Right Hon. W. L. MACKENZIE KING (Prime Minister):: Mr. Speaker, as today has been set apart for the official observance in Canada of His Majesty's birthday I am sure

it will be the wish of all hon. members that an expression of their good wishes be extended to His Majesty, King George VI, from this House of Commons. I have had a word this morning with my friend the leader of the opposition (Mr. Bracken) and he and I have agreed on a resolution which we are sure that hon. members will be pleased to support. I would suggest that after the motion has been put by His Honour the Speaker, and any other hon. members who may wish to speak to the motion have addressed the house, we should signify our approval of it by the singing of God Save the King.
The motion, seconded by Mr. Bracken, is as follows:
That an humble address be sent to His Majesty, King George VI, in the following words:
"To the King's Most Excellent Majesty:
Most Gracious Sovereign:
We,-the members of the House of Commons of Canada in parliament assembled, desire respectfully to extend to Your Majesty, on this day set apart for the celebration in Canada of the King's birthday, our loyal greetings and heartfelt good wishes. We pray that Divine Providence may continue to guide and protect Your Majesty and that you may be given strength to meet in the future as you have in the past the great responsibilities of your high office."


Mr. JOHN BRACKEN (Leader of the Oppositioh):: Mr. Speaker, I am very happy to associate myself with the Prime Minister (Mr. Mackenzie King) in this resolution. I am pleased also to associate the party I lead with the good wishes it expresses to His Majesty the King.
This is a resolution which does not need the support of argument in order to secure what I trust will be the unanimous approval of this house. The crown in all parts of the commonwealth has come to mean to us more than a hereditary position, more than royalty, more than kingship as we have known it in the past. The crown has come to mean a continuing democracy, no matter how often governments change, and no matter what partj is in power. Members of the commonwealth may differ in many things, but there is od' thing in which they do not differ, and that is in the respect we have for the person of His Majesty the King and the high regard we have for the crown as we have come to know it. I am very happy indeed to have this opportunity of associating this group with the spirit of the resolution.


Mr. M. J. COLDWELL (Rosetown-Biggar):: Mr. Speaker, may I just say that we of this party wish to associate ourselves with the

Price Control
expressions of loyalty and good wishes which have been extended to His Majesty the King, the symbol of our unity within the commonwealth of nations.
Mr. SOLON E. LOW (Peace River): I am sure that I speak for every member of this group when I say that we are happy to join with others in support of the resolution proposed by the Prime Minister. It is most fitting at this time that we all unite in expressing our good will and felicitations to the crown in the person of the king, and to assure him of our united loyalty to the great . ideals for which Britain has stood for so many years.
(Translation):
Right Hon. L. S. ST. LAURENT (Secretary of State for External Affairs):	Mr. Speaker, I wish to mark the bilingual character of this house in associating myself and all those whose mother tongue is mine with the feelings expressed in the resolution moved by the Right Hon. the Prime Minister (Mr. Mackenzie King) and seconded by the Leader of the Opposition (Mr. Bracken).
(Text):


[Stage Direction]
Motion agreed to.
(The members rose and sang God Save the King.)


