1983-03-10

GOVERNMENT ORDERS


[Stage Direction]
The House resumed from Tuesday, March 8, 1983, consideration in Committee of Bill C-139, to amend the statute law relating to income tax (No. 2)-Mr. Lalonde-Mr. Blaker in the Chair.
The Deputy Chairman:: 1 apologize to Hon. Members for the delay. There was under consideration a ruling on a point of order raised by the Hon. Member for Simcoe North which may be ready later in the day.
On Clause 4-Amounts receivable in respect of services, etc., rendered


Mr. Darling:: Mr. Chairman, on Tuesday afternoon when the sitting came to a close, I was on my feet asking the Minister for clarification on certain points. I gave the example of the farmer who sells his farm and, with the capital, expects to retire in comfort or at least be able to look after himself. In the past he could purchase an immediate life annuity which would guarantee him so much a month as long as he lived. Of course, this is no longer available under the new revised regulations.
[DOT]	(1110)
Then I cited the case of someone who probably did not have any assets whatsoever but was fortunate enough to win one of the $1 million lotteries. That windfall is not subject to capital tax, but of course the revenue and interest derived therefrom is subject to income tax.
Would the Minister explain the difference between the two? Why is the person with the windfall profit home free, whereas persons who purchase other investments are able to have substantial lump sum gains but are not able to look after their future in their retirement years?
I could cite many other examples of people in modest circumstances who might have a bit of cash when they reach retirement. They know they will receive the old age pension and Canada Pension, at least the great majority of them. If they have a lump sum with which they want to purchase a life annuity, why are they not able to do it out of profit from some sort of a deal, whether the sale of a house or whatever?


Mr. Cosgrove:: Mr. Chairman, I would be very pleased to attempt to answer the Hon. Member's questions, which really deal with IAACs, when Clause 30 is under consideration. Part of the difficulty in responding to the points and issues raised which are not before the Committee for deliberation is that unless we deal with the Clause in front of us, it would be a hopeless chore to deal with 139 Clauses in any kind of order. I would be happy to focus my attention on the items raised by the Hon. Member when we reach that point.
In the same vein I would like to inquire of the Hon. Member, or possibly the Hon. Member for Mississauga South, whether Hon. Members opposite have agreed that we would deal with Clauses in addition to the Clause which gave rise to this discussion, that is Clause 4, the first one dealing with the whole issue of insurance and annuities. It was agreed that the House would deal with related Clauses. I provided Hon. Members opposite with a list of the related ones and hoped that we could deal with the related items. Unfortunately Clause 30, upon which the Hon. Member has now touched, does not fall within those items. Are they now proposing that Clause 30 be dealt with?


Stan Darling: No.


Paul James Cosgrove: The answer is no. Therefore, I would prefer to deal with that item when we come to it. Also I would be interested in knowing if it is possible for Hon. Members opposite to indicate whether the proposal we made and the Clauses we listed were acceptable, to put some form to the discussion. Have they reached that conclusion at this time?


Stan Darling: Mr. Chairman, certainly I will be more than willing to defer that particular item until it is reached.
If I could move on to another item, on Tuesday the Minister indicated that he had received some letters. In fact, he quoted from letters from officials of both the Life Underwriters Association of Canada and the Canadian Health and Life Insurance Association. I have been in touch with both of those organizations recently, in fact, with one of them today. They can see that great strides have been made in the revision of the regulations. Of course, they are much happier now than they were with the original budget of November, 1981. They hope the Bill will get through before too long, as we do on this side of the House.
I questioned these people on the amount of revenue which the Department of Revenue hopes to recover, and I received

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the figure from the Minister's officials of $75 million. I took that as being an average of $75 million a year. I assume that is not a total of $75 million. I see one of your two wise men nodding his head in the affirmative, so I assume that is correct.
In the first year, 1983, I would assume that figure would be closer to 75 cents than $75 million. Of course, it would go up a bit. I checked again with the president of one of the major life insurance companies and told him that I wondered how the Minister's Department could come up with any figure that would hold water. I am of the opinion that the $75 million amount was drawn out of a hat, or someone used a Ouija board or spun a wheel of chance to get it. I do not think the Minister could produce anything to verify that amount.
I want to re-emphasize that policies taken out prior to December 2, 1982, or whenever it is, are not affected by the new legislation. Seventy-five per cent of the new policies which are being sold now and in the future I am told are term policies which have no cash value, and therefore do not enter the picture.
There is another 30 per cent of policies which are whole life policies, limited life policies and investment policies. Of that 30 per cent, only 5 per cent will qualify, or in other words be subject to tax. I just want to point out here that the Minister and his departmental officials are going to all this trouble on the basis that they will only be able to collect from 5 per cent of the policyholders. Only 5 per cent, give or take a few, will even be subject to tax. Again, let me repeat what I said. It is in the years to come that the tax will be collected. I say you will get 75 cents this year-and I may be on the high side-but in subsequent years some of these policies will be subject to tax. But with all the problems of collecting the tax, I am curious whether the Minister thinks it will be worth it.
I would like verification of the $75 million. I presume the Minister's officials must have some idea as to the percentage of policies on which the Department feels it will be able to collect. Am I very far out in my calculation?
We certainly want to see this legislation get through. 1 am aware also that the insurance companies have great reservations about annuities, pensions and so on; but that is another story. I think the Minister's Department has told them that down the pike that question will be discussed along with the White Paper on Pensions, perhaps through the Department of National Health and Welfare or the Department of Finance. I would appreciate the Minister's comments on that as well.


Paul James Cosgrove: Mr. Chairman, when I made reference to the $75 million which would be forgone revenue to the Government, the Hon. Member may recall that I made reference to a Financial Post article dated July 4, 1981, which was headed "Big Sums Go Into Deferred Annuities". I made reference to some of the features in that article, for example: "The smart money is moving into deferred annuities. Investments that earn today's high interest rates and let income accumulate compound and tax defer to 10 or 20 years or more." I was addressing the issue of annuities. If it was not clear, my reference to the $75 million was directed to the use of deferred annuities.
The $75 million referred to the amount of forgone revenue with respect to annuities.
It arose as a result of our dealing with Clause 4. We then had to bring in all of the other Clauses because the principle applies equally to annuities and life insurance policies that have an income or investment build-up where there is money left over after buying protection. In short, with respect to the figures used by the Hon. Member as far as life insurance policies are concerned, I would not quarrel with him. I would not quarrel with the 75 per cent of term policies. The fact that only 5 per cent of life policies sold in the future might be subject to the three-year accumulation amendment in the Clause before us is correct. But it was not that provision that gave rise to the tax saving.
Second, the Hon. Member is correct that there is no intended income recovery, not only for 1983 but for 1984. It is a three-year accumulation provision. That three years gives a grandfathering break-in period to people purchasing those contracts now. Therefore, the realization of revenue to the Government would not occur until the third year.


Stan Darling: Mr. Chairman, the Minister is now saying that the Government will recover absolutely nothing for two years. I am wondering why they are going through the birth pangs and criticism for two years when they know that in two years they will be sitting on this side of the Speaker's chair.
On Tuesday, I also brought up the question of the singlepremium life insurance contract. This is a contract that is no longer eligible. Naturally, it can be sold but it will be subject to tax. As I mentioned previously, there are certain circumstances under which this contract is ideal. I will admit that a single-premium contract is not sold to the average blue collar or office worker, but to someone who wants that particular insurance for a specific purpose.
One of the things that I pointed out was that an individual who has a substantial estate and knows that it will be subject to succession duties will try to plan. He will realize that the Government will take a good deal of his estate because it is worth so much. That is the tax system. He realizes its merits. The Government must get its money where it can. The Hon. Minister is a lawyer but is probably too busy now to be advising too many clients. However, a good many of them would be coming to him and asking, "What do 1 do when I die?" A will is arranged and the value of the estate is known. However, it is very well known that the family will not get it all, that Her Majesty in right of Canada and the Department of National Revenue will come tapping gently at the door.
I suggest that a single-premium insurance policy be purchased for $200,000. That would be liquid cash which could go immediately to the Department of National Revenue, and would not tamper with other assets, such as a home, perhaps real estate investments or even stocks or bonds. I ask the Minister, is there not some merit to that proposal? I ask him
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why he should be going after that particular one, because the cash value or the immediate premium which was paid would not be even close to the face amount of the policy. That is one example.
Another example concerns people with some means who say that when they die they will leave some money to the Red Cross Society, to their church or to this or to that body. But instead of leaving such organizations $5,000, they will buy $5,000 single-premium insurance policies, perhaps totalling $30,000 worth, and the church or organization could wait for it. Is there not some merit to such a policy? Yet the Minister will not consider any of those suggestions, as I understand it now. Would you let me have your comments on that, Mr. Minister?


Paul James Cosgrove: Mr. Chairman, I will not comment on the introductory comments of the Hon. Member, which 1 think were wishful thinking, as to where people will be sitting or standing two years hence. There is one thing that is certain: no matter where Hon. Members sit in the House, whoever occupies the Government benches will be pressed by the public for strategic investments and the use of Government resources to address the economy.
Second, the Hon. Member made reference to my profession and said that a few clients were receiving advice on this matter. As a matter of fact, I have no clients. Under the guidelines, a Minister does not continue his profession.


Stan Darling: No, I meant before, Mr. Minister.


Paul James Cosgrove: Of course, I have not practised my profession while being engaged in the Government.


Mr. Crosby:: One of a few.


Paul James Cosgrove: With regard to the first example concerning which the Hon. Member has asked for some assistance, a person with a large amount of money considering the purchase of a single-premium policy which would not qualify as an exemption, the answer is that he should look for another type of policy which is exempt so as to take him outside of the problem. He could do that by purchasing a 20-pay policy and keeping his money in the bank account or in whatever other instrument he thinks is more beneficial. It is possible that he might even be able to earn more interest on the money from some other instrument while he is making the purchase down the line.
In so far as a charity is concerned, and the Hon. Member's example was the Red Cross, the officials have advised that there should not be any concern because a charity is exempt. Therefore, transfer the annuity to the charity. The charity, being in an exempt category, would therefore not attract this provision of accrual either.


Stan Darling: Mr. Chairman, I appreciate the comments of the Minister. I am well aware, as the Minister points out, that an insurance policy with a 20-year payment or more or a whole life policy is not subject. In other words, the single premium
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will still be the best buy for an insurance purchaser in particular cases like that. It is true that the Minister can suggest that that is still not eligible, but it will certainly not fill the same bill. A single-premium insurance policy may show a charitable institution, a church or the Red Cross as beneficiary. Even if it had a substantial cash value, the cash value would, of course, rise as the policy remained in force, even though only one premium would be paid. At that particular time, in those cases the policy would not be subject to this tax on accrued interest. Would the Minister not consider the Department of Revenue to be another charitable organization? I understand that one can make a grant or a bequest to Her Majesty which can be considered a charitable donation. Why would "donations" to the Government not be considered in the same way?


Paul James Cosgrove: Mr. Chairman, in answer to the first question, in the situation referred to by the Hon. Member, provided that the ownership or control of the policy was transferred to the exempt organization, they would be taken without the accrual rules.


Roderick Blaker: Order. The House will be aware that last week the Hon. Member for Simcoe North and others raised a point of order. Before I recognize the Hon. Member for Calgary West, the Chair will deal with the point of order raised.
On Thursday, March 3, 1983, at the start of the proceedings in Committee of the Whole on Bill C-139, an Act to amend the statute law relating to income tax (No. 2), the Hon. Member for Simcoe North raised an interesting point of order on the procedural acceptability of Clauses 1 and 109 as they relate to paragraphs 1 and 151 of the Ways and Means motion adopted by the House on December 3, 1982, and upon which provisions Bill C-139 must be based. The Hon. Member then raised the question of the propriety to proceed with the consideration of Clauses 1 and 109 without a further Ways and Means motion.
The Hon. Member for Simcoe North, the Hon. Member for Edmonton West, who has many years of experience on the subject, and all the others who contributed arguments will appreciate the necessity for the Chair to attach the greatest importance to its consideration of this matter and to give it the researched study it requires.
During the discussions on the point of order, many commented upon the fact that such a Bill must be based on the provisions of a Ways and Means resolution, although it does not have to be identical, and that if such a Bill is found not to be in compliance with the resolution, a further Ways and Means motion would be necessary or the Bill would have to be amended so as to conform to the resolution. Citations 518 and 519 of Beauchesne's Fifth Edition and previous rulings given by Mr. Speaker Jerome were quoted to substantiate the arguments. The Chair agrees with and supports without hesitation the views expressed on the subject.

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But that is not the gist of the point of order now before us. The Chair has to determine if Clauses 1 and 109 of Bill C-139 are in accordance with, or go beyond the provisions of, paragraphs 1 and 151 of the Ways and Means resolution of December 3, 1982.
After a careful examination of Clauses 1 and 109 and the precedents, the Chair is convinced that, in both cases, the Bill is in conformity with the Ways and Means resolution and that the regular practice has been followed. There is no imposition of a tax not already covered by the resolution that would require the tabling and adoption of a new Ways and Means motion.
Many interpretations could be given, were in fact given and will undoubtedly be given in the future, on the consequences of Clause 1 of the Bill as it relates to the expression "automobile standby charge" and on the consequences of Clause 109 as it relates to the special tax of 12.5 per cent on certain corporations and the expression "preferred-earnings amount". But the Chair cannot be asked, nor can it be expected, to get involved in the interpretation game. It is sufficient for the Chair-and this is its only role-to be satisfied that the proper procedure has been followed and that Bill C-139 does not try to bring in the imposition of an additional tax not based on the provisions of the Ways and Means resolution.
The Chair has determined that the proper procedure was followed in accordance with the rules and practice of this House. I must therefore, with regret, rule that the Hon. Member for Simcoe North does not have a point of order and that the Committee of the Whole can proceed, in due course, with the consideration of Clauses 1 and 109 of Bill C-139.


Paul James Cosgrove: Mr. Chairman, on the issue just raised, I thank the Chair for the time and the research. Obviously, this is a precedent that will be useful to Members in future.
The ruling invites us now to consider how we should proceed, having had this initial question with Clause 1 dealt with. I would propose, if it is agreeable to Hon. Members, that we continue deliberation of Clause 5, the insurance provision, which we are now dealing with. Having concluded that, we could then return to Clause 1 and any agreed associated Clauses.


Roderick Blaker: 1 think the Chair should indicate to the House that there is a proceeding under way which is such that the Committee of the Whole is now considering a number of Clauses and Subclauses. That debate seems to have been agreed upon by the Committee but the impression I have is that the specific Subclauses have not yet been listed. Before I come to the point raised by the Minister of State for Finance, perhaps it would be more convenient to Hon. Members if the Chair could be informed as to precisely which Clauses and Subclauses of this Bill are not under debate, and which I will put to the House for its consideration on a question, in due course. For that purpose the Chair will recognize the Hon Member for Mississauga South.


Mr. Blenkarn:: Mr. Chairman, we have agreed with the Government to proceed with a listed series of Clauses. I could read these into the record. I think it might be just as easy for Hansard to take a list because there is a whole series of Clauses. A number of Clauses on the list that I would ask to be given to you, Mr. Chairman, have the letter "A" beside them. It is my understanding that the Minister intends to introduce amendments to the Clauses with the "A" beside them.
We would be happy to accept those amendments as moved and seconded by the Government and consider them at this point. When the vote takes place on the grouping of the Clauses, which we hope will be later today, the adoption or rejection of all of these Clauses including the amendments that have been proposed by the Government will be voted on.


Paul James Cosgrove: Mr. Chairman, that is agreeable to the Government.


Roderick Blaker: The Hon. Member for Mississauga South did not read the list of Clauses and Subclauses to which he made reference. The Chair has a copy, if the House wishes to proceed in that fashion. The list presently in the possession of the Chair includes a number of Clauses and Subclauses and also includes, as the Hon. Member for Mississauga South pointed out, provisions for amendments to be deemed to have been moved and seconded, those being designated by the letter "A" beside the particular Clause or Subclause. It is now proposed that that motion be made an order of the Committee. Is that unanimously agreed?


Paul James Cosgrove: Agreed.


Mr. Orlikow:: Mr. Chairman, we have had discussions and we are agreeable to that.


Roderick Blaker: It is so ordered. It is understood that it is the Committee's intention to debate all of those Clauses and Subclauses together. I think it is appropriate to go back to the Minister of State for Finance, who has suggested that in view of the ruling made earlier, when this set of Clauses and Subclauses have been disposed of, the House would then wish to revert to Clause 1. Is my understanding correct?


Donald Alex Blenkarn: Mr. Chairman, obviously we will have to come back to Clause 1. I think it might be appropriate for use to see how we go today and whether it might be expeditious to get some other small matters cleaned up throughout this day, because I can assure this House that there will be very extensive debate on Clause 1. Clause 1 is a matter which affects a great number of Canadians. We could commence discussion today. However, we might finish the Clauses we are presently debating, and in the course of discussions during the day we might agree what Clauses could be expeditiously carried. It may be Clause 1, but I do not think we should make any procedural arrangements as to where we go after that Clause until later today.
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M0)
Mir. Cosgrove: Mr. Chairman, that would be agreeable, but I would reserve for the time being until I have had an opportunity to discuss this matter with the Elon. Member for Mississauga South. For the time being the Government would argue that procedure requires us to go back to Clause 1 unless we have the agreement of the Committee to do otherwise. I am willing to discuss this matter with Members opposite. For the time being, in the absence of the agreement of Members, the normal course of events is to revert to Clause 1 when we conclude the matter before the Committee.
As a further convenience, we are attempting to look at other Clauses that might be related to Clause 1 and produce those to Members opposite with explanatory notes, and thereby expedite business by putting up related Clauses for discussion at the same time.


Donald Alex Blenkarn: Mr. Chairman, that is the ideal type of arrangement. When we group Clauses that are related to each other, we can properly debate and dispose of them, much the same as we are disposing of a very large group of Clauses now with respect to the insurance industry, the annuity industry and so on. That moves the Bill ahead. It shows co-operation on all sides and makes it possible for proper representation to be made without undue delay.


Roderick Blaker: Accordingly, debate is now proceeding on the group of Clauses which were brought forward for joint debate a few moments ago by the Hon. Member for Mississauga South and which were made an order of the Committee of the Whole.


Mr. Hawkes:: Mr. Chairman, I would like to go back to my first question of the other day. I indicated that I felt the Government was embarked on a course that would make it more difficult for people to build up assets in anticipation of their retirement. In the context of that discussion, the Parliamentary Secretary indicated, and I quote from Hansard:
I suggest to him, as a general answer in reply to his general question, that from our point of view accrual is the fairest way of measuring income and, thereby, measuring tax liability.
I would like to examine that as my starting point for today. From our point of view, the Government is embarked on a determination which we find in many places in recent Government legislation to tax people on assets that may lie on the books but have not yet been acquired or begun to be used. Therefore, I put forward the perspective that I see this as a very unfair way of taxing. I will begin with a very short question.
A number of Canadians take their after-tax dollars and purchase such things as gold or silver, a commodity which in time rises in value. Over the last decade it has risen enormously in value. Does the Government have any intention of taxing it every three years on its presumed accrual value as an asset?


Mr. Fisher:: Mr. Chairman, I understand that the accrual method is a generally accepted accounting method, and certainly by and large it treats assets similarly. For example,
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people with Canada Savings Bonds or people with savings accounts are both treated in the same fashion by using this method, even though one person has cash on hand and the other person only has the financial instrument. In both cases people are treated in the same fashion and are given equal and fair treatment by doing this.


Frederick James (Jim) Hawkes: Mr. Chairman, I come back to my question. Assume that I buy gold, silver, coins or stamps and hang on to them for a period of time. Will the tax Department require me to value them periodically and, if the value has gone up, is it the intention of the Government to tax me on that accrued value?


Paul James Cosgrove: Mr. Chairman, in addition to Clause 5 there are approximately a dozen other Clauses in the Bill before us dealing with insurance and annuities. We are talking about accrual of tax on income. We are really strained when we get into examples and questions dealing with capital gains. The discussion could become confused. We could stray too far from the matter before us.


Frederick James (Jim) Hawkes: Mr. Chairman, I would simply repeat my question. We are engaged in a debate. It is a chance to ask questions and find out where the Government principle is. They have taken certain assets of Canadians and decided to tax them. On the previous day the Minister indicated that the fairest way to measure income was on an accrual basis to make it available for taxation. I simply ask what other commodities do they intend to apply this principle to. Will it be applied to stamps, coins, gold and silver?


Douglas Glenn Fisher: Mr. Chairman, the intention in this Bill is not to do that. It is not mentioned at all. The Hon. Member will know that capital assets such as coins, stamps, property or gold are treated differently and are taxed differently from other investments and savings.


Frederick James (Jim) Hawkes: In other words, the Minister is saying there are different kinds of property. Physical property will be taxed differently from paper property.


Douglas Glenn Fisher: Mr. Chairman, the Hon. Member is correct. There are capital gains, corporate income and personal income. They are all treated differently for tax purposes. The Hon. Member is absolutely correct in that. He is being somewhat hypothetical in his description of treating capital gains on an accrual basis.


Frederick James (Jim) Hawkes: Mr. Chairman, is there any intention to apply the same kind of taxation principle to paper property, such as common or preferred stocks?


Douglas Glenn Fisher: No, Mr. Chairman.


Frederick James (Jim) Hawkes: Mr. Chairman, can I go one step further. Maybe I could use as an example school teachers who work for Government, in this case provincial, and belong to a pension plan. They make a contribution to that pension plan on a regular basis. Their contribution is allowed to grow. Once a

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year they get a statement regarding the increased value of their holding inside that plan. That seems to be analogous to the increase that might be found in a whole-life policy. Is it the intention of the Government to tax the accrual inside a pension plan?


Paul James Cosgrove: Mr. Chairman, I am told that the case which the Hon. Member raised is really designed and recognized as a tax-exempt shelter.


Frederick James (Jim) Hawkes: Mr. Chairman, we have in one case a plan that has collective elements to it. In other words, there may be 10,000 teachers who belong to it. It is a registered retirement plan of some kind for 10,000 people. Why do we allow 10,000 people to shelter that income from tax but we deny that opportunity to a single individual who wants to do it through some kind of life insurance policy or annuity plan?


Douglas Glenn Fisher: Mr. Chairman, the single individual has that opportunity by getting an RRSP. It may be helpful to point out to the Hon. Member that he is mixing apples and oranges a little bit here. We have made specific policy decisions about things like pension plans which make them distinct and different funds for tax purposes. Tax is allowed to be deferred on such funds, as the Minister just pointed out, for specific policy reasons. We believe tax deferral is a useful way to help people prepare for their retirement. The line of questioning the Hon. Member is following is interesting, but he is mixing apples and oranges in his questions.


Frederick James (Jim) Hawkes: Can the Hon. Member give me the characteristics of the kinds of plans on which the Government will allow deferral of income for retirement purposes? Must it be done the way the Government tells us to do it rather than the way we might choose to do it? Is that one of the characteristics, that we will follow Government orders rather than our own common sense?


Douglas Glenn Fisher: Mr. Chairman, the characteristics of these plans are that they are debated in Parliament and included in the law. They are a public decision, not the result of an accident or a hidden decision. They are the result of openly debated social and tax policy. That is what makes them exceptions to the rule.


Frederick James (Jim) Hawkes: But is the Government considering, for instance in a self-administered RRSP, that I could put any kind of assets in that plan that I want to and therefore keep them sheltered, or do I just have to put in those things that the Government tells me to?


Paul James Cosgrove: Mr. Chairman, in line with the last answer, these would be stipulated in the legislation and debated by Parliament as a matter of law.


Frederick James (Jim) Hawkes: Can I ask the Minister or the Parliament Secretary, if I get into one of these tax sheltered opportunity
systems which the Government will provide me with, a 20-year whole life policy for example, and then I want to convert somewhere in that middle period, how do I go about converting it to a different kind of asset without incurring tax? I do not want to take it into income but keep it sheltered, so what regulations will I have to follow?


Douglas Glenn Fisher: Mr. Chairman, it is quite clear that if you want to convert a 20-year policy into something defined as exempt under the law, then you will continue to be exempt. The taxpayer is simply required to research those instruments that continue the exemption. If, on the other hand, the taxpayer chooses, contrary to the example given, to go into a nonexempt instrument, then the investment will become taxable.


Frederick James (Jim) Hawkes: Will I be able to change my whole life policy, say, at the midway point from one company to another and avoid tax?


Douglas Glenn Fisher: I understand, Mr. Chairman, that the taxpayer in that case would become liable to tax. It would be deemed a surrender. This is something that was decided upon in 1969.


Frederick James (Jim) Hawkes: So if I stayed with the same company and changed policies I could avoid tax, but if I feel there is a different company which better meets my needs, I am going to have to pay tax?


Paul James Cosgrove: Yes, Mr. Chairman.


Frederick James (Jim) Hawkes: Why?


Paul James Cosgrove: Because of the provisions of the law of 1969.


Frederick James (Jim) Hawkes: Has the Government given any consideration to changing the law in 1983?


Paul James Cosgrove: No, Mr. Chairman.


Frederick James (Jim) Hawkes: Can the Government tell us why it has not considered changing the law?


Paul James Cosgrove: The amount of money recovered on surrender, Mr. Chairman, is income.


Frederick James (Jim) Hawkes: The amount of money recovered on surrender is income; is that what the Minister said?


Paul James Cosgrove: Yes, Mr. Chairman.


Frederick James (Jim) Hawkes: What is the definition of surrender? If I in fact change my policy within the same company, I do not surrender it; but if I change to a different company, I surrender it. Can the Minister tell me why there is logic in the word "surrender" in one case but it is absent in the other?


Paul James Cosgrove: No, Mr. Chairman. It was not my definition.


Frederick James (Jim) Hawkes: Is the Minister telling us that he in fact agrees with the current definition as it exists in law? It is one that he personally supports?


Paul James Cosgrove: Yes, Mr. Chairman.
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Frederick James (Jim) Hawkes: Can the Minister tell us why he personally supports it? The only reason given at this point is that it is a 1969 law. Tell me where the logic is in the fact that if I stay with the same company, I do not surrender; if I switch companies, if I go to a more efficient company, I have to pay tax because there is a definition which says I surrendered. What did I surrender?


Paul James Cosgrove: The difficulty is, Mr. Chairman, that the Government has no control over what the person does upon receipt of the money surrendered.


Frederick James (Jim) Hawkes: If it stays in the same company, the Government controls it? Is that the implication?


Paul James Cosgrove: Yes, Mr. Chairman. Provisions of the Act before us require that records be kept, that a person who holds a policy which falls within the provisions of the Act and the amendments before us would have to declare that as income if surrendered.


Frederick James (Jim) Hawkes: Let me go back to an issue raised the other day. To refresh the Minister's memory, matrimonial law in Canada is changing in the direction of a split of assets. On divorce, the courts will order a split of assets. Forty per cent of Canadian marriages are at risk, according to the most recent statistics. In other words, 40 per cent of the families in Canada are going to have to go through a court process in which assets have to be split.
Now, what we are doing here in law, as I understand it-


Douglas Glenn Fisher: We are not changing the practices.


Frederick James (Jim) Hawkes: -would be to require of Canadians in the middle of a divorce, when expenses are high, when emotional costs are high, that assets of this kind have to be split. The Government of Canada is then going to say they were surrendered, tax has to be paid, and there will be smaller amounts left for investment. In other words, the assets of a married couple will be reduced as a consequence of this law. Is that correct?


Paul James Cosgrove: Mr. Chairman, there have been some media reports about studies which presently show the incidence of success in marriage is deteriorating. My personal hope would be that this will not be a long-term experience, and therefore I do not accept the assumption that this is what will happen in the future, as the Hon. Member has done.
Secondly, as I indicated, the law governing how assets are split or whether they are to be split on dissolution of a marriage is a matter of provincial jurisdiction. The operation of the courts in that area is a matter of provincial jurisdiction, and for anyone in this House to comment on it would be pure hypothesis.


Frederick James (Jim) Hawkes: Mr. Chairman, I am not asking the Minister to comment on what the courts are likely to do. It is a known fact that the courts are ordering asset splits. I am asking the Minister, where a court orders a whole life policy asset to be
Income Tax
split, one which has been in place for ten years, and those people get the money from the policy split, first of all will that be viewed as a surrender? Let us go back to his term. Will that be a surrender? If I have to cancel the policy in order to split it, will it immediately be the case that I have surrendered it and therefore incurred a tax liability?


