cost or with the fair market value. The value is to be determined on what can reasonably be expected to be billed. That is what can reasonably be expected to become receivable.

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Would the Parliamentary Secretary please answer the question instead of giving us the bafflegab of what is in Section 10 of the Income Tax Act?


Douglas Glenn Fisher: Mr. Chairman, I think that the Hon. Member has difficulty with the difference between the Act and the amendment. At the moment we have before us an Act and an amendment. When they are passed, they will be blended into one document and we will have three Sections in the law that work together; Section 10(5)(a) that says that work in progress is inventory, that is the first step; Section 10(1) in the current one which says that the value of inventory will be the lesser of either the cost or the fair market value, and finally, Section 10(4) which will define fair market value for work in progress for professionals.
We are asking the Hon. Member to see all of these in one package. We want him to realize that fair market value, is defined in Section 10(4), and will then be utilized against cost in Section 10(1) to come up with the lower of the two amounts. When we have the lower of the two amounts, we have the value of the work in progress.


Donald Alex Blenkarn: Mr. Chairman, if the Parliamentary Secretary had any knowledge of law he would realize that when you refer in the specific to the value of work in progress for a professional, the general categorization of work in progress, which would be applicable to manufacturers, retailers or processors, would apply, according to his argument, in Section 10(1). When you get to the specific-and the specific is clearly defined in Section 10(4)(a) to mean what work in progress is and its value-then there is no question of how it is determined. It is determined by what can reasonably be expected to become a receivable. That is what the inventory value is. That is where the problem lies. Does the Hon. Parliamentary Secretary not understand that?


Douglas Glenn Fisher: Mr. Chairman, I thank the Hon. Member for his representation. Our officials will look at this again to see if his concern is justified. I think we are looking at the same thing and seeing two different images. I am assured by the officials that the definitions he has referred to set the fair market value, and then that is put into the equation and balanced against cost, in order to determine which of the two is lower.
As I say, we understand what he is talking about. It is on the record and we will look into it and see whether there is agreement. I suspect, however, that he may be seeing a one-way street where we intend it to be a two-way street. He sees it as an irrevocable definition, that once a professional has a project, it has an invoice value and, therefore, that must be the value that the professional uses. We do not agree with that. We say that when he reaches that value he is on a two-way street. He compares it with the cost. Between the two, he determines whichever is the lower for tax purposes. Some day he will make a profit on top of the cost and then that will be taxed, in addition to the cost. Like all businesses, in the meantime that cost is taxed at the end of his year and becomes
a credit for him on the first day of the next year. He continues with that credit in the same way as any other business.


Donald Alex Blenkarn: Mr. Chairman, I thank the Parliamentary Secretary for undertaking to review Clause 3. His understanding is more or less the understanding we had in committee. If he will recall the committee evidence, at that time the Minister was talking about the value of work in progress at the actual cost to the professional. In other words, he was saying, with respect to a lawyer, that we would charge the cost of a junior lawyer, the actual out-of-pocket expenses. On that basis I can understand him.
What I am pointing out to him is that this particular Clause does not achieve that. It takes the hard-nosed position that taxes the work in progress and determines an inventory value for that work in progress on the basis of what might reasonably be expected to become a receivable. That can only be determined at the end of the event.
That being the case, if the Government would like to stand Clause 3 and Clause 16 temporarily and move on, we would accept that. I should like to know what the Government would like to do in that regard.


Paul James Cosgrove: Mr. Chairman, in the exchange between the Parliamentary Secretary and the Hon. Member for Mississauga South, each Member expressed a point of view which is a different interpretation of the Act. I have attempted to follow the exchange, and that is what has happened.
The officials have confirmed to me that the explanation given by the Parliamentary Secretary is the intention of the Government, it is the intention of the Section, and it is the way in which the Act has been interpreted in the past. They are confident that that is the way a court would interpret it as well.
I have to say, with the greatest respect to the Hon. Member for Mississauga South, that the officials have concluded that his interpretation of the definition of market value-the exposition being the difference between a one-way street and a two-way street-is faulty. Certainly the officials and I are not of different opinions, but obviously there will continue to be a difference of opinion between the Hon. Member for Mississauga South and the Parliamentary Secretary.


Frederick James (Jim) Hawkes: Mr. Chairman, I would like to bring two or three concrete illustrations to the attention of the Minister to see if we can resolve them and understand the Minister's interpretation. Let us assume that I am a professional person and that I sign a three-year retainer. The retainer is one where you purchase my services on a first-call basis, and the amount of money you will give me for that is $90,000. When I do the work, I get $600 per day. Now, at what point does the $90,000 come into income, and how do we deal with this for inventory of work in progress? I start with a signed contract for a three-year retainer for work worth $90,000.
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Douglas Glenn Fisher: Mr. Chairman, on a technical basis I know what the Hon. Member is talking about because I have worked under these kinds of contracts. I am sure he would agree that in his experience there is usually a minimum number of days committed per annum. Is he talking about that kind of situation? What are we talking about? Is it a three-year contract which has an ultimate $90,000 value that he collects at the end of three years, whether or not he puts in any time? Is he talking about a minimum number of days per annum, or does he have some more open-ended idea in mind? I am just curious. I would like to know his view on this.


Frederick James (Jim) Hawkes: I would like to keep it clear. I get $90,000 at the end of the three years because you have had first call on my services. For every day that I work I get a per diem fee, let us say $600 per day. Even if I do not work a day for you, I still get the $90,000 at the end of three years. How do I treat that situation for tax purposes over that three-year period?


Douglas Glenn Fisher: Again, Mr. Chairman, just as a matter of clarification, is the Hon. Member dividing his contract into three one-year periods, for example, where he bills $30,000 every year, or does he simply hope that he does not put in a single day and at the end of the three years he collects $90,000?


Frederick James (Jim) Hawkes: 1 thought I was clear. 1 get $90,000 at the end of the three years because I have performed and given you first call on my services. That is the work I did.


Douglas Glenn Fisher: As I understand it, he would be considered to have $30,000 per annum income, so he would be including $30,000 worth of work in progress every year. I am sorry, just a moment. He would be deemed to have received $30,000 income per year for three years, not work in progress. It is not work in progress; it is income.


Frederick James (Jim) Hawkes: It is not work in progress; it is income. I did not get any money.


Mr. Darling:: You did not do anything.


Frederick James (Jim) Hawkes: I did not do anything, and I have $30,000 worth of income on which I have to pay taxes.


Douglas Glenn Fisher: I can answer this for you if you will just hang on for a second.


Frederick James (Jim) Hawkes: I want some of these answers before we finish with this Clause. Why is that not inventory or work in progress? Why is that deemed to be income all of a sudden when I did not receive a penny?


Douglas Glenn Fisher: As I understand it, although I would have a question for our officials which I would like to explore further, they indicate to me that at the end of the year each year the time is deemed to have passed and the Hon. Member has collected his income of $30,000. I would wonder what would happen if he did $90,000 worth of work in the last two years in terms of time and therefore has $90,000 worth of billable time
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in the last two years. I wonder how that would affect his tax position.
The Hon. Member has asked a very complicated specific question which reflects not on work in progress but on the current legislation. This is why we are having some difficulty. He has asked a very complicated specific question, and we want to give him an accurate example because we know that millions of people are hanging on this answer. At the same time we would like to point out to him that we view this not as work in progress but as income, and therefore something which would probably fall under existing provisions of the law.


Frederick James (Jim) Hawkes: Let me give the Parliamentary Secretary another example. You have a small business and you contract with me to do some work on your behalf over a three-year period of time, and there is no guaranteed amount involved. I do five hours' worth of business for you this year as part of something which will take me ten hours, but I do not do the other five hours until two years down the road and I cannot bill you until the job is done. In that circumstance, the work in progress provision says that I have to take in the inventory the first five hours. I keep it in inventory and pay tax on it until I do the last five hours two years down the road. How can you do that to me and treat the guy with the retainer contract as having received income?


Douglas Glenn Fisher: If the Hon. Member recollects some of the discussions that we had earlier with the Hon. Member for Mississauga South, a good deal of the difficulties surrounding the question of work in progress is not around liability of income but around writing off costs. The individual the Hon. Member has cited does not have costs which are being written off; he has straightforward income. Then, on the five-hour example which he just cited, I understand that he can just save that up until the end, the costs of it, and apply the whole thing at the end.


Frederick James (Jim) Hawkes: Let us be even more specific about work in progress. Somebody works for me and I bill their services out at $40 per hour, but I only pay them $20. They do the work this year but I have not billed anybody for it because it is part of a larger project. What is this whole thing about, if I do not have to put something into inventory? What am I putting into inventory? Is it those five hours at $20 or those 5 hours at $40, which is the amount I will eventually bill? What goes into inventory?


Douglas Glenn Fisher: As I understand the example I have just been given it is $20 per hour that you are paying out, times five hours, which is $100. You would not write that off as costs until you had income. It is just the same as the example with physical inventory.


Frederick James (Jim) Hawkes: You have quoted those three paragraphs and you have told me that I have a choice of fair market value or cost, whichever is lower.


Douglas Glenn Fisher: All right.

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Frederick James (Jim) Hawkes: Now, help me decide what cost is. I have somebody working for me. I pay them $20 per hour. They do five hours' worth of work on a project for which I have not billed. When I bill, I will bill at the rate of $40 per hour. Now, what is cost?