Hon. DOUGLAS ABBOTT (Minister of Finance):: Mr. Speaker, I wish to inform the house that effective today a further list of articles and services has been removed from price ceiling and rationing controls. The list is much shorter and less important than at previous stages of the decontrol programme. The main groups are, first, certain products which it is desirable to remove from control now because of seasonal factors; secondly, a number of metals which show signs of having settled at price levels on world markets substantially above those prevailing in pre-war years; and, thirdly, restaurant meals.
The most important foodstuffs released from price control are dairy products of all kinds, including butter, cheese, evaporated milk and ice cream. These products are now at their seasonal peak of production and price ceilings can therefore be removed with minimum danger of significant price increases. At the same time butter is removed from the list of rationed foods.
Honey, being subject to the same seasonal factors, is removed from both price control and rationing. All jams, jellies and marmatdes are also being derationed but price controls are being retained on strawberry and raspberry jam and any jam containing strawberries or raspberries.
Eggs were removed from price control several weeks ago. Because of good supplies it has now been decided to remove ceilings from poultry and poultry products of all kinds. Canned soups and salt are also released from price ceilings.
With respect to clothing, home furnishings and household equipment and supplies, the items removed from control are of relatively minor importance, and I shall not take the time of the house by listing them.
All agricultural equipment and supplies remain under the ceiling, with the exception of brooders, incubators and other poultry equipment for which the current season is past. Hay, which will soon be at its season of high production, is free from control.
The new order provides for the removal of only three items in the list of construction products, namely, hardwood lumber and plywood made wholly of hardwood and hardwood veneers. This action has been taken, first because practically all end-products have already been removed from control, and, second, because increased production in the United States, accompanied by some recession in United States prices, is now reducing the cost of hardwood imported into Canada. Mill-work of all kinds remains under control.
In the metals field, the new order removes from control lead, copper and zinc, leaving under control only primary and secondary tin and alloys containing more than 95 per cent tin. World prices of lead, copper and zinc appear to have settled fairly steadily at levels considerably above pre-war. Since practically all the end-products which embody these metals have already been removed from control, this appeared to be a logical time to complete the process of decontrol of these items.
The only other important change is to free from control the supplying of meals and refreshments in all public eating places. The government has had to recognize the fact that during the past few months most of the costs which enter into restaurant meals either have been decontrolled or, as in the case of meat, butter, sugar, shortening and rents, have had authorized price increases. The government considers the time now appropriate to take this further step.
Questions



PETITION


Mr. ALISTAIR STEWART (Winnipeg North):: The right of petitioning the crown and parliament for redress of grievances is acknowledged as a fundamental principle of the constitution. Since the ordinary citizen has no right to appear personally before the House of Commons, I have been asked to present to this house a petition signed by 500,967 Canadians asking for a bill of rights. I now present the petition, although I do not agree with the religious views of the organization which promoted it.



CRIMINAL CODE


[Stage Direction]
Right Hon. J. L. ILSLEY (Minister of Justice) moved the first reading of Bill No. 268 (from the senate) to amend the criminal code.
Motion agreed to and bill read the first time.

[Stage Direction]
(Questions answered orally are indicated by an asterisk).

Mr. NICHOLSON:: 1.	What has been the total capital invested by Wartime Housing Limited as of March 31, 1947?
2.	What were the total receipts by way of rentals since Wartime Housing Limited commenced operations?
3.	What were the total expenses in connection with wartime housing?
4.	How many houses have been offered for sale by Wartime Housing Limited?
5.	How many of these houses have been sold?
6.	At what price per unit were these houses sold?


Mr. HOWE:: 1.	$118,524,969.08.
2.	To March 31, 1947-333,801,053.68.
3.	To March 31, 1947-321,334,881.68.
4.	As of May 15, 1947-1,940.
5.	As at May 15, 1947-727.
6.	Where property was leased by Wartime Housing Limited, and houses sold to owners of the property, or houses sold for removal, prices range from $1,200 to $1,800, depending on the type of house.
Where property was owned by Wartime Housing Limited and houses sold to tenants with the property, price ranges depending on the type of house are as follows:

(1)	Munition workers' houses from $2,300 to 33,500.
(2)	Munition workers' houses (with basement) from $3,105 to $5,696.
(3)	Servicemen's houses from 32,950 to $4,400.


NAVAL SERVICE-VESSELS AND PERSONNEL
Mr. STIRLING:: 1.	What are the names of the cruisers now in commission?
2.	What ships' companies do they carry (a) officers; (b) petty officers; (c) ratings?
3.	How many cruisers are not in commission and where are they?
4.	How many are employed in their maintenance?


Mr. STIRLING:: 1.	What are the names of the corvettes now in commission?
2.	What ships' companies do they carry (a) officers; (b) petty officers; (c) ratings?
3.	How many corvettes are not in commission and where are they?
4.	How many are employed in their maintenance?