Paul James Cosgrove: The Hon. Member prefaces his remarks with "if', so it is truly hypothetical. I do not think it is terribly useful to try to prejudge or guess what any provincial judge is going to rule anywhere in the country.


Frederick James (Jim) Hawkes: At the ten-year stage of a 20-year policy, if I choose to cash it in and give half to my wife or to my ex-wife, will I have to pay tax?


Paul James Cosgrove: In that circumstance the amount taxable would be to the extent that the surrender value exceeds premiums. I would remind the Hon. Member that in that circumstance the parties would have available the $1,000 investment income exclusion.


Frederick James (Jim) Hawkes: Did the Minister just say yes, I would have to pay tax?


Paul James Cosgrove: I will repeat my answer. The tax would be to the extent that the surrender value exceeds the premiums. I would remind the Hon. Member that in the case he cites, the $1,000 investment income exclusion would be available.


Frederick James (Jim) Hawkes: In other words, the Minister is saying that if I have some other assets or income of that kind, the answer is yes. If my income does not exceed my deductions I do not have to pay tax, which is the basic principle of the tax system. I do not understand the reluctance to say yes.
Would the Minister consider an amendment to this Clause to give some relief to those people who are unfortunate enough to encounter court-ordered asset splitting in this area?


Paul James Cosgrove: No, Mr. Chairman. We believe that the provisions of the Act that deal generally with the disposition of assets, however ruled by whatever provincial jurisdiction, are sufficient.


Roderick Blaker: Order, please. The time allotted to the Hon. Member for Calgary West has expired. I understand that the Parliamentary Secretary to the Minister of Finance has a point of order.


Douglas Glenn Fisher: Mr. Chairman, I understand that in order to clarify matters you would like the list of Clauses and Subclauses that we are dealing with read into the record.
I understand that we are dealing with Clause 4 and an amendment to it; Clause 5 and an amendment; Clause 10; Clause 12(1), (5), (8), (9), and that there is an amendment to Subclause (9); Clause 18(1); Clause 22(2), (4), (10), (11) and (13) and that there are amendments to Clause 22, Subclauses (11) and (13); Clause 26(4) with an amendment; Clause

March 10, 1983
Income Tax
28(1); Clause 39(1), (2) and (3); Clause 47; Clause 52(6); Clause 53(2); Clause 54(2), (3), and (5) and that Subclauses (3) and (5) have amendments; Clause 66; Clause 67(2); Clause 73(1); Clause 96 with an amendment; Clause 102 with an amendment; Clause 110; Clause 118(8) and (9); Clause 128(2) and (7) and Clause 133(4).
Further, I would ask that those motions deemed to be moved and seconded by the Minister of State for Finance be printed in today's Hansard. There is a list in your possession, Mr. Chairman.


Frederick James (Jim) Hawkes: Mr. Chairman, I do not think it is normal for the particular Minister to move motions of that kind. I think someone else on the Government side should move them.


Roderick Blaker: There is no problem with that. The motions have already been accepted. The motion now being put is that the amendments be printed in today's Hansard. Is that agreed?


Some Hon. Members:: Agreed.


Roderick Blaker: Agreed and so ordered.
[Editor's Note: Amendments referred to above are as follows:]
That Subclause 4(8) of Bill C-139 be amended by striking out lines 19 to 22 on page 12 and substituting the following:
"terest in a prescribed debt obligation, an amount determined in prescribed manner shall be deemed to accrue to the taxpayer as interest on the obligation in each taxation year during which he held the interest in the obligation."
That Subclause 4(12) of Bill C-139 be amended by striking out lines 37 and 38 on page 13 and substituting the following:
"(12) Subsection (4) is applicable in respect of amounts that became receivable after December 31, 1982 in respect of the period after that date." That Subclause 5(1) of Bill C-139 be amended
(a)	by striking out lines 22 to 29 on page 14 and substituting the following: "holder has, under the terms and conditions of a life insurance policy that was not an annuity contract and that was last acquired before December 2, 1982, received the proceeds therefrom in the form of an annuity contract,"
(b)	by striking out lines 39 to 43 on page 15 and substituting the following: "holder has, under the terms and conditions of a life insurance policy that was not an annuity contract and that was last acquired before December 2, 1982, received the pro-"
(c)	by striking out lines 19 and 20 on page 18 and substituting the following: "contract described in paragraph (l)(d) or (3)(e) or a contract to which subsection (1), (3) or (4) or 12(3) applies or would apply in a year if the contract had a third anniversary in the year) last acquired by the taxpayer"
(d)	by striking out lines 34 to 49 on page 18 and lines 1 to 40 on page 19 and substituting the following:
Rules where	"(9) Where, at any time after December 1, 1982, a
premium paid	prescribed premium (other than a premium referred to in
subsection (8)) has been paid by or on behalf of a taxpayer in respect of an interest in a life insurance policy last acquired on or before that date, and
(a)	the policy is not an exempt policy, or
(b)	there has been a prescribed increase in any benefit on death under the policy,
this Act applies after that time with respect to his interest in the policy as if
(c)	subsections (1), (3) and (4) and 148(4), paragraph 148(2)(b) and clause 148(9)(e.2)(iv)(A) were read without reference to the words "last acquired after December 1, 1982";
(d)	subsection (1) were read without reference to paragraph (d) thereof;
(e)	subsection (3) were read without reference to paragraph (e) thereof:
(0 subsection 148(6) were not applicable;
(g)	subparagraph 148(9)(a)(ix) were read as follows:
"(ix) in the case of an interest in a life insurance policy (other than an annuity contract), the aggregate of all amounts each of which is the net cost of pure insurance in respect of the interest, as determined in prescribed manner, immediately before the end of the calendar year ending in a taxation year commencing after the later of
(A)	May 31, 1985, and
(B)	the end of the year before the year in which subsection 12.2(9) first applied in respect of the interest, and
before that time,";
(h)	subparagraph 149(9)(c)(ix) were read without reference to clause (A) thereof; and
(i)	all that portion of subparagraph 148(9)(e. 1 (iii) preceding clause (A) thereof were read as follows:
"(iii) that portion of any amount paid, after the later of May 31, 1985 and the time at which subsection 12.2(9) first applied in respect of the interest, under the policy with respect to"
and, for the purposes of this subsection, paragraph 148(10)(d) shall be read without reference to the expression "(other than a conversion into an annuity contract)".
Riders	(10) For the purposes of this Act, any rider added at any
time after December 1, 1982 to a life insurance policy (other than an annuity contract) last acquired before December 2, 1982 that provides for additional life insurance (other than an accidental death benefit) shall be deemed to be a separate life insurance policy issued at that time.
Definitions	(11) In this Section, paragraphs"
(e)	by striking out lines 2 to 14 on page 20 and substituting the following: "prescribed by regulation; and
"Third anniversary" (b) "third anniversary" of a life insur-"
That Subclause 12(9) of Bill C-139 be amended
(a)	by striking out lines 16 and 17 on page 49 and substituting the following:
"a life insurance policy, that is not an annuity contract, (otherwise than as a consequence of a death) or an annuity contract under which"
(b)	by striking out lines 33 to 36 on page 49 and substituting the following:
"(b) an amount determined in prescribed manner."
That Clause 22 of Bill C-139 be amended by adding, immediately after line 29 on page 61, the following Subclause:
"(4.1) Subparagraph 53(2)(a)(i) of the said Act is repealed and the following substituted therefor:
"(i) any amount received by the taxpayer after 1971 and before that time as, on account or in lieu of payment of, or in satisfaction of, a dividend on the share (other than a taxable dividend or a dividend in respect of which the corporation paying the dividend has elected in accordance with subsection 83(2) or (2.1) in respect of the full amount thereof)," "
That Subclause 22( 11) of Bill C-139 be amended by striking out lines 23 to 36 on page 63 and substituting the following:
"(r) where the property is
(i)	a share of a class of the capital stock of a corporation acquired by the taxpayer as a consequence of the death of a person (otherwise than by way of purchase),
(ii)	a share of the class referred to in subparagraph (i) acquired by the taxpayer after the death of that person, or
(iii)	a share substituted for a share referred to in subparagraph (i) or (ii), the aggregate of all amounts each of which is a dividend thereon received by the taxpayer (otherwise than pursuant to a transaction described in subsection 84(2)) on or before that time that can reasonably be considered to be as, on account or in lieu of proceeds of a disposition and in respect of which the corporation has made an election under subsection 83(2.1)."
That Subclause 22(13) of Bill C-139 be amended by striking out line 39 on page 63 and substituting the following:
March 10, 1983


Donald Alex Blenkarn: Mr. Chairman, I have a number of questions for the Minister. In his interpretation of Clause 10, will the Government now be able to collect income taxes from those individuals who are presently buying Treasury bills from the Government that are purchased at a discount and have no interest on the face of them? Will the Government send out T-5 slips in those cases?


Paul James Cosgrove: I am advised that the answer is yes, that they go on the accrual system.


Donald Alex Blenkarn: Will the Government send every individual who purchases Treasury bills, directly or indirectly, T-5 slips

March 10, 1983
Income Tax
and has the Government organized a method of keeping track of that type of investment?


Paul James Cosgrove: Yes, the regulations will provide for that. I qualify my answer by saying that there is a general obligation on persons earning income to declare it.


Donald Alex Blenkarn: Will the Government be able to prorate income and discount and will the T-5 slip specify what is income and what is capital? How will the Government do that with Treasury bills which vary in face value and worth by the minute, by the hour, by the month, by the day, and which are sold for periods of up to 364 days?
Will the Minister explain to the House how the Government proposes to collect that tax and how it proposes to determine who owns Treasury bills? How does it propose to keep detailed records of those Treasury bill transactions so that people who invest with the Government will finally pay some tax?


Paul James Cosgrove: Perhaps that question is best answered by repeating my last answer in reverse order. First, there is an onus on the taxpayer to declare income; second, the method by which he will be assisted in doing that will be covered by the regulations which will follow.


Donald Alex Blenkarn: For many years the Government has successfully been selling Canada Savings Bonds on a cumulative basis with the promise that if people buy the bonds, in six or seven years they will have doubled their money. This Act now requires people to pay income tax on the accumulating interest either annually or every three years. Will the Minister advise how the Government proposes to follow this form of taxation and why, in November, 1982, the Government proceeded to sell cumulative bonds without telling the purchasers that this would be a provision of the Income Tax Act which it then introduced on December 7?


Paul James Cosgrove: The accrual for those bonds would not come into place until 1985. I am told that the Bill before us was widely understood and, of course, the specifics of the regulations follow on the actions of the House.


Donald Alex Blenkarn: Will the Minister explain how the Government expects ordinary people to understand complicated Ways and Means motions which were changed and changed and changed again? Will the Government advise the House as to why, in making representations on the sale of Canada Savings Bonds, it did not specifically set out that the bonds would be taxable on an annual or tri-annual basis? Any Government offering anything to any person must in the normal course of events explain clearly and properly. Do we have a Government which proceeds to sell something without giving clear, open and complete explanations of what it sells in terms of its financing?


Paul James Cosgrove: Mr. Chairman, the Government will attempt to explain it to Canadians as best it can in a form which is understandable. I hope the Hon. Member for Mississauga
South will not criticize the Government for using funds in an attempt to explain things to people.


Donald Alex Blenkarn: On the Canada Savings Bond matter, has the Government set up the machinery to advise people, who presently hold cumulative Canada Savings Bonds purchased in November, on how to receive advise as to what in fact is the interest on the accumulating bonds? Bearing in mind that under Subclause (8) of Clause 4 it is the obligation of the taxpayer to notify the issuer of such a bond if he wants to receive advise as to what is the accruing interest. It is the obligation of the taxpayer. Does the Government have a system of keeping track of people who hold Canada Savings Bonds to bring to their attention that they must in fact advise the issuer of the bond, that is the Minister, whether they want advice concerning the accruing interest?


Paul James Cosgrove: My officials advise me that the example used by the Hon. Member for Mississauga South pertains only to the case of annual accruals. In the other cases, as I have indicated, the tax does not fall in until April, 1986. Of course, it is a matter which is under the jurisdiction of the Minister of National Revenue. Also it is a matter which would follow only upon passage of legislation by Parliament and the drafting and promulgation of regulations, bearing in mind the need to attempt to bring provisions in a simplified manner to the attention of Canadians generally so that they could be understood.


Donald Alex Blenkarn: In view of the relatively small amounts of money which people are allowed to invest in Canada Savings Bonds, why has the Government decided to use this complicated accrual demand of payment of tax on interest every three years, with provision for it to be, at the taxpayers' option, taxable every year? Why has it not left the law the way it is and collected the tax on the income which investors in Canada Savings Bonds will have to pay in the normal course? That is the way the law is now. Why has the Government decided on relatively small amounts, such as the Canada Savings Bonds that it sells to people on a restricted basis, to insist upon this rather cumbersome, complicated and indeed unfair method of collecting taxes on those bonds?


Paul James Cosgrove: I am advised by my officials that we are doing what many people are presently doing administratively in order to take advantage of the $1,000 deductible. We are doing it because of the revenues which will be gained. Finally, as I indicated at the outset, deferral unlimited becomes unlimited non-payment of tax, and to be fair to all taxpayers there should not be one segment of taxpayers using a particular method which can put off tax and therefore avoid tax over a long period.


Donald Alex Blenkarn: If that is the case, why does the Government sell cumulative bonds? Knowing that people could buy these bonds and defer tax over a long period of time-indeed, the Minister said forever-why would the Government have ever sold that type of security in the first place? Is it not true that the Government sold this security to raise money? Is it not also
March 10, 1983

true that the Government encouraged people to save money? Why is the Government now encouraging people not to save?


Paul James Cosgrove: My officials advise that it is a better instrument for people. The proof of the pudding is that Canadians are buying them. In so far as people saving or not saving, we know it is a mixed issue. Canadians are saving at a record rate. Is that good or is that bad? Does it help spur the economy? Is the use of savings productive? Of course, that is not a matter for the Clause which is presently before us.


Donald Alex Blenkarn: The Minister said that people are escaping vast amounts of taxation. We have talked about Canada Savings Bonds. Now I would like to direct the Minister's attention to guaranteed investment certificates. He may know that one way to handle small inheritances to children, situations where a grandmother, for instance, wants to look after her grandchildren in her will and leaves them $500 or $1,000, is for a trustee to buy a cumulative guaranteed investment certificate, maturing on the child's eighteenth or twenty-first birthday, as the case may be. Why does the Government insist upon complicated taxation of such a GIC? What is the point of it? What is the Government trying to accomplish? Is it fairness by some mythical concept of fairness determined on the twenty-fifth floor of the Place Bell Canada?


Paul James Cosgrove: If a taxpayer wants to pay the tax, he can choose to buy an instrument which pays interest annually. It is really a choice of the trustee in each individual case.


Donald Alex Blenkarn: Does the Minister not appreciate in the instance I have given him that in order to turn the funds over to the infant, if there is not a provision for someone to give a receipt as a trustee, one must go to court to obtain a court order? When the amount of money is $500, $1,000, or $1,500, to burden the estate with obtaining a court order for a receipt in that amount would be unconscionable. The way these matters are handled is by the purchase of relatively small cumulative GICs running until the birthday of the beneficiary, so that the beneficiary can give the receipt when he or she reaches legal age. Why is the Minister being so stubborn?


Paul James Cosgrove: Mr. Chairman, there are a number of things we should consider in the example. First, the child conceivably would not have any taxable income. Second, if that were the case and we are talking about the very small amounts the Hon. Member used in his example, the child would be able to take advantage of the $1,000 exemption. Finally, if the difficulties are additional costs because they are required to go through probate or estate procedures governed by provincial jurisdiction, of course the answer is to ask the provincial jurisdiction to try to streamline its operation of court procedures so as to do away with this unnecessary and unproductive cost.


Donald Alex Blenkarn: The Minister knows better than that. That is, without a doubt, the dumbest answer I have ever received. The Minister is a lawyer. He knows that when a trustee pays money he has to have a receipt and that an infant cannot give a receipt either for income or for capital. To say that the trustee can turn the income over to the child and obtain a
Income Tax
receipt from the child, the Minister knows is not the case in law. The only way the trustee can do that is by obtaining a clearance from the court. The Minister knows that the cost of going to court on a matter of $500, $1,000 or $1,500 is ridiculous. The Minister knows better than that, and to give us the dumb answer that he gave insults this Parliament. To ask a provincial Government to change the estate laws of a Province to accommodate the stupidity of this Income Tax Act is also a dumb answer. Let us get on to something more.


Mr. Cullen:: More stupidity.


Donald Alex Blenkarn: Mr. Chairman, can the Minister tell us what is to prevent people who have large amounts of money and want to buy annuities from going to every other jurisdiction in the world prepared to sell annuities without having the tax on the income of those annuities paid out on an accrual basis? The Minister knows that in the United Kingdom, the United States and in every other country annuities are not taxed on an accrual basis; they are taxed when the annuity is paid. What really prevents people from buying their annuities elsewhere? I really do not want the Minister to tell me that because they are Canadians they have to declare their foreign annuities, because he knows, I know, and we all know that they will not do it and the Government will never collect the taxes.


Paul James Cosgrove: Mr. Chairman, the Hon. Member has admonished me not to say that they are foreign annuities subject to the tax provisions wherever they are held and in whatever country, and I must say that because I would be tolerating or condoning the breach of obligation of some people whom he said do not declare income. Therefore, there is no income realized.
I am told by officials that indeed if you check the records and speak to the Minister of National Revenue you will find income in such cases is declared, as it is, of course, by many Canadians. I would respectfully suggest that if the Hon. Member knows people-I do not know whether they would be clients-not doing that, then he should bring to their attention the provisions of the Income Tax Act.


Donald Alex Blenkarn: Mr. Chairman, the Minister knows that people will pay tax when they receive the income. What we are talking about is imputed income that cannot be received, that is not received and will not be received. When people have money which the Minister defines as income but which no one else in the world defines as income, they will not pay tax until they receive that income. If the money is coming from a foreign source, they will pay the tax when they receive it from the foreign source. Will the Minister tell me how he expects to collect this? Is not the effect of what we are doing with respect to annuities driving capital out of Canada, forcing people who want this type of investment to go offshore, away from Canada? When they get used to going away from Canada to invest their money, I can assure the Minister they will have lots of other opportunities to do that. Why is this provision in the Act

March 10, 1983
Income Tax
when the Minister knows that it is not in any other income tax provision in any other jurisdiction? Why only in Canada do we try to drive capital out of the country?


Paul James Cosgrove: Mr. Chairman, if the Parliament of Canada in its amendments to the Income Tax Act defines the capture of income in accordance with the accrual method as set out in the amendments here, that will be the law of Canada. The Hon. Member, although he disagrees with it and has given some philosophical reasons why he does not agree with this method of identifying income for revenue purposes, still, I am sure, as a professional would have to draw this law to the attention of anyone who asks for his professional advice. It is not the whim of the Minister that is the law but the Income Tax Act of Canada, under which people are expected to conduct their business affairs.
In so far as what attracts people to make choices as to where they invest, I respectfully submit that the method under which income tax is identified and paid is only one element in a decision a person would make. The rates themselves are probably the predominant factor, but there could be many others and it would be conjecture and an individual decision for a person making that choice.


Stan Darling: Accrual interest is cruel.


Donald Alex Blenkarn: Mr. Chairman, I want to advise the Minister that legally people can set up an offshore, non-resident trust to buy an annuity. They can buy an annuity from New York Life in New York, Occidental Life in California, or by just driving to Buffalo and seeing a friendly agent. They can set up the non-resident trust in which case the income goes to the trust, and it is perfectly legal. They are not required to pay the accrual on the income from that annuity. That can be done with insurance companies who operate in this country through their foreign subsidiaries or with a foreign company. The arrangements can be organized, I am sure, through any lawyer. Any investment adviser will advise them how to do it.
The Minister is not at all preventing people from buying accrual annuities; he is allowing people to buy accrual annuities in other countries without any tax problem in Canada whatsover. Indeed, there is nothing he can do in Canada to catch the tax accruing on those annuities. All the Minister has done in the amendments is to drive investment funds out of the country. There is absolutely no purpose to it. It is a grasping, foolish idea conceived on the twenty-fifth floor or thereabouts of Place Bell Canada. The Minister has not thought about it, he has not worked it through. He has also been told by insurance companies and those who sell annuities everywhere. What he is doing to deprive companies operating exclusively in Canada from selling those annuities and investing the proceeds in long-term investments in Canada. The Minister has not done anything for Canada. He has not done anything for the income collection system. All he will do through these provisions is to drive money out of the country.
If this Section passes, his officials might be very happy, but I will tell him and his officials right now while they are listening that these provisions will be changed by the next Conservative Government. We want investment in Canada. We want people to invest in Canada. These provisions do not allow this. All they do is drive money out of the country.


Some Hon. Members:: Hear, hear!


Paul James Cosgrove: Mr. Chairman, the flowery language used by the Hon. Member for Mississauga South does not at all accord with actual experience in the sale of annuities by major Canadian insurance companies. I invite the Hon. Member to look at the experience of sales of major Canadian companies, and I think he will agree that perhaps his flowery interpretation of the implication of this law is, indeed, just that, a flowery interpretation.
The Hon. Member raises a point where he feels-I do not know on whose legal advice-that there may be high-priced lawyers or high-paid tax accountants who, upon payment of these fees, can attempt to assist otherwise well-heeled taxpayers find some way around the provisions of the Act. Of course, each individual case would have to be analyzed by Government lawyers to find out under what category that kind of advice and those kinds of schemes would fall. I cannot pretend to offer any kind of judgment on the scheme that the Hon. Member has just put forward. Obviously, officials and lawyers employed by the Government would have to know whether those are evasion methods, avoidance or fraudulent methods. One thing we can all be assured of is that it will be costly to the taxpayer who is employing those types of high-paid accountants.


Frederick James (Jim) Hawkes: Mr. Chairman, could the Government share with us their estimate of the impact of this legislation on the formation of capital pools?


Paul James Cosgrove: As I indicated earlier, we have some 12 or 18 complicated Clauses before the House dealing with the implication of income tax and the philosophy in the area that the Hon. Member wishes to investigate. I think that it is so far removed from the work that the House has before it that I am reluctant to get into these kinds of philosophical discussions.


Frederick James (Jim) Hawkes: Can the Minister tell me whether or not the Government has an estimate of the impact of these changes on the formation of capital in this country?


Paul James Cosgrove: I repeat my last answer, Mr. Chairman.


Frederick James (Jim) Hawkes: I will repeat my question. Does the Government have an estimate? Have the Government's officials looked at the possibility that these tax changes will affect the formation of capital pools in this country? Do they have an estimate?


Paul James Cosgrove: I will have to repeat my last answer, Mr. Chairman.
March 10, 1983


Frederick James (Jim) Hawkes: Mr. Chairman, I guess we have to assume no.
I find that to be very disturbing. I think it is crystal clear that one of the difficulties is that $18 billion worth of capital has been chased out of the country simply because of one change in federal policy.
I think it is important that all Members of Parliament understand whether or not the Government has looked at the potential impact of this policy on the formation of capital. Without capital, it is not possible to modernize, increase productivity and get new export businesses started. Certainly, the life insurance industry and the annuity businesses have been prime sources of capital to the private sector for expansion, development and productivity.
Has the Government looked at the probable effects that this tax legislation will have on the formation of capital that will help get the economy going again? If it has not looked at it, will it?


Paul James Cosgrove: Mr. Chairman, we are willing to consider that in another forum and in a more appropriate exchange.


Frederick James (Jim) Hawkes: May I examine the implication of the word "appropriate" with the Minister. To this point, we have a current law which has resulted in particular types of businesses. What the Minister is asking us to do in Committee of the Whole at some point in the next few weeks is to pass a change in the law. How can Members of Parliament be expected to decide how to vote on those changes if the Government has not shared with us the implication of those changes for Canadian society?
My colleague from Mississauga South has raised the issue of the potential impact of this legal change on the formation of capital. The formation of capital lies at the heart of our economy. How can the Minister indicate that there is a more appropriate time or forum for information of that kind than right here today, before we have to vote on whether these changes would be good for the country?


Paul James Cosgrove: Mr. Chairman, the Parliamentary Secretary has already expressed an opinion on it. How can the Hon. Member say that we have not made the opinion of the Government known to the Opposition? It is obvious that the Hon. Member disagrees with it. Why does he not say that? The opinion of the Parliamentary Secretary is known to the Hon. Member.
Second, it would seem to me that the more appropriate forum by far would be, for example, in the Standing Committee on Finance, Trade and Economic Affairs dealing with the borrowing authority Bill, C-147, which deals with capital formation and the like. That matter will be before the Committee either this week or early next week. The Minister of Finance will be available. I suggest that the detailed analysis of movement of capital is more germane to that kind of exercise.
Income Tax


Frederick James (Jim) Hawkes: May I ask the Minister how much capital has been formed in the last year to four years through the industries that are being attacked by this tax law?


Paul James Cosgrove: Mr. Chairman, I have to repeat my last answer.


Frederick James (Jim) Hawkes: It is a totally different question. How much money has been raised for capital purposes through these industries which are under attack from this tax law?


Paul James Cosgrove: I have to repeat my last answer, Mr. Chairman.


Frederick James (Jim) Hawkes: The last answer was that the Parliamentary Secretary gave us an opinion. I am simply asking the Department of Finance officials to tell us how much money has been raised over the past five years, or in the period for which they have statistics. Do they have that information?


Paul James Cosgrove: I have to repeat my last answer, Mr. Chairman.


Frederick James (Jim) Hawkes: A stonewall makes me stubborn, Mr. Chairman. I can get up and down for seven days.
Perhaps the Minister can take those questions under advisement. We will be back at three o'clock and perhaps the Minister can be more forthcoming about capital formation at that time. I will switch topics for now, but I will come back to it after three o'clock so that he will have a couple of hours to do some research and put the twenty-fifth floor to work.
One of the aspects that we have not yet dealt with is the case of small businesses. Quite often, they are entered into on a partnership basis when two people form a small business. As part of that small business arrangement, they frequently take out a life insurance policy so that, in the event of the death of one of the two partners, the business can be taken over by the surviving partner. The survivors of the person who dies are compensated.
As the law exists now, the tax liability which would accrue in those situations can be determined in two ways. The tax liability can lie on behalf of the surviving partner or it could be the deceased partner's family who accrues whatever tax liability there is. If we pass the law as the Minister presently proposes, that choice will be taken away. The tax liability will accrue to the survivor's family.
Could the Minister share with us his reasons why he wants to take the choice away from people in that situation and put it on the heads of the surviving family to pay the tax?


Paul James Cosgrove: Mr. Chairman, the reason would be to prevent deferral. Once the estate becomes, for time immemorial, the beneficiary of the proceeds, then the money would fall in. The provision did present some difficulty to the industry at the outset. I know now that it has been accepted, for example,

March 10, 1983
Income Tax
by the Life Underwriters Association of Canada. I suppose it includes the underlying philosophy behind the Section.
I refer the Hon. Member to a letter dated February 2, 1983, written by the Chairman and Chief Executive Officer of the LUAC which concludes that "the presentation of the agreed upon amendment resolves to our satisfaction the concern of the Life Underwriters Association of Canada relating to corporate-owned life insurance and the capital dividend account issue". I would be pleased to make a copy of this letter available to the Hon. Member.


Frederick James (Jim) Hawkes: I thank the Minister for a copy of the letter and for his assertion that the salesmen of life insurance are satisfied with the provision. The issue which I bring to the Minister's attention concerns whether or not the owners of small businesses who buy this kind of life insurance are happy with this change in the law. Up to this point, and including those who are grandfathers, two partners can make a decision on where the tax liability should lie, on the survivor or on the family of the deceased. This change in the law takes the option away and states that the tax liability will be borne by the family of the deceased. These people would pay it as compared to the survivor who has income earning opportunities. It is nice that the life insurance industry is happy. However, what about the partners who actually end up paying the tax? Have you considered them and are they happy?