Douglas Glenn Fisher: As I understand it, this was the entire discussion we had with the Hon. Member with Mississauga South, so I thank the Hon. Member for Calgary West for his specific example. The fair market value is $200. The cost of getting that fair market value is $100. Therefore, the cost of the inventory is $100.
I would like to follow through with specific references so that the Hon. Member may have them. I would refer him to Section 10(5)(a) which states that work in progress is inventory. That is what we are discussing now. Second, Section 10(1) states that we should take either the lesser of the cost or the fair market value, and the definition of the fair market value is provided in Section 10(4). Therefore, Section 10(4) tells us that the fair market value of the Hon. Member's example is $200. Section 10(1) states that the lower of those two is the cost, at $100. Therefore, according to Section 10(5)(a), work in progress is treated as $100.


Frederick James (Jim) Hawkes: Thank you.


Douglas Glenn Fisher: You are welcome.


Frederick James (Jim) Hawkes: I would like to return to the subject of my retainer. Why can I not have the right of choice between fair market value and cost? I am a professional. I sign a retainer. This paragraph refers to fair market value, and another refers to cost. If I can take it into inventory, I should be able to take it into inventory as zero, because I did not pay the $20 an hour. I did not pay anything.


Douglas Glenn Fisher: Mr. Chairman, that is a fascinating example and I congratulate the Hon. Member for it. However, he does not have any costs involved in the kind of hypothetical retainer which he has described. By the way, I would like to know, looking ahead to the days when I am retired, how I can receive $90,000 for doing nothing over three years. I look forward to any suggestions that my colleagues can give to me.


Mr. Crouse:: See the Minister of Finance.


Douglas Glenn Fisher: However, 1 can tell him that until he has incurred costs and he has write-offs and so on, he is not in the work in progress category. He has a retainer, which is a contract, and he earns it as income which comes under the existing law, not under work in progress.


Frederick James (Jim) Hawkes: Let me give the Parliamentary Secretary another example. Professionals are working on the Olympic Stadium in Calgary, a new arena which will host the 1988 Winter Olympics. It is probable that for their services, they will receive a bonus upon completion of their work, if they bring it in under cost or in a hurry. There are several ways in
which bonus contracts are written. However, let us assume there is a $100,000 bonus for those people in 1987 if they have done a good job as architects. How will that work in progress be treated?


Douglas Glenn Fisher: Not as I understand it. I am learning a great deal about what goes on in Calgary. It sounds like the land of milk and honey to me that people are able to arrange these deals. I congratulate them for their comfortable arrangements.
As I understand it, such bonuses are contingent and they will not be taken into account until they are earned, because it is quite possible that they would not be earned and that such individuals would not make their bonuses, for whatever reason, whether their contracts were filled or not filled, or whether it was not possible to pay the bonuses which were promised. Therefore, it is contingent. One waits until the payment is made and then one deals with it accordingly.


Frederick James (Jim) Hawkes: Now we are getting to the nub of the objection. Professionals generally do not get paid until the task is completed. If they fail to complete, they receive nothing.


Douglas Glenn Fisher: They get write-offs, though.


Frederick James (Jim) Hawkes: Why is there a tax Bill which treats them as though they have earned income when they have not earned any income? How does a contingency contract differ from a normal contract concerning professional people who do not get paid until they have done the job?


Douglas Glenn Fisher: Mr. Chairman, the Hon. Member is quite right, but professionals have costs. While they have the potential of earning such income, they also incur costs, and that is part of what we are discussing here. If people are to have write-offs, then they must be treated in the appropriate fashion. For instance, it is not always possible, in my business, to make a sale which we anticipated. The only difference is that we are dealing with physical property, in my case, which might end up as being unsaleable, or professional services. In someone else's case, this might also be true, with their services or goods being unsaleable. However, each case is treated in the same manner.


Frederick James (Jim) Hawkes: Let us examine that logic. I have a small business and incur costs involved in purchasing gasoline to run a car, costs of buying my coffee, and other costs. After I sell my coffee, I must pay bills. I can see all kinds of legitimate costs. A professional person incurs direct costs, perhaps such as advertising, or time costs involved in travelling to different places.
I invest my time in the development of my business, and also dollars. In the coffee business, those are legitimate costs. Concerning a professional, are those legitimate costs, or are those legitimate investments in inventory? I suggest that the Government is attempting to make them investments in inventory.


Douglas Glenn Fisher: As I understand it, Mr. Chairman, direct costs are the factors that we are considering here, not the
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individual's time, which is profit, in effect, on the arrangement, in the same way as the Hon. Member for Edmonton West, a little earlier, described a businessman's time as being his profit from his efforts.


Frederick James (Jim) Hawkes: Then, if I am in business for myself and have completed five hours of work, but the Government is forcing me to do the work in progress and put it into inventory, is the Parliamentary Secretary telling me that all I must declare is costs of heat, light, rent, water and transportation, and that I do not have to put my time into that inventory? Is this the tax department's interpretation?


Douglas Glenn Fisher: Again, I remind the Hon. Member that it is only the direct costs of the job. Our officials have indicated that if one is a sole proprietor and one has overhead costs, then those costs are not included here. They can be used in other ways in one's business operations. It concerns the direct costs of the project itself, the direct wages of business employees, the costs involved in the development of the project.
The Hon. Member indicates that he is concerned, for instance, about the costs of the proprietor, the professional or whoever. I remind him again that it is the profit in the situation, not part of the work in progress.


Frederick James (Jim) Hawkes: We know of a professional person who has been the subject of much discussion in the House. His name is Alastair Gillespie. On October 29 he signed a consortium agreement with several firms. It provided a retainer of $30,000 a year, $600 per diem, plus expenses. There were also provisions in that agreement for buy-outs. If he wanted to be bought out he would receive $250,000, and if his partners wanted him out he would receive $750,000.
If he is acting as a professional person, providing services to that consortium, explain to me the income situation relative to work in progress. What does he take into inventory? What does he pay tax on, and at what point?


Paul James Cosgrove: Mr. Chairman, I do not have enough information on the situation posed by the Hon. Member as a specific case, but rather, I suppose, as a hypothetical case. For example, I do not know whether Mr. Gillespie, in that situation, is the shareholder, the stockholder or a partner. We just do not have those kinds of facts. Mind you, I suppose we have had much time in which to look at the situation, inasmuch as the project and its details were announced in concert with the announcement made by the Premier of Nova Scotia some two years ago. I suppose that if we had been concerned about it, those details could have been made available to us today. However, I think it would be inappropriate for the Minister to respond to a question which becomes less of a hypothetical question and more of a specific example. If one substitutes the name of Mr. Gillespie for any other Canadian's name, then what the Hon. Member, in effect, is inviting officials and the Minister to do is to give free legal and tax advice on a specific case this afternoon, and we obviously cannot do that.
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Roderick Blaker: Order, the Hon. Member's time has expired.


Douglas Keith Anguish: Mr. Chairman, I would just like to make one point of clarification. When the Minister was responding to the effects of Clause 3, he stated that this in no way applied to farmers and that the Government had no intention of applying it to farmers in the future. Now I am assuming that there are some cases, and if my assumption is wrong 1 hope that the Minister will be advised and will in turn let me know, where farmers and farming operations could be considered eligible for the small business tax. If they are eligible for the small business tax in some circumstances then, from what the Parliamentary Secretary has told me, they could quite well be included in the work in progress provision. The key here is whether or not farmers or farming operations are eligible for the small business tax. Could he provide me with that information?


Douglas Glenn Fisher: Mr. Chairman, the Hon. Member was asking us earlier how we drew the distinction between one set of professionals and the other, and I appreciated his question because it allowed us to say very clearly that the small business tax was in fact the device that we use to draw that line, and that these people who were exempted were people who had previously been named in the Act.
Now he has carried that question one step further. As I understand it, farmers are a completely separate category from professionals in the Act. They are cash-basis taxpayers who are entitled to a small business rate, but they are treated separately in the Act from professionals. They are not included in the same category, I am told.


Douglas Keith Anguish: So the minister can give us his assurance then that when this Clause and the provisions of C-139 have been passed, if we assume that they are going to pass at some point in time, Revenue Canada will not bring in regulations to include farmers under the provisions of the work in progress, and they cannot do that under the present regulation, either.


Paul James Cosgrove: Mr. Chairman, I can confirm my earlier answer to the hon. gentleman. The answer is, yes, Revenue Canada would not do that. It is not the intention of the Government; it is not in the legislation; the Income Tax Act has dealt with farmers in a separate category, as the Parliamentary Secretary to the Minister has indicated. Yes, we are hopeful that the Bill will pass and, of course, the sooner the better because there are some 11 million taxpayers, families, who would benefit by refunds upon passage of this Act.


John Albert Gamble: Mr. Chairman, I am rather disturbed to hear the Minister suggest that the sooner we pass this piece of legislation the better, justifying that urging upon the House by the fact that there are some people who may be entitled to refunds. I would hope that the guide that might be used in this place is whether the legislation we are contemplating is good or bad for the country, whether it indeed lives up to its billing

March 3, 1983
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as being fair, reasonable and equitable, whether it brings justice to the tax scene. With that in mind let me just draw to the attention of the Parliamentary Secretary, who has been dealing with this issue, the consequences of the application of the various Sections of the Act to which he has already made reference with respect to valuing work in progress. I think he will agree with me that if he analyses the circumstances of the present case in light of the proposed amendment, when we are dealing with the valuation of the work in progress of a professional of a kind that is not exempt from the provision of these amendments, the amount included in the inventory of that professional with respect to that work in progress is an amount representing the lower of costs or, in this case, the amount that can reasonably be expected to become receivable in respect thereof after the end of the year.
Would he not agree that that indeed will be the law if this section is passed?