Mr. STIRLING:: 1.	What are the names of the frigates now in commission?
2.	What ships' companies do they carry (a) officers; (b) petty officers; (c) ratings?
3.	How many frigates are not in commission and where are they?
4.	How many are employed in their maintenance?


Mr. STIRLING:: 1.	What are the names of the destroyers now in commission?
2.	What ships' companies do they carry (a) officers; (b) petty officers; (c) ratings?
3.	How many destroyers are not in commission and where are they?
4.	How many are employed in their maintenance?


Mr. STIRLING:: 1.	What are the names of the mine sweepers now in commission?
2.	What ships' companies do they carry (a) officers; (b) petty officers; (e) ratings?
3.	How many mine sweepers are not in commission and where are they?
4.	How many are employed in their maintenance?


Mr. STIRLING:: 1.	What are the names of the aircraft carriers now in commission?
2.	How many aircraft are maintained on board of each?
3.	What ships' companies do they carry (a) officers, naval and air; (b) petty officers, naval and air; (c) ratings, naval and air?
4.	When the expected aircraft carrier arrives, how many carriers will be retained in commission, and on which coast? _
5.	Will the carrier and aircraft be owned by Canada?

Questions


Mr. CLAXTON:: With reference to these six questions having to do with the Canadian navy, it is not considered in the public interest to give the names, locations and strengths of ships in the Canadian navy in detail. There is no objection, however, to giving the total strength of the Royal Canadian Navy, which today stands at 7,386, of which 1,202 are officers and 1,845 are chief and petty officers. Of these 3,590 are on the complements of ships.
As was announced in the house last Monday by myself, Canada at present has one aircraft carrier, the Warrior, on loan from the United Kingdom, and this will be replaced at the end of the year by the Magnificent, which will also be on loan from the United Kingdom.
We own two cruisers, the Uganda and Ontario. The Ontario will be commissioned in July when the Uganda will be placed in reserve. We have ten destroyers, of which five are in commission and one is awaiting disposal. We have fifteen frigates, of which ten are for disposal and one is in commission. We have nine minesweepers, of which one is for disposal and four are in commission.
In understand that, with the information contained in the statement I have just given, the hon. member for Yale is agreeable to accepting the questions as being answered or dropped.


NAVAL SERVICE-RESERVE DIVISION TRAINING ESTABLISHMENT
Mr. STIRLING:: 1.	How many (a) officers; (b) petty officers; (c) ratings, are employed in naval establishments at Esquimalt, Vancouver, Halifax, Ottawa and Sydney, Nova 'Scotia?
2.	How many (a) officers; (b) petty officers; (c) ratings, are attached to the reserve divisions across Canada?
3.	What is the strength of each reserve division training establishment?


Mr. LAPOINTE:: (a)	(b) Chief and Petty	(c)1. Locality	Officers	Officers	RatingsEsquimalt ...	.. 185	318	416Vancouver ..	.. 2	16	16Halifax 	.. 279	376	420Ottawa 	.. 198	25	53Sydney 	.. 2	-	-	-Total 	.. 666	735	905
Note: The above figures do not include any reserve personnel borne in naval divisions in the above localities.
2. (a) 499, (b) 428, (c) 1766.
Chief and
3. Locality	Officers	Petty Officers	Other RatingsSaint John, NJ.	23	18	67Ottawa 	19	13	71Kingston 	26	14	57Prince Rupert .	7	13	11Winnipeg 	42	57	177Vancouver ....	39	19	80Montreal 	47	47	240Port Arthur ...	16	20	34Windsor 	12	19	25Quebec 	13	11	110Edmonton ....	33	17	79London 	17	12	80Regina 	5	16	17Charlottetown	10	10	19Hamilton 	34	27	181Calgary 	22	18	70Saskatoon 	16	27	114Toronto 	89	46	190Victoria 	10	9	9Halifax 	19	15	135-	-	-Total 	499	428	1,766