Paul James Cosgrove: Mr. Chairman, of course, the life insurance salesmen do not act in a vacuum. They act on behalf of their clients, on behalf of the very people to whom the Hon. Member is referring. The life insurance salesmen do not act for the life insurance companies; they act for their policy-holders, for the people who are affected. I must put great store by and stock in the fact that the underwriters have indicated that they are satisfied. Therefore, their appreciation of the market and of their clients is that it serves that situation adequately as well.


Frederick James (Jim) Hawkes: Is the Minister indicating that the life insurance industry approached him and asked him to change the law? Was it inadequate before?


Paul James Cosgrove: I would merely draw the Hon. Member's attention to the letter which I have just produced to him, which states exactly that, that the underwriters are in agreement with the amendments which are before us on this issue.


Frederick James (Jim) Hawkes: Let us not confuse questions. Did the life insurance industry approach the Minister and ask him to change the law in any way? As I read this letter, they are saying that it was a very bad law which the Minister proposed in the first instance, that he is now ready to modify it and it will be less bad and will be satisfactory.


Stan Darling: That's more like it.


Frederick James (Jim) Hawkes: My question is, did they come to the Minister a year or two ago and ask him to change the law because the
law, as it now exists, is unsatisfactory? The letter does not say anything about the current law being unsatisfactory. Did they tell the Minister that verbally?


Paul James Cosgrove: Yes, Mr. Chairman.


Frederick James (Jim) Hawkes: They told the Minister verbally, some time ago, and asked him to make a change in the law affecting corporate-owned life insurance?


Paul James Cosgrove: Yes, Mr. Chairman. They agreed in principle that the issue of deferral was not intended by the provisions of the original Act, and they agreed with the movement of the Government to attempt to overcome that potential abuse.


Frederick James (Jim) Hawkes: In other words, the life insurance industry has been lobbying the Minister to do something about tax deferral. Is that the implication?


Paul James Cosgrove: I am hesitant at this point to get into definitions with the hon. gentleman as to what he considers to be lobbying.


Douglas Glenn Fisher: Carrying it to absurdity.


Frederick James (Jim) Hawkes: Those in the industry have been speaking to the Minister and offering their support for changing tax law to get rid of some of the deferral principles. The Minister has the support of that industry. Its members want you to get rid of those deferral principles. Is that what the Minister is saying?


Paul James Cosgrove: Yes, Mr. Chairman.


Frederick James (Jim) Hawkes: Well, they have not lobbied me or sent me information.


Douglas Glenn Fisher: That's because you were not over here.


Frederick James (Jim) Hawkes: Let me return to an issue which we barely got into in my previous round. It concerns the issue of policy conversion. The Minister has acknowledged that if one stays with the same company and converts from one kind of policy to another, it is possible to avoid surrendering the policy and therefore incurring tax liability. However, if one changes companies, it is not possible to avoid the concept of surrender and therefore the tax liability. It strikes me that this has implications of considerable magnitude for any new company which would like to enter this field, which would like to provide Canadians with a better and more efficient policy, with a better bang for their buck. In effect, what the Minister is asking Hon. Members of the House to do later this day is to approve a change in tax law which would really guarantee existing companies something approaching a monopoly, and certainly an advantageous position in terms of future business. Is the Minister anxious to reduce the competition in this field? Is that one of the purposes of the change in tax laws?


Paul James Cosgrove: Mr. Chairman, of course, in proposing to the House the amendments to the various Sections which we have before us now in a cluster group, we have many opportunities for consultation with the industry, both with the CHLIA and LUAC. Many Hon. Members have been canvassed by their
March 10, 1983

constituents, individual life insurance salesmen, officers of companies and the like. I have met with representatives of CHLIA and LUAC on numerous occasions in the last four months. The Minister of Finance has met with the representatives of the industry. We have not been requested to make the change or to find some difficulty with the proposals which have been flagged by the Hon. Member.
Quite frankly, I do not know why the industry would not come forward with the case which has been presented by the Hon. Member. I would only reason that since the changes have been before the industry since November of 1981, they have surely not overlooked this provision. If they have had some difficulty with it, they would have let Hon. Members know of their problem with it.
There could be many reasons why the industry is not interested in this subject. One might be self-interest, I do not know. Maybe companies feel that without adopting the approach of the Hon. Member, it would tend to secure policyholders with each individual company and thereby would avoid cross-company movement. However, I do not know. Maybe they have decided it is a good feature in the industry.
This much I do know, and that is that the principle which the Government is applying here, and that is that we treat of whatever income we calculate is derived flows upon surrender, that that income is treated as receipt of any other income. Therefore, perhaps the industry recognizes that in that case we should not really be trying to differentiate between income in this industry and income which falls into a person's use through various financial instruments.


Roderick Blaker: I will recognize the Hon. Member for Calgary West on a brief and last question.


Frederick James (Jim) Hawkes: Mr. Chairman, I may take a little more time this afternoon to follow up this subject, but I think it is fair to say that it is the business of Government and certainly the business of Parliament and the Parties to protect the consumers' interest. It is a legitimate purpose of any trade association or any gathering of that kind to protect the interests of those in their membership.
In the context of our current discussion, I would be quite surprised if the life insurance industry had indicated to the Minister that it wanted a change in the law which would encourage more competition for a market which may already be saturated. In those cases, enlightened self-interest would indicate that one protects one's share of the market.
I am just wondering whether or not the Minister will consider the issues I have raised between now and three o'clock, and think through whether or not he would like to move some other amendments in relationship to them.
I point out a wider issue of principle and practice which is coming at us down the road, hopefully in the not too distant future. One of the problems with pensions in Canada is portability. We are going to have to find societal mechanisms
Income Tax
that enable people to transfer their pension credits from one location to another and from one kind of plan to another. This issue I am raising in relation to this specific law is perhaps the tip of the iceberg. When people want to change from one company to another, the Government is saying that they cannot do that without incurring tax liability. That is making an individual a captive for life of a single company which may have a poor performance over time.
I am simply asking the Minister, now that the issue has been brought to his attention, hopefully in a forceful way, whether or not he can use the creativity of the twenty-fifth floor to find a mechanism that would allow Canadians freedom of choice, without penalizing them in the tax system simply because they want to change companies. Would the natural instincts of the Minister be in that direction, if he could find such a mechanism?


Paul James Cosgrove: Mr. Chairman, I think that when the industry representatives, LUAC and CHLIA, have an opportunity of reading the blues and the introductory statement by the Hon. Member, they will be scandalized by his statement that they do not act in the best interests of the clients they serve or that they do not exercise a trust on behalf of the policyholders they serve, in an industry that has served this country and has been a leader in the world. To make that kind of statement, that the industry acts in its own interest, is in my view nothing short of scandalous.


Frederick James (Jim) Hawkes: Mr. Chairman, on a point of order, I would encourage the Minister to read the blues. He has asserted that I said certain things which I did not say, and I would like to draw that to the attention of the House. I find his behaviour and his assertions scandalous.


Mr. Bosley:: Mr. Chairman, I would like to return to the earlier comments made by the Hon. Member for Mississauga South with regard to annuities and the ability to shelter annuity moneys. Perhaps I could ask the Minister some straight questions of fact.
It is true, as I understand it-and I would like the Minister's comments-that if someone of my age had inherited a sum of money and chose to buy an annuity for my retirement, under the provisions of this Act, if I buy that as an annuity investment to look after me when I am elderly, this Act says that the Government requires that I pay tax on the investment effect of that annuity every three years or every year. But it is also legal for me to invest that money in this same form, an annuity instrument, offshore in a trust, and not pay Canadian tax, quite legally; in effect, defer the tax until the whole investment vehicle pays me money and then pay tax when the annuity pays me. Is that correct?


Paul James Cosgrove: No, Mr. Chairman.


John William Bosley: How is it not correct?


Paul James Cosgrove: Mr. Chairman, it is not correct because of the inaccuracies of the assumption of the Hon. Member. I do

March 10, 1983
Income Tax
not know whether he was present when I answered the question by the Hon. Member for Mississauga South dealing with the offshore trusts. We do not believe that the example he used is one that will be found to be supported as a valid method of avoiding the provisions of the Act.


John William Bosley: Mr. Chairman, this is an important point. I would like to ask the Minister if he can tell me, since the vehicle is to appoint a trustee in an offshore country and for that trustee to acquire the annuity on behalf of the trust, how that is illegal under Canadian law?


Paul James Cosgrove: Mr. Chairman, the Hon. Member and I as Minister would have to have legal advice on that matter.


John William Bosley: Mr. Chairman, has the Minister had legal advice to confirm that what he is saying is correct, that it is not legal?


Paul James Cosgrove: Mr. Chairman, the matter is being explored by the Department.


John William Bosley: Mr. Chairman, this is specifically important because, as the Minister may know, there is a company in the Bahamas, Casuarina, which has since the budget of November, 1981-or certainly since 1981-attracted $80 million of Canadian investment money to that jurisdiction precisely to avoid-avoid is an unfair word, Mr. Chairman-but precisely because of the treatment proposed in this legislation.
My question to the Minister is, is the Minister saying that Canadians who have shipped money to the Bahamas to be invested in that trust vehicle, in that company, to avoid the accrual effect that this Bill proposes on annuities, have broken the law of Canada?


Paul James Cosgrove: The Department is looking into it, Mr. Chairman, and it is possible.


John William Bosley: Mr. Chairman, my final question is this. Will the Minister make sure that the House sees that information as to whether or not it is illegal. If it is not illegal, as many Canadians and Canadian experts believe it is not, if it finally turns out to be the case that this method of sheltering annuity investment is legal, bona fide and proper, which will mean that this method will be used increasingly by Canadians to ship money out of this country, will the Minister undertake to reverse the provision in this Clause?


Paul James Cosgrove: The question is entirely hypothetical, Mr. Chairman.


Stan Darling: Mr. Chairman, if I could follow the question which I put earlier this morning regarding the single-premium insurance policies which would be taken out by an individual and made payable to a recognized charity, the Minister informed me that in this case there would be no tax collected
on this premium. Since that statement was made, I have been informed that even though the original policyholder would not have to pay tax, the beneficiary, the charitable institution, would have to declare the income each year, beginning from the year that the policy was issued, even although no money was, obviously, received. Is this correct?


Paul James Cosgrove: No, Mr. Chairman. I would like to reassure the Hon. Member that the information that he has received is inaccurate. I can only repeat that the charity is exempt under Section 149.


Stan Darling: Mr. Chairman, do I understand then that there will be no money paid by the policyholder nor will the recognized charity have to declare part of the premium as income each year?


Paul James Cosgrove: That is correct, Mr. Chairman. That is again providing, as I have indicated, that there is a transfer in ownership to the charity.


Donald Alex Blenkarn: Mr. Chairman, the Minister mentioned, in reply to the Hon. Member for Don Valley West, that the Government was looking into the legality of certain trusts that had already been set up to avoid the accrual rules in this Bill. The Member for Don Valley West mentioned a trust called Casnarina that is deliberately advertising and collecting Canadian savings and has since November, 1981 collected at least $80 million of Canadian savings to avoid the very rules we are now discussing. The Minister has said that the Department is looking into the matter and has an opinion, or is in the process of having an opinion. Will the Minister undertake, prior to three o'clock, to deliver to this side and to the House the details of that opinion?


Paul James Cosgrove: Mr. Chairman, the difficulty in answering the question is that I am advised that the company referred to has been doing this kind of advertising regarding trusts for the last six years. It does not spring from this budget at all.


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


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


[Stage Direction]
AFTER RECESS

The House resumed at 2 p.m.
March 10, 1983

Mr. Marcel Roy (Laval):: Madam Speaker, I wish to draw the attention of my colleagues in the House to the contents of a report by the Royal Canadian Mounted Police according to which in 1981, Canadians spent more than $8 billion on drugs. Some three million consumers, one third of whom are teenagers, spent $5 billion on soft drugs, while $2.5 billion was spent by 20,000 heroin users, and 225,000 children thirteen years and over spent $475 million on cocaine.
Madam Speaker, I wish to inform Hon. Members that to help children avoid drugs, there is a brochure available called "Les drogues . . . parlons-en!", prepared by young people belonging to a non-profit organization called ACCES. This brochure which contains topics for discussion received the approval of famous hockey player Michel Bossy, who allowed his name to be used free of charge to help warn young Canadians against the use of drugs.


ABORIGINAL RIGHTS
Mr. Stan Schellenberger (Wetaskiwin):: Madam Speaker, 1 am greatly disappointed by the attitude that the Government has adopted toward Canada's aboriginal peoples. Throughout a year during which the Government should have been negotiating with the aboriginal peoples to arrive at a mutually acceptable position that could be presented to the Provinces for ratification at the impending constitutional conference, it has neglected its responsibility.
Instead of coming forth as the advocate of aboriginal rights, a position that would have been a source of pride to all Canadians, the Prime Minister (Mr. Trudeau) has adopted the role of moderator between vying interests, those of the Provinces and those of the aboriginal peoples. Attention due to the identification and definition of the rights of Canada's aboriginal peoples has been deflected to lesser issues.
To ensure that due consideration is given to safeguarding the rights of these people, a process to continue the constitutional discussions with the full participation of the aboriginal people must be entrenched in the Constitution by amendment, at the constitutional talks next week. Only in this way is it possible to ensure that a satisfactory definition of aboriginal rights will be entrenched in the Constitution within a reasonable time.


QUEBEC-CONSEQUENCES OF NEW HYDRO-QUEBEC PROJECT ALONG LACHINE RAPIDS
Mr. Raymond Savard (Verdun-Saint Paul):: Madam Speaker, recently, Hydro-Quebec announced that a new 500 megawatt power station would be located along the Lachine Rapids on the side of the St. Lawrence Seaway. Madam Speaker, since we now have a power surplus and since the location in question happens to be the most beautiful spot on the St. Lawrence in my riding, I think it would be a disaster to carry out this project. We must consider the fact that the Lachine Rapids are in a recreational area where thousands of people go fishing and where fish, especially various kinds of trout, have always spawned, and that this project would therefore eliminate a natural resource and therefore would be environmentally unsound. Diverting the Rapids would do away with the streams bordering the riding of Verdun-Saint Paul, and this would also be environmentally damaging. The ridings of Verdun-Saint Paul and LaSalle have a number of plans for developing the river, and we think it would be a disaster to divert the Lachine Rapids to carry out a project which will not be needed for the next twenty years.


INCOME TAX ACT
Hon. Roch La Salle (Joliette):: Madam Speaker, on December 14 of last year, I put a question to the Minister of Finance (Mr. Lalonde) about what I imagine was an oversight in Bill C-139, where it identifies professions in Clause 16(2). On behalf of the 2,000 notaries in the Province of Quebec, I pointed out that notaries had not been included, and at the time I asked the Minister of Finance to ensure that this profession would be listed in the legislation. We are now in Committee of the Whole and there has still been no amendment to that effect. Yesterday, I mentioned the fact to the Minister of Finance and the Minister of State (Finance) (Mr. Cosgrove), and 1 was given the assurance that an amendment would be tabled. I therefore hope, on behalf of those 2,000 notaries, that at last there will be a very clear indication that notaries constitute a profession in Quebec.


AIR TRANSPORT
Mr. Andre Maltais (Manicouagan):: Madam Speaker, since Quebecair's financial statements have been brought to the

March 10, 1983
attention of Air Canada and the Minister of Transport, and the Quebec Parliamentary Commission on the future of Quebecair will finish its proceedings on March 24, I wonder, Madam Speaker, whether the Minister of Transport would not consider meeting the press or the people of Quebec, either in Quebec City or Montreal, very soon, to give them a progress report on the Quebecair dossier and on what has been done to date by the Federal Government and what its intentions are with respect to Quebecair, Nordair and Air Canada. Madam Speaker, I believe it is very important at this stage that the Minister of Transport should be concerned about the issue of Quebecair's staff, and generally about Regionair, Quebecair, Propair and all air services on the Middle and Lower North Shore and especially in Eastern Quebec.
I think that full clarification is necessary now and that the companies and users concerned ought to know what is happening. Therefore, the Minister of Transport should take charge of this dossier and as soon as the Quebec Parliamentary Commission has finished its work, direct action can then be taken for the benefit of all concerned.


PENSIONS
Hon. Stanley Knowles (Winnipeg North Centre):: Madam Speaker-


Some Hon. Members:: Hear, hear!


Stanley Howard Knowles: -my point is one that I have made several times over a number of years. I make it again today, in the hope that one of these times the Government will do something about it.
I refer to the provision with regard to the Old Age Pension under which it is possible for people between the ages of 60 and 65 who are in financial trouble to get a portion of their pension, provided a person between 60 and 65 is related to an older person who is receiving the pension. Still the law denies any such pension to any women between 60 and 65 who is single. It also denies it to a woman between 60 and 65 whose husband may have died before she reached age 60. It is most unfair. We feel these women should be covered, and I hope the Goverment will soon change the law in this direction.


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


ACCESS TO INFORMATION
Mr. Ron Stewart (Simcoe South):: Madam Speaker, our basic democratic freedom is rapidly being stifled, and I view the situation with alarm. The Government is so obssessed with
secrecy it goes to unprecedented lengths to establish its right to conceal. Canadians have no alternative but a free press in the hope of obtaining information.
Lately the concept of freedom of the press has become more illusion than reality. An example is the refusal by the CBC to sell air time to the Ontario Medical Association for an advertisement outlining the danger of more state control in medicine. Is this agency of Government unwilling to carry a message stating the dangers of socialism simply because the Prime Minister (Mr. Trudeau) is so deeply committed to socialism? Is this freedom of the press?
Do Canadians have access to information when the Prime Minister refuses to hold press conferences? Do Canadians have access to information when the Prime Minister appears here for less than an hour each day and replies to questions by refusing to answer? Will Canadians have access to information when the Prime Minister appoints a commission on newspapers which recommends further Government control? Shades of Tass.
Alarming as the position of the Government has become, it is equally distressing to witness the lack of response from those whose duty it is to present the information. Are the media not yet sufficiently outraged at this manipulation? Are they not yet prepared to refute such control? The Prime Minister said:
In the last analysis, any given political authority exists only because men consent to obey it. In this sense, what exists is not so much the authority, as the obedience.
I would suggest to the media that obedience and freedom of the press are two entirely different things.

[ Translation]


UNITED STATES DECISION NOT TO IMPOSE SURTAX ON CANADIAN LUMBER
Mr. Michel Veillette (Champlain):: Madam Speaker, I was very pleased Tuesday when the Minister of State for International Trade (Mr. Regan) announced the outcome of the negotiations between the Canadian and American Governments concerning exports of Canadian lumber, as reported in the media yesterday. The United States have decided not to levy a 65 per cent countervailing duty on the $2.1 billion shipments of Canadian lumber, thus saving at least 70,000 jobs in Canada, including 15,000 in Quebec. This duty was a direct threat to the 8,500 workers of Quebec, because 25 per cent of the industry which exports 56 per cent of its output to the United States would have been forced to shut down. A duty of 65 per cent would have signalled the end of the forest industry.
It was good news indeed for several Members, particularly those of the Lower St. Lawrence, Lac-Saint-Jean and Abitibi regions, as well as myself as Member for the riding of Champlain. There are three major sawmills in my riding, and I am
March 10, 1983

sure that this news does give hope to the workers of that industry in Quebec who will now play an active role in boosting the construction industry in the United States. The Canadian Government did spend $2 million on those negotiations, but I can say that never has so little money been so profitable to workers of the forest industry in Quebec and elsewhere in Canada.


Madam Speaker:: Order, please.


COMMUNICATIONS
Hon. Flora MacDonald (Kingston and the Islands):: Madam Speaker, the recent decision by CNCP Telecommunications to close a number of its local telegraph offices across Canada, including one in my riding of Kingston and the Islands, has caused grave concern and apprehension. It will mean the end of over the counter personalized service in many towns and cities throughout the country. The most serious impact of this short-sighted decision will be felt in the business sector in each community. Tenders, contracts, notices of change to specifications, and many other instruments of business, are communicated by telegram and telex, where the date and time of receipt are, in most cases, a matter of legal significance. Delays on these transactions can be both time consuming and costly, and may even result in the forfeiture of a contract.
As a publicly owned federal agency, CNCP Telecommunications has a responsibility to ensure that Canadians have convenient and immediate access to a national communications service, for both personal and commercial transactions. I therefore urge the Minister of Transport (Mr. Pepin) to take immediate steps to reverse the decision of CNCP Telecommunications with regard to the closure of so many of its local offices.


INCOME TAX
Mrs. Margaret Mitchell (Vancouver East):: Madam Speaker, we congratulate the National Council on Welfare for again proposing reform of the child tax system to benefit those families with greatest needs. Their proposal to abolish the regressive child tax exemption in favour of universal family allowances and child tax credits makes practical economic sense. Many organizations support this position. The present
child tax exemption provides greatest benefits to high income families and no benefits at all for the poorest families. One billion dollars in tax revenues is lost each year which could be used for a more equitable system of family benefits. We support the recommendation to abolish the regressive child tax exemption, and favour an increased universal family allowance which is taxed back progressively as family incomes increase.
The report, called "Family Allowances for All", recognizes the universal family allowance as a foundation of Canada's social security system. Family allowances provide independent income for mothers and stimulate consumer spending. They recognize all Canada's children. We call on the Government once again for a review of both income support programs and the income tax system in order to provide maximum benefits for families and particularly for those who are suffering from increased unemployment and poverty.


NUCLEAR ARMAMENTS
Mr. Paul E. McRae (Thunder Bay-Atikokan):: Madam Speaker, on Monday President Reagan indicated that groups like those who support a nuclear freeze "would place the United States in a position of military and moral inferiority". Members of this House will remember the President, in front of a bar chart, showing American nuclear missiles in blue and Russian missiles in red, and over the years the blue bars becoming shorter and the red bars longer. The President concluded that this showed Russian superiority.
What the President did not say was that, while the bars showed Russian superiority in missiles, the American Government has been consciously reducing its numbers in favour of new Mirv'd missiles, that is to say, missiles containing multiple independent re-entry vehicles or warheads, each capable of landing on separate targets over a wide area. For example, one Trident submarine missile has 24 warheads. In fact, in round numbers, the American forces possess about 30,000 warheads versus 20,000 Russian warheads, including 9,000 to 8,000 ICBMs respectively. Only 300 of these warheads on each side would destroy both nations.
The 1982 U.S. Department of Defence Annual Report states, "While the era of U.S. superiority has long since passed, parity, not U.S. inferiority, has replaced it". Therefore, Madam Speaker, this is the time for our Government to join with the United States House of Representatives whose Foreign Affairs Committee on Monday voted 27 to 9 in favour of a bilateral nuclear freeze, the same motion found in the so called minority report prepared by six Members of this House from all three political Parties.

March 10, 1983
Oral Questions



ORAL QUESTION PERIOD


Stanley Kenneth Schellenberger: Madam Speaker, my question is directed to the Minister of Justice. According to the terms of the Constitution the Prime Minister has a clear responsibility to invite representatives of the aboriginal people, the Indian, Inuit, and Metis, to the conference table to discuss area of aboriginal definition which affect them. The Metis people feel this has not been done. As a result, the Metis People from the Provinces of Alberta, Saskatchewan and Manitoba have joined together and now represent 80 per cent of the Metis people. They want the right to represent the Metis people at the Conference table.
Is the Minister prepared to deal with the difficulty which has arisen regarding seats at the conference and the problems which result from the injuction application being filed in the courts this afternoon which, if successful, could stop the conference from being held? Will he deal with this matter before that happens in order that the conference can start in a mood of harmony?
Hon. Mark MacGuigan (Minister of Justice and Attorney
General of Canada): Madam Speaker, I am somewhat limited in what I can say on this matter because it is in court today and I will have to be very careful in my comments. However, I think I can tell the House what is already to some extent generally appreciated, that at the first of the preliminary conferences which I chaired, where provincial Ministers met with aboriginal leaders-


Mr. Nielsen:: And the leader of the Territories.


Mr. MacGuigan:: Yes, and the leaders of the Territories were also present as my hon. friend suggests. The native Council of Canada allowed the western Metis representatives to hold one of their two seats. It was, I think, everyone's understanding at that point that that arrangement would continue. On the eve of the second such conference which I chaired, the NCC changed its point of view and excluded the various Metis representatives from the table. This precipitated a crisis which began at that conference itself.
Our role, Madam Speaker, is primarily that of mediator between the various groups involved. We have been trying to use our good offices in that role to facilitate some form of agreement.


ROLE OF GOVERNMENT
Stanley Kenneth Schellenberger: Madam Speaker, the problem we see, as a result, is that the federal Government is becoming a mediator instead of dealing with this problem well in advance of the last couple of weeks. Will the Minister of Justice shoulder his responsibility now, because the Government has not shouldered its responsibility in the last year, and guarantee the two seats to the Metis people? This is all they
are asking for in order to represent themselves, as declared in the Constitution. In that way we can start this conference, which is so important to these people, in harmony.


Mark R. MacGuigan: Madam Speaker, the way in which my hon. friend phrased the question was quite unfair, perhaps because of facts of which he is not aware. In fact some of the spokesmen for native people have been taking the position that this group of prairie Metis should not be represented at the constitutional conference. That is the reason why we have had to take on this role of mediation. It is true that the invitations to the constitutional conference next week are extended by the Prime Minister, and he acted on that responsibility some time ago when he invited representatives of the Native Council of Canada to have two representatives at the table, but on the general understanding at that time that one of those seats would be held by representatives of the prairie Metis.
That is the situation in which we now find ourselves, which we have been trying to mediate, and I can assure the House we will certainly assume the responsibilities we have in this matter.


ADMINISTRATION OF JUSTICE
Mr. G. M. Gurbin (Bruce-Grey):: Madam Speaker, my question is also for the Minister of Justice. He will be aware that the President of the Canadian Farm Survival Association has been arrested and in fact is in jail now and on a hunger strike. This is in response to the situation which occurred in southwestern Ontario which resulted in a penny auction being conducted similar to what we saw in the 1930s. The Minister will know that this situation exists as a result of farm foreclosures, increasing farm bankruptcies, and lack of Government action.
Does the Minister agree with the action taken by the bank and by the law in arresting this farmer? If he does agree, does he feel that the other 400 farmers involved in the penny auction should also be arrested? Would he make a commitment, with the Minister of Finance and the Minister of Agriculture, to deal with this matter so that we will not have to face the same problem in future?


Mark R. MacGuigan: Madam Speaker, if I understand the matter that my hon. friend is referring to, charges have been laid and are before the courts. The provincial authorities are responsible for enforcing the law, so I do not think it would be appropriate for me to make any comment on this situation at this time.
March 10, 1983


EMPLOYMENT
Mr. W. C. Scott (Victoria-Haliburton):: Madam Speaker, my question is directed to the Minister of Employment and Immigration. The job creation program set up by Section 38 of the Unemployment Insurance Act has been of great assistance, but I am told that although these projects have a maximum of 52-weeks duration they will all terminate on March 31.
Could the Minister tell me why this is so and how many individual agreements were originally scheduled to extend beyond that date? Also, would the Minister consider extending those projects which have not completed their mandate? If not, would he consider an automatic referral of existing projects for approval for a further 52 weeks?


Hon. Lloyd Axworthy (Minister of Employment and Immigration):: Madam Speaker, I am very pleased that the Hon. Member has found the Section 38 job creation program to be helpful in his region. Over 15,000 jobs have been created under that program.
I am not sure where the Hon. Member's information comes from concerning the termination of the program. There is no plan to terminate it. In fact we are continuing to sign new agreements. The program will continue according to whatever terms are arrived at with the individual employers sponsoring the projects. I should like to correct the Hon. Member's impression; we are not planning to terminate the program.


FEDERAL-PROVINCIAL FISCAL ARRANGEMENTS LEVEL OF EDUCATION PAYMENTS
Mr. Bill Blaikie (Winnipeg-Birds Hill):: Madam Speaker, my question is for the Minister of Finance. I should like to return to a matter that was raised in the House on Tuesday. Apparently the Government is contemplating imposing the six and five formula on post-secondary education. However two different messages seem to be coming from the Government. In the House on Tuesday the Minister of Finance maintained that there would be no cutbacks in the health portion of the established programs financing. Later the Secretary of State indicated to the press that, whatever cutbacks there might be, the Provinces would continue to receive EPF funds in a lump sum and it would therefore be up to the Provinces to decide whether universities or hospitals would be affected.
We hope that the Government will not go ahead with this but, if it does, could the Minister tell us how it will be achieved? I would like some clarification on the mechanics of what the Government has in mind. In terms of provincial discretion, it will be crucial how they go about it.