Douglas Glenn Fisher: Yes, I agree with that, Mr. Chairman. The Member for Mississauga South and I had a long discussion about that. That certainly is my opinion.


John Albert Gamble: Mr. Chairman, I was here during that discussion and 1 was not left with the absolutely firm conviction that that was the interpretation that the Parliamentary Secretary has placed on Clause 3, amending as it does Subsection 10(4). If indeed that is the case, let me ask the Parliamentary Secretary whether the treatment of work in progress is the same for a manufacturing firm as it is for a profession. If it is not, does he not also share my concern that fair market value can, in many cases, be considerably lower than the amount that you expect to receive when the work is billed?


Douglas Glenn Fisher: Mr. Chairman, it is my understanding that inventory is inventory under this proposal, whether the inventory be a physical item or professional services. Therefore, the parallel that the Hon. Member has drawn is correct. I was not quite sure about what he was referring to, in setting the price tag for fair market value. I agree that prices will fluctuate up and down, but I am not sure what the consequences of that fact are, for his question. I would be grateful for clarification.


John Albert Gamble: Mr. Chairman, let me then pose the question in this fashion. Why has the Government found it necessary to treat work in progress of a profession in any fashion differently from the way it would treat work in progress for a small manufacturing undertaking? Why in fact do they not simply leave Subsection 10(1) to apply to the valuation of the work in progress of a professional? I can tell you, very simply, why they have decided that this would be inappropriate. It is because the work in progress of a professional, if it is to be valued at the lower of either cost or market will in fact be valued at nil.
What the Government has done, recognizing this obvious fact, is to decide it will create new rules for professionals. I cannot help but think that if you examine the new rules to determine what fair market value is, in the case of work in progress for professionals, it is an amount that can reasonably be expected to become receivable. There is no valuation
process, be it fair or otherwise. It is what in the minds of the intended biller of those accounts he can receive after the end of the year.
I would suspect that what we will become involved in is a very acute examination of the financial status of the recipient of that intended account, whether at the end of the year the company that is to pay that bill is insolvent or has financial difficulties and what considerations the professional might bear in mind in the event that he wished to establish something in the case of a lower amount for that bill than he would otherwise send.
I fully appreciate that it is the lower of two items, the lower of the cost to the taxpayer professional or the reasonable amount that he might bill for it. I recognize that fully, and in some cases the cost may be the lower of the two and would save him the trouble. But I just listened to the explanation given by the Parliamentary Secretary with respect to what cost was, and it too troubles me. He has said that cost would only include direct cost for that project.
Mr. Chairman, if it includes only the direct costs for that project, what we now have is one horrendous burden of identifying each project for the architect, for instance, to which reference has been made, so that we can see the costs that are applicable to that project.
This is an undertaking which in the past has not been absolutely essential, clearly not essential at all. The Parliamentary Secretary has indicated that, in determining what these costs are, the costs in terms of the work of the proprietor are not to be included. If that is the case, I wonder how those comments in fact tie in with the assurance, or the threat I might suggest, of the Minister of State for Finance who, a short time ago, told us that it was appropriate in this process to value ideas. If he is valuing ideas to determine costs, where in heaven's name will this lead us? I would like both the Parliamentary Secretary and the Minister of State for Finance genuinely to give us some guidance as to what the rules are.
There is one other consideration that has to be borne in mind. Having listened to the Parliamentary Secretary and the Minister of State for Finance receiving some guidance from officials in the Department of Finance, I cannot help but think that this House is relying very substantially on officials for the kind of information we require. If indeed the cost is to be calculated exempting the work of the proprietor, let us have that kind of assurance included in the statute. If the overhead costs referred to by the Parliamentary Secretary are to be excluded in determining costs, then let those provisions be written into the statute.
It is small comfort to the taxpayers of this country who read the debates in the House and find that on a number of occasions these very issues later give rise to a costly appeal before the Tax Review Board or the Federal Court of Canada, especially when they look at the debates in Hansard and find that we have had assurance that what they are arguing about
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would never occur. We know the courts pay absolutely no attention to what is said in this House, either by Members of the Opposition or by Members of the Government. The courts will interpret these Sections.
I am not convinced that any genuine assurance is given to this place upon which Members should rely that in determining costs they, the bureaucracy, are going to exclude overhead costs or a *tipro rata amount with respect thereto or costs representing the valuation of ideas, referred to by the Minister, in fixing the costs which are to be used for the purpose of determining the amount that is to be included in the income of professionals.


Douglas Glenn Fisher: Mr. Chairman, I appreciate the additional questions from the Hon. Member for York North who is giving us a chance to cover some important details in all of this.
First, I think that professionals keep dossiers or files on their costs. When I served in this kind of capacity, I did that. I know that my lawyer does it. We are talking here about people who normally, as a matter of business practice, do not have a great deal of difficulty defining the direct costs of a project for their own use or for tax use. In fact, it is probably the pattern that all professionals-architects, engineers and others-keep some kind of running tab of the exact costs or direct costs that they apply to a project.
On December 18, 1981 the then Minister of Finance said that in order to make it easier for professionals, he would only ask them to include such direct costs as a convenience for professionals because the professionals have their own accounting in this style, because they do keep track of their direct project costs. The broader picture he has described of overheads and so on is very often more contentious, and it is in fact harder to keep track of these overheads on a project by project basis. It was because of that and in order to facilitate this kind of accounting that we had that comment on December 18.
The Hon. Member made some reference to businesses becoming insolvent and, therefore, the values of the goods fluctuating. As I understand it, this law is written on the basis of businesses being an on-going affair. It is not written for occasions when businesses go bankrupt.


John Albert Gamble: Mr. Chairman, I noted the comments of the Parliamentary Secretary who indicated that the professions with which he has become familiar have followed a practice of accounting and maintaining a record of their costs. There is no doubt of that. The question here is whether the record maintenance is with respect to each individual project. I know that professionals keep a record of their intended billings, but there is no record maintained of the allocation of actual costs.
Let me give the Parliamentary Secretary an illustration. While dockets may be maintained by an architect with respect to those On his staff so that he may render an account to his client, to the best of my knowledge, as in the case of the practice of law, there is not a record maintained of the salaries paid to employees who may be professionals in the group working on the files, breaking that account down as between a
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number of files. It is precisely that kind of bookkeeping and accounting process which will become necessary under the circumstances.
The Parliamentary Secretary referred to those who practise law. Quite frankly, they are not the ones who are covered because of their exemption as a consequence of the provisions here. 1 know personally that the legal profession never did keep a record of the costs. They keep a record of the bills. They keep a record of the charges that apply to a particular client with respect to a particular project, but not a pro rata share of salaried solicitors in a firm who are allocated to that particular file. I know of no professional who hitherto has been obliged to maintain that kind of record with respect to the project now to be undertaken. I would like the comments of the Parliamentary Secretary with respect to that.


Douglas Glenn Fisher: Mr. Chairman, I can only repeat what I said earlier. Professionals generally do have very good records for their very own use. We are attempting to tie in our requirements to existing record-keeping habits. We are not anxious to force people into keeping brand new records.
The Hon. Member for Mississauga South will recall the heated discussion we had in the Finance Committee about lawyers and the difficulties they would have in this regard. It was precisely because of this argument that we were somewhat sympathetic to their case. We felt that they would indeed be in a situation where they would have to go through unproductive paper work and unproductive activity, to determine costs for the sake of tax.
We were also told very clearly that it is a professional practice to keep costs and to keep some idea of expenses for the sake of billing. When the law is devised, we can say with some confidence that we believe that professions like computer companies and so on can figure out their direct costs for a specific project for the sake of this provision.


John Albert Gamble: Mr. Chairman, can the Parliamentary Secretary indicate whether he has any evidence that firms of architects maintain a specific list of salary allocations among various client accounts, salary allocations with respect to employees of that firm who are working on a client's project?


Douglas Glenn Fisher: Mr. Chairman, I refer the Hon. Member to the suggestions in the Finance Committee from representatives of the Canadian Institution for Chartered Accountants who at that point indicated what they would consider to be reasonable accounting practices.


John Albert Gamble: I would have hoped, with a view to informing this House of a serious obligation which, I suggest, is going to be imposed on a group of professionals, that the Parliamentary Secretary would have simply given us a yes or no. I accept that response as an answer in the negative, and I seriously doubt that we will ever get an answer in the affirmative, because professionals do not allocate direct costs among client files.

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What they do, obviously, and I indicated this before, is to maintain a list of charges to client files but not in fact costs.
May I inquire of the Parliamentary Secretary whether, in light of the recognized generation of tax in but a single initial period-I know the increased taxes are going to be split over a couple of years-there is any genuinely long-term benefit in maintaining taxpayers in the professions on this complicated burdensome route?


Douglas Glenn Fisher: I wonder if the Hon. Member would be so kind as to repeat his last question. I understood his explanation a little, but I wonder if he would give us the question again?