CANADIAN NATIONAL RAILWAYS-PENSIONS TO EMPLOYEES
Mr. KNOWLES:: 1.	Do any former employees of the Canadian National Railways, now retired receive pensions from the United States as well as pensions from Canada because of international service? If so, how many?
2.	Is any deduction made from the Canadian pension of such persons by reason of pension rights earned in the United States?
3.	If so, what is the basis of such deduction, what is the average amount, and for what reason is such deduction made?
4.	How many present employees of the Canadian National Railways are earning pension rights in both the United States and Canada because of international service?
5.	Is there any curtailment of the Canadian pension rights of said employees because of pension rights earned in the United States?
6.	If so, on what basis, how much is to be deducted, and for what reason is it done?


Mr. CHEVRIER:: The Canadian National Railways advise as follows:
1.	Yes. 265.
2.	By agreement dated May 31,	1937,
between the Canadian National Railway Company and the general chairmen of the employees' committees it was agreed that a coordinated pension would be paid to all Canadian National railway retiring employees who had been engaged in international service on the following basis:
Questions

(a)	Such employees to be entitled to contribute to the railway pension fund on earnings for services performed in Canada. They are required by the U.S. Railroad Retirement Tax Act to contribute to the U.S. railroad retirement fund on earnings for services performed in the United States. Such contributions (within certain limits) to be matched by the railway.
(b)	On retirement they receive a coordinated pension equal to what they would receive if all their service had been in Canada and if contributions paid into the U.S. railroad retirement fund had been paid into the railway pension fund. The proportion payable by the railway is the difference between this coordinated pension and the amount awarded by the U.S. railroad retirement board.
3.	See answer to question 2. Without such a coordinated pension international employees would have been in a more favourable position than employees who served wholly in Canada or wholly in the United States.
4.	1,347 in the month of April, 1947.
5.	See answers to questions 2 and 3.
6.	See answers to questions 2 and 3.


WARTIME HOUSING-PETERBOROUGH
Mr. FRASER:: What is the total amount of moneys received by the Wartime Housing for rents from the following wartime houses in Peterborough, Ontario, from the date they w'ere first rented until March 51, 1947: (a) rents from 4-room bungalows in project No. 1, rents from 6-room houses in project No. 1, rents from 4-room (large) bungalows in project No. 1; (b) rents from 4-room bungalows in project No. 2, rents from 6-room houses in project No. 2, rents from 4-room (large) bungalows in project No. 2; (c) rents from 4-room bungalow's in project No. 3, rents from 6-room houses in project No. 3. rents from 4-room (large) bungalows in project No. 3: (d) rents from 4-room bungalows in project No. 5, rents from 6-room houses in project No. 5, rents from 4-room (large) bungalow's in project No. 5; (e) rents from 4-room bungalows in project No. 8, rents from 6-room houses in project No. 8, rents from 5-room bungalow's in project No. 8?


Mr. HOWE:: In connection with the question I have a letter from Central Mortgage and Housing Corporation, of which I shall read one paragraph, as follows:
We have at present a total of 658 wartime houses in Peterborough. The only form of record which shows both the type of house and the actual rentals received is the tenant's rent ledger card. I am sure you will appreciate that during the life of a project there is a considerable turnover of tenants and that we might well have an average of five tenant cards per house to review to compile the data required. The tenant's rent ledger cards would show all moneys collected as rents from the individual tenants but it would be necessary to total the various entries of these cards to compile the required answ'er. I am sure you will agree that to have

this done in overtime periods by a staff that is already worked to capacity would take several weeks.
I suggest that perhaps the hon. member will reword his question. It has been suggested that we can give the total gross rent receipts from wartime houses rented in Peterborough.