Hon. Marc Lalonde (Minister of Finance):: Madam Speaker, I am very pleased to clarify this for the Hon. Member. As I indicated, no change is considered to the health financing formula and the payments under the existing formula. If a
Oral Questions
change is made under post-secondary education, it would be a change increasing post-secondary education payments to the Provinces by six and five per cent in the next two years. This is paid to the Provinces under the bloc funding arrangement. There would be a cheque for the health contribution and a cheque for the post-secondary education contribution, but, as the Hon. Member knows, the Provinces take that money and put it in their Consolidated Revenue Funds. They can then allocate it in any way they want. No particular stamp is put on the cheque saying "This is an education dollar, this is a health dollar". The Provinces-and sometimes people say that this is unfortunate-can use it to build roads, to pay civil servants-


Erik Nielsen: Or for coal liquefaction.


Marc Lalonde: -rather than allocate it to education. We have seen this in many instances. At the present time the federal contribution to post-secondary education is well in excess of 50 per cent.
The Provinces will remain free to allocate funds they receive from the federal Government to education, highways, publicity, or whatever way they want. There is no way that we can control exactly where our funds are used. We are trying to get a better accounting in that regard and to make sure that at least the Provinces are spending the equivalent of the moneys that we are sending to them. As I say, we are paying well over 50 per cent of the total cost of post-secondary education while the share of the Provinces is between 30 and 40 per cent.


Madam Speaker:: Order, please.


William Alexander (Bill) Blaikie: That is precisely the point, Madam Speaker. We want more accountability. This Party has always been in favour of stricter earmarking of federal transfer payments to the Provinces. It seems that the Minister of Finance and the Government are backing down on this by adopting a penal attitude toward the Provinces as opposed to a positive one.


POSITION OF PROVINCES
William Alexander (Bill) Blaikie: Has the Minister considered more positive, creative ways in which the federal Government could have some leverage over the Provinces that are not spending up to expectations on post-secondary education while the Provinces that are spending what is expected of them will not be penalized by this across-the-board measure? Has the Minister considered any alternatives other than this big stick approach?


Marc Lalonde: Madam Speaker, if this is a big stick approach it is a rather small stick. In effect, for 1983-84, the federal payments to the Provinces per full-time student will go up from $4,520 for 1982-83 to $4,753. The federal Government is going to increase its post-secondary education contribution very significantly. It is up to the Provinces to decide if they really want to use that money for post-secondary education. Some Provinces are doing better than others in that regard.

March 10, 1983
Oral Questions
I agree with the Hon. Member that most Provinces are contributing a lot less to post-secondary education than the federal Government. Discussions are taking place between the Secretary of State and the Ministers of Education concerning a better accounting of the federal contribution in that regard. The discussions have been progressing reasonably well and I hope there will be a satisfactory resolution of this issue.
On the other hand, I have to tell the Hon. Member that the federal Government does not have the authority and is not looking for the authority to dictate to the Provinces how they should spend their own money.


Madam Speaker:: I ask the Hon. Minister to be more brief in his answers. I think he is taking a little too much time with them.


William Alexander (Bill) Blaikie: Madam Speaker, basically what the Minister of Finance is saying is that somehow this Liberal Government hopes that two wrongs can make a right-that the Liberal Government, imitating Progressive Conservative provincial Governments, will somehow arrive at a solution-


Madam Speaker:: Order. The Hon. Member must ask a question.


STATUS OF ESTABLISHED PROGRAMS
William Alexander (Bill) Blaikie: Madam Speaker, does the Government no longer regard these programs as established? The legislation is called the Established Programs Financing. Does it no longer regard these programs as established? Why is it going ahead with a move that will hurt everyone involved in post-secondary education, particularly those Provinces which, regardless of the double talk of the Minister, will receive a decrease in funding compared to what they might otherwise receive, if the Government does not go ahead with the six and five program in this year. Do not kid us about increases.


Marc Lalonde: Madam Speaker, the Hon. Member can be assured that the programs will remain established. Any change that would require legislation would have to be made through a change approved in the House.
I can tell my hon. friend, for instance, that I have had meetings with the authorities heading the Canadian Association of Universities and Colleges of Canada last fall when I discussed this matter with them. They indicated that they would be ready to accept, in the spirit of restraint that we all have to apply in Canada, a limitation on increases to six and five per cent over the next two years.
I think the attitude taken by the Canadian Association of Universities and Colleges is a very responsible one, and I would invite my hon. friend to act as responsibly.


BROADCASTING
Mr. Ray Chenier (Timmins-Chapleau):: Madam Speaker, last week the Minister of Communications tabled a broadcasting strategy paper. One of the thrusts of the paper dealt with broadcasting for native people or native organizations in the Far North. Can the Minister tell us what he has in mind for this area?


Hon. Francis Fox (Minister of Communications):: Madam Speaker, I thank the Hon. Member for his question.


Some Hon. Members:: Oh, oh!


Francis Fox: I know that the Hon. Member and other Members, at least on this side of the House, are interested in listening to the answer. I have always indicated a very real interest in broadcasting going to northern residents, particularly broadcasting for native organizations in the North. I am delighted to announce that today the Government is making $40 million available to various native communications societies across the country for the purpose of native broadcasting.


Some Hon. Members:: Hear, hear!


Francis Fox: Knowing the Hon. Leader of the Opposition's very real interest in broadcasting for northern residents in general, I would like to say that we also made public today the five principles with respect to northern broadcasting. This is along the lines of the extension of services to northern remote communities about which the Hon. Member knows a great deal, and it is very much in line with the announcement made yesterday by the CRTC concerning CANCOM, allowing CANCOM in the future to make available an additional four channels of television to northern residents.


FINANCE
Mr. Tom McMillan (Hillsborough):: Madam Speaker, my question is directed to the Minister of Finance. It has both employment and consumer price implications. Yesterday the Minister of the Environment announced in Toronto plans to restrict, and possibly eliminate altogether, the consumption of leaded gasoline. Since such a policy would force Canadian consumers to buy exclusively the much more expensive unleaded gasoline, would the Minister of Finance consider doing two things-first, reducing all federal taxes on unleaded gasoline and, second, instructing Petro-Canada to take the lead in reducing the base cost of unleaded gasoline, which Environment Canada officials say is grossly over-priced relative to the price of leaded gasoline, given the comparative costs of production of the two fuels?
March 10, 1983


Marc Lalonde: Madam Speaker, yesterday the Minister of the Environment made a proposal and said that there would be a public debate on the subject during the next two months. He invited representations from the general public and those concerned. It is obvious that the Minister and the Government will consider all views that will be expressed on the project announced by the Minister of the Environment yesterday. As to whether further measures should be taken, I shall assume the Hon. Member's remarks are suggestions he would like me to take into consideration.


TOURISM
Stan Darling: Madam Speaker, my supplementary question is directed to the Minister of State for Small Businesses and Tourism whose Department, in my view, should be one of the very high profile ministries in the Government. Further to what the Hon. Member for Hillsborough said regarding the high cost of gasoline, the Minister is aware of the recent news that Canada had a $1 billion deficit in the tourist industry. I believe the total was $2.5 billion of U.S. spending Canada and $3.5 billion of Canadian spending in the United States, for a minus of $1 billion.
Could the Minister tap the Minister of Finance on the shoulder, and the other Members of Cabinet, to see if something can be done? I know he is a hard-nosed nut, and I can see him shaking his head. I am wondering whether Cabinet would give consideration to doing something to help the tourist industry, which is the second biggest industry in the country, as the Minister knows. In my own Province of Ontario it is a $7 billion industry-


Madam Speaker:: Order, please.


Hon. William Rompkey (Minister of State (Small Businesses and Tourism)):: Madam Speaker, what I have just done is pat the Minister of Finance on the back rather than tap him on the shoulder because, in his recent statements in the House, he has clearly given an indication of his support for small business. I remind the Hon. Member that, by far, the majority of businesses involved in tourism are small businesses. I thoroughly agree with him that indeed we should give this industry an increasing profile and priority. I would remind him that, although energy costs are high, the Canadian dollar gives us a particular advantage.
Also I would remind the Hon. Member that, according to press reports today, many of the disincentives are related to taxes within the Provinces. If he had read the press reports I read today, he would know that Tourism Ontario Inc., for example, has approached its Government to get it to lower its taxes on accommodations, meals, alcohol and so on. There is a
Oral Questions
large mix of factors, but I assure him of our support on this side for the tourist industry.


PUBLIC WORKS
Mr. Bob Corbett (Fundy-Royal):: Madam Speaker, my question is directed to the Minister of Public Works. It concerns the closure of CFB Chatham in New Brunswick, which is placing in jeopardy hundreds of jobs in that region. Everyone knows that the Minister is the man who cans the ham in New Brunswick. The other day I put a question to him in which I asked when he would be prepared to meet with the CFB Chatham Steering Committee to resolve the problems. They have asked repeatedly to meet with the Minister. He did not answer or even address himself to that portion of the question. Again I ask him when he will go to New Brunswick and meet with the CFB Chatham Steering Committee to resolve the impending tragedy.


Hon. Romeo LeBlanc (Minister of Public Works):: Madam Speaker, I really have to ask the Chair for some clarification as to whether a Minister is responsible for his Department or his region, not because I do not want to try to answer questions fully but because I really must have guidance. The headlines in my own Province were rather derogatory-


Madam Speaker:: Obviously Ministers may not answer questions regarding their so-called regional responsibilities.


NUCLEAR ENERGY
Howard Edward Crosby: Madam Speaker, my question is directed to the Minister of Energy, Mines and Resources. No doubt the Minister is aware that the official unemployment rate in Cape Breton, Nova Scotia, is over 18 per cent, and that thousands of other workers have given up their job search. He must also know that closure of the heavy water plants in Cape Breton will add 3,000 Nova Scotians to the jobless ranks. Does the Government intend to allow closure of the heavy water plants at Glace Bay and Strait of Canso and, if so, what alternative employment can the Minister offer to the 3,000 Nova Scotians who will lose their jobs? I do not mean Alastair Gillespie and his Scotia Coal Synfuels Project.


Hon. Jean Chretien (Minister of Energy, Mines and Resources):: Madam Speaker, we are well aware of the problem and we have been working on it. At this time AECL is working very hard to find some new markets. There is some potential for the development of a second Lepreau in New Brunswick and so on, so we have decided for the time being that we can keep these two plants in operation. If we are successful in looking for new markets or new sales of Candu
23650

March 10, 1983
Oral Questions
reactors, we might be able to keep those plants in operation for a longer period of time. The Government is doing its utmost to ensure that we save these jobs, but of course it is all within the normal possibilities of selling that heavy water.

[ Translation]


LUMBER EXPORTS TO UNITED STATES-GOVERNMENT POSITION
Michel Veillette: Madam Speaker, first of all, I want to congratulate the Minister of State (International Trade) on his excellent work during negotiations with the United States Department of Commerce on lumber exports.
In a press release received in our offices, it was mentioned that the U.S. Department of Commerce would continue its enquiry and that a final decision would be made on May 23. Could the Minister inform the Elouse what points are still at issue and what he intends to do until May 23?


Hon. Gerald Regan (Minister of State (International Trade)):: Madam Speaker, I am satisfied with the preliminary decision given by the U.S. Department of Commerce. Factual documentation required for the final decision has been provided by the federal and provincial agencies concerned to the Department of Commerce. We are continuing our representations to the United States and await the final decision with confidence.


SHIPBUILDING
Mr. J. M. Forrestall (Dartmouth-Halifax East):: Madam Speaker, I have a question for the Minister of Supply and Services. It stems from the very serious plight of Canadian shipyard workers in which they find themselves today. Would the Minister not agree acceleration of the Navy's fleet replacement program, the much needed fleet replacement program for the Coast Guard and oceanographic vessels, and a reinstitution of boatbuilding subsidies might not only save those dwindling jobs still in place but at the same time bring back into the work place the many thousands of Canadians who have been displaced by lack of activity? If the Minister agrees with that, does the Government intend any particular action now before we lose our pool of skilled workers from our major shipyards?


Hon.   J.-J. Blais@Minister of Supply and Services: Madam Speaker, I wish to thank the Hon. Member for his question.
This is the second time in the little while that I have been asked about our shipyards. I want to congratulate the Hon. Member on asking a question of general interest. I agree this is one of the most important industries in Canada because it involves underdeveloped areas throughout the country. I can assure the Hon. Member that we are doing our best to accelerate the Canadian Government's fleet replacement program and maintain adequate levels of employment in Canada and in our shipyards.

I would like to advise the hon. gentleman that I would be pleased to provide him with a copy of my speech to the Canadian Ship Repair and Shipbuilding Association in which I covered the very points he mentioned.


Some Hon. Members:: Oh, oh!


BANKS AND BANKING
David Orlikow: Madam Speaker, I have a question for the Minister of Finance. Bank profits in the first quarter of 1983 will total $484 million, an increase of 41 per cent and an all-time first-quarter high. At the same time home owners, who were locked into mortgages arranged in 1981 and 1982 at rates of 18 per cent to 21 per cent and who are now trying to renegotiate them because the mortgage interest rate has been reduced by a third or more, are being told by the banks that the three-month penalty, which they had to pay, until recently, to renegotiate their mortgages has been changed. They are now being asked for a cash penalty of $5,000 to $6,000. This is a completely unacceptable amount. Would the Minister discuss these exorbitant penalties with the senior officials of the banks and urge the banks to deal with their customers who have mortgages, in a more equitable way?


Marc Lalonde: Madam Speaker, I will be very pleased to pass on the representations made by the Hon. Member to the Inspector General of Banks.


Mr. Deans:: That is what you said two months ago.


Marc Lalonde: I am not surprised at the Hon. Member's comments because I indicated the corporate sector last year had one of its worst years in history. Obviously, if there is to be any recovery there will have to be increased profits. Knowing the losses incurred by companies last year, one should not be surprised that there would have been some increase in profits this year. In percentage terms this will appear considerable. As a matter of fact I forecast in this House that we would receive this kind of comment from the New Democratic Party.
March 10, 1983


EFFECT OF MORTGAGE RENEWAL PENALTIES
[Stage Direction]
Mir. David Orlikow (Winnipeg North): Madam Speaker, the Minister surely knows the one corporate sector that did not suffer losses was the banks. The figures announced yesterday and today indicate that the banks' profits are at an all-time high. Does not the Minister realize that, to the extent mortgage holders have to pay these very high monthly rates, they are not able to buy consumer goods and that the purchasing power of those consumers is reduced? If the banks would allow people to renegotiate their mortgages, people could begin to buy the products produced by Canadian manufacturers, the sector that is really suffering, while the banks are not.
Marc Lalonde: Madam Speaker, I have already said that I would transfer the representations made by the Hon. Member to the Inspector General of Banks. I would like to remind him that the return on assets of the banks, which is the best measure of the profitability of banks, has gone up from .47 per cent last year to .56 per cent, around a half a percentage point. This is still below historical averages. My hon. friend should look at the situation. I invite him to read the report of the parliamentary committee which had hearings last year on this subject. The committee came to the conclusion that bank profits in the circumstances were not considered to be excessive.


EMPLOYMENT
[Stage Direction]
Oral Questions
The Alberta Chamber of Mines, the Canadian oil industry, and the Canadian Chamber of Commerce submitted briefs to the federal Government urging an accelerated program for oil sands development, because it is essential to Canada's goal of oil self-sufficiency by 1990 or even by 1995. At a time when 2 million Canadians are unemployed, who want jobs and who want to work, when is the Minister going to design a program that will assist in the development of Canada's resources and allow those people to go back to work? When is the Minister going to do something in the Department that he took over from the other disastrous Minister of Energy?
Joseph Jacques Jean Chrétien: Madam Speaker, we are continually reviewing different propositions. Right now we are in communication with the Government of Alberta and with the Government of Saskatchewan concerning heavy oil projects and so on. There are some projects going on at this time.
Of course the megaprojects of the past, when everyone was forecasting the price of oil would go to $50, $60, or $70 a barrel, are not realistic with today's prices. We have some propositions to the industry in conjunction with the Provinces. These are being studied by the companies and the Governments. Some projects might go ahead, but with the decline in world oil prices it will make these projects much more difficult to materialize economically. However, we are working in close co-operation with the Governments of Saskatchewan and Alberta. In fact yesterday I was discussing two projects with the Saskatchewan Minister of Finance. We both recognized that first we have to look at the economic viability of the projects.


Mr. Rolland Dion (Portneuf):: Madam Speaker, my question is directed to the Minister of Employment and Immigration, if I can get his attention. In view of the fact that the Valcartier Canadian Forces Base is in my riding and, as the Minister is no doubt aware, the Quebec City area and the riding of Portneuf have been severely affected by unemployment, perhaps the Minister could inform the House what progress has been made by his Department and the Department of National Defence with respect to job creation under the NEED program?


Lloyd Axworthy: Madam Speaker, we have signed a job creation agreement with the Minister of National Defence which provides for 3,000 jobs under the terms of the NEED program.


OIL SANDS DEVELOPMENT PROJECTS
Mr. Jack Shields (Athabasca):: Madam Speaker, my question is for the Minister of Energy, Mines and Resources.
* *
*


SCIENCE AND TECHNOLOGY
Roch La Salle: Madam Speaker, my question is directed to the Minister of State for Economic Development and Minister of State for Science and Technology. About three weeks ago, an article in one of the newspapers quoted the Hon. Minister as having said that Canada would certainly not ask to be considered as one of the possible locations for the International Biotechnology Centre sponsored by the United Nations. In view of this statement, could the Minister inform the House today whether this means that Canada will definitely have to drop a project that was being eagerly sought after, not only by Montreal but also by two or three other provinces?


Hon. Donald J. Johnston (Minister of State for Economic Development and Minister of State for Science and Technology):: Madam Speaker, I wish to thank the Hon. Member for his question, because biotechnology is a subject that is of

March 10, 1983
Oral Questions
tremendous interest to the whole country. We are very keen on setting up biotechnology centres in Canada, and especially in the Province of Quebec, because the Government of that province is also very interested. The project in question, the UNIDO project, was not very attractive to us because of the terms and conditions set by this organization. However, that does not mean we are not interested. On the contrary, we are eager to act in this area across the country, and as I said at the beginning of my comments, especially in the Province of Quebec.


LABOUR CONDITIONS
Hon. Sinclair Stevens (York-Peel):: Madam Speaker, my question is for the Minister of Finance. Is he aware of the data released recently by Data Resources of Canada which show that unemployment will continue at 1982 levels through 1983, 1984, and into 1985? If he is aware of that unfortunate level of unemployment, would he indicate what concrete steps we may anticipate to relieve that situation?


Marc Lalonde: Madam Speaker, I have not seen the particular figures which have been put out by Data Resources. I am aware of a number of forecasts, some of which are mort optimistic than others and some more pessimistic than others.
I have indicated that, when 1 address issues in my budget, the issue of unemployment would be very high on the list of top priorities. I would invite my hon. friend to wait for the budget.


REQUEST THAT MINISTER TABLE DOCUMENTS DEALING WITH FOREIGN-OWNED BRANCH PLANTS
Mr. Lome Nystrom (Yorkton-Melville):: Madam Speaker, my question is directed to the Minister of State for International Trade. Yesterday I referred to some confidential documents that quoted senior Government officials and trade commissioners as saying that up to 75 per cent of the branch plants operating in Canada were prohibited from exporting by their foreign parents, thus losing a lot of jobs.
This morning I sent a note to the Minister's office asking that he make six specific documents public. I will send that
note to him again now. I have enclosed the titles of the documents, their dates, and the file numbers. Those documents include ones such as the Special Study on Export by Canadian Subsidiaries, which names companies that prohibit their branch plants from exports. There is also the main report on Exports by Canadian Subsidiaries-


Madam Speaker:: Order. Does the Hon. Member have a question? This is Question Period.


Lorne Edmund Nystrom: The documents include the two to which I have referred. My question is very straightforward. Will the Minister table these documents so that the Canadian people will know what advice the Government has been receiving from its senior officials since the 1950s about the lack of export opportunities for branch plants of foreign multinational companies?
Hon. Gerald Regan (Minister of State (International
Trade)): Madam Speaker, I thank the Hon. Member for sending me a copy of his note just now. I did not receive his note this morning because I was away from my office at meetings.
I note that he is asking for documents that are dated in four cases, April, 1963; in another case, 1961, and the other in 1958. I do not know if he is studying ancient history. These hardly seem current. I have to say to the Hon. Member, not having had notice of the nature of the documents until I came to the House, that I will make inquiries as to their status and whether they are eligible for release. If the Hon. Member already has them from some illicit source, I cannot see why he wants them released.


Lorne Edmund Nystrom: It is because the public deserves to know. Because of the mania for secrecy by the Government across the way, I am not allowed to release these documents without putting someone in jeopardy. That is why I asked the question.


REQUEST FOR RELEASE OF STUDIES
Lorne Edmund Nystrom: Madam Speaker, I will ask once again. Will the Minister make a commitment to make these documents public? Will he also make a commitment to make any studies that have been done since the 1960s, regarding the activities of foreign companies in this country, public as well? I suspect that the exact same practice is going on today that went on throughout the 1940s, 1950s, and 1960s and cost this country tens of thousands of jobs.
Hon. Gerald Regan (Minister of State (International
Trade)): Madam Speaker, I know that there are many thousands of jobs in this country as a consequence of the exports of Canadian companies, including many that are foreign owned. I suggest that the Hon. Member is cognizant of the fact that the proper way for him to proceed for the production of papers is to seek an order for return. I suggest that he do so.
March 10, 1983


CANADIAN NATIONAL RAILWAYS
Hon. Elmer M. MacKay (Central Nova):: Madam Speaker, I would like to attempt to get some information from the Minister of State for Regional Economic Expansion who, I am sure, has conferred with his colleague, the Minister of Transport, on this problem. What are the future intentions of the CNR with respect to the manufacture of its own railway rolling stock? It is of great concern to the Hawker Siddeley works in Trenton, Nova Scotia, to a plant in Montreal, and to a plant in Hamilton as well. There are many thousands of workers who are wondering about the policy.


Hon. Ed Lumley (Minister of Industry, Trade and Commerce and Minister of Regional Economic Expansion):: Madam Speaker, the Hon. Member knows that Canadian National Railways are not the responsibility of the Minister of Industry, Trade and Commerce or DREE. I would suggest that he pose the question to my colleague, the Minister of Transport, who is responsible.


Elmer MacIntosh MacKay: I thought, because there were so many jobs involved, the Minister would know.


NOVA SCOTIA STEEL PLANTS
Elmer MacIntosh MacKay: Madam Speaker, my supplementary question to the Minister is about another situation in Nova Scotia that is causing concern. The Deputy Prime Minister recently announced the possibility of a steel fabricating plant in his constituency that is going to have the possibility of creating 1,000 jobs. As the Minister knows, a short distance away there is another plant that has closed down. It is the same Hawker Siddeley plant that can duplicate the very jobs that the Deputy Prime Minister is hoping to create in his constituency. Is this Government policy, departmental policy, or more political puffery from the Deputy Prime Minister?


Edward C. Lumley: Madam Speaker, as the Hon. Member knows, the Deputy Prime Minister has devoted the majority of his adult life to the people of that particular area in terms of creating jobs. There are several substantial projects which are on-going at the present time to create jobs in that area.


FISHERIES
Hon. James A. McGrath (St. John's East):: Madam Speaker, my question is directed to the Minister of Fisheries and Oceans. He will know that this is not a hypothetical question because an organization known as the Sea Shepherd Conservation Society, which owns a converted trawler called the Sea
Oral Questions
Shepherd, is currently hove to off St. John's, Newfoundland, and threatening to ram the three sealing ships that are planning to go to the ice within the next few days.
What action does the Minister intend to take under the Fisheries Act to protect these three ships which have Canadians on board? Does he intend to call in the assistance of the Coast Guard and/or the navy to ensure that this vessel will not ram the Canadian sealing ships? As he knows, this vessel has already boasted of having sunk three whalers.


Hon. Pierre De Bane (Minister of Fisheries and Oceans):: Madam Speaker, obviously no Canadian should be allowed to prevent other Canadians from practising a lawful activity, whether fishing, seal hunting, or whatever. If a small group like the one on the Sea Shepherd tries to prevent other Canadians from undertaking such an activity, that of course will have to be looked at by my colleague, the Minister of Justice.
If any group wants to impose its will on other Canadians, I would call it tyranny and totally unacceptable.


REQUEST THAT SEALING SHIPS BE PROVIDED WITH ESCORTS
James Aloysius McGrath: Madam Speaker, does the Minister intend to provide these three ships with escorts from either his own fleet or the Armed Forces, so that they can leave port and head for the ice without fear of harassment or being rammed?


Pierre De Bané: Madam Speaker, with respect to movement on the sea, it involves regulations of the Department of Transport and my own Department. There is also the responsibility and assistance that we can have from the Department of National Defence. At this moment an interdepartmental group is monitoring the situation. I am very pleased to have the support of the Hon. Member that that group should not be allowed to prevent other Canadians from practising their lawful activities.


INCOME TAX
Mr. J. R. Ellis (Prince Edward-Hastings):: Madam Speaker, my question is directed to the Minister of National Revenue. The Mohawks of the Bay of Quinte had plans to put men to work clearing and preparing land for the planting of 28,000 trees. The work is to be done on the reserve and the whole project will come under the Canadian Forestry Service reforestation program under which unemployment insurance benefits are supplemented and paid to those workers involved.
At the present time the whole project is on hold awaiting a formal ruling on the question of whether or not wages paid to the workers will be taxed. Would the Minister tell us if the wages paid to those natives working on reserve land are subject

March 10, 1983
Point of Order-Mr. Corbett
to tax, and when can we expect a ruling on this particular matter?


Hon. Pierre Bussieres (Minister of National Revenue):: Madam Speaker, if I remember correctly, unemployment insurance benefits paid to Indians who live on the reserve are taxable. Consequently, funds used to pay for the kind of projects the Hon. Member has just mentioned, funds that are paid out of the Unemployment Insurance Fund, would be taxable, while the additional amount to supplement the amount paid to a person as wages would not be taxable. In other words, there are two wage components, one from the Unemployment Insurance Fund, which would be taxable, and the wage supplement paid by another agency through the band council or another organization on the reserve, which would not be taxable.


PETITIONS
Madam Speaker:: I have the honour to inform the House that the Clerk of the House has laid upon the Table reports of the Clerk of Petitions stating that he has examined the petitions presented by Hon. Members on Wednesday, March 9, 1983, and finds that they meet the requirements of the Standing Orders as to form.


[Stage Direction]
MR. CORBETT-QUESTION ASKED OF MR. LeBLANC DURING QUESTION PERIOD
Robert Alfred Corbett: Madam Speaker, I have a point of order which deals with the effort of the Minister responsible for Public Works to sleaze out of his responsibilities to answer a question with reference to a matter pertaining to his Department in New Brunswick by asking the Speaker for clarification as to whether or not in his capacity he is responsible for answering a political question with regard to the Province of New Brunswick. The record will clearly show that the question as I asked it was directed to the Minister responsible for Public Works. He knew that, and I suggest that it is time he started taking his responsibilities seriously.


Some Hon. Members:: Hear, hear!


Madam Speaker:: The Hon. Member has made a point, but I do not consider it to be a point of order. I ruled on that matter. I was asked for guidance. The Minister felt that that particular
question referred to wider responsibilities than those of his Department and, of course, that is the rule.


BUSINESS OF THE HOUSE
Mr. Lewis:: Madam Speaker, today being Thursday, I would like to ask the Government House Leader whether he can advise us as to the business for next week.
I hope that in his explanation the Government House Leader will correct an impression which the Minister of State for International Trade tried to create in the country when he suggested there was a connection between the Government's commitment to fund the Calgary Olympics and the sports pool legislation. The Government House Leader knows that there is no connection. I would ask him to straighten that out for his colleague. At the same time, perhaps he could tell the House when the Government, which controls the sports pool legislation, intends to bring forward that legislation.