John Albert Gamble: Let me say, by way of background, that we know, from an accounting standpoint that income is equal to the sales, minus the cost of sales. Cost of sales are generally defined as including an opening inventory, plus additions during the year, minus a closing inventory. As a consequence of adopting that formula taxwise to these circumstances, we become involved in the process of valuing inventory and involved in the process of determining what work in progress is and how to value it. We also know that until now, and until this Bill has been dealt with, it has not been the obligation of professionals, or fishermen, to include in income an item which would be part of the inventory or the work in progress. It has only been necessary to include items in income which have been billed, whether or not they are ever received. Having regard to the fact that this changeover of systems will have but a brief temporary effect, an initial injection of revenue, does the Parliamentary Secretary genuinely believe, under those circumstances-since there will be no continuing source of revenue as such-that it is appropriate to burden the professional community with this kind of arrangement?


Douglas Glenn Fisher: Mr. Chairman, that is a very important question. It is one we have been struggling with all day. In fact, my answer to that directly is, yes, I believe the taxation measure is worth-while and it is a good idea. I remind the Hon. Member that we are dealing here with many professionals who are only newly classified as professionals, either because their profession did not exist previously or because, as a result of some court ruling, they have been able to get themselves classified as professionals. There has been, for example, some behaviour in this respect in the computer industry. In those circumstances, many of these people did in fact go through the inventory process previously, and we are now trying to put them back on that footing. We believe that we are dealing with people who have some experience and understanding of this tax measure. At the same time, to turn that coin over, it was because the measure would not have been productive, would not have had a long-term benefit and would have had disruptive costs, that we did exempt some professionals. Also, I would remind the Hon. Member that the people involved here are people who have access to the small business tax rate, whereas the people who are exempted were not given that tax rate.
The Hon. Member has asked me, and I appreciate the question, whether the tax would be productive in the long run. My answer is that it will not be disruptive in the way he has
described. The people who would have been hurt have been exempted. The people for whom it would have been a brand new experience, an unproductive administrative experience, such as lawyers, have been excluded from this provision. Equally, the people for whom it would have been inequitable in a tax sense have been excluded, whereas those who are able to take advantage of the small business rate are now being, in effect, treated like all small businesses and their work in progress is viewed as their inventory instead of some physical goods. Therefore, those who get the small business rate are being treated like other small businesses. The Hon. Member should turn his mind to the fact that we are not looking here at these people solely as taxpayers. There are other taxpayers in Canada, small businesses, large businesses and unincorporated people, who have to pay the freight for those who receive the exemptions. Therefore, we must be able to go to those taxpayers and justify such exemptions. For example, how do we define some professionals' work in progress? Is it different from a small business inventory? I will tell the Hon. Member quite directly that if he reviews the records of meetings of the Finance Committee, he will see there my concern which I voiced as a taxpayer precisely about that point. How could I, as a small businessman, dealing with a physical inventory be expected to pay extra tax because a professional who has work in progress in inventory is being excluded? I queried all kinds of people about that. I asked lawyers and the accountants who came in. I kept on repeating this question with all of them. Why would a small businessman, dealing with physical goods, have to pay more because a professional dealing with a service pays less? Where is the equity in that? I was able to satisfy myself with the case of lawyers and doctors, and it was tough. But I was converted. It was not a question of my being convinced in the beginning. As the record will show, and the Hon. Member will see, I was converted. I could see that some professionals would be subjected unfairly to too much paperwork, which was unproductive, and also because they are not paying the same rate of tax that I am in the beginning. I hope those specifics will help the Hon. Member to understand at least my perspective on the tax.



PROCEEDINGS ON ADJOURNMENT MOTION


The Acting Speaker (Mr. Corbin):: Order, please. It is my duty, pursuant to Standing Order 45, to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the Hon. Member for Central Nova (Mr. MacKay)-Science and Technology-Government contribution to International Institute of Applied Systems Analysis, (b) reported use of data banks by Soviet delegates; the Hon. Member for Halifax West (Mr. Crosby)-Nuclear Energy-
March 3, 1983

Future of heavy water plants in Nova Scotia, (b) use of coal to produce oil; the Hon. Member for Kootenay West (Mr. Kristiansen)-Unemployment Insurance Commission-Delay in making payments under work programs in British Columbia, (b) request that Minister make personal investigation.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed consideration in Committee of Bill C-139, to amend the Income Tax Act (No. 2)-Mr. Lalonde- Mr. Corbin in the Chair.
On Clause 3-Fair Market Value
On Clause 16-Professional Business
Donald Alex Blenkarn: Mr. Chairman, the question to be determined here with respect to Section 10 of the Act is, what is the cost of the work? Subsection (4) as it appears in Clause 3 determines what the fair market value is. Now we want to know what the cost is. The Hon. Member for Mississauga North suggested that it was a new profession to those people who look after marriage arranging or setting up a marriage. I put this question to him: suppose he goes into that business-which probably he would be very good at-but he does not have any marriages coming up until 1984; suppose that during 1983 he spends a great deal of money setting up a plush office with fancy phones and has a series of expenses, enormous expenses. Those expenses could be deducted from his other income, his investment income, for example. Would those expenses represent his cost of the work, because he does not bill anything until 1984? All those expenses, the cost of the work, are they his costs? Presumably, what he has led us to believe so far is that it is only direct costs. Where do direct costs end and ordinary overhead costs start? What are costs? Is he not now required, if he takes the position that the professional is obligated to pay tax on the lesser of costs or fair market value, to have the Section further amended to define what is a professional cost with reference to the work? If he does not further define it, are we not in a position where we put the professional to an enormous amount of bookkeeping to determine the pro rata of overhead expenses which has reference to the unbuilt or uncompleted work?


Douglas Glenn Fisher: Mr. Chairman, in the case of a hypothetical marriage counsellor who is not able to find anybody to counsel but who still has expenses, I understand this individual would have a variety of different expenses but they would not directly relate to work in progress. The professional would consider work in progress usually to be the wages of someone hired to work on a specific project.
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Donald Alex Blenkarn: Mr. Chairman, in the case of a manufacturer, when he determines what the cost of his work in progress is, why does he, in the normal accrual sense, put in an amount for his light, heat, water, general overhead and that type of thing? Why would he do it but a professional not be required to do that? If you are going to try to treat the cost of a professional as only his out-of-pocket expense specific to a file or retainer, how can you treat him any differently from a manufacturer? If the representation you intend to make in that regard is the same representation as the Minister made in the House on December 18, 1981, why would you not now add a further provision to determine what the cost is with reference to professionals since you have determined what their market value is with regard to professionals?


Douglas Glenn Fisher: Mr. Chairman, the Hon. Member has asked me basically two questions. He has asked about specific details involving the definition of cost for professionals in comparison with manufacturers. He has asked a policy question about why we do not include costs in the legislation. I will defer to the Minister of State for Finance for the second part of that question.
On the first part, I understand that manufacturers have costing systems set up which would allow them to incorporate a certain portion of overhead into the value of a good. Most manufacturers, if they are worried about their overhead, will include it in the price of every good. There is nothing in the provisions that would prevent a professional from doing that if he wanted to set up some formula which would allow him to consider overhead on some direct basis. I would remind the Hon. Member of the alternative to that, the example used by the Hon. Member for York North who indicated that somebody might spend $10 on a piece of paper to draw up some architectural plans and have $3,000 worth of time. Therefore, the fair market value might be $3,010, but the taxpayer would have the advantage of charging off only $10 as work in progress, and would wait until he gets to the point of selling the project to earn the income. I would suggest to the Hon. Member of Mississauga South that if manufacturers choose to set up some factor for overhead to be included in the cost of inventory, then so can professionals. On the other hand, they might find it advantageous to just keep track of their cost and use that.


Donald Alex Blenkarn: Mr. Chairman, perhaps before we have the answer from the Minister I could put one situation to him. A young man goes into architecture, not one of the favoured professions. He does not incorporate because he cannot incorporate. He proceeds to do work on an important building, but he cannot bill that work until the following year.


Douglas Glenn Fisher: No employees?


Donald Alex Blenkarn: He has no employees. Is the value of his work in progress the lower of his costs or realizable value? If it is the lower of his costs or realizable value, is his cost not the cost of his telephone, his office space, his automobile, his paper and his secretary? Is that not his cost? If that is his cost, and it is

March 3, 1983
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the intention of the Government to make that his cost, will the Government be introducing an amendment to so provide for that? In other words, will the Government introduce an amendment to define what is the cost when we are determining what is the lower of the cost or value, just as we have been determining what is fair market value with respect to value?


Paul James Cosgrove: Mr. Chairman, the officials advise me that, flowing from the examples and discussions between the Parliamentary Secretary and the Hon. Member for Mississauga South, the architect under those circumstances has a choice between the two. It could be zero. No wages, no employees. It could be the example he uses as cost.


Donald Alex Blenkarn: He does not have a choice.


Paul James Cosgrove: I do not think the item is a matter of policy, I think it is a matter of application of the sections of the Act presently existing, and the amendment which is before us, which the Parliamentary Secretary has already indicated, is taken in conjunction and presently provides the architect, or who ever under the circumstances, a choice to submit his returns on the basis of the existing legislation, assisted by the statements of the Minister of Finance on December 18, 1981.