Gordon Knapman Fraser: The gross rent receipts for each type of house in each project would be sufficient,


NATIONAL DEFENCE-MOTOR VEHICLES-C.M. DEPOT, HAGERSVILLE, ONT.
Mr. LENNARD:: 1.	How many motor vehicles were at C.M. depot, Hagersville, as of May 1, 1947?
2.	How many in each classification?
3.	How many of these Were (a) new (never been used); (b) reconditioned; (c) beyond repair?
4.	What disposition is to be made of these motor vehicles?


Mr. LAPOINTE:: 1.	7,097.
2.	(a) Engineer, technical and armoured vehicles, 2,569; (b), personnel and load carrying vehicles, 4,528.
3.	(a) 3,769; (b), 3.227; (c), 101 in process of disposal to War Assets Corporation.
4.	(a), 6,996 to be distributed to active and reserve units of the navy, army and air services as required; (b), 101 to War Assets.


CIVIL SERVICE-WAR DUTIES SUPPLEMENTS
Mr. LOCKHART:: 1.	What are the names of temporary and permanent civil servants in the city of Ottawa who did not receive payment of war duties supplements in (a) the Department of Mines and Resources; (b) National Film Board; (e) War Assets Corporation; (d) Department of Transport?	.
2.	Who recommended payment of war duties supplements in the above-mentioned departments?
3.	What constituted eligibility for the payment of war duties supplements?
4.	Why were war duties supplements not paid to all employees of the departments mentioned?


Clarence Decatur Howe: I can answer this as it affects the Department of Mines and Resources. There are about ninety members on the staff of mines and resources out of some 6,000 who received war duties supplements. If my hon. friend would reword his question and ask for the names of those who received the supplement it would be much simpler than to give the names of those who did not.


Mr. LOCKHART:: Stands.
Question stands.

Questions


CANADA-AMERICAN DEFENCE BOARD
Mr. McKAY:: 1.	What are the duties of the Canada-Ameri-can defence board in peace time?
2.	Who are Canada's representatives on this board?
3.	What is their tenure of office?
4.	How much salary and expenses is each member allowed yearly?
Mr. ST. LAURENT:
1.	The permanent joint board on defence was established in 1940 by the Prime Minister of Canada and the President of the United States in order to facilitate the consideration of common problems related to the defence of the northern half of the western hemisphere. As indicated in the Prime Minister's statement in the House of Commons of February 12, the board continues to make recommendations to the two governments concerning defence cooperation between Canada and the United States.
2.	General the Hon. A. G. L. McNaughton, chairman, Major General C. C. Mann, army member, Acting Commodore F. L. Houghton, naval member, Air Vice Marshal W. A. Curtis, air member, Mr. S. F. Rae, secretary.
3.	Members of the Canadian section of the permanent joint board on defence are appointed' by order in council.
4.	No salary is paid to members of the board for their work on the board. Three or four meetings are held annually either in Canada or in the United States, the expenses of which are met by the individual departments concerned.


HEALTH AND WELFARE-HOSPITAL DESIGN DIVISION
Mr. BREITHAUPT:: 1.	What is the function of the hospital design division of the Department of National Health and Welfare?
2.	Since the inception of this division, how many requests have been received for designs or information regarding active treatment hospitals?
3.	How many requests have been received for assistance in replanning existing hospitals?
4.	What other information besides active treatment hospital plans has been supplied by the hospital design division?


Mr. MARTIN:: 1.	To collect, tabulate and make available to the provinces the most recent information regarding the planning of hospitals and other health institutions, and to be prepared to study problems of design and construction in the provinces.
2.	Thirty-three.
3.	Nine.
4.	(a) Preliminary plans for an 85-bed pediatric hospital; (b) Preliminary plans for 60-bed and 120-bed tuberculosis sanatoria and also for nurses' residence: (c) Design of a chest operating suite for a teaching hospital.


BARCLAYS BANK (CANADA)'-RESIGNATION OF CANADIAN DIRECTORS
Mr. POULIOT:: 1.	During the summer of 1946, did five Canadian directors of Barclays Bank (