Mr. Pinard:: Madam Speaker, as far as the business of the House for today and tomorrow is concerned, we shall continue debate in Committee of the Whole on Bill C-139. Next week on Monday, we shall complete second reading of Bill C-143 to authorize the Government to borrow certain sums of moneys. The House is aware that if necessary, debate will be interrupted at 5:45 p.m. Monday evening, for the vote. Next Tuesday and Thursday, we shall resume debate in Committee of the Whole on the important and urgent Bill concerning income tax. Next Wednesday will be Private Members' Day, as usual.
As far as the legislation on sports pools is concerned, I can confirm to the Hon. Member that it is very high on the Government's list of priorities, and, since he raised the issue, the Hon. Member will have to admit that on numerous occasions I have suggested completing debate on this Bill in one day it is now at the report stage and his answer was always negative. If the Hon. Member changes his mind, he should say so, since I am willing to reserve time tomorrow for completing debate on the report stage and second reading of the sports pools Bill.


Philip Derek Lewis: Madam Speaker, the Government House Leader finds it easy to gag his colleagues, and that is the way the Government operates. Over on this side of the House, we feel it should have full and honest debate, and we are prepared to debate at any time.


Ian Deans: Madam Speaker, concerning the matter of the sports pool Bill, we are opposed to it and are prepared to deal with it the moment it is called.
I want to raise another matter, however, with regard to House business. The President of the Privy Council no doubt
March 10, 1983

heard, in a question today posed by one Conservative Member, although I cannot recall which one, of the dilemma confronting Allan Wilford, the President of the Farm Survival Association. Mr. Wilford is quite rightly demonstrating against the banks' usurious actions.
I wonder if the President of the Privy Council would indicate to the House whether he would be considering calling either Bill C-653, which is an amendment to the Farm Credit Arrangements Act, for debate in the House of Commons in committee, or whether he would consider sending it to a standing committee for consideration. Given the fact that it is a Private Members' Bill, would he perhaps consider bringing forward a Government Bill which would accommodate the same desires?
If he were to do any one of those three things, I want to assure him, at least on behalf of the Hon. Members of this Party, that we would be prepared to deal with the matter expeditiously.


Yvon Pinard: Madam Speaker, I am told that a friend of the Hon. Member for Hamilton Mountain (Mr. Deans) has been charged with theft before the courts in Ontario, and my learned friend will understand that I do not intend to comment on matters that are sub judice.


Ian Deans: I am not interested in whether the President of the Privy Council can answer whether he is stealing or not. That is not the issue. The contents of the Private Members' Bill would resolve a very difficult problem for a large number of farmers, particularly in Ontario but in other parts of the country as well. Is the Government prepared to have that Bill called or is it prepared to duplicate it with a Government Bill? I want to assure him, and I think I am speaking on behalf of all Hon. Members, that if the Government were to proceed with this Bill or with another similar Bill, we would guarantee dealing with it as expeditiously as humanly possible.


Yvon Pinard: Madam Speaker, if only I could say that past experience has shown the Hon. Member is indeed able to deliver the goods when he guarantees support for a Bill. Unfortunately, we have had some negative experiences in the past involving both the Progressive Conservatives and the New Democratic Party. In the circumstances, if the Hon. Member has any proposals to make regarding legislation on sports pools, agriculture, income tax which bill is very urgent or on the Borrowing Authority Bill which is also very important and very urgent, if the Hon. Member has any definite proposals to make with respect to these bills, I feel that the appropriate place to discuss the issue is at our meetings of Parliamentary House Leaders, and I am very receptive to any suggestions aimed at accelerating the legislative process in this country.
Business of the House


Mr. Wise:: Madam Speaker, I rise on a point of order directed to the comments made by the President of the Privy Council with reference to House business. I would ask a question supplementary to those raised earlier during the Question Period by my colleague, the Hon. Member for Bruce-Grey and also by the House Leader for the NDP.
I simply want to be clear on the Government's position with regard to the Private Members' Bill, the bankruptcy Bill or a new piece of legislation dealing with the specific subject. It is my understanding, after listening to the explanations, that the Government House Leader indeed has no intention whatsoever of moving in this area, either through separate legislation on behalf of the Government, the Government's own Private Member's Bill, or through similar amendments to the Bankruptcy Act through Bill C-12. Am I right or am I wrong?


Mr. Baker (Nepean-Carleton):: I rise on the same point of order, Madam Speaker. The House and the Government House Leader will know, and certainly the Hon. Member for Lambton-Middlesex (Mr. Ferguson) will know, that when this matter came before the House before I gave an assurance that if the Government were to allow the introduction of the Bill of the Hon. Member for Lambton-Middlesex, I would be very pleased to second it. So the ball is very much in the Government House Leader's court with respect to bringing forth that legislation. It would be of great assistance to Canadian farmers.


Erik Nielsen: As well as Bill C-95.


Ian Deans: Madam Speaker, I do not want to belabour the point, but I do want to make one other suggestion, if I may, for consideration. The Government House Leader quite correctly said that this is a matter which we should perhaps negotiate. 1 am, of course, prepared to negotiate on any matter at any time. However, this matter is serious inasmuch as it will directly affect an individual who has chosen the only course which apparently, in his mind, is open to him to try to get the Government to move. Would the Government House Leader be prepared to meet this afternoon to discuss some way of resolving this particular matter?


Yvon Pinard: Madam Speaker, an Hon. Member asked me whether he had understood correctly. 1 think what I said was quite clear. He can check in Hansard. If he does not understand, there are others who will. My answer was very simple, clear and complete. As far as the offer made by the Hon. Member for Nepean-Carleton (Mr. Baker) is concerned, it is only a partial one in that it only indicates his intention of seconding the Bill, and we have no guarantee that the Bill will be concurred in without debate. I would like further explanations from the Hon. Member for Elgin (Mr. Wise) regarding amendments he would like to make for the same purpose.

March 10, 1983
Business of the House


Walter David Baker: You have the offer. Talk to the House Leader.


Yvon Pinard: Madam Speaker, I just want to give a proper answer to the colleague of the Hon. Member for Nepean-Carleton. I was interested in his suggestion of considering an amendment to the Bankruptcy Act. I would like to see the wording of such an amendment to make sure that it responds to the concern expressed. If the Hon. Member for Nepean-Carleton is against such a move, then there is no way that this will be discussed further in the House.


Walter David Baker: Madam Speaker, on a point of order, I do not think that the hon. gentleman ought to misrepresent my position. My position has been quite consistent. I said at the beginning that if the Bill brought forward in the name of the Member for Lambton-Middlesex, which would help farmers, was allowed to be brought forward by the Government House Leader, I would second it, if that became necessary. I repeat that assurance. That was the reason for the intervention. It was not to suggest in any way that I was against the provisions in the Bankruptcy Act, as he has tried to misrepresent.


Yvon Pinard: Madam Speaker, the fact that the Hon. Member would second the Bill does not help in any way. We do not need him to support any Bill moved by the Hon. Member.


Some Hon. Members:: Oh, oh!


Walter David Baker: Bring it on, then.


Yvon Pinard: The question is, if the Bill is put, will it be adopted right away without debate? That is the commitment 1 have been asking for. The Hon. Members know very well that we have to deal with the Income Tax Act, with the borrowing authority Bill and now they are asking that we give more time to other pieces of legislation. For this reason I am saying that I doubt very much that the Tory Party is in a position to deliver, when some of their individual Members pretend that this Bill could be dealt with efficiently in the House.


Walter David Baker: I am trying to help you.


Mr. Beatty:: He wants the Soviet Union type of efficiency.


Ian Deans: Madam Speaker, on a separate topic, I wonder if the Government House Leader could either affirm or deny-


Madam Speaker:: Order, please. I believe I have a point of order on this topic.


Mr. Hnatyshyn:: Madam Speaker, I rise on a point of order. I am trying to assist the Government House Leader, as always, in the course of Government activity, and it is in that spirit that I rise. In order for us to make an assessment with respect to the amount of debating time that may be necessary on any piece of legislation, it seems to us in the Opposition that the common courtesy would be for the Government House Leader
to get up and give us an indication as to whether or not a decision has been made as to when the Speech from the Throne for the next session will be brought down.


Erik Nielsen: The one they said is ready.


Ramon John Hnatyshyn: Maybe the one that is ready now, and has been for some months, if not years. I wonder if the Government House Leader might give us a little hint, so that we on this side could give proper attention to the idea of transacting Government business forthwith and without delay, as to when this session will end.
This has been the longest session in the history of Canada. We would like to know when we will have a new Speech from the Throne so that we can assess what we can do with Bills now on the Government timetable.


Walter David Baker: That would be very helpful.


Yvon Pinard: Madam Speaker, I can assure the Hon. Member that if this session has been the longest in history it also has been, and is, the most important and the most productive.


Some Hon. Members:: Hear, hear!


Erik Nielsen: Producing two million unemployed.


Yvon Pinard: In almost three years we have succeeded in adopting over 150 Bills. That is well above average as compared to any normal session which, when there is not an election, adopts less than 50 Bills a year. We have not completed three years yet but already we have adopted over 150 Bills. We have patriated the Constitution; we have a new Charter of Rights; we have a National Energy Policy-


Some Hon. Members:: Oh, oh!


Yvon Pinard: -we have had two economic statements. This is and has been the most important and the most productive session ever.


Mr. Kempling:: The country is bankrupt.


Yvon Pinard: The Hon. Member wants to know when is the next Speech from the Throne or when shall we stop dealing with the economy and start an eight-day debate, generally speaking. It has been made very clear under the parliamentary reform with which we are experimenting. I had to make a statement at the beginning of this semester, in January. The letter was made public, was sent to the House Leaders of both opposite Parties. This contained a list of all the Bills that have to be completed before we consider proroguing. With good will we could complete all the remaining stages of the important Bills. All this could be completed easily, with good will, within the next 15 days or so.
However, if there is no good will it could take longer, if the Opposition keeps forcing the Government to limit debate. We are under negotiation. If we do not achieve the results that we
March 10, 1983

would like at this time, at least we on this side are trying to allow this session to come to an end, even though it has been very, very productive. The Hon. Member knows that the Income Tax Act is urgent and important. He knows that the borrowing authority is needed by the Government at this time and it is also important to get the money for the sports pool in Calgary as soon as possible.


Walter David Baker: Bring on the Bill.


Yvon Pinard: I would welcome the consent of the Hon. Member's Party to conclude debate on the sports pool tomorrow. That was the offer that was rejected a few moments ago by his House Leader.
Therefore, Madam Speaker, although this session is about to end, we have to conclude debate on the Bills I have just indicated, and it is most likely that with good will this could be achieved within the next few days.


Ian Deans: Madam Speaker, on the point the President of the Privy Council just raised, if it is true, and I agree that it is, that this has been the most productive session in parliamentary history and we have covered more ground than any other Parliament, why are we always being accused of stalling and not co-operating?



ROUTINE PROCEEDINGS


Edward C. Lumley: Madam Speaker, in response to requests put forth by the Hon. Member for Wellington-Dufferin-Simcoe (Mr. Beatty) and the Hon. Member for Central Nova (Mr. MacKay), and in the spirit of the Access to Information Act, I wish to table, under Standing Order 46(2), documents pertaining to the Scotia Coal Synfuels Project. These documents were obtained from the Cape Breton Development Corporation.


Some Hon. Members:: Hear, hear!


Henry Perrin Beatty: Madam Speaker, on a point of order, the Hon. Member has indicated that he is tabling these documents in response to our request. Can the Minister give us assurance that all relevant documents from Devco's files are being tabled and none is being withheld, including documents of an intergovernmental nature?


Edward C. Lumley: Madam Speaker, I said that in the spirit of the Access to Information Act the documents I indicated are tabled.
Order Paper Questions


Henry Perrin Beatty: Madam Speaker, is the Minister then implying that there are some documents in Devco's files which are relevant to this case which are not being tabled today? For example, would he claim an exemption under the Access to Information Act for some documents that were not tabled today, or can he give the House the assurance that all relevant documents are being tabled?


Edward C. Lumley: Madam Speaker, I would first of all suggest to the Hon. Member that he take a look at the documents. Obviously there are some documents and minutes of the consortia that involve commercial confidentiality which would not be included, but in each case there is a note with respect to those particular minutes or documents which are not included in detail.

[ Translation]


PETITIONS
Marcel-Claude Roy: Madam Speaker, pursuant to Citations 669 and 671, Beauchesne, Fifth Edition, I intend, at the request of 100 petitioners from Chomedey, to express their appreciation and to thank the members of the Ligue d'action communautaire de Laval for the magnificent work they have done to improve home services and recreation. These senior citizens are seeking the support of the House to ensure the continuation of this project which has brought some more sun into their lives and is a liberal ray of hope.


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. 4,312.


Mr. Mazankowski: Did the Department of Employment and Immigration purchase $1,026,430 of hotel accommodation services from Guaranty Properties Ltd. of Toronto and, if so (a) for what purpose (b) which hotels were used (c) how many rooms were used and for how many days (d) what was the daily cost per room (e) how many persons used the rooms (f) what was the average and maximum length of stay
(g)	what special services were required and what were the costs of the services
(h)	what charges, if any, were assessed to those persons using the rooms?

March 10, 1983
Order Paper Questions


David P. Smith: I am informed by the Departments of Employment and Immigration and Supply and Services as follows:
Two contracts were awarded, on behalf of the Department of Employment and Immigration to Guaranty Properties Ltd. (i) Contract T0X81-10655/1 valued at $343,000.
(a)	To provide hotel accommodation and meal services to persons detained for immigration pursuant to the authority of the Canadian Immigration Act for the period of April 1, 1982 to March 31, 1983.
(b)	The only hotel used was: Waldorf-Astoria Hotel, 88 Charles St. East, Toronto, Ontario.
(c)	The Department contracted for 21 rooms per month for detainees plus five rooms for administration. For the period April 1 to May 6, 1982, a possible 756 accommodations were available (21 rooms X 36 days). In that period, 671 room/days were used.
(d)	$32.10 (including three meals a day).
(e)	A total of 940 detainees used the rooms.
(f)	Average length of stay was 5.7 days, maximum stay was for the complete 36 days.
(g)	No special services were provided.
(h)	No charges were assessed to users.
(ii) Contract T0X81-11083/1 valued at $683,430.
(a)	For accommodation with cooking facilities for newly arrived immigrants for the period of April 1, 1982 to March 31, 1983.
(b)	See reply to part (i)(b).
(c)	The contract is still in force. There is a provision that only the rooms actually occupied will be paid for. All rooms have been occupied to date. The contract is for the provision of:
50 rooms per month-April and May, 1982 60 rooms per month-June to August, 1982 70 rooms per month-September to December, 1982 40 rooms per month-January to March, 1983
(d)	$30 (excluding meals).
(e)	Rooms were occupied by family units of varying size.
(f)	Neither average nor maximum length of stay can be determined at this stage.
(g)	No special services were provided.
(h)	No charges were assessed to users.


David P. Smith: I ask that the remaining questions be allowed to stand.


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


Mr. McKenzie:: Madam Speaker, I rise on a point of order. Last week I asked the Parliamentary Secretary to make inquiries with regard to question No. 4,175 which was placed on the Order Paper on March 24, 1982. It is with regard to the Government's hiring teams that are hiring in universities in Ontario and Quebec. It is a detailed question asking which Department has these hiring teams, whether they are going right across Canada, in what areas they will be hiring and what nationalities will be hired.
A number of complaints have been filed with the Canadian Human Rights Commission with regard to the discriminatory hiring and promotional policies of the Liberal Government. It is causing the Canadian Human Rights Commission great difficulty in reaching a decision on these complaints because the Government is not providing them with the proper documentation.
The information requested in my detailed question on hiring teams is the type of information that the Canadian Human Rights Commission requires. Will the Parliamentary Secretary inform me what the problem is? Is there any particular Minister who is not co-operating or any Government Department that is not co-operating? What answer does he have for me after having made this inquiry last week?


David P. Smith: Madam Speaker, the Hon. Member is quite correct, he did raise this last week. I want to assure him that I did initiate inquiries as a result of the point he raised last week, but to date I have not received a response. I will again follow up on it.
[ Translation]


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 Committee of the Whole.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed consideration in Committee of Bill C-139, to amend the Statute Law relating to Income Tax (No. 2)-Mr. Lalonde-Mr. Blaker in the Chair.
Roderick Blaker: When the House rose at one o'clock, the Committee of the Whole was considering Clause 4 and a series of associated Clauses and Subclauses. If my recollection
March 10, 1983

serves me correctly, the Hon. Member for Mississauga South had the floor.


Donald Alex Blenkarn: Mr. Chairman, prior to lunch we got into the question of certain money funds that were organized and have been organized principally since the budget of November 12, 1981, making it possible for Canadians to invest in Canadian Government bonds and other Canadian Government securities in such a fashion that the funds can accumulate, accumulate and accumulate and there will be no accrual of tax. The various offerings in these funds were being peddled in the Toronto area and indeed across Canada. For reference this afternoon, I want to put on the record the detail of a company called "The Money Fund Limited".
The Money Fund is organized as a fund to invest in the medium-term debt obligations issued or guaranteed by Canada or a Province of Canada or an agent thereof in any financial institutions having a Standard and Poors rating of AAA. The question is asked in their prospectus which has been approved, issued by Bache Halsey Stuart Canada Ltd, 170 Laurier Avenue in Ottawa: "Why is an investment in a Money Fund tax-sheltered?" The answer is: "A Canadian resident investor will not be taxed on an accrual basis or have taxes payable in Canada or Nassau until such time as the B shares are redeemed".
The next question is: "Will an investor be liable for any taxes on the redemption of First Series A shares". The answer is: "No, there are no taxes payable by an investor upon redemption of the shares".
On the question of their B shares, they say: "All of the investment growth will be attributable to B series shares. The value of the shares will be subject to tax on the capital gain realized on any redemption of the series B shares".
The next question is: "Can this investment be used as bank collateral?" Here is the answer: "Yes. Bank of America Trust and Banking Corporation Bahamas Limited will normally provide excellent collateral loan facilities with shares of the Money Fund as collateral. The interest on the loan may be tax deductible as an expense to the investor."
That particular fund is open to any investor who wants to put $100,000 into it. In effect, the investor puts up $100,000. The fund issues him Series A shares, annually the interest which is payable and collectible in the Bahamas on Government of Canada securities, which by the way have no withholding tax on them, if received by the trust company in Bahamas. In place of giving the Canadian shareholder his interest on his share of the income received on the bond, the Canadian receives a Series B share. That Series B share can be redeemed at any time. It is totally open. Indeed, the Series A share in the fund is totally open and redeemable at any time.
The Series A share redeemable without cost because that is the original capital. The Series B share comes back to the Canadian subject to Canadian capital gains tax only because, after all, it is a share. In other words, there is no tax on the accumulation principle for money taken out of Canada and invested with these people. These people are able to and have
Income Tax
cleared their share issue with the Securities Commission of Ontario. The opinions with respect to the legality and the tax position on these securities has been cleared by the top solicitors in the country, indeed with the tax Department, if my memory serves me correctly.
This morning there was mention of the Casuarina Corporation. The Minister says that was six years ago. May 1 point out to him that the confidential offering memorandum for Casuarina is dated May 3, 1982. I pointed out this morning that Casuarina has already pulled out of Canada $80 million of investment funds that would have gone to mutual insurance companies in Canada. They would have been used in Canada for long-term mortgage investment in this country. The money was pulled out of Canada because of the nature of the income tax amendment now before us. There can be no justification whatsoever for this kind of activity that is allowed to take place, yet the very nature of the amendments before us initiate this activity and force money out of the country.
The Minister said privately before lunch that he had a legal opinion that people who went into these kind of schemes and invested in annuities or in these money funds outside of Canada may be avoiding Canadian income tax. I challenge him to present to this Committee that opinion. If he cannot produce that opinion, then he should withdraw all of these Clauses because these Clauses deliberately cause headaches and problems for Canadians. They take away the investment potential of Canada. They take money out of Canada and put it in foreign countries. That is what this income tax amendment and this part of the Section does. This Government does not realize what is happening.
This morning the Minister talked about the history of the annuity business in Canada. He was quite right. We were developing a very good deferred annuity business in this country where trust and insurance companies would take money in on long-term deposits and the interest would accumulate. That money was available for long-term mortgages and industrial bonds. What this Clause does is to force money invested in Canada by Canadians into short-term investment. It shortens the length of debt securities. It destabilizes the investment climate of the country. This particular series of Clauses is doing more harm to the investment climate of this country than any other series of Clauses in this horrendous set of amendments.
Has the Minister any current figures on the current attitude of Canadians toward buying deferred annuities since December 1, 1982? Have any Canadians bought them?


Paul James Cosgrove: Mr. Chairman, I indicated before the one o'clock break that the issue the Hon. Member for Mississauga South has just characterized is generally known, I am told, as offshore mutual funds. It is likely that there are not a large number of Canadians knowledgeable of, or who have come in contact with, this provision. As the Hon. Member indicates,

March 10, 1983
Income Tax
they require the services of the highest price lawyers in Canada to set up the trust and give opinions on the matter. I for one have not had a reason to call upon such highpriced opinions or help. Obviously the majority of Canadians have not done so as well. It is probable, Mr. Chairman, that these Canadians who, because of their financial resources are able to call upon the best and most expensive advice on the conduct of their financial affairs must be first, the envy of some other Canadians, and second, I would think that some Canadians must feel a little frustrated, even a little angered, at the fact that there are some high rollers who have the resources necessary to take special advantage of the tax system.
However, getting back to the offshore mutual funds issue, it is not an offshore mutual annuity question; it is an offshore mutual fund tax technique.


Donald Alex Blenkarn: So what?


Paul James Cosgrove: The Hon. Member says, "so what?". The answer is that this special tax treatment has been in place for a number of years. It has nothing to do with this budget or specifically with annuities. It is only that annuities may be one of the riders under the trust, the mutual fund vehicle, that the issue now comes up. So I contest his protestation that this vehicle is the result of any of the Clauses which are before Parliament today on this issue.


Mr. Thacker:: That is some answer.


Donald Alex Blenkarn: Some answer, as my friend says. The Minister says it is only the high rollers. Let me tell him that in the Casuarina prospectus the per unit cost is $10,000, not a great deal of money bearing in mind that the maximum amount of Canada Savings Bonds purchased by one individual is $35,000. If the Minister wants to buy the Money Fund, he can go down to Bache here in Ottawa and buy it. No problem, he does not have to be a high roller there. The Casuarina fund is financed and organized by the Royal Bank of Canada, not exactly an unknown institution in Canada. I am sure that if he really wanted to get involved he would just have to see his local Royal Bank manager, and that could be organized for him. The Minister says that is not an annuity, that is a money fund. Well, I want to point out that these Clauses deal with any investment situation where the money is invested and interest accumulates. The normal tax treatment in every jurisdiction in the world, other than this one if this Bill passes, is that interest is not taxable until it is received by the lender. Whether it is an annuity, an insurance policy, a guaranteed investment certificate or Canada Savings Bond with a cumulative feature, does not matter one iota.
The principle, Mr. Chairman, is that this Government wants to tax interest which has not been received. If people are going to save money in this fashion, they are going to earn a lot of money, and the Government says it is not going to get its tax fast enough. So the Government says, "Let us wring the neck of the golden goose; we will get the eggs out faster that way". I want to tell the Minister that he has wrung the neck of the golden goose. He has not answered my question about the
experience on the sale of deferred annuities since the beginning of December, 1982.


Paul James Cosgrove: Mr. Chairman, the Hon. Member urges the Government not to take any leadership in drafting a tax system which we promote on the basis of equitable treatment of all Canadians. Yet scarcely a day goes by in the House that we are not urged by Hon. Members opposite that we do need specifically Canadian designed policies in, you name it, energy, housing, or interest rates. Then, because the Government of Canada takes leadership in proposing an equitable system for the vast majority of Canadian taxpayers, he complains that we are taking leadership. I do not know where the consistency is in that.
To make the observation that investment in annuities is down, as I indicated this morning, what does that add to our understanding of what has happened in the economy? Can you name six sectors of the economy which have shown improvement, or where financial investments have not suffered as a result of the downturn in the economy in the last 24 months? I doubt it.


Donald Alex Blenkarn: The Minister still refuses to tell the House how much the sale of deferred annuities has decreased in the country since the Minister decided to bring in Subclauses 4(6) to (11). The money funds that I spoke of were deliberately set up to avoid the problems created for investors in those Clauses, the ones we are now dealing with.
The Minister said that the annuity business was great in Canada. That is what he said before lunch. I asked him what has happened to the sale of deferred annuities since December 1, 1982? He weaseled, he did not answer. I am going to sit down and expect an answer from him because he should have an answer and he should have it now.


Paul James Cosgrove: Mr. Chairman, I am going to repeat the answer that I gave before the break, and the one which I just gave a few moments ago, that the sale of annuities is down.
If the Hon. Member for Mississauga South is so familiar with this fantastic tax scheme that permits people to have a tax advantage by getting high priced assistance-he has mentioned the name of McLeod, Young and Weir-I suspect he could get specific information on that question from the people who are offering those schemes. 1 have not been into the offices of McLeod, Young and Weir recently, but the Hon. Member has. I am sure they could give him that information.


Roderick Blaker: The time allotted to the Hon. Member for Mississauga South has expired. The Chair recognizes the Hon. Member for Winnipeg North.


David Orlikow: Mr. Chairman, I rise to make a plea to Members of the Official Opposition to let the House get on with its business. Millions of Canadians whose only income comes from wages or salaries, do not have money to squirrel away in an annuity or RRSP or any of the hundreds of loopholes which the tax laws provide so that people with money can
March 10, 1983

avoid paying taxes. I wish we could get off these pleas which we have heard all day for more concessions and more loopholes for people who already have more than enough.
I should like to discuss the problems of the people who cannot save money and those who can save a little but cannot afford the high-priced lawyers and accountants who give advice to people with money on how to avoid paying taxes.
Organizations such as the National Council on Welfare have documented evidence that large numbers of people in this country get away with paying little or no tax because of the loopholes in the tax laws. In 1978, approximately 2,316 people with assessed incomes of more than $50,000 did not pay any tax at all and 96 of them had incomes exceeding $200,000. In 1979 the Government lost more than $30 billion in revenue as a result of tax loopholes.
I wish we were not spending our time discussing ways to find more tax loopholes, which is what my friends from the Conservative Party are trying to do, but instead discussed ways to plug loopholes. People with money should pay their fair share of taxes and thus lighten the burden on people on low and middle incomes who do not have the money to invest or hide and who pay more tax than they should because they do not know how to avoid it.


Frederick James (Jim) Hawkes: Mr. Chairman, I am glad that the NDP has joined the debate. I think that Members of that Party are missing the point. What we are concerned about is the small Canadian who is being hurt by particular parts of this tax Bill. If the Hon. Member listens carefully perhaps we can identify some of those areas for him.
May I ask the Minister to reconsider the issue of court ordered asset splitting in relation to matrimonial matters. He knows that quite often in the process of a divorce, the courts order the splitting of assets. The Minister indicated that if the law remained as it is, then at the moment of divorce those people will be liable for increased taxation. This comes at a time when they can least afford it, financially or emotionally.
Has the Minister reconsidered my request for an amendment that would exempt people involved in that kind of forced-family splitting of assets from an increase in taxes? Has that matter been reconsidered, and can we expect an amendment that will remove that negative part of the Bill?


Paul James Cosgrove: Mr. Chairman, I will repeat an answer that I gave this morning and on a previous day when we considered that question. I have to remind the Hon. Member that the law with respect to what a judge may do, as it pertains to property rights between spouses at termination of marriage, lies explicitly within the jurisdiction of the Provinces. The Hon. Member is obviously interested in the question because he has quoted statistics on marriage breakup. I suggest that he should address himself to the provincial jurisdiction in his efforts to obtain more humane treatment of people faced with this situation.
Income Tax
Life insurance, annuities, etc., is only one area that is affected by a court looking at a household. A consideration of the whole issue of matrimonial relations and how they are governed upon termination, has presumably to be done in a coordinated way so that it addresses not only life insurance but such things as real estate, family car, etc.
While the Hon. Member's interest is legitimate, I think it is directed to the wrong jurisdiction.