Donald Alex Blenkarn: Mr. Chairman, the Minister in his statement in December, if I understand it correctly, said that the professionals would only have to account for the actual wages paid to people specifically working on the project. The case I have put to him was not just wages; it was all overhead costs. They are in fact his costs. If that is the intention of the Government, then I point out that what it is attempting to do is to tax professionals not on what they have earned-because they have not earned anything at that moment-but on what they hope to earn or what their costs are. Whoever taxed a person through an Income Tax Act on the basis of what it costs the individual to do business? Normally you deduct costs; here you want to tax the costs. When you want to tax the costs, that is exactly what you should do. If you were going to have a definition of what is fair market value for a professional, which means what he can reasonably expect to become a receivable, why would you not also have a definition of costs for a professional in line with what the Minister said in December 1981 ?


Douglas Glenn Fisher: Mr. Chairman I appreciate the comments of the Hon. Member for Mississauga South. I would remind him of our discussions in the Finance Committee when he said that normal business costs are not taxed, they are deductible. I urge him to review the discussion in that Committee and also all the provisions that one normally applies to inventory. As he knows, inventory does not quite match the definition he has given. I urge him to see that what we are talking about is inventory, the definition of inventory and the definition of costs to generate that inventory.
We have tried to indicate to the Hon. Member that it is an option for the professional. If the professional has a direct cost
involved in the generation of that inventory, then the professional can write off that cost, or, as we have just said, if the professional wants to broaden that and include other costs, he can.
We went over all this in the Parliamentary Committee, talking about the parallels between physical inventory and work in progress inventory. The parallels are exact. I draw to the Hon. Member's attention the comments I made about equity and about small businesses. I discussed the same matter with the Hon. Member for York North. We have been over this ground a few times already.


Donald Alex Blenkarn: Mr. Chairman, I do not want to be repetitive, but apparently the Government is not prepared to accept the position taken by the Parliamentary Committee that professional work in progress would not be taxed. The Parliamentary Committee held that if professional work in progress is to be taxed in a similar manner to other businesses, then, some noted, the 3 per cent inventory allowance conferred on other businesses should be applied to the professional.
I wonder if, on the basis of the Committee report, the Parliamentary Secretary will be introducing a further amendment to the Act to lessen the burden on the taxpayer, so that he will not need a further Ways and Means motion to add for professionals who are now to be taxed on their inventory-this is defined as inventory. Will they be given a 3 per cent inventory allowance?


Douglas Glenn Fisher: I would remind the Hon. Member that the report he is quoting from was intended to be a discussion of the various viewpoints put forward. That recommendation for a 3 per cent inventory allowance was by no means a unanimous opinion, any more than it is a unanimous opinion now. The 3 per cent inventory allowance that is in the law now is intended specifically for tangible property, not intangible property.
I do not think we could say that the Parliamentary Committee was unanimous in its report that this should be allowed under this provision. In fact, I think the division of views between us now probably reflects accurately the division of views in the Committee.


Donald Alex Blenkarn: If that is the case, the argument in favour of taxing professionals on their work in progress has been argued on the basis of fairness and equity. We are now in the position where apparently fairness and equity do not apply because the receivable is an intangible inventory and should not have the inventory allowance.
Do we have a situation where it is heads the Government wins and tails the taxpayer loses? Is that the fairness and equity that we are getting with all this bafflegab about taxing the professional who is operating an unincorporated business on his work in progress? He is not being given the same advantage as a manufacturer or retailer. Why will the Government not give him the same advantage? Why is it being so unfair?
March 3, 1983


Douglas Glenn Fisher: Mr. Chairman, we went into this in some depth in the Parliamentary Committee. 1 would urge the Hon. Member to come up with some new information. He knows that real estate and securities, for example, are not given the 3 per cent inventory allowance. He also knows that the 3 per cent inventory allowance was intended to help manufacturers who have problems with inflation. It was not intended to be used as a parallel with intangibles like work in progress or real estate and securities.


Frederick James (Jim) Hawkes: Mr. Chairman, in my previous round, we dealt with two or three situations. We have with us today a Minister of the Crown, a Parliamentary Secretary and two major officials from the Department of Finance. Given concrete examples, they could not tell us how this tax law would apply. I suggest that there are a lot of situations where it would be difficult for this group to tell us how it would apply. In my opinion, that is clear evidence that the law should be rewritten.
After the last hour or hour and a half of questions may I ask if the Minister is now persuaded that we have a piece of legislation which Canadians do not understand, which departmental officials cannot understand, and which the Minister himself cannot understand? If no one can understand it, will the Minister undertake to stand the Clause and come back with a rewrite?


Paul James Cosgrove: Mr. Chairman, I made notes of the questions raised by the Hon. Member for Calgary West this afternoon. He posed five specific questions. It took four of them to get him to the fifth, which was the only one germane to the Clause of the Bill under consideration. The examples he used were not of work in progress but examples of contracts or business arrangements between people. The Parliamentary Secretary, advised by the officials, indicated that these did not fall under this Section.
I think the Hon. Member is either unfair or he does not recall well the answer given to him. If he would read the "blues" to check the answers, I think he will find that as he introduced the five examples, he even said that. In other words, he admitted himself that "fine, I have asked more questions that are not on point and do not have to do with work in progress, but my fifth example to the Minister and to the Parliamentary Secretary must surely be one that comes under the sanction". Then I believe the Parliamentary Secretary satisfied the Hon. Member's fifth example. I thought that he had done it to the satisfaction of the Hon. Member.
I invite Hon. Members who did not have the advantage of hearing that exchange between the Hon. Member for Calgary West and the Parliamentary Secretary to refer to the "blues". On this item the exercise or exchange was a valuable one because the Hon. Member referred to specific examples. He did not talk hypothetically, with the exception of the last case in which he was being, I may say charitably, a little mischievous. With the exception of that last item, there were specific
Income Tax
questions. We were able to look at the specific questions. We were able to put them against Clause 3 dealing with work in progress and they did not apply. I invite Hon. Members to take a look at that exchange. Also I invite the Hon. Member to check the "blues" because I thought the exchange was very valuable. I thought it would be useful, not only to him but to other Members or people looking for some assistance in the interpretation of Clause 3.


Frederick James (Jim) Hawkes: Let us test the Minister's thesis. I will return to one of my examples and just change it slightly. I am a professional. I have a professional business. I normally charge $40 per hour for my services. I have done five hours' worth of work in this taxation year. It is part of a longer term project. Now, what do I have to take into inventory? What are the types of costs, exactly, which I have to include in the inventory?


Paul James Cosgrove: Mr. Chairman, in responding to the Hon. Member, he has really turned the clock back an hour and a half. He began with that very question. It was his second example this afternoon. He began with that question, and we had to rise and ask, "What were the specifics of the contract?" We had to ask him whether there were other conditions of the contract to assist us in answering the question. We went through that route. We have answered that question. With respect, I think the Hon. Member does not advance an understanding of the Clause by repeating the process and having to lead up, by questions and answers, to the question he really wants to ask.


Frederick James (Jim) Hawkes: If the Minister checks the "blues", he will see that I have not asked that question.


Douglas Glenn Fisher: Yes, you have.


Frederick James (Jim) Hawkes: No. I was a professional who employed somebody who was paid $20 per hour, and they did the work. That was the way I first asked the question. Now I am the professional. I have done the five hours' worth of work and I have not billed for it because it is part of a longer-term project. I normally bill my own services out of $40 per hour. What do I take into inventory? What are the factors which I have to take into inventory?


Douglas Glenn Fisher: Mr. Chairman, as the Hon. Member must know after the debate this afternoon, he has choices as to what he can take into inventory. He can assess some costs, as we discussed with the Hon. Member for Mississauga South, as we also discussed with the Hon. Member for York North, and as we will apparently discuss with him. The businessman or the professional would choose his method of assigning costs to that project.
We have indicated that we are trying to facilitate professionals by allowing them to assign direct costs because we believe that that is the approach most commonly found among professionals for their billing practices, and therefore it might be a very easy approach for them to follow for their tax

March 3, 1983
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practices. We had an earlier discussion comparing manufacturers and professionals, wherein it was indicated that professionals could allocate some formula per project for their general overhead costs.


Frederick James (Jim) Hawkes: Let me contrast two firms. Over here we have a one-person firm with a professional. Over there we have a professional plus an employee. In the one case, the professional does the five hours' worth of work. In the other case, the employee does the five hours' worth of work. It seems to me, from what you have told us earlier, that the single-professional firm can cost his time at zero and simply take into inventory the overhead costs, a proportion of those which are relative to the work. But in the second case, that of the two-person firm, that person has to take the overhead costs, plus the wages of the employee. They have both done the same work, but the tax position for the two-person firm is a lot more expensive than for the one-person firm. Is that the Liberal idea of justice?


Douglas Glenn Fisher: Again I would like to remind the Hon. Member of the many, many examples which we have had this afternoon along this very route. The individual who has an employee has a direct cost which can be applied against the project. The person involved in the project, the professional, will have to define the value of the inventory as either the lower of the costs or the fair market value. Then, when the project is completed and the billing is finished, the individual who has the one employee has a higher deduction which he can put against income than the professional. The professional will have to bill the full time as profit, whereas the two-person company will have a salary which will be used as a deduction. There is an offsetting deduction against the cost. It is not a question of being unfair to the individuals.