Frederick James (Jim) Hawkes: Mr. Chairman, I am not talking about the federal Government taking over provincial jurisdiction but about a federal tax law. I would point out to the Minister that people in the middle of a divorce will have to surrender assets, to use his own term, and will thus be liable for extra taxes.
If we proceed without the amendment which I suggest, then people in the midst of the most difficult time of their lives will be forced to incur an additional tax liability that they cannot afford. I am simply asking whether the Minister will bring forward an amendment in relation to the kinds of assets we are discussing that fall under federal jurisdiction so that the tax liabilities of the parties will not be increased. People do not want to surrender the assets but simply to split them. The technical part of the Bill requires them to surrender before the split, however, and this involves a tax liability which they do not need, do not want and which I do not think is humane. Would the Minister consider an amendment along the lines I have suggested?


Paul James Cosgrove: Mr. Chairman, once again, the issue of how assets are dealt with by a court-whether they should be split, apportioned to one or the other, whether to set off one asset againt another, falls strictly within the provincial jurisdiction. In designing the rules for settlement, I think they have to take into account not only this law which deals with insurance but the law as it pertains to real property and other assets.
To be consistent, the question should be put to the Government that sets the rules about what happens upon dissolution of marriage.


Frederick James (Jim) Hawkes: Mr. Chairman, "consistency" is the operative word. Earlier we were talking about fairness. Does the Minister think it is fair to leave the law the way it is now?


Paul James Cosgrove: Yes.


Frederick James (Jim) Hawkes: Another issue that 1 brought out was that of giving people the flexibility to change companies. We have regional insurance companies in Canada, but not all companies operate in all regions, yet we have a very mobile population. If this law passes in the way it is written, and I move, for example, from one region of Canada to another and I wish to change my insurance company, I will be required to surrender my first policy, pay tax on the accrued income, and have less money to invest in the subsequent policy. I will be at a disadvantage as compared to those people who do not move and choose to stay with the same company. Will the Minister consider this matter once again and consider allowing me to change insurance companies without having to pay tax?

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Paul James Cosgrove: The Hon. Member's concern is laudable. It is interesting to note that not a single insurance company in Canada, nor any consumer group, thought that the matter should be the subject of representation; there has been none. It reflects the reality of the improvement of the way in which not only the insurance business but financial services are offered across the country. There may be regional offices, but companies have the ability, inexpensively and quickly, to deal with Canadians moving from one coast to the other.


Frederick James (Jim) Hawkes: Earlier today I asked the Minister and his officials if they could use the lunch hour to enable them to indicate to us how much money historically had been accumulated through annuities and life insurance and thus was available as a pool of capital to lend out to business and industry to modernize and make our country more efficient and effective. Does the Minister have those figures at this point?


Paul James Cosgrove: Mr. Chairman, I took advantage of the hour between one and two o'clock, in addition to answering telephone calls, signing letters, receiving other representations by officials and having lunch, to spend some time on the question raised by the Hon. Member. After reflection, I would again ask him to consider the area in which he is now inviting the Committee to enter. It is an area of capital markets and capital market formations, and it would be better addressed in another forum. I suggested this morning, for example, that when the Minister of Finance was before the Standing Committee on Finance, Trade and Economic Affairs later this week or next week there would be an opportunity to ask him and his officials questions in that regard.
Capital formation is not restricted to insurance or annuity policies. The subject matter before the Committee at this time is not restricted or confined to the Income Tax Act. There are many other pressures or economic forces which come to bear on the larger issue. The Minister of Finance periodically reports on long-term, larger financial and economic projections and performance. I would recommend that this question be put before another forum so that, as the Hon. Member for Winnipeg North recommended, we could spend our time more profitably on the material which is actually before us.


Frederick James (Jim) Hawkes: I find it incredible that we can be considering such an important piece of tax legislation without any information or data on what it will do to capital formation in the country. This industry has been a significant part of how we have put together pools of capital to enable us to build plants, develop mines and drill for oil and gas. If we are destroying or hurting that market in any significant way, it simply means that there will be fewer jobs in the future. I draw to the attention of the New Democratic Party that without the formation of capital we cannot be productive and efficient and there will be no jobs. This is part of what has gone wrong in the country.
I remember standing in the House in October, 1980 and saying that if Members supported the National Energy Program, we would drive significant billions of dollars of capital out of the country and that if we did that, we would also drive out jobs and tax revenue. I stand here some two and a half years later, and all of that has come to pass. Capital was driven out of the country and jobs disappeared; we have 1.6 million unemployed. I am afraid that these few Clauses in the tax Bill may have similar implications in the future.
Also I am very disturbed that the Minister of Finance clearly indicated to the House that they have not done their homework, that they do not have data a projection or a guess about the degree to which capital markets will be hurt by this particular piece of legislation. This hurts job creation, this hurts the productivity of the nation, and it increases deficits. I think this matter is critically important, and I hope the Government will reconsider its position.
I would like to ask the Minister a few more questions. What happens if I have a life insurance policy which matures on my sixty-fifth birthday and I want to change it into an annuity to last through my retirement? Do I have to pay tax at that point?


Paul James Cosgrove: The only exception to that case would be the one I indicated to the House in the case of disability, which obviously is not the case raised by the Hon. Member.


Frederick James (Jim) Hawkes: My question was: do I have to pay tax at that point? If my policy matures at age 65 and I want to change it at that point into an annuity, have I surrendered it at that stage and am I therefore eligible for tax before I move it into an annuity?


Paul James Cosgrove: Yes, Mr. Chairman.


Frederick James (Jim) Hawkes: What happens if I die one day before that comes about? Do I have any tax liability at that point?


Paul James Cosgrove: I assume not. If death occurs before the surrender is applied for or committed, the Hon. Member's estate merely receives the benefits from the policy without tax.


Frederick James (Jim) Hawkes: Is there a sense of fairness or a sense of justice in the fact that I can save a large tax bill by dying one day sooner?


Paul James Cosgrove: I do not think the Hon. Member would be concerned at that point about whether or not he has saved anything. Probably in the back of his mind was his concern for his estate, his business partners and his family, which obviously was the reason he took out the policy in the first place. The benefits from the policy would be available to the estate in that case, and it would be a very commendable action on his part.


Frederick James (Jim) Hawkes: Why would the Government not just let me roll it into an annuity and, as I took it out on a monthly or yearly basis, let me pay the tax at the point at which I wanted to use the money I had saved all my life? Why could the Government not let me do it that way? Why does it have to
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take some money before I can invest it in an annuity thus reducing the size of my annuity and my monthly payments for the rest of my life? The Government is really borrowing or taking my money before I have a chance to use it. Why could the Minister not consider an amendment of that kind?


Paul James Cosgrove: In the Hon. Member's example he has received income. The principle of the Income Tax Act is to tax income. The Government uses the resources it gains through the taxation of income to meet some of its bills, presumably offering some of the services of the federal Government to the Hon. Member or to people associated with him. That is one of the major ways in which the Government of Canada finances public services.


Frederick James (Jim) Hawkes: Mr. Chairman, can the Minister see that if I have my assets in the form of grain in the granary which is there for my retirement, I will not be taxed on that unless I sell it? If I happen to live in a city and have been a salaried worker all my life, my life insurance policy is like the granary, but, all of a sudden, the day I turn 65, I will be taxed on the whole thing. Yet the other chap who has his money in a different form of asset, such as grain, will only be taxed when he delivers the grain to the station and sells it. Why do we have this kind of inequitable principle? A great many Canadians live on salary all their life. They do not have a whole lot of money. They would like to keep whatever they have been able to acquire to see them through their retirement years. Why is the Government stepping in and telling me that I am taking this into income when I am not? All I am trying to do is to invest it on a long term so it pays back a little every month rather than all at once. That is what I really want to do with it. Why will the tax man not allow me to do that?


Paul James Cosgrove: Mr. Chairman, I would have to repeat my last answer. One of the major tax areas available to the Government is income tax. We do not have a grain tax or a grain collection system. Obviously, as the Hon. Member indicates, not everybody is into grain. We have an income tax system. It is a universal system. It is one where assets can be assessed on the basis of income easily identifiable in connection with financial institutions. It is a much more convenient way of assessing a plan against resources to be transferred into resources of the Government in order to finance Government services. We are being consistent, whether it is income which the Hon. Member earns through wages, through his occupation or through the sale of assets. The build-up in the life insurance policy that accrues over and above the cost of protection is viewed as income, and when received by people it is taxable under the Income Tax Act.


Frederick James (Jim) Hawkes: Mr. Chairman, earlier this day we talked about those Canadians who have a pension plan or an RRSP. If I were a small-businessman and I wanted to put something away for my retirement, I could put money in an RRSP, which is before-tax money. In other words, the taxpayer is making a partial contribution to my retirement by letting me defer tax
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on that amount until retirement. What is the maximum amount of that deferral?


Paul James Cosgrove: Mr. Chairman, if I understood the Hon. Member's question, for the RRSP it is $5,500 and for the RPP it is $3,500.


Roderick Blaker: May I advise the Hon. Member for Calgary West that his time on this point has expired.


Donald Alex Blenkarn: Mr. Chairman, before my time expired last time, I was discussing with the Minister deferral of income. The Minister seems to indicate, in the way the Government is approaching these Sections, that people buy annuities, put money into guaranteed investment certificates, guaranteed investments, insurance policies that are single-premium pay insurance policies or accumulating funds only if they want to avoid income tax. The Minister knows that taxation is only one of the things that motivates people. Indeed, the Minister said that himself.
The Minister indicated earlier that there was a fair tax impact on the Government when the tax is not paid, it is deferred, taxes deferred are to some extent avoided. What studies does the Minister have in his Department with respect to what changing attitudes Canadians will have toward longterm savings as a result of the imposition of taxes on an accrual basis? What changing forms of investment are likely to take place? Does he not foresee that Canadians will, generally speaking, invest their money for shorter and shorter periods of time? On that basis, they will receive their income within the year and, therefore, have the income with which to pay the tax. Does he not foresee that indeed we will have shorter investment certificates-one year, no more than that. That is the kind of thing that is likely to develop? Will the Minister tell us what studies are available on how that will affect the long-term capital market?


Paul James Cosgrove: Mr. Chairman, we know that Canadians are saving and probably investing at rates unparalleled in the history of Canada. Obviously there is room for debate as to whether investments should be locked up for 20 years, whether, as the Hon. Member for Mississauga South says, a move toward shorter investment is good or bad, or whether a move toward shorter investment permits people flexibility in being able to direct funds toward new opportunities in a fast paced technological world. It is almost impossible to guess or to generalize whether one is better than the other. I suppose a mixture is what will occur. Some people will go for short investments for their particular reasons while others will look for long-term investment for their particular reasons. That really is the choice of the individual. Surely, the Government should not be conducting in depth psychological analyses to try to mind-bend people as to what is the best investment for them.


Donald Alex Blenkarn: Mr. Chairman, the Minister has already admitted that there has been a tremendous drop in the sale of deferred annuities. I suggest to the Minister that deferred

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annuities as sold in Canada by Canadian life insurance companies to Canadians is a dead issue. No longer will they be sold. Nobody will buy them because they become taxable on an accrual basis. The only way an annuity earns is by accruing income and adding income to capital and capitalizing it, and so on. It is quite true you pay the tax on the income portion accumulated in the annuity as you draw out the money in the normal course. But now the system is that you pay the tax every three years at least, and there would be no way a person could invest in that type of certificate.
I suggest also to the Minister that cumulative GICs with trust companies are no longer a viable investment unit unless the cumulative period was less than three years.
I suggest to the Minister that single-pay premium life insurance policies that might, for one reason or another, be purchased by someone who had a block of cash and wants to protect an interest for a long period of time is no longer a viable method of protection because the single-pay policy causes the owner of the policy to be subject to tax every year or every three years on the imputed earnings behind the policy without receipt of income with which to pay the tax. I suggest to him that that form of long-term investment has been forced out. In other words, while these methods of investment may have been available as tax deferrals, at least the Government was getting taxes from the people who held these investments as the interest or other amount was paid out on the investments. Now that the Government has become so greedy as to collect its taxes on an annual accrual basis, it has, in effect, squeezed the neck of the golden goose so hard that there is no life in the goose at all. For all practical purposes it has wiped out accumulating GICs, accumulating bonds, accumulating deferred annuities and single-pay and accumulating investment type insurance policies. It has wiped out that source of investment opportunity for Canadians in Canada.
The Minister will know that we have pointed out that if Canadians want to invest in those type of instruments, there is no problem. They can go offshore to the United States or Great Britain. They can do this with a type of trust agreement, money fund or any number of ways. They are only prevented from doing it in Canada.
What studies has the Government done to determine what it really expects to accomplish with these Clause? What additional revenue does it really expect to receive? Having squeezed off the revenue source, is it not likely that the Government will receive no revenue? All it has done is to drive capital out of the country. Will the Minister tell us what revenue source the Government hopes to have as a result of these changes, bearing in mind that it has squeezed the neck of the golden goose so that there is no possibility of its even breathing, let alone laying eggs?


Paul James Cosgrove: I believe that the Hon. Member's analysis is too narrow. His question is not as broadly focused as that of his colleague, the Hon. Member for Calgary West, who pointed out that one of the objectives of the tax policy certainly is a legitimate concern for job creation.
While the Hon. Member for Mississauga South may have a hang-up about interest-bearing securities and giving a preference to that kind of long-term investment, I would invite him to consider the same question that his colleague from Calgary West asked us to consider. Is that good for the mix that we would want in the economy, those investments in which we are trying to interest people who have funds available? Is a longterm debt security instrument, which has a preference over other types of investment opportunities such as shares and stocks necessarily the best thing that we should do at this time in the country? Is it the best thing to do when investment is down, production is down and the interest of small businessmen is at a low point? For example, they are not able to draw the same kind of investor interest in share or stock support for their projects.


Donald Alex Blenkarn: I am glad that the Minister now realizes that what we are really talking about is jobs. We are really talking about the growth of the country and investment in the country.
What we are concerned about is the way these Clauses in particular and this Bill drive out long-term capital to other countries. The people who want to invest in this way are not prevented from doing so. They will not pay tax on their accumulating income. They will go somewhere else and do so without any problem.
Incidentally, the Minister said earlier that they would have to pay high-priced lawyers. Let me advise the Minister that the new round of accumulating money funds for investment offshore will now be sold in units of $1,000. They are not large units so that the ordinary Canadian will be able to buy them offshore in competition with Canada Savings Bonds and not have to worry about paying tax on the accumulating money as he will be required to do under this Bill.
Again, in terms of real revenue, what does the Minister really believe he will get by virtue of these Clauses? Does he think, for example, that by passing this kind of punitive measure he will somehow persuade Canadians who want to invest in instruments that are banned by this punitive measure to invest in something else in the country? Does he not think, though, that they will take their money somewhere else in the world where they can invest it as they please? What kind of revenue does the Minister hope to receive in the future by a tax on these kinds of investment vehicles?


Paul James Cosgrove: Mr. Chairman, as I indicated earlier, the objective is to eliminate the drain which is a result of the deferral that otherwise would be available in these instruments, which is estimated to be some $75 million because of the high interest rates in the last two years. That is revenue that is not available to the Government in order to meet its obligations.
I point out as well that the Bill lowers the top marginal rate, which is a policy decision by the Government to induce those in the higher income brackets to be able to use the difference between the former rate and the lower rate for investment purposes. What this Clause does specifically is to take away the privileged or preferred spot that annuities held over such
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other instruments in the economy which are the vehicles for the direct creation of jobs. I am talking about stock and bond opportunities for investment.
The Financial Post article which I drew to the Hon. Member's attention calls the buyers of this annuity instrument sophisticated, well-healed investors, perhaps a little wary of the stock market, who can afford to tie up income for a long time in order to avoid paying tax on it at current high marginal rates. We are trying to provide some direction through the marginal rate reduction, which I have discussed, and through increases in the small business limits to show that there is a need for investment in other areas. Certainly, the Government ought not to continue to provide such a nonproductive preference to non-job generating areas of return to investors.


Donald Alex Blenkarn: It is unfortunate that we have a Minister of State for Finance who does not realize that a cumulative bond such as a Canada Savings Bond is precisely the same debt instrument as a bond that does not accumulate. The only difference between a cumulative certificate and an annual or semi-annual pay certificate is the date on which the payor is required to pay interest out to the payee. The money that goes into these certificates is precisely the same money that goes into any other certificate. Through these Clauses, the Minister is forcing those people who wish to have an accumulating type of investment, either a GIC, Canada Savings Bond or insurance policy or annuity, to go to some other country with their money where they will be treated honestly and fairly as they were by Governments in the past in this country.
We are talking about investment money being driven out of Canada because that money is invested where investors wish to place it. It is the absolute and supreme arrogance of the Minister and the Government for them to suggest that their tax laws can force investors to invest in modes in which they do not want to invest. Do they not realize that the 49th parallel is a pretty imaginary line and that investors can take their funds and invest them wherever they want in this big, wide world, and in the kinds of investment instruments that they want? They are not forced by the Minister or by the Income Tax Act in Canada to do something that they do not want to do. Therefore, we are really discussing jobs and investment, the creation of new opportunity, which the Government wants to drive out of the country.
Blindly, the Minister has decided that this is the way he should go. The philosophy was developed from the top floor of the Place Bell tower by people who have no understanding of the way the world works. They are hidebound in this city of Ottawa. Their vision of Canada is limited on the south by the airport and on the north by the Ottawa River. That is their vision. They do not know what is happening or where they are going.
I want to say that we will not carry on with these Sections much longer. As far as I am concerned, I will suggest that we vote on these Sections right now.
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Frederick James (Jim) Hawkes: Eight minutes.


Donald Alex Blenkarn: Here they are. They are all going to roar in now. The ducks are coming in, guys.


Paul James Cosgrove: Powerful man.


Joseph Jacques Jean Chrétien: Back in power.


Douglas Glenn Fisher: He's better than our Whip.


Donald Alex Blenkarn: However, my colleague, the Hon. Member for Calgary West, says that he wants to speak for a while.


Frederick James (Jim) Hawkes: It is nice to have an audience for a change.


Mr. Prud'homme:: We will be here until six. We will be here today and tomorrow and Monday and Tuesday. Do not worry. We might as well pass it now. We will be here. No, no, the numbers game, we will not fail on that.


Frederick James (Jim) Hawkes: Just before my allotted time expired, I was asking the Minister how much money a small-businessman could shelter for retirement purposes, and the Minister said, $5,500 or $3,500. How much money can a Cabinet Minister shelter in his pension plan?


Douglas Glenn Fisher: Mr. Chairman, all Members of Parliament, of course, follow the same sheltering rules as all Canadians follow. I understand that in after-tax dollars, we contribute more. However, we as a group are paying twice on those funds because we are taxed when we take them out again, too. Therefore, we pay for a good portion of our pension plans with after-tax dollars, and we pay again.


Frederick James (Jim) Hawkes: I was hoping I would hear the response that it is the same for all Canadians. I would bring to the Minister's attention the case involving corporate executives. Is it not true that an executive, himself, can put money in, but then the company can put in an almost unlimited amount to provide a pension of $60,000 a year, inflated, and that that money which the company puts in is not taken into income and is not taxed?


Paul James Cosgrove: Mr. Chairman, the Hon. Member has raised interesting subjects. However, again, with 150 clauses before us, I think we should really try to deal with items which are before us. I understand that it is not germane to the Act before the House.


Frederick James (Jim) Hawkes: The Minister stands and speaks of fairness time after time. I simply want information as to whether the system is fair. It is our conviction that life insurance and life insurance annuities are really the poor man's vehicle in preparation for retirement. They are in somewhat the same category as the family home. If one considers the assets of an average Canadian preparing for retirement, one finds that there may or may not be a pension plan. There is usually a family home involved, and there is quite often a life insurance policy or some kind of annuity which is bought in later life.
We on this side are suggesting that by becoming involved in the notion of accrual as it affects these Clauses, an additional

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tax is really being placed on average Canadians. Those who are rich enough to afford gold, silver or stamps, or who have a granary full of grain, do not have to pay on the basis of accrual. They pay only at the moment they begin to use incomes. In this tax Bill there is a provision to tax when a court directs that assets of those involved in a divorce must be split. There is a provision by which tax accrues the minute people become age 65 and want to turn their savings into annuities. If this comes into the system, it will cause average Canadians to face an extra tax. That is the problem concerning this particular piece of legislation.
I want to deal with one last issue and lay it out on the table. Does the Department have an estimate of the cost to Canadian society of the additional paperwork which this change in law will require? Just think about it for a moment. Every policyholder in the country will have to be notified, and each letter will require a 32 to 35-cent stamp. Material setting out the calculations and so forth will be required, meaning additional cost to the industry to notify policy holders to their tax position. Does the Minister have an estimate of the cost to Canadian society?


Paul James Cosgrove: Mr. Chairman, as the Hon. Member for Parry Sound-Muskoka indicated this morning, from his own investigation he found that only 5 per cent of life insurance policies, a very small amount, would be affected by the three year accrual route.
Further, we all know that insurance companies are leaders in terms of information management, of taking advantage of the new technological gains to assist them in very economic handling of all types of information recording, including the small 5 per cent of their policies which would be subject to the rules in the Bill before us. The information of the Hon. Member concerns the profile of persons taking advantage of annuities. His description of annuities as being the poor man's vehicle certainly does not coincide with that of the impartial writers and analysts of the situation. I would again refer the Hon. Member to The Financial Post of July 4, 1981. It states:
Annuity brokers say most contracts are for more than $10,000. Many exceed $100,000 and, occasionally, million-dollar contracts are sold.
I would be interested in the Hon. Member's definition of a poor man.


Frederick James (Jim) Hawkes: I think the words I used were "average Canadian". Certainly, at the age of 65, having a $10,000 cash surrender value which one desires to turn into an annuity is not a rich man's game. If one reads the article carefully, one finds that, yes, there are some policies sold for $1 million, and tax laws can be written specifically for those kinds of cases. However, in reality, I would certainly not describe the number of people who will get caught in this as being wealthy.
The question which I asked was whether the Department has an estimate of the increased cost through the paper
burden. The Minister indicates that in his opinion this cost is going to be slight, but there does not seem to be any data available.
Has the Department considered the increased cost to every partnership in the country which will have to re-write partnership agreements as their business expands, as dollar volumes change and the previous insurance policy that they had becomes inadequate and therefore has to be redone? I am speaking of survival-type corporate insurance. Has the Department considered those kinds of costs, and what that will do to the small business sector?


Paul James Cosgrove: Mr. Chairman, the officials remind me that obviously it is the insurance companies through their agents who offer the kind of service and advice that would be required by persons in partnership referred to by the Hon. Member. Increased costs would be negligible.


Roderick Blaker: Is the House ready for the question?


Some Hon. Members:: Question.


Roderick Blaker: The Chair has before it a package of Clauses, Subclauses and amendments. Earlier today the Committee made it an order of the Committee that certain amendments proposed by the Minister were deemed to have been proposed and seconded and that a certain list of Clauses and Subclauses were to be grouped, along with the amendments, for the purpose of a vote. I think the House perhaps will accept my reference to that as Clause 4 and the Clauses and Subclauses grouped with it.
Accordingly, I would now put the vote on what I would refer to as Clause 4, but the Committee will understand that it consists of all those Clauses and Subclauses and amendments referred to.
Shall Clause 4 carry?


Some Hon. Members:: No.


Roderick Blaker: Those in favour will please say yea.


Some Hon. Members:: Yea.


Roderick Blaker: Those opposed will please say nay.


Some Hon. Members:: Nay.


Roderick Blaker: In my opinion, the yeas have it. Clause 4 and the others grouped with it are carried on division.


[Stage Direction]
Clauses agreed to.
Roderick Blaker: Because of the grouping of Clauses, that would mean that Clause 5, and the amendment thereto proposed and seconded, has now been dealt with as well.
In the ordinary course of events, the Chair would look to returning to Clause 1 because that Clause was stood earlier on the grounds of a point of order raised by the Hon. Member for Simcoe North. Earlier in the Chamber there was some discussion as to how we might proceed. Perhaps I could hear those Hon. Members who wish to rise on this point.
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Donald Alex Blenkarn: Mr. Chairman, we have had several discussions with respect to the grouping of Clauses. It would be our view that Clause 1 should be discussed next, and should be discussed separately. We would then go on to Clause 6 which deals with terminal losses. We would then go on to Clauses 8, 9 and 128(12) which deal with small business bonds. We suggest then that we go on to Clauses 7, 12(2), 44 and 45 which deal with loans to shareholders and employees, or employee benefits of that nature. We then suggest we go on to Clauses 54(1), 86, 90 and 109 which deal with small business taxation.


Roderick Blaker: I understand that Clause 1 is to be debated separately, but I wonder if the Hon. Member for Mississauga South would indicate to me whether or not it is the case that the remaining Clauses or Subclauses which he has mentioned-


Donald Alex Blenkarn: That would be the next five separate groupings. If we could go to Clause 1 now we could carry on with that until we had a reasonable discussion on Clause 1. Then I suggest we have a discussion on Clause 6, followed by Clauses 8 and 9, which deal with the small business bond, but that would be a separate discussion.


Roderick Blaker: I will hear the Minister of State for Finance, if he wishes to make a contribution on the point, but the Chair is not clear as to how the remaining Clauses after Clause 1 are to be grouped. Are they all in one group or are they in several groups? As I understand it, there may be agreement to proceeding to Clause 1.


Paul James Cosgrove: Mr. Chairman, I want to deal with the proposal that we go to Clause 1. I am not proposing that we proceed to Clause 1 at this time.
In considering Clauses 3 and 16 we had a request from the Member for Mississauga South that the issue of notaries from the Province of Quebec be included in the exempt category under work in progress. I indicated that there were no amendments put forward to those Clauses because that exception would have to be dealt with by way of definition, under the definition section included in Clause 128 of the Act, and that because it was urged that the section be expanded so as to include notaries from the Province of Quebec, I indicated that we were in agreement to put forward Clause 128, which in effect was an expansion of the exemption under Clause 3.
I know that the Hon. Member for Mississauga South wondered why we had to go to the definition section instead of amending Clause 3. I provided him with an explanation. I wonder, Mr. Chairman, before we do proceed with Clause 1, whether the Hon. Member for Mississauga South and other Hon. Members would indicate whether they are now agreeable to having that Clause amended by the amendment to Clause 128.


Donald Alex Blenkarn: Mr. Chairman, it was indeed unfortunate that the Government, in its effort to smash professional groups
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and tax professionals unconscionably on their work in progress, insisted on refusing-


Roderick Blaker: Order, please. My understanding is that at the moment there is some negotiation taking place in Committee as to whether or not the Committee will consider Clause 1 and Clause 128(1) together. Am I correct?


Donald Alex Blenkarn: That cannot be done.


Paul James Cosgrove: Mr. Chairman, the Hon. Member for Mississauga South proposed that we proceed with Clause 1. I inquired whether the Hon. Member for Mississauga South would prefer that we deal quickly with the amendment to include notaries, which was requested by the Hon. Member early in the proceedings. That was my question.


Roderick Blaker: That is my understanding. In view of the fact that we are in Committee of the Whole, I presume that the Hon. Member for Mississauga South would like to address himself to the question put by the Minister.


Donald Alex Blenkarn: That is what I was doing, Mr. Chairman. The problem is that we should have amended Clause 3 and Clause 16 when they were before the Committee. The Minister has now tried to correct his stomping through this Act by fooling around with Clause 128. Unfortunately, when he changes Clause 128 he increases the burden in the taxation of notaries beyond that contemplated in the Ways and Means motion. Because by amending Paragraph 125(6)(f)(i) of the Income Tax Act he makes it so that if a notary were to incorporate by some method, that notary would then have to pay a corporate tax rate at the level of 33 per cent. At the present time if a notary or a group of notaries are entitled to incorporate, they only have to pay at the small business rate of 15 per cent, or 25 per cent in total when the provincial tax is included. The effect then is that by amending Clause 128 the way the Minister wants to do it, he potentially increases the burden of tax on that group of professionals.


Roderick Blaker: The Chair has a difficulty. There is not before the Committee at this moment a Clause for consideration. As I understood the exchange between the Minister of State for Finance and the Hon. Member for Mississauga South, the issue is whether or not the Committee would now review Clause 1 or whether it would review Clause 1 provided that the Minister were permitted to put forth his amendment to Clause 128(1). That is my understanding. This is not the time for debate on Clauses or amendments which have not been put. The Chair has to know which Clause is going to be discussed or debated.


Douglas Glenn Fisher: Mr. Chairman, the question to our colleagues and friends opposite is very direct. One word, yes or no, will help us out. Is the Hon. Member willing to consider the amendment to Clause 128 prior to our deliberations on Clause 1? If so, we would then go to Clause 128. If not, we will go to Clause 1. The Hon. Member can help us with his reactions.

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Donald Alex Blenkarn: Mr. Chairman, very simply the proposal by the Government is out of order. It does not comply with the Ways and Means motion. The Government cannot do it that way. The proposal by the Government is out of order.


Roderick Blaker: I do not want to dispute with the Hon. Member for Mississauga South. However, in my view he has not raised a point of order as to the admissibility of the proposed amendment by the Minister. What he has indicated is quite correct, that it would require unanimous consent of the House to consider these two Clauses together. There is not unanimous consent. That is evident. The Chair would normally revert to Clause 1 in standard practice, having dealt with other Clauses subsequent to Clause 1. The Committee will recall that a point of order was raised on Clause 1. That has been disposed of. I would put to the Committee that we now begin debate on Clause 1.


Some Hon. Members:: Agreed.


Roderick Blaker: There is agreement.
On Clause 1-Value of benefits


A. Daniel McKenzie: Mr. Chairman, I have a few comments to make about automobile standby charges, and I have a couple of questions for the Minister. The auto standby charge is a tax levied on the personal use of company cars. The Bill proposes that the tax be raised from 1 per cent per month of the value of the car to 2 per cent per month, and in the case of lease cars the tax would be two-thirds of the lease cost. The 2.5 per cent figure in the November 12 budget has been revised downward to satisfy the initial burst of opposition. In cases where personal use does not exceed 1,000 kilometres per month, 12,000 per year, the standby charge would be reduced proportionately. The impact on the individual taxpayer is that the change will effectively double the tax payable by persons using company automobiles. It can be expected that this will reduce the desirability of company cars dramatically.
The over-all impact is that industry reaction focuses on the effect of the change on the purchase and operation of company cars. The initial result will be reduced orders for company fleets and reduced inventories for leasing agencies. Further opposition centers on the process of implementation of the changes. Confusion surrounding the calculation of the taxable benefit, the timing of the changes coming into force and the effect of terminal charges serves to perpetuate the general uncertainty of this proposal.
The Progressive Conservative Party position is as follows: While the principle of taxing this benefit is not unacceptable, the rate of taxation and the method of calculation is suspect. The negative impact of the tax increase overshadows the benefits of increased revenues. It should be amended downward. The sections of the Act dealing with calculation of benefits should be clarified along with the regulations.
I am sure all Members have received complaints from the Commercial Travellers' Association of Canada. They have sent us detailed letters on the adverse effects of this change. They point out that clearly the standby charge, based on an
employer's cost, does not accurately reflect the real value to the employee. We have an example of how it is going to affect one firm in Ontario, Globe Modern Curriculum Press. They give the following example of how they will be affected by this tax change. I quote from their letter:
We are book publishers and supply our representatives with station wagons because of the large number of samples they must carry. This heavy load requires us to equip these wagons with heavy-duty shocks and load-levellers as well. For each of us to empty our cars, and provide space for family is a real chore. Personal use is at an absolute minimum.
Therefore, I consider your plans to tax personal use onerous, unnecessary and unethical and urge you to reconsider your planned legislation.
This letter was sent to the Minister of Finance in January of this year. I hope the Minister will give an indication of changes he will be making to this automobile standby charge.
A recent court case dealt with car expenses. There was a revesal in court of the Government's proposal. For years the Government has based its decisions on whether or not the salesmen can claim automobile expenses on their personal definition of "ordinarily". In a recent federal court trial decision where the Government disallowed a relatively small claim for automobile expenses because of their definition of "ordinarily", the Court found the meaning of the word "ordinarily" as equivalent to "normally" as opposed to "rarely or exceptionally". In view of this recent federal court decision, I would ask what corrective measures the Government plans to take and if the Government will remove this Clause from the Government's regulations.


Paul James Cosgrove: Mr. Chairman, I was encouraged to hear that the position of the Official Opposition is that they do not in principle object to the taxation of this item as a benefit. What they are concerned about is the rate of tax and, as indicated by the specific question of the Hon. Member, the way in which the calculation of that tax is arrived at.
To begin with, I should point out that, if it was not clear as we began consideration of Clause 1, the agreement was, I believe, that we would consider Clause 1 as amended. As we dealt with the various Clauses in the last vote, there were a number of amendments that were identified with "A" on the list that was left with the Chair.
I point out that there are two technical amendments to Clause 1. I presume that in saying they agreed to debating Clause 1, Hon. Members included as well those technical amendments which we have made available to Members opposite. I see the Conservative House Leader is checking on that point. That should be clear. We should not lose sight of it as we begin debating this Clause. For the assistance of the Hon. Member for Mississauga South, I am referring to a document which refers to Bill C-139, items dealing with small business corporations. I think the Hon. Member for Mississauga South would agree with me, Mr. Chairman, that the reference to Clause 1 is in effect reference to Clause 1(a), which is the same way in which we proceeded with the previous vote and which is repeated again with Clause 44, Clause
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45, Clause 86, et cetera. We have made copies of these technical amendments available.


Donald Alex Blenkarn: Mr. Chairman, I will have an answer on this matter with respect to the acceptability, but obviously these motions are with respect to Clause 1 and this is the appropriate time to move them and the Minister, I presume, has now done so. I would not say that the amendments are entirely technical, but that is another matter for debate.


Roderick Blaker: Order, please. The Hon. Member has made reference to those amendments having been moved. They have not yet been formally presented or proposed to the House.


Paul James Cosgrove: I was seeking the consent, Mr. Chairman, of Members opposite to deal with these amendments in the same way we dealt with the amendments on the last vote. That is, we have made them available to Hon. Members opposite, and we would ask that they be considered and agreed to as moved. If the Hon. Member wants some time to look at them, would he please advise us as soon as he can, in fairness to other Members who may feel there is something in the amendments to which they wish to address some questions.


Donald Alex Blenkarn: I am quite prepared to have the Minister move those amendments now and we will treat the Bill, as amended, as being the subject of what we are debating in the very same fashion as we treated the amendments in connection with Clause 4, Clause 5, and so on.
I think the way to handle this whole matter is for the Minister, at the beginning of discussion on a Clause, to move his amendments with respect to that Clause. The Clause is then presented to the House in the amended form. The debate will then be on the Clause in the amended form, so that when a vote is required at the termination of debate on the Clause, it will be on the Clause as amended.


Paul James Cosgrove: Mr. Chairman, I move, seconded by the Parliamentary Secretary to the Minister of Finance:
That Subclause 1(3) of Bill C-139 be amended by striking out line 43 on page 2 and substituting the following:
"employer or to the person related to the employer equal to the percentage
there-"
I also move, seconded by the Parliamentary Secretary:
That Subclause 1 (4) of Bill C-139 be amended
(a)	by striking out line 12 on page 4 and substituting the following:
"the said Act preceding subparagraph (b)(i) thereof'
(b)	by striking out line 24 on page 4 and substituting the following:
"read as a reference to "1 Vi%"; and
(b) the cost to the employer of the automobile were the quotient obtained by dividing"


Roderick Blaker: Order, please. Is it the pleasure of the Committee to adopt the amendment? The Hon. Member for Winnipeg-Assiniboine.
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A. Daniel McKenzie: Mr. Chairman, we will have to study these amendments. We are not going to pass them at this particular time. I would like to carry on and get some more information with regard to these automobile standby charges.


Paul James Cosgrove: Mr. Chairman, the Hon. Member for Winnipeg-Assiniboine finished his first comment by asking for an opinion or some comment regarding what he referred to as a federal court decision. I do not know if that is a federal court decision of Canada or the United States. If the Hon. Member could provide us with the citation, I will have our solicitors obtain a copy, and I will attempt to give him an answer once we have had an opportunity to look at it.


A. Daniel McKenzie: Mr. Chairman, there is a complete write-up in the January 10, 1983 issue of the Financial Times with regard to this case. Perhaps the Minister could give us an opinion at a later date as to whether he is going to change anything regarding the standby charges due to this court case.
Now I would like to ask the Minister to calculate the standby charge on a fair value basis to the employee, not the cost to the employer. Right now the Government has raised this charge from 1 per cent of the original capital cost per month to 2 per cent. For example, when a car is four years old, the employee standby charge is still 2 per cent per month of the original capital cost, which cost never diminishes as the car depreciates. 1 ask the Minister if he will retain the present rules for a supplied automobile which is principally used for business. The proposed maximum of 12,000 kilometres for personal use is actually unfair. For example, even though the personal use is only 30 per cent and the business use is 70 per cent, the employee still incurs the maximum standby charge. It has been understood that with these proposed unfair tax changes, salesmen will use their second vehicle for personal use, thus eliminating any tax revenue for the Government. Perhaps the amendments the Minister has tabled will counter that. If not, perhaps he can give me his opinion on the question I have just asked.


Douglas Glenn Fisher: Mr. Chairman, the Member has asked a question which was raised in the Committee as well. His argument is that we should allow the standby charge to reduce as the car ages. Somehow the standby charge should reflect the lower value of the vehicle. He forgets that what we are trying to do here is to ensure that all taxpayers use after-tax dollars for their personal use of a vehicle. If the vehicle is the taxpayer's personal vehicle, then he has bought that car with after-tax dollars. In this case, it is an employer's vehicle which is being, in effect, lent to the taxpayer for personal use, and the standby charge has to reflect the original cost of the car and the fact that the taxpayer is going to be using after-tax dollars for personal use.


Donald Alex Blenkarn: No, he is not, the cars are written down.


Roderick Blaker: Order, please. Perhaps the Hon. Member will allow the Chair to proceed with another formality.

March 10, 1983
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PROCEEDINGS ON ADJOURNMENT MOTION


Roderick Blaker: 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 Wellington-Dufferin-Simcoe (Mr. Beatty)-The Administration-Conflict of interest guidelines, (b) Request for Committee review (c) Request for appointment of monitoring officer; the Hon. Member for Yorkton-Melville (Mr. Nystrom)-Automotive Industry-Request that Canadian content legislation be enacted (b) Canada-Japan negotiations.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed consideration in Committee of Bill C-139, to amend the Statute Law relating to Income Tax (No. 2)-Mr. Lalonde-Mr. Corbin in the chair.
Roderick Blaker: The Hon. Member for Simcoe North.


Philip Derek Lewis: Mr. Chairman, I have some general remarks to make with respect to Clause 1. I want to bring to the attention of the Government the concern of car dealers with respect to the doubling of tax which the Government is inflicting on people who have company cars. I received a letter from Bourgeois Motors in Midland, Ontario, in which the General Manager indicates he is concerned about the effect the budget is going to have on car sales. I have another letter from Thor Motors in Orillia which indicates the same concern. The Government is doubling the tax paid by employees on company cars. On what basis does it feel it is necessary to do that or to increase it, whether the car be owned or leased by the company?


Paul James Cosgrove: I indicate that what we were doing was updating the provision that has been in the Act since 1972 to reflect the change in the economy and the value to the employee of the benefit bestowed by an employer through the provision of a motor vehicle.
I have also pointed out that the 2 per cent rate has been in force in the Province of Quebec since 1979. The move reflects an update of the calculation of the benefit to people who work with a company which offers it.


Philip Derek Lewis: The Minister referred to what has happened to the economy under the Liberal regime. I think all Canadians know what has happened to the economy and to employees, especially those in the automobile industry.
Is it the view of the Government that the legislation will increase or decrease car sales?


Paul James Cosgrove: It is certainly a better deal for the employee who is taking advantage of this provision to continue to pay the tax on a vehicle provided by the employer rather than to provide the same kind of transportation for himself. The increased revenues received from the tax will assist the Government generally as it responds to the demands made on the economy which has experienced a downturn. For example, it would assist in an oblique way to provide the guarantee to the Chrysler Corporation, which the Government believes it was instrumental in assisting that company to maintain jobs and production of new lines in this country and in the United States. It is part of a larger scene where the Government is called upon to provide resources to help the auto industry at this time.


Philip Derek Lewis: The Minister's reply is going to make interesting reading for salespeople all across the country who have less take-home pay as a result of the downturn in the economy. What the Government is doing is doubling the taxation on company cars. That does not make any sense.
It seems to me that by suggesting that two-thirds of the leased cost should be charged to an employee for a company-owned car, the Minister is suggesting that the employee uses it eight months of the year for himself and four months of the year for the company. Does the Government subscribe to that theory?


Douglas Glenn Fisher: Mr. Chairman, the Hon. Member has hit on the key problem. I would remind him that people who do not drive these vehicles for fewer than 12,000 kilometers per annum can prorate the tax downward. The figures the Hon. Member quotes, which he says are charges against the employee, are not quite correct. The employee is asked to pay tax on those charges, not the charges themselves.
I hope it will put the argument into perspective for the Hon. Member to realize that we are talking only about uses applied to personal benefit and not business benefit. If someone drives the car for personal benefit two-thirds of the time and for business use one-third of the time, the car is surely a personal benefit which can be taxed. It would not be something that adds to the employer's benefit, but to the employee's benefit.


Philip Derek Lewis: Could the representatives of the Government define operating costs?


Douglas Glenn Fisher: As I understand it, Mr. Chairman, this includes gasoline, repairs, insurance and other charges that would be applied against the vehicle to keep it on the road.


Philip Derek Lewis: Has the Government considered that there is a difference between insurance for business use and insurance
March 10, 1983

for personal use? How would it expect the employers of this nation to do the fantastic calculations that would be necessary for each employee who drives a company car?


Douglas Glenn Fisher: As I understand it, the regulations on this are forthcoming. The employee will prorate these charges in the same way he does every other part of the operation of the vehicle.


Philip Derek Lewis: When will the tax be imposed? On what date?


Douglas Glenn Fisher: The tax is applicable for the 1982 tax year.


Philip Derek Lewis: I think we have come to the point, Mr. Chairman. The tax is imposed for the 1982 year, but the regulations will be forthcoming sometime. When does the tax on this employee benefit come into effect?


Paul James Cosgrove: I indicated earlier that the tax is in effect at the moment. The prorate is a practice which is reviewed by the Department of National Revenue on the filing of the individual tax return. There is nothing different about the way in which returns will be handled. The way in which the prorate is done is the way in which it has always been done.


Philip Derek Lewis: I respect the Chair's ruling on standby charges and on whether operating costs were included as a standby charge. When did the Government issue form S82-5?


Paul James Cosgrove: If the Hon. Member would provide us with a copy of the form, we would be happy to identify it.


Philip Derek Lewis: Mr. Chairman, this is unbelievable. It is the Revenue Canada taxation form that refers to benefits from employer-provided automobiles. It has an interesting last Clause which I would like to read while they scurry through their briefcases to find one. It reads, "The form will be available from your local District Taxation Office after November 15, 1982 and will be applicable to 1982 only. A revised form designed so that declarations can be made at the beginning of a taxation year will be issued at a later date for 1983 and subsequent years". Are we to understand that employees driving employer-owner automobiles will be taxed on the benefits portion of the driving they did in January, February and March, 1982, through to December 31, 1982? The Government does not have the form ready yet, but it will assess them and go back and collect the tax.


Paul James Cosgrove: I refer the Opposition House Leader to the Revenue Canada publication supplement to the 1981 employer's and trustee's guide for tax practitioners in the special released interpretation bulletin, IT-470, which indicates that all employers should maintain records and information necessary to establish mileage or kilometreage for business and personal use, as well as costs and expenses thereon.


Philip Derek Lewis: What that made available to employees and employers? The Government is trying to tax in 1983 what was paid or incurred in January 1982, but it still does not have the forms out. Where are the forms? Where will employers find
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out about this retroactive tax? When will the Government start coming clean with employees who have been driving such cars? Does it actually think that all employers across Canada have kept those records? This form, for the Minister's edification, only went out with the standard remittance form of the Department of National Revenue. When will they get their act together for the people of the country they want to tax?


Douglas Glenn Fisher: Mr. Chairman, I have been a salesman since 1968, and since 1971 I have been keeping these records. The only thing that is different in this tax year is the amount, not the record-keeping. The Hon. Member is misleading people by assuming that new records have been required. They have not been required. Since 1971 people have been asked to keep records of the personal use of their vehicles which they have enjoyed, as distinct from the business use of their vehicles.
The keeping of these records has been common practice by sales people from coast to coast. It is not, as the Hon. Member tried to indicate, a new practice being imposed upon sales people. I know this personally because I have kept such records and have paid the standby charges since 1971. The only thing different this year is an increase in the amount, not an increase or a change in the record-keeping.


Philip Derek Lewis: The Parliamentary Secretary has bared his personal affairs to the House. He is taxpayer No. 1; did he base the standby charge on all his operating costs? Did he operate as an individual or as a company? If he operated as an individual, it is easy because everyone knows that an individual professional or commissioned salesman has expenses and income within his grasp. We are talking about the employee who does not have access to all information on the costs, but simply has been paying a standby charge which until now the Government based upon lease costs. Is he suggesting that every company in Canada has kept such records for every sales person, that every company has kept individual records for every sales person?


Douglas Glenn Fisher: Again I can assure the Hon. Member that I have acted in both capacities. The answer to his question is that a well-run company can identify those costs beyond a doubt. A well-run company knows what it paid to obtain the vehicle and to operate it. In addition, such companies probably ask their salesmen to keep records of personal use because they do not want salesmen using the car excessively for personal use or, if salesmen are doing so, they definitely want to allot it as a substitute for salary, which in that case would make it, by our definition, a taxable benefit.


Philip Derek Lewis: What type of forms does the Government distribute to companies across Canada so that they can delineate the operating costs of each vehicle in a fleet, the insurance costs applicable to each vehicle, whether or not sales people have interchanged vehicles and the costs of gasoline and car washes? Is the Parliamentary Secretary suggesting that these kinds of records are being kept for every company-owned car in Canada?

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Douglas Glenn Fisher: Every year the employer's guide instructs employers and companies to keep such records. Any operating salesman knows and has known for ten years that this is a very delicate area for Revenue Canada and, as a result, has kept very careful records. Any salesman operating and using his car for a mix of personal and corporate purposes has always kept careful records. These are not big surprises for people. They are big surprises for people who have used the very low, very affordable standby charge, the 1 per cent standby charge. Those people are now discovering that it may well be to their benefit to keep records because standby charges were unrealistically low.


Frederick James (Jim) Hawkes: Mr. Chairman, concerning the issue of recordkeeping, what is the Government changing, aside from the rate? It is going from 1 per cent to 2 per cent, but what else is being changed?


Douglas Glenn Fisher: Mr. Chairman, we had this discussion when we talked about the Ways and Means motion a few days ago. We have maintained the same ratios for automobile salesmen. They continue to pay a prorated amount; they do not have to pay the full amount. The charges for operating costs are the new ones.


Frederick James (Jim) Hawkes: Is that all the Minister and the Parliamentary Secretary think is being changed? The rate is being changed and the operating costs are being added in. Are there any other significant changes?


Douglas Glenn Fisher: I am not familiar with any extra changes. I have just checked with our officials and they do not think there are any extra changes. There may be some form or another which the Hon. Member has to fill in for the first time in his life that he might feel is a big change, but for those of us who have been doing it for a while, there is nothing new here.


Frederick James (Jim) Hawkes: Perhaps the bureaucrats have changed something and not told the Minister or the Parliamentary Secretary. Has the definition of an automobile changed?


Douglas Glenn Fisher: Again we are not aware of any change in definitions. The bureaucrats assure us that they are not aware of any and that they are not trying to sneak anything through on us.


Frederick James (Jim) Hawkes: 1 will just test that a little. Is a pickup truck an automobile under this provision?


Douglas Glenn Fisher: This may be a question of interpretation by National Revenue in a particular individual's case, but it is not involved in this law.


Frederick James (Jim) Hawkes: Is a four-wheel drive an automobile under this tax law?


Douglas Glenn Fisher: The same answer, Mr. Chairman.


Frederick James (Jim) Hawkes: Is the answer that the bureaucrats will decide and the Minister will not? Is that what I am hearing?


Douglas Glenn Fisher: I think the principle here is that we are looking for people who want to use vehicles for personal use rather than defining a vehicle. I would assume, if somebody could show that he was getting excessive personal use out of his cement truck, National Revenue would want to take a look at that question.


Sinclair McKnight Stevens: That would be an automobile?


Frederick James (Jim) Hawkes: Up to this point, has it always been the same, or has there been a recent change?


Douglas Glenn Fisher: I understand from our officials that the word used in the Act is "automobile", but that its interpretation has always been up to the courts.


Frederick James (Jim) Hawkes: Mr. Chairman, each time we look at a Clause, we sort of invite people to go to court. It is probably as good for lawyers as the Constitution has been and will be.
People are inventive. They tend to do things that operate in their own self interest. If I use my automobile on behalf of my company and they give me money back for the mileage, is that taxable?


Douglas Glenn Fisher: No, Mr. Chairman, that has not been changed. Over the years that continues to be a tax-free repayment to the taxpayers in recognition of the business use of the vehicle.


Frederick James (Jim) Hawkes: Is there an upper limit on that amount, Mr. Chairman?


Douglas Glenn Fisher: Mr. Chairman, 1 believe the upper limit is what can be shown to be a reasonable use for business practice. It would have to be backed up by appropriate receipts and mileage records, just as it does for the standby charge.


Frederick James (Jim) Hawkes: Mr. Chairman, what is the current rate paid by the Government of Canada to its employees for the use of their cars on behalf of the Government?


Douglas Glenn Fisher: Mr. Chairman, we will check that for the Hon. Member. None of the four of us here have that information.


Frederick James (Jim) Hawkes: Let us assume it is 20 cents a kilometre, Mr. Chairman. If I were to use my car 10,000 kilometres a month on behalf of the Government, that would be $2,000 worth of tax-free income, some of which would have to go toward the cost of gasoline, maintenance and so on. Do you think I might be able to pay for my car in a relatively short period of time with tax-free dollars under that system?


Douglas Glenn Fisher: Mr. Chairman, if it is strictly for business use or, as in his example, Government use, if it is not for the personal benefit of the taxpayer, that is fine. I would imagine equally that if the Hon. Member used a vehicle for that number of kilometres per month he would wear it out in a hurry.
March 10, 1983


Frederick James (Jim) Hawkes: Mr. Chairman, if it is true that I am using my personal car on behalf of my employer and taking mileage in, there is no tax on the portion of personal use, in other words, I can, by doing that, get my car paid for with tax-free dollars.


Douglas Glenn Fisher: Mr. Chairman, the Hon. Member has the principle under control, and I congratulate him. For business use it is tax-free. For personal use it is after-tax dollars. If a taxpayer buys his own car and he gets a portion of his own car paid for because of business use, that portion will be tax exempt. If, on the other hand, the employer supplies the car, and the employee uses the car a portion of the time for his own use, that portion will be added on as a taxable benefit to the taxpayer's income. The Hon. Member has the principle under control. If the vehicle is used for personal use, then it is taxed. If it is used for business use, then it is not taxed.


Frederick James (Jim) Hawkes: We are beginning to learn, Mr. Chairman. In Western Canada there are a number of one-man RCMP detachments in the small communities and rural areas. Those RCMP officers must be on duty 24 hours a day. Generally, many of them are single. The RCMP squad car has a radio for contact purposes. If an RCMP constable uses the car to go down the road to a dance on Friday evening for pleasure, is that a taxable use of the Government of Canada automobile? Has that directive gone out to the RCMP?


Douglas Glenn Fisher: Mr. Chairman, I would assume that is a personal use of the vehicle, and, therefore, is a taxable use. If the Hon. Member is making a representation to us, then we will bring it to the attention of the Solicitor General.


Frederick James (Jim) Hawkes: Mr. Chairman, does the Minister or his Parliamentary Secretary have certain knowledge that such a directive has gone out to the RCMP, that if they use the squad car to go to the corner grocery store they will be taxed on it? How do we decide whether it is business or not when a human being is on 24-hour call and the radio by which they are called is in the vehicle? The radio is in the vehicle. They are on call 24 hours a day. They also have to live, they have to go to the grocery store, they have to have entertainment, and yet they! have to have radio contact at the same time. How do they separate business from pleasure?


Paul James Cosgrove: Mr. Chairman, on this side we have confidence that the RCMP act in all they do honestly, accurately, and efficiently. Whatever directives they receive from their superiors are ones they follow honestly.
However, the Hon. Member does hit upon a policy that is adopted by some police forces in some cities across the country. They request police officers to take police vehicles to their homes when they are not "on duty". The point is that the presence of the police vehicle with its markings acts throughout the community as a deterrent and a security source. Therefore, I would think that on looking at what is the definition of the use of the vehicle at that time, it would be concluded in some circumstances that the vehicle was being used at all times, whether at home or in the business community, for purposes of security and, therefore, is business.
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Frederick James (Jim) Hawkes: Mr. Chairman, if you accept that principle, then suppose I have a company and a number of company vehicles. I put my logo on the car door. Now I can encourage my employees to drive to and from work. That will be considered business rather than personal use simply because I want my logo advertised throughout the community. Is that a ruling from the Minister with which people can live?


Paul James Cosgrove: I do not think the two examples are at all parallel, Mr. Chairman.


An Hon. Member:: Why not?


Frederick James (Jim) Hawkes: I cannot recall precisely the Minister's words, but the particular form of the police vehicle, the colour, the presence of an aerial perhaps, acts as a deterrent throughout the community. Certainly it is good for my business if my logo is seen throughout the community. In fact, many businesses spend lots of money on advertising by painting their logos on car doors. Why can I not argue with Revenue Canada that it is good for my business for my employees to take those vehicles and drive them throughout the community on all occasions, for example, drive to the store, drive to a social event, and so on? Why would it not be all business if my car had a logo on it?


Douglas Glenn Fisher: Mr. Chairman, I think the Hon. Member could argue his case. Go ahead. I would suggest that if he looks at the debate on this whole issue, he would find that we followed his line of thought with automobile salesmen who were successful in telling us that by driving their product home, they were, in fact, advertising. It is for that reason that automobile salesmen pay a lower standby charge than other salesmen do for personal use. They do, indeed, follow the practice described by the Hon. Member. There was considerable debate on this, and other groups were not able to present their cases successfully. I would suggest, on a case by case basis, that the Hon. Member might be successful in demonstrating that such advertising or such behaviour would not constitute personal use but would constitute business use. Perhaps if he can think of examples, he could pursue them.


Frederick James (Jim) Hawkes: Mr. Chairman, can we pursue a couple more? Let us assume I own a fair sized farm which I have incorporated. The vehicles belong to the corporation, which is in reality my farm. If I use the automobile on the farm, the pickup truck or the four-wheel drive to go 15 miles to the local town or village to buy supplies and then drive back to the farm, is that business use or personal use?


Douglas Glenn Fisher: Mr. Chairman, I think the Hon. Member is in an area of interpretation where it might be useful to raise this issue with Revenue Canada instead of in Committee of the Whole.


Frederick James (Jim) Hawkes: I think it is our responsibility as Parliamentarians to provide sufficient definitions to legislation so that Canadians can understand their tax liabilities as a consequence of the definitions. Does the Minister not believe that it is the

March 10, 1983
Income Tax
responsibility of Parliament to define the terms? We are trying to separate business from personal use. We either do it in a clear-cut from in legislation or we turn it over to the bureaucrats or the courts. If we are to tax people on the difference between business and personal use, it is our job as Parliamentarians to try to define it. Is it not our job to define those terms?


Douglas Glenn Fisher: I would remind the Hon. Member that we are not operating in a vacuum with this measure. We have had this measure since 1971. The questions he raises about people driving from their farm to the city or people who drive with their logos on the side of their cars have all been asked. There is a body of experience on those questions now. The questions that he is raising are hypothetical. He would probably be well advised to refer to that body of experience and to the debates in places such as the parliamentary committee in order to familiarize himself with the background on this. We are not dealing with a new measure. We are dealing with hypothetical views on a body of experience.


Frederick James (Jim) Hawkes: The Minister indicated earlier in this discussion that there was a new part ot this provision, which is the one dealing with operating costs. Maintenance is part of operating costs. Is maintenance to be valued at market value or at some other value which I choose to put on it?


Douglas Glenn Fisher: Mr. Chairman, whatever the employer uses as an expense would be the value that would be put on for the employee.