Frederick James (Jim) Hawkes: I guess that when you serve in Parliament for quite a while you lose track of the real world. Out there in the real world firms compete with each other, and if you are a better competitor than the person on the other side, you might get the business and the other person does not. When you take tax law and you give a bonus to some firms and punish other firms, you are distorting the marketplace. My question is really a very simple one. Are you or are you not granting bonuses through this system, potentially through the tax system, to single-member firms and putting at a disadvantage those with two or more employees? Is that not the impact of your taxation?


Douglas Glenn Fisher: No, Mr. Chairman.


Frederick James (Jim) Hawkes: 1 appreciate the assertion, but can you tell me how you are not?


Douglas Glenn Fisher: We have gone over it again, and again we repeat for the benefit of the Hon. Member that you deduct your costs when you sell the goods.


Frederick James (Jim) Hawkes: If I have a small business, I start with an opening inventory of tangible goods. I add to that the costs associated with the purchase of replacement goods or new goods. From that, I substract the actual purchase value of those goods which remain in my warehouse. From that, I have some which is left over, which is the value of my inventory.
Tell me what I must put in each of those three parts of that formula, under this tax Bill.


Douglas Glenn Fisher: I could ask the same question concerning almost any business. Is there an advantage which is being artificially created here? I must apologize to the Hon. Member. I feel that I am somehow missing his point. However, I know that in my own business, physical inventory is treated in this fashion. I do not suffer a competitive disadvantage with regard to someone who has a different structure. The inventory is created. The value of that inventory is added to my tax bill. The very next day, in effect, it is taken off my tax bill as a deduction. The whole inventory rolls over from year to year. There are some years in my business when I have a more valuable asset added on, and then if I sell it or if I go out at the end of the year, I reduce my tax bill. However, I am not at a competitive disadvantage.
I must apologize to the Hon. Member. I do not know if I have been in Parliament for too long or simply if I am confused, but I do not understand how it is possible for us to have this competitive disadvantage.


Frederick James (Jim) Hawkes: Out there in the marketplace, if I buy a number of boxes of coffee from someone else, I am given an invoice and the price I pay is set out. What the Government is inviting me to do, through this piece of legislation, is to estimate cost for inventory. It is not set out by someone else, who sold to me. The Government is saying to a single individual or to a collection of two or three or five, "Invent your inventory costs". Then someone, some policeman out there, must decide whether it was done correctly.
The legislation is not the least bit helpful in telling me how to value my inventory at cost. There is not a single word which tells me what I must do. If I am faced with that situation, then how do I appeal to a tax board? If the law is silent, and an official says that I did it wrong, then a cost has been immediately added to my business because I must appeal or suffer a penalty. How can I appeal when the law is silent?


Douglas Glenn Fisher: Mr. Chairman, again, I am sort of forced to go back to the bedrock of my own experience. Nothing in the statute has told me how to value my physical inventory, yet somehow, between myself and my accountant, I have been able to do it, and to come up, on an annual basis, with the lower of costs or fair market value for physical inventory. I would hope that we could have the same happy circumstance with professionals.
The Minister has indicated a reply to this line of thought earlier, in his discussion with the Hon. Member for Mississauga South. I would only want to add to the Minister's reply by saying that the Hon. Member for Calgary West is not asking for greater clarification. If we were to follow his line of reasoning here, we would be adding even more complexities to the law. He would want us to add more Clauses, more definitions, more complexities-


John Horton McDermid: Just wipe out the whole thing.
March 3, 1983


Douglas Glenn Fisher: -yet in proven business practice, we have been able to find that it is not necessary elsewhere, where the circumstances are far more complex and where the range of services and goods is far broader.


Frederick James (Jim) Hawkes: I simply cannot imagine sitting down with my accountant tomorrow, faced with the problem involving work I had in progress last December, and trying to value it on a cost basis. Generally, tangible goods which are purchased in total or in part for inventory are purchased from others. For the most part, the costs become readily apparent from someone else's invoices. However, the Government is trying to set up a system which I believe would be a bureaucratic nightmare.
In every city in this country, a local official from the tax department will have almost unlimited discretion to say, "You did it right", or "You did it wrong", and the taxpayers out there will have no idea as to what it is they are supposed to do. Where is the historical experience which would enable people to estimate what should go into their inventories? Where has that been evident in our system?


Douglas Glenn Fisher: We could go over this matter again and again. I just remind the Hon. Member that all we are doing here is deferring the deduction of costs to the time when income is earned. It is a basic accounting principle. Although I am not an accountant, I am told that these are practices which have been followed over the past century.
I know from my own experience with my own business that these practices have been followed at least over the last decade, because that is how long I have been going through this. As far as costs are concerned, I think that if the Hon. Member has a hard time defining costs, then he would not be well advised to get into a business because, sooner or later, he will run into a cost somewhere and he might not be able to recognize it.


Donald Alex Blenkarn: Mr. Chairman, I move:
That Bill C-139. an Act to amend the statute law relating to income tax (No. 2) be amended in Clause 3 by adding, immediately after line 33 at page 6, the following new sub-section:
"4.(1) For the purpose of sub-section 1, the cost of the property, that is, the work in progress at the end of the taxation year of a business, means those costs which are directly related to a specific work in progress of the professional but excludes (a) any cost associated with the time incurred by the professional or any other non-employed professional associated with him and (b) any costs associated with the general overhead of carrying on the business which is a profession.


Douglas Glenn Fisher: That is not complex, eh?


Mr. Cullen:: Author!


Douglas Glenn Fisher: What's "overhead"? Let us have a body of law on that.


Paul James Cosgrove: I rise on a point of order. I would draw to the Chair's attention the argument introduced by the House Leader for the Opposition, the first point made in the proceedings this morning. He indicated that any provision of the legislation, which is the Bill, must follow the Ways and Means motion. I disagree that the examples raised in argument dealing with amendments to Section 1 and Section 109 earlier were examples or fit that criterion. In other words, we argued
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that the provisions of the Bill did fit the notice of motion as tabled. I would ask Your Honour to find that you are faced with the same problem concerning the motion of the Hon. Member for Mississauga South. The Hon. Member is attempting to introduce a provision by way of amendment to the Section. I do not want to discuss its merits or argue the case, but the amendment clearly does not follow the provisions of the Ways and Means motion before the House.
In as much as the Chair has reserved on the argument proposed by the Opposition, I would urge that the Chair must consider whether in fact it can proceed with the motion if it violates our rules for the same very reason put forward by the House Leader for the Opposition earlier in the day.


Marcel Joseph Aimé Lambert: Mr. Chairman, on that particular point it would be very instructive if the Minister of State for Finance brushed up on his precedents with regard to the nature of amendments at this point in Committee of the Whole. May I point out to him that it has been long established that it is within the competence of any Member to move to either reduce or restrict a tax proposal. No private Member may increase the incidence of the tax, but at any stage in Committee of the Whole an Hon. Member of the Opposition, or even on the Government side, and we would welcome them from the Government side, could move to limit the incidence of a tax or reduce it. This is well within the competence of a Member. Those limitations do not have to follow the strictures of the Ways and Means motion.
The Minister again has missed the point, which is that the Government is bound by the Ways and Means motion in the nature of the Bill it brings in. Subsequently the Government may bring in motions to amend, particularly to reduce the incidence of the tax or to clarify the tax.


Donald Alex Blenkarn: Mr. Chairman, on the point of order raised by the Minister, the particular amendment introduced by myself and seconded by the Member for Brampton-George-town is an amendment that just defines what is cost. In fact, it comes within the statement by the Minister in the House on December 18, 1981. It is, as pointed out by the Member for Edmonton West, a relieving matter, but even so, if anything, perhaps it reduces the tax. It certainly does not extend the tax, and therefore the amendment is perfectly in order.
The argument put forward by the Member for Simcoe North with respect to Clause 1, which of course is still under the consideration of the Chair, was that the Government was attempting without a Ways and Means motion to introduce two additional forms of taxation that were not included in any Ways and Means motion. Here we have an amendment that defines more precisely and indeed reduces the scope of the tax imposed or alleged to be imposed in the Ways and Means motion and therefore is perfectly acceptable, whereas in the other case there was an attempt by the Government to impose

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taxes that are not authorized in the Ways and Means motion under the instruction from the Crown.
On that basis, I suggest that the motion is in order, and can be put.


Paul James Cosgrove: Mr. Chairman, on the same point of order, with the greatest respect, you are in the position of having to determine, on the basis of the motion before you, even using the test put forward by the Member for Mississauga South, whether the impact of the amendment is to reduce or restrict. Is it a relieving matter, or does it contravene the rule that it is not admissible because it would increase the tax?
The Hon. Member for Mississauga South has indicated that it would offend. If the motion offends by increasing the cost and increasing taxation then, by his own words, it is not admissible as an amendment. That was the rule that he said the Chair must apply.
My submission, Mr. Chairman, is that you are in the position that you are going to have to interpret the amendment and take a look at that. I argue that the effect on some firms and some professionals of the adoption of the resolution by way of the amendment of the Hon. Member would have the result of increasing the cost to the professional. The point I began with is that the Chair, earlier this morning, faced with this kind of argument reserved the issue of whether amendments could be introduced for consideration, because it involves the argument of whether such an amendment, number one, increases and, number two, offends because it introduces a matter that is not in the Bill which is not in accordance with the Ways and Means motion introduced in December.
The gist of my submission is that the Chair, with respect, I think must consider this matter and reserve this matter unto itself, just as it did on the submission made by the House Leader of the Opposition earlier today.