Frederick James (Jim) Hawkes: If I live in a high-class area where we use a commercial garage to fix something, and I drive the vehicle 1,000 kilometers a month so that I am eligible for 24 per cent, I will pay more in taxes than someone who works for a compay which has a mechanic who fixes the automobile and there is no direct charge to that automobile. Will we have this type of difference, or would I have to keep track of the commercial value of every automobile that I fix in the fleet?


Douglas Glenn Fisher: Mr. Chairman, it is expenses. Bear in mind that we are talking about expenses for personal use. If it was someone's personal car, the same principle would hold true. In higher cost areas one would pay higher cost after tax, and in lower cost areas one pays lower cost after tax. It is a simple principle of paying tax on personal use.


Frederick James (Jim) Hawkes: Perhaps I was not very clear. Suppose that I work for a small company and I cannot afford a mechanic. I drive the company's automobile 1,000 kilometres a month. Therefore I have to take into income 24 per cent of the maintenance costs of that particular automobile. Suppose my friend seated next to me works for a large company with many automobiles and that company has its own garage and staff. It does not charge for maintenance or repairs, it simply absorbs it. Therefore, working for a small company, I pay more tax than my friend. Is that the kind of tax system we are putting in place?


Douglas Glenn Fisher: Mr. Chairman, I am pleased to be able to clear this up. I am sorry I did not do so in the last round. The cost of the mechanics would be prorated over the cars because those are the expenses that the employer is writing off for the fleet.


Frederick James (Jim) Hawkes: Could the Hon. Member point out to me where, in the legislation, I am allowed to average repair costs over a fleet?


Douglas Glenn Fisher: Mr. Chairman, that is a practice for Revenue Canada to determine.


David Orlikow: Mr. Chairman, we have been having a long but interesting discussion dealing with the various kinds of expenses which employers can charge off because the cars are used for business purposes. There are also provisions in the Income Tax Act to allow self-employed people such as salesmen, doctors and lawyers to charge off the expenses of their cars for gas, oil, maintenance, insurance and, 1 presume, depreciation to the extent that those cars are used for business.
Is the Government giving consideration to the problems of thousands of Canadians who are not self-employed doctors, lawyers or salesmen but must use their cars because of the vast distances they must drive to work? There are Canadians who have no choice but to drive up to 50 miles to work because in most cities the public transit system does not get them to work on time. Is the Government giving any consideration to those hundreds of thousands of people who are spending large amounts of money each year to go to and from work? They do not have the same ability, because our tax laws do not permit it, to charge off part of the expenses of their automobile transportation. It is a necessary expense for them in order to keep their job and earn their money.


Paul James Cosgrove: Mr. Chairman, there is a general employment deduction or expense allowance. Of course, the result of the increase in the tax from 1 per cent to 2 per cent to those people, such as in the example of doctors and lawyers used by the Hon. Member, whose occupation is in fact their business, brings in more revenue to assist in the provision of services to people generally.
Finally, I do not take such a pessimistic view of the role of public transit as that which the Hon. Member seems to have adopted in his preamble. I think that the opportunities for the improvement and enhancement of public transit in Canada are great. For example, the federal Government has supported both the research and technology for the improvement of public transit facilities. For example, we have supported the trial system in the City of Vancouver which will indirectly result in the mass production of these types of systems that will be available to Canadians in larger numbers and large urban areas in particular.


David Orlikow: I do not think the Minister understood my point. If he were to visit the Oakville automobile plant and talk to the people who work there and who come there by car, he would find that many of them live as far as 40 miles from Oakville. If he were to go to Thunder Bay and talk to the
March 10, 1983

people who work in the grain elevators, he would find that there are people who live 20 miles, 30 miles, and 40 miles from the grain elevator. If he visited the people who work in the rolling mills in Selkirk, Manitoba, he would find that they drive from Gimli or other places that are miles away.
I am asking if the Government is giving consideration to applying the same principle to people who work for a company and have to drive long distances to get there. Is the Government giving the same kind of consideration to tax concessions to workers as are now given to self-employed people or those who work in the categories we have been discussing, such as those who use their own cars?


Douglas Glenn Fisher: Mr. Chairman, the Hon. Member has hit upon a very important point. His point, in effect, is what the current provisions are doing. The Hon. Member has described, for example, the great distances that people drive to work. I would remind him that under this legislation, personal use of a vehicle and expenses for that kind of driving, along with some of the other employment expenses involved, are covered under the employment deduction which the Minister mentioned. I would also remind the Hon. Member that the self-employed person, the professional or the salesman who only uses a vehicle to go from the place of work to the home, is using that car for personal use, and it is precisely for that reason that we are hearing some of the complaints from the Conservative benches.


David Orlikow: Mr. Chairman, I am sorry, but I did not understand the explanation that the Parliamentary Secretary gave me. Is he saying that it is considered personal use for a person to drive a car from home to work? That is precisely the point I am trying to make. One can hardly call using one's car to get to work personal driving when it is the only way one can get to work. If one did not get to work, one would not earn a living and one would not be in a position to pay income tax or anything else.


Mr. Anguish:: It's an employment expense.


David Orlikow: It's an expense of employment, Mr. Chairman. What I am saying to the Government is that I know nothing has been done until now. In my view, people who must use their cars to get to work, who must drive substantial distances, should be treated no differently from the salesman who travels from Winnipeg to Regina, stopping on the way to make calls and, hopefully, to make sales. He is using the car to make sales, to earn his commission, to earn a living, in the same way a person driving his car from Winnipeg to Selkirk to work in the rolling mills is using his car to earn a living. Therefore, what I am saying is that 1 would like the Government to give serious consideration to making some provisions to benefit these people in the same spirit as is now evident with regard to self-employed people or others who work in the way we have been discussing this afternoon. They should be given the same kind of consideration and same ability to deduct expenses incurred travelling to and from work, as self-
Income Tax
employed and other people have been afforded for a number of years in this country.


Douglas Glenn Fisher: It is an interesting perspective to the problem which the Hon. Member has put forth. I would simply urge him to consider equally the fact that the employment expense deduction is designed to do exactly what he is describing. How, for example, would he calculate the benefit of someone travelling by public transit versus someone travelling by automobile? Should we assume that people travelling by public transit should simply be allowed a great big deduction to make them equal to the people who travel by automobile? I think that if he begins to draw those parallels, he should take them right through all the logical steps instead of stopping where he did. I would urge him to realize that the Government proposed the employment expense deduction precisely to avoid that kind of detailed calculation involving streetcar or automobile expenses.
The Hon. Member is quite correct in the way that he has described these employment related expenses. However, I would suggest to him that these are already covered under the deductions which every taxpayer is entitled to enjoy at this point. Concerning automobile expenses, we are trying to ensure that automobile usage by professionals, self-employed people and salesmen is treated in the same way as usage by the employees he has described, and that there is no special advantage for them in the way that he fears.


David Orlikow: I raise problems of a different category of workers, the problems which have been brought to the attention of the Government on a number of occasions in recent years by the building trade unions. Construction workers very frequently must travel very long distances from home in order to get to work. Until about a year ago, the economy in Alberta and Saskatchewan was very active. There were a large number of big, ongoing construction projects. Construction in Manitoba was slow. A large number of construction and skilled workers from Manitoba went to Alberta and Saskatchewan. They have spoken to me, to the Minister of Finance and to the Minister of National Revenue of their problems. As they explained in their annual submissions, they travel 500 to 600 miles away from home. They leave their families at home. Family expenses continue, as always. They work on construction sites.
A recent example was that of a Winnipeg worker on a power project in Saskatchewan. He had to travel from home to the power project and stay there for two or three weeks. Because he wanted to see his family and, in fact, keep his family together, he would make the 500 or 600 mile journey from the construction site to his home and then go back at the end of the weekend. Therefore, he made a round trip of 1,000 or 1,200 miles. I wonder why that worker should not be able to deduct the expenses involved in that kind of trip which was necessary, not only for his job but also if he was to keep his family together. I wonder why he should not be able to deduct part of his automobile expenses in the same manner as self employed people.

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Income Tax


Douglas Glenn Fisher: Mr. Chairman, the Hon. Member has waxed eloquent on many worker-related topics. I would suggest that he might want to raise some of these questions when we consider some of the other provisions in the Act. For example, for workers who are at temporary work sites, there are now some special considerations as to the benefits they receive there, i would hope that he would examine those and take into consideration the fact that we have relieved those people of some of the previous tax burdens that they faced.
I would hope, as well, that he would consider the increases which we have brought about this year, for instance, in Child Tax Credits, or the $200 spousal transfers and the decreases in the general tax rates which we have introduced. If the Hon. Member wants to speak in general terms of workers and the way they are affected by the Act, he should consider some of those questions as well. Above all, I think he wants to return to his main point which concerns the question of equity.
In his case, he has raised his concern about salesmen, doctors or other professionals and self employed people who somehow derive a benefit for which every one else pays but which is denied to everyone else. I want to set the record straight. I want him to know that what we are trying to do is the very thing that he is urging us to do. We are trying to create equity involving employee benefits. We are trying to ensure that workers who do not enjoy certain benefits can see that the benefit is, nevertheless, deserved. In other words, workers will see that if they are not allowed a car write-off themselves, their company benefits from the activity of a salesman who goes out in his car and brings in new orders. They will see equally that when the salesman uses his car for personal use, he does so in the same way as they do. He pays for that car in after-tax dollars. He makes use of the car in after-tax dollars.
That is the intention of this Clause. We are not trying to set up yet one more benefit for another group. We are in fact trying to remove unjustified benefits and we are trying define more clearly the benefit that is business-related and productive, which keeps other people employed. When a benefit does that, we are prepared to say that it should be a tax-exempt activity, that the individual who takes his car and goes out and gets orders or generates new sales for a business is doing something on behalf of that business which he should not have to pay tax on. It does not matter whether the individual is doing that in his own car and getting mileage payments, or whether he is using the company car and getting it tax-free. As long as it is business-related, the individual should not be paying tax on the use of that vehicle. If it is personal, if it is something that aids the individual's personal life, then he should be enjoying that benefit with after-tax dollars. That is all we are asking here.
We have heard from the Conservative benches that the application of this rule is harsh, but in fact it is not. All we are saying is that the salesman who drives the car on a holiday to Florida or a lawyer who drives his car back and forth to the
office every day, and that is the extent of it, or some selfemployed man who enjoys the car 50 per cent of the time for his own use and 50 per cent for business, should pay tax because everyone else in the same circumstances is using a car purchased with after-tax dollars.
The Hon. Member has asked about individuals driving to and from work. I have tried to clear up with him the principle that such driving is a general employment expense and that we have given all taxpayers a general employment deduction. It is much simpler for us to use one deduction of that nature than it is to create a whole bunch of categories, so much for shoes, so much for bus fare, so much for cars, so much for uniforms and so on. That is not a reasonable kind of categorization of employment expenses. Instead of getting into that sort of very detailed consideration, we have given a general flat deduction.
If the Hon. Member would like to raise that deduction and discuss with us the size of the deduction, we would be happy to hear his comments. We would like to know if he feels that that deduction is too low. Let us bear in mind that such a deduction would apply not only to the individual working on the assembly line but would also apply to the salesman driving a company car. It is the principal equity that we are concerned with here.
We want the Hon. Member to understand that we are not trying to single out and give a benefit to a salesman or to a worker or to someone who drives a short distance or a long distance. We are not trying to create special categories. What we are trying to do is to remove those special categories and get back to simple, basic principles, namely, if a vehicle or any other benefit is employment-related then it is tax-free because it is productive. It adds to the economy; it creates jobs; but if a vehicle or any other benefit is used for personal use then it should be paid for in after-tax dollars.
I would like to point out to the Hon. Member that that is all we are doing, asking for after-tax dollars for personal use of the vehicle. The salesman, the self-employed person, the professional, can avoid this problem altogether simply by not using the car for any kind of personal use. That seems to be a heresy for some people, but 1 find it quite a simple, direct proposition. If one feels that the car is too expensive, then one should not use it for personal use but only for business use. But if it is felt to be reasonable to pay a bit of tax for a bit of personal use, then there is a fairly inexpensive car. Treated fairly, every other taxpayer can look on that vehicle and see that it is paid for on an after-tax basis and that it is not a special perk for a special individual.
I hope the Hon. Member takes some of these principles to mind. He has waxed eloquent on the problems of people who live a long way away from their business, and who have to drive there. Equally, I would ask him to reflect on the complexities of bringing in all these special considerations for every worker. Should we ask that worker, for example, to keep mileage charts? Should we ask the worker to keep receipts for boots that he has to buy for his work? Should we ask the worker to keep receipts for uniforms? Instead of getting into that complexity, we have just suggested a flat deduction which
March 10, 1983

the individual can enjoy, whether he has an expense or not, and we think that is a fair and straightforward procedure and it applies to self-employed people and to workers, to professionals and to men and women on assembly lines.
I hope the Hon. Member will take that into account and try to give us his reaction about the more general category of the employment deduction, rather than to try to split that deduction into specific categories that would add incredible headaches and complexity to every working man and woman in this country. We have heard from people all over the country that the tax form is already too complicated. We have heard that it is difficult to understand the Income Tax Act, and I urge the Hon. Member to realize that the Income Tax Act would be made worse by the kind of proposal that he is making. I think we would hear very fruitfully from him about the size of the deduction, but I would urge him not to get into special categories beyond that deduction, because it would make the situation even worse.


An Hon. Member:: Great filibuster speech!


Sinclair McKnight Stevens: Mr. Chairman, I think it would be very helpful in this type of discussion if we could perhaps get down to more specifics, and I would like to address my question to the Minister. I take it that the Minister is supplied with a Government car. Is that correct?


Paul James Cosgrove: Mr. Chairman, the vehicle that I originally used was one that came to me when I was Minister of Public Works responsible for CMHC and the NCC. When I had the opportunity of changing Ministries and accepting responsibility for the Ministry of State for Finance, because it was the first time I had had the opportunity of changing portfolios and the second opportunity I had had of accepting a portfolio in this Government, it was new to me, but the system then provided that, with changes in those responsibilities, the vehicle that was assigned to the Minister in the original portfolio remained with that Minister in that portfolio. As a result, the vehicle that I was using in Public Works was no longer available to me and another vehicle was made available from Finance.
Unfortunately, that vehicle was on its last legs, and after letting me down on a number of occasions when I had to hail cabs or look for help from garages and the like, I had to look for yet another vehicle. That vehicle has only been of use and provided to me while on Departmental or Government business in the City of Ottawa. When I travel to my own constituency, and I do that each weekend, or on Government business in other Provinces, of course I would look for transportation-


Roderick Blaker: Order, please. There can only be one Member speaking at the one time. The Minister has the floor.


Sinclair McKnight Stevens: He is just talking out the time.
Adjournment Debate


Paul James Cosgrove: Mr. Chairman, the question was, was I provided with a vehicle. I had to explain under what circumstances and what conditions. I thought it would be useful to the Hon. Member.


Douglas Glenn Fisher: It is six o'clock.


Roderick Blaker: It being six o'clock, I will interrupt the proceedings.
Progress reported.



PROCEEDINGS ON ADJOURNMENT MOTION

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

Henry Perrin Beatty: Mr. Speaker, over the course of the last couple of days I have been directing a series of questions to the Prime Minister (Mr. Trudeau) and Deputy Prime Minister (Mr. MacEachen) about the Government's attitude toward the conflict of interest guidelines which appear to so clearly have been breached in the Alastair Gillespie Affair.
What is clear from the attitude of the Government to date is that the Government is not concerned about the whole issue of conflict of interest. It is concerned about the public relations aspect of the issue, whether or not the reputation of the Government has been injured by the way it has performed. It is not concerned about ensuring that there are comprehensive guidelines, which are tough, which are strict, which are enforced and which ensure the highest standards of probity on the part of Government officials.
On reading the guidelines any reasonable person would see that the guidelines have been breached. They have been breached with complicity of the Government. Mr. Gillespie was not alone in this affair. He had to do what he did with the co-operation of the Government. The Government's response has been to deny that lobbying is lobbying. It decided to reinvent and redefine the word in its own way to ensure that what Mr. Gillespie did in asking for the support and guidance of his former Deputy Minister, did not constitute lobbying in the opinion of the Government.
Secondly, the guidelines refer to undue influence or the appearance of undue influence. When Mr. Gillespie was able to get immediate access to his former Deputy Minister and able to get the rules changed for his particular proposal, the Government simply said that in its opinion this did not constitute undue influence on the part of Mr. Gillespie. What it has done is to render the guidelines absolutely meaningless. Any

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reasonable person examining the guidelines, if the guidelines were at all meaningful, would have concluded that the guidelines had been breached.
The second question Parliament must ask is, if the guidelines are breached, what teeth is there in them, what sanction is there and what ability is there to help people to account for breaches of the guidelines? Any Government with integrity would have required that Ministers who were responsible for breaches of guidelines must resign. If they were not prepared to go themselves, the Prime Minister had the obligation to fire them.
However, we find that the Prime Minister tells me, in answer to questions I put to him in the House, confirmed by the Deputy Prime Minister, that what they are toying with, in a review of the conflict of interest guidelines is a watering down. If the Gillespie affair was to happen again, they would not do anything to change the guidelines to ensure that proper conduct was to be followed by the Government. They would rewrite the guidelines to ensure that no one could claim that guidelines had been breached.
I said yesterday in the House that that sort of procedure was tantamount to the Liberal's discovering that a Liberal was caught trying to burn down the Parliament Buildings and the Government then legalized arson. It is very easy to ensure that the guidelines are never breached if the guidelines are rendered meaningless. If the Government were serious about putting an end to the concern that exist in this affair, it would have been candid with Parliament. Parliament would not have been misled in the first place. The Prime Minister and the Minister of Energy, Mines and Resources (Mr. Chretien) have conceded that Parliament was misled. When the Government tabled documents in the House, it would have made an effort to ensure that all relevant documents were tabled.
Following Question Period, the Minister of Industry, Trade and Commerce (Mr. Lumley) tabled documents relating to the Cape Breton Development Corporation. He indicated when he spoke in the House that if one looked at the documents, he would find that in each case there was a note there with respect to particular minutes about documents which were not included in detail. When I ask him about it, he made it very clear that some of the documents had been laundered or deleted in his review of the files. Yet when you look at the material produced by the Minister, there are no notes indicating which documents have been deleted from the file. Again, the Government has not been candid with Parliament.
What should the Government be doing? First, Mr. Speaker, if the Government were serious about making the conflict of interest guidelines meaningful, it would strike a parliamentary committee, not have the in-house whitewash review, designed to water down the guidelines, contemplated by the Prime Minister. Instead, we should have a parliamentary committee charged with the responsibility of writing a meaningful set of guidelines and enforcement procedures.
I think one of the key elements of such a study would be a finding that it is time to have an officer of Parliament charged with the responsibility of investigating alleged breaches of the guidelines, and making a report to Parliament which could then be acted upon by a parliamentary committee. That is what is being done in the United States in many jurisdictions where they have ethics committees. In our case, that would be tantamount to having the Chief Electoral Commissioner given the responsibility of enforcing guidelines on ethics, not just during election campaigns, but also with regard to conflict of interest by officials and former officials. A report to Parliament could be made by this independent officer of Parliament and, if it appeared that the evidence warranted further study, a parliamentary committee could be called in.
It is essential that the Government act now, Mr. Speaker, to cut out the cancer which is growing here; the cancer of cover up and patronage which is rampant in this Government; the cancer of decline in public trust in the behaviour of public officials. It could do that by plugging Parliament back into the process, by striking that parliamentary committee and ensuring the sort of independent review of conflict of interest which I have suggested. Anything less than that can only damage the reputation of Parliament, and can only weaken the regard in which public life is held by ordinary Canadians.


David P. Smith: The Hon. Member for Wellington-Duffer-in-Simcoe (Mr. Beatty) has been suggesting that the conflict of interest guidelines should be referred to a parliamentary committee for review, and further, that a parliamentary auditor be appointed to monitor and report to Parliament on the application of these guidelines. It is hard to believe the Hon. Member is serious. In view of the totally irresponsible and outrageous way in which this Member and his colleagues in both Opposition Parties have comported themselves on this issue in the House, I do not see any benefit at all in the Government referring this question to a committee. In fact, this would probably be the worst thing we could do to Parliament. It would reopen the vicious unfounded attacks on Hon. Ministers, unnecessarily ruin reputable careers, and further tarnish the image of the House of Commons in the minds of all Canadians.
The value of the present and any future guidelines rests with the integrity of Members of Parliament. It is indeed unfortunate that this fundamental principle has been put to such unfair tests in the last few weeks. I for one believe in the basic principles of democracy. One of these principles is the integrity and good faith of public officials. Without this trust our system cannot operate. This trust cannot be engendered by the creation of yet another bureaucratic watchdog. I would hope after the bitter debate of the last two weeks, Parliamentarians would now unite and reinforce the will of Parliament to deal with the major issues facing the country.
Perhaps the Hon. Member should reflect upon the proposal he has recently advanced to create another officer of Parliament. In a time of severe economic restraint, the Opposition is recommending the establishment of a new bureaucratic
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organization. Not only would this be a waste of taxpayers' money, but it is also not at all related to the prime objective of this Government, to rebuild the economic well-being of our country. Surely the Opposition does not wish to dilute the impact of this Government's economic recovery program by spending more money to increase the Parliamentary bureaucracy.
In closing, Mr. Speaker, I would again ask that Members of the Opposition read the present conflict of interest guidelines. Now more than ever it is important that Members forget their partisan role, fully understand the guidelines, interpret them in a just and fair way, and start acting like Parliamentarians.


The Acting Speaker (Mr. Corbin):: The Chair would like to draw Standing Order 15(3) to the attention of Hon. Members. It provides as follows:
When a Member is speaking, no Member shall pass between that Member and the Chair, nor interrupt him or her, except to raise a point of order.


Lorne Edmund Nystrom: I am happy that you reprimanded my good friend, the Minister of Industry, Trade and Commerce (Mr. Lumley).


AUTOMOTIVE INDUSTRY-REQUEST THAT CANADIAN CONTENT LEGISLATION BE ENACTED. (B) CANADA-JAPAN NEGOTIATIONS
Lorne Edmund Nystrom: Mr. Speaker, I want to pursue this issue in relation to a question I put to the Minister of State for International Trade (Mr. Regan) on March 1, about the failure of the Canadian Government to negotiate for Canadian content in Japanese cars sold in this country.
A short time ago, General Motors and Toyota in California were able to come to an agreement whereby Toyota, in partnership with General Motors, would establish a plant there which would give jobs to about 12,000 Americans.
[ Translation]
There are many other examples of countries throughout the world where a national corporation has an agreement with a Japanese company. I am thinking about Peru, Brazil, Australia and France, all of which have negotiated an agreement with Japan to have a national content in the manufacture of Japanese vehicles. I believe that we could have the same type of agreement in Canada if our ministers negotiated more earnestly than they have done in the past.

I suggest that we should give the Minister more bargaining power. I think the Government should introduce for first reading in this House a Canadian content bill which would provide that 85 per cent of the content of Japanese cars in this country should be Canadian. In other words, if $1 million worth of Japanese cars were sold in Canada, $850,000 worth of the construction cost should be Canadian. This would create more jobs. I make this suggestion because I want to give the Minister some more clout. I do not suggest that we should pass the bill at all stages at this time, but just that it should be
Adjournment Debate
introduced for first reading. That would enable the Minister to go to Tokyo to meet his counterpart there and point out how worried we are about the situation.
At the moment, 25 per cent of our automobile market goes to Japanese cars. We recognize that they have some of the most efficient and beautiful cars in the world, and Canadians want to drive them, but we also want to make them in Canada. Our people want the jobs. They do not like the idea of buying a Japanese car, or any other foreign product, thus creating jobs elsewhere. More manufacturing in Canada would create more jobs and put the country back to work, making it more productive and wealthy.
When the Parliamentary Secretary responds I hope he will not reject my idea out of hand. I hope he will lend support to the proposition that we must be tough negotiators, no matter with whom we deal. I have heard many trade commissioners and others involved in foreign trade describe us as the "Boy Scouts" of international trade. In many ways we are really the pussycats of international trade and, Mr. Speaker, our claws are being pulled. It is time for us to be tough. We can learn from the Americans, from the French, the Germans and the Japanese how to drive a tough bargain. I do not think anyone respects a country that bows to a threat, and that is what we have been doing. We have been much too meek and mild.
We are the sixth largest consumer of cars in the world and the third largest consumer of Japanese cars, after the United States and West Germany. That gives us clout with the Japanese. We are their third largest market and they want to keep that market and expand it. We sell valuable raw resources to Japan that are fabricated over there, giving jobs to the Japanese. I commend the Japanese for their tough bargaining. In return, I am just asking the Japanese that we do the same thing. We can purchase their cars but we could construct at least 85 per cent of them in this country as well, so that we could give jobs to Canadian workers in the manufacturing of cars. It also seems that this would be an excellent idea for western Canada. The car plants could be located there, very close to Japan compared with Central and Eastern Canada, and many Japanese cars are purchased by western Canadians. I think it makes sense all around.
The Australians, Mexicans, Peruvians and Brazilians with smaller markets are purchasing fewer Japanese cars than we are. If they can negotiate a deal with the Japanese, I wonder why we cannot, since we have the third largest Japanese car market in the world. We are a much bigger country and should have a lot more clout. If they can do it, we can do it. If the Americans can do, we can do it. We are no worse off than the Americans. We are no less imaginative than the Americans. We are no worse bargainers or traders than the Americans. If they can have Japanese car plants in their country, we can have them as well. If we do not, the time will come, in ten or 15 years, when we will still be importing Japanese cars, but instead of importing them all from Japan, we will be importing

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Adjournment Debate
them from California, Ohio and other places in the United States. This would even compound the problem we have today.
I appeal to the Government to use a little foresight, be tough, use some imagination and insist that Japanese negotiators treat us as fairly as they treat the Australians, Mexicans, Americans, and many other people around the world. If they do that with us, I will be pleased because we will have Canadian jobs.
[ Translation]


Mr. Jean Lapierre (Parliamentary Secretary to Deputy Prime Minister and Secretary of State for External Affairs):: Mr. Speaker, in reply to the Hon. Member, I would like to point out that, in my opinion, if the Government had such a simplistic approach to our exchanges with Japan, nearly 93,000 jobs would be threatened in Canada. If we looked strictly at the automobile market, there would obviously be cause for concern. However, I would ask the Hon. Member to look at this in perspective and to realize that Canada, contrary to other countries which envy its position, such as the United States, Europe, and so on, has a positive balance of trade with Japan, which is certainly not the case of some of its other commercial partners whose balance of trade is negative. Mr. Speaker, it is easy to say: Let us become protectionists and threaten to adopt protectionist measures to strengthen our negotiating position. However, we are well aware that 600,000 jobs in Canada are directly dependent on a healthy export market. We are also well aware that 30 per cent of our economy operates under the rules of the open market. In my opinion, we would be worse off if the open market were to be ruled by tariffs, which would reduce our exchanges with markets such as Japan. The Hon. Member was also over-simplifying when he said that we sold only raw materials to the Japanese. I would like to point out to him that in 1981, 34.6
per cent of Canadian products sold to Japan were food products and that 24.5 per cent were semi-processed and processed products. However, Mr. Speaker, because of his own bill, I understand of course the frustration which the Hon. Member feels towards Japanese car manufacturers. On the other hand, I would ask him to have confidence in the outcome of our negotiations this spring, where we shall once again be able to bring pressure to bear on our Japanese partners.
1 would also ask him not to jump to conclusions regarding the outcome of the automobile task force created by the Minister of Industry, Trade and Commerce (Mr. Lumley). I believe that the Hon. Member is panicking while, considering his concern for the commercial relations of Canada, he should develop a global approach and realize that Canadians have an advantage over Americans and Europeans and should certainly not feel inferior. On the contrary, other countries have much to learn from us.
As for the California project mentioned by the Hon. Member, Mr. Speaker, I must tell him that, according to my information, the agreement between GM and Toyota is a private one. It is not part of any negotiation between the American government and Japan. This is strictly a private company, and for our part, we shall stress the need for an increased Japanese contribution to the Canadian economy. We shall certainly do so. However, this will be done in the context of our negotiations. I do not believe that it is wise to make threats without reason, especially when we announce them in advance, as the Hon. Member has suggested.


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 6.20 p.m. the House adjourned, without question put, pursuant to Standing Order.

Friday, March 11, 1983