Frederick James (Jim) Hawkes: Mr. Chairman, on the same point of order, I tried to listen carefully to the Hon. Minister. I think he talked about individual taxpayers. I think the point at issue in relation to an amendment should be whether or not Government revenue is increased or decreased, in total.
Could the Minister indicate to us his understanding of that amendment and whether or not he believes the force of that amendment would be to either increase or decrease Government revenue in total, as a test of what he knows about the legislation.


Douglas Glenn Fisher: Mr. Chairman, I would like to give one example to back up the point of order raised by the Minister. You heard earlier in the afternoon the Member for York North indicate that direct cost to a professional could in fact be as low as $10 or, in other examples here, we heard them being described as as low as zero.
If we were to allow those same professionals to charge off their overhead, their tax obligations would differ here. Obviously, when you have that kind of a circumstance in this motion, it is going to add extra tax burden to some people and take a tax burden away from other people. This is because it
creates inflexibility around the very question of overhead and what the definition is and whether those who would be able to have it would pay more and others who would not be able to have it would pay less.
So I agree with the point made by the Minister. The motion is totally inappropriate because it adds extra expense and inflexibility and extra burden for some taxpayers.


Donald Alex Blenkarn: Mr. Chairman, on the same point of order, the Minister has suggested that the matter be deferred for your consideration, as to whether the amendment increases the burden on the taxpayer or in fact decreases the burden. It is obviously our submission that it decreases the burden. It was our hope to complete this matter, but I suggest, in view of the Minister's suggestion, that the Chair consider the matter. The Chair will have until Tuesday to do that, presumably, if we start again on this Bill on Tuesday. I suggest that the Chair take until Tuesday to consider the amendment and that we then would be able to proceed, I think relatively quickly, with considering the balance of Clause 3 and Clause 16.
Before six o'clock, and just for a moment, may I ask the Minister if he will be introducing the amendment that would protect notaries, or is he going to leave those out, and when will he be introducing his amendments so that-


Roderick Blaker: Order. The Hon. Member is introducing a totally new element in the debate on the point of order.
I thank Hon. Members for their comments. It has been suggested that the Chair take the amendment under advisement. The Chair will do that.
Progress reported.



PROCEEDINGS ON ADJOURNMENT MOTION

[Stage Direction]
A motion to adjourn the House under Standing Order 45 deemed to have been moved.

Hon. Elmer M. MacKay (Central Nova):: Mr. Speaker, on February 11 the Minister of State for Science and Technology (Mr. Johnston) in reply to my inquiry promised to review the results produced to date by the International Institute of Applied Systems Analysis. On the same occasion the Solicitor General (Mr. Kaplan) made a commitment to look into the security aspects of this international organization. I am still awaiting the results flowing from these promises. In the meantime, I would like to put on record a few facts about the
March 3, 1983

Canadian participation which costs the taxpayers of this country $400,000 annually.
To start with, the Systems Analysis approach to global problem-solving is increasingly decried as a passing fad, or worse, as an intellectual fraud committed by bureaucrats of participating countries. It is for this reason that the venerable Royal Society of the United Kingdom recommended an end to British participation in this venture. In fact, the British Government stopped financial support by the end of last year.
The United States also withdrew financial support from the institute. Americans decided that their money could be spent elsewhere and that the technological benefits gained by the Soviets at the institute outweighed those obtained by the West. In fact, the Americans realized that under the guise of international co-operation, the Soviets are using the institute as a vehicle for access to Western scientists, technology and data banks without providing anything valuable in return.
The Soviets over the last decade or so succeeded in acquiring the most advanced Western technology by using, in part, their technological and scientific agreements with the West, thus supplementing their clandestine purchases of Western equipment and know-how.
Together with Austria and Switzerland, Canada seems to have become, unwittingly or otherwise, one of the most frequently used Soviet intermediaries in transferring American and Western technological innovations to the Soviets. I am not going to cite the well-known examples in this respect which occurred in the recent past. I am going to mention two lesser-known ones.
I would like to call the Government's attention, for example, to the trans-shipment from Detroit via an Ontario firm of a complete car assembly technology capability to the Lada, factory in Soviet Russia. The other involves a Canadian manufacturing company in Montreal named Velan Engineering which exports high-pressure valves to Russia, Czechoslovakia and Hungary. The latter case involves components which are almost exclusively used in rocketry and the nuclear industry. Believe it or not, it appears to be a quite legal undertaking, given that over the years these particular exports were backed up by many millions of dollars from the coffers of the federal Export Development Corporation.
It seems that Canada is one of the best examples of the old Communist doctrine that Western capitalistic countries will sell Communists whatever they need to succeed. In the Velan case, for a few million dollars we weaken and jeopardize our future as a free society. Interestingly enough Mr. Velan, as he calls himself, appears to have the background of a refugee from a worker's paradise in Eastern Europe, I believe Czechoslovakia. Suffering perhaps from pangs of conscience at the time of the Soviet invasion of Afghanistan, he was quoted in the Montreal press to the effect that he was curtailing his dealings with the Soviet Union, but an examination of his record indicates that the business was merely shifted to Hungary and Czechoslovakia.
Adjournment Debate
In the IASSA matter, we are giving the Soviets not only access to our technology, but also an annual bonus for the upkeep of this institution, whatever it should be called, of about $400,000.
The Canadian representative who appears to be a catalyst here is Dr. Michael Kirby whose expertise runs the gamut from railways to fish. Nonetheless, I would urge some of the more responsible and sensible Cabinet Ministers opposite, such as the Minister of State for Science and Technology, to reassess this whole affair and ask himself whether this is really a better use of our resources at a time when every dollar that we need for Research and Development could be better used here in this country.


Mr. Jim Peterson (Parliamentary Secretary to Minister of State for Economic Development and Minister of State for Science and Technology):: Mr. Speaker, I am indeed pleased to be able to respond to the Hon. Member for Central Nova (Mr. MacKay).
Let us examine first of all the reason why the United States has withdrawn from this organization. They have cited budgetary reasons, and I believe that factors relating to the cold war might have also been a part of that influence. But what has happened in the United States? The official role of the Government has been assumed by the American Academy of Arts and Sciences, and this Academy is being supported by industry, foundations and private sources, thus the continuing participation of the United States in these exchanges is assured. In the United Kingdom, the Royal Society has withdrawn, but there is, nevertheless, a body of support within that country for continued types of exchanges of know-how and technology, and we have a feeling that perhaps this official relationship is going to be maintained between the United Kingdom and the Organization through the Fellowship of Engineering.
As to Canada's relationship, we joined in 1972, and the question is, can we as Canadians, a technology-hungry country attempting to compete on world markets, do this in isolation? I believe we have to be forward looking and resourceful in bringing new ideas to Canadian production, to Canadian manufacturing, new Research and Development and new know-how to Canadians, in order that we can compete in world markets. Many other countries in the past have benefited from exchanges. They have adopted the highest technologies they have found in the West, and they are now out-competing with us in world markets. That is the opportunity we have by participating in organizations which offer Canadian scientists and engineers the opportunity to learn what is going on in other parts of the world.
Let us not condemn these initiatives on the basis of smear and innuendo. I do not believe this should be a basis for attacking someone who has been working assiduously to come to grips with the very difficult question of the fisheries, which affects the Hon. Member's riding very closely. I believe, Mr. Speaker, that Canadians from all walks of life should be more
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outward looking in trying to find out the best of what is happening in every type of industrialized region of the world.


NUCLEAR ENERGY-FUTURE OF HEAVY WATER PLANTS IN NOVA SCOTIA. (B) USE OF COAL TO PRODUCE OIL
Mr. Howard Crosby (Halifax West):: Mr. Speaker, on January 25, 1983, I expressed once again in this House of Commons my concern for the future of the heavy water plants in Cape Breton, Nova Scotia. Last fall, and on several occasions before that, I raised with the Minister of Energy, Mines and Resources the problem which would result if the heavy water plants located at Glace Bay and on the Strait of Canso were closed.
Just to give you some idea of the magnitude of this problem,
I point out that there are over 760 skilled workers employed in these two plants. More importantly there are at least 2,000 related jobs which would be adversely affected by the closure of the plant, particularly the Seaboard Power Plant where 100 jobs would be in jeopardy, as well as the power plant at Point Tupper. When one considers the effect of closure of these sources of employment, one must realize that an horrendous problem would be generated in an area that has already been shocked by employment problems for the last century, particularly the last decade.
In November 1981, the unemployment rate in Cape Breton was 11.8 per cent. A year later, in 1982, it was 12.4 per cent. Then it rose very sharply in that same year to 15.2 per cent. Unemployment there is now over 18 per cent. If you are talking about the loss of as many as 3,000 jobs in an area that is already hit with drastic unemployment, you realize the seriousness and magnitude of the problem, Mr. Speaker.
What is the solution? The former Minister of Finance, whose constituency of Cape Breton Highlands Canso is affected by this closure of the Strait of Canso heavy water plant, has indicated to the people that they ought to be optimistic. The Hon. Member for Cape Breton-East Richmond (Mr. Dingwall) has in the same tone and form indicated that there is reason for some optimism. But the fact is that Canada's nuclear program has been failure. The failure to sell and market CANDU reactors has left the heavy water plants virtually with no market for their products. One must come very close to a realization and recognition that the closure of the heavy water plants is inevitable. That is what I wanted to find out from the Minister of Energy, Mines and Resources (Mr. Chretien), because on other occasions and before the Standing Committee on Public Accounts he indicated fairly clearly that the closure of the heavy water plants was inevitable.
The Ottawa Citizen reported last month that there was a row brewing between the Minister of Energy, Mines and Resources and the Minister of Finance (Mr. Lalonde) over the closure of the plants. It was evident from that report that the Minister of Finance was losing the battle with the Minister of Energy, Mines and Resources over the closure of the heavy water plants. That is what prompted me in my supplementary questions to ask the Minister what alternative sources of
employment could the Government provide to those workers who would be out of work as a result of the closure of heavy water plants.
It may come as a surprise to you, Mr. Speaker, and to other Members of the House, that it was on that occasion when for the first time in this House of Commons I made a reference to the infamous Scotia Coal Synfuels Project. I said to the Minister of Energy, Mines and Resources that I hoped the Scotia Coal Synfuels Project headed by Alastair Gillespie would not be put forward as the source of alternate employment for the nearly 3,000 Cape Breton workers whose jobs are in jeopardy. Later on, and day after day in this House, we heard about Mr. Gillespie and his involvement with the former Minister of Energy, the former Minister of Finance and all the other Cabinet Ministers and Government officials who were involved in the promotion of the Scotia Coal Synfuels Project. We have heard that subject debated ad nauseam.
I want to comment just briefly in the few minutes remaining on how important the debate of that subject is to the people of Canada, particularly to the people of Cape Breton. If we are going to allow the Government of Canada and its Ministers to play fast and loose with the public financial resources in the manner in which they have done in the case of the Scotia Coal Synfuels Project, then we are in even greater jeopardy than the jeopardy Cape Bretoners are facing as a result of the closure of the heavy water plants. That kind of public and governmental immorality will bring this whole system crashing to the ground.
The only way we can deal with this is to have before the Parliament of Canada and enact as a statute of the Parliament of Canada, sensible rules of conduct not only for Cabinet Ministers but for all Government officials and those who pass from that status into the private sector. Unless we know what are the rules that govern conduct, the conduct of Government affairs, and unless we can have some confidence in the ability and capacity of our Government officials, Members of Parliament, Cabinet Ministers and our public service officials, to deal properly with the affairs of Government, then we are in very serious difficulty. When the Prime Minister (Mr. Trudeau) comes into the House and tables what he claims are guidelines of conduct for Ministers and Members in the Scotia Coal Synfuels Project and claims that those guidelines and rules of conduct are not enforceable, so they can do what they want, we realize what a terrible state the Government has brought the country to.
I want to make an appeal on behalf of Cape Breton workers for a sensible way to deal with the problem created by the imminent closure of the heavy water plants. At the same time I want to appeal to the Government to review, in a sensible way, the manner in which Government business is conducted and to develop and present to the House some sensible rules of conduct, or conflict of interest rules which Cabinet Ministers
March 3, 1983

and other officials can be made to follow. When there are instances in which the public interest is being deflected and diverted because of the conduct of present or former officials, we will then have a forum in which to make the complaint and where the officials must answer for their wrongdoing. We will not again find ourselves in the kind of mess we have been in during these past weeks, arguing over something which is of vital importance to the people of Cape Breton and, indeed, to all the people of Canada.


James Scott (Jim) Peterson: Mr. Speaker, the Hon. Member for Halifax West (Mr. Crosby) is not the only person in the House who is concerned about unemployment and about jobs in Cape Breton. We recognize that there is serious difficulty in that situation. At the moment markets for heavy water are closed because in Canada we have adopted a policy that we will not sell nuclear generation facilities to any country which has not signed the international Non-Proliferation Treaty. We are not prepared to sacrifice the prospect of the peaceful use of atomic energy for the betterment of humanity everywhere just to earn export dollars. This is a critical issue which we have pursued and we are prepared to follow up on it. I hope that the Hon. Member will agree that we have a responsibility, above and beyond everything else, to ensure that there is non-proliferation.
We are trying to create jobs in that depressed area of the country. There is under consideration a coal liquefaction plant which would use coal to produce gasoline from existing reserves. If the feasibility plans prove up we can look forward to expenditures of perhaps $ 1 billion to provide direct employment for 1,200 coal miners and 800 workers in the liquefaction plant. This enterprise would take advantage of the unique availability of Cape Breton coal, Sable Island gas and the facilities of a closed refinery on Canso Strait.
We have been working on this proposition and the Hon. Member for Halifax West has not come forward with any concrete alternative. All he does is bemoan the fate of some people who may lose their jobs, and complain that he does not like the way things are being done to create jobs in that area. He has not offered any positive alternative. We are very concerned about what is happening to those workers and their families, Mr. Speaker. That is why we are trying to come up with projects that would be of benefit to all Canadians, particularly those faced with the prospect of losing their jobs in that area. This is the object and the desire of the Government in the days, weeks and years ahead.


UNEMPLOYMENT INSURANCE COMMISSION-DELAY IN MAKING PAYMENTS UNDER WORK PROGRAMS IN BRITISH COLUMBIA. (B) REQUEST THAT MINISTER MAKE PERSONAL INVESTIGATION
Mr. Lyle S. Kristiansen (Kootenay West):: Mr. Speaker, on February 2 I raised a question in the House regarding delays in UIC payments and payments under the Employment Bridging Assistance Program. I should like to say something that is not often said in the House, particularly by Members of
Adjournment Debate
the Opposition, that after months of complaints, substantial progress has been shown by the Department of Employment and Immigration. They have virtually eliminated long delays in British Columbia in payments to people under that program.
When I realized that I would be participating in the adjournment debate today, I did some checking among my colleagues and the various project sponsors in my constituency. They in fact report that the long delays seem now to be in hand. I thank the Department and its officials for getting at that, and just hope that we never again find ourselves with the kind of backlog which was so evident just a matter of a few short weeks ago.
I was also advised today that a new committee has been formed in my constituency among all the Employment Bridging Assistance Program sponsors called the West Kootenay Committee on Forest Employment Development. Yesterday they wrote to the Minister of Employment and Immigration (Mr. Axworthy), with copies to myself, and to various provincial officials with a number of recommendations they feel may help prevent some of the same problems and other possible future problems. I would like to touch on some of those recommendations as food for thought and hopefully as prods to action.
The first recommendation was that the Employment Bridging Assistance Program be extended to December 31, 1983. We are still awaiting word of this hoped-for extension of that program. Hopefully, participants who are working on those programs now might continue to draw payments until perhaps June 30, despite the fact that payments would otherwise expire by March 1, in order to allow for a sensible conversion over to the NEED program for some of those participants whose benefits are expiring. Some of those projects are worthwhile. Hopefully, if we can integrate those two programs in such a way that the programs themselves can continue, it will be of benefit not only to the workers involved but to the forest industry in those particular regions.
I know my time is fast running out, so I will not continue to list the various recommendations at this point. Again I thank the Government and the officers of the Department, particularly since they have taken a lot of brow-beating by some of us over the past number of weeks and months, for finally getting some of those matters straightened out. I ask them again to keep a close eye on the situation and perhaps give some additional authority to local forestry or employment officials, if payments should be delayed beyond three weeks in the future, so that locally they may have the authority to be able to meet emergency payments until such time as the broader questions can be straightened out.
[ Translation]


Mr. Remi Bujold (Parliamentary Secretary to Minister of Employment and Immigration):: Mr. Speaker, it goes without

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Adjournment Debate
saying that I want to thank the Hon. Member for his words of appreciation for the peple of the Department of Employment and Immigration. I am sure that his comments and those of his Progressive Conservative colleagues regarding improvements that have been made, and particularly the substantial amount of work being done by departmental employees, especially in the areas they represent on the West Coast, will be greatly appreciated by the people concerned. Many people are aware, and I am sure all Hon. Members and most Canadians have realized that Employment and Immigration employees have had an enormous workload during the past year. The Department and the Government have taken steps to try to reduce delays, and the Minister of Employment and Immigration (Mr. Axworthy) informed the Hon. Member accordingly when he enquired about this in the House.
We have had to increase the number of staff in order to answer requests as quickly as possible, and in the British Columbia Region we have also set up a computerized system in order to be able to provide a quick response to all requests
and provide efficient service to people who are seeking work and are to benefit from the various job creation programs we have established.
As for the recommendations made by a committee formed in my hon. colleague's riding, I am sure the Minister and the Government will bear them in mind. The Government and Cabinet are now examining various job creation projects, and the committee's recommendations will undoubtedly be most welcome. Mr. Speaker, I would hope that other groups would take similar action, and I am sure the Minister of Employment and Immigration and the Minister of Finance (Mr. Lalonde) will be very pleased to receive these recommendations.


The Acting Speaker (Mr. Corbin):: Order, please.
The motion to adjourn the House is now deemed to have been adopted. Accordingly, this House stands adjourned until tomorrow at 11 a.m.
At 6.25 p.m. the House adjourned, without question put, pursuant to Standing Order.

Friday, March 4, 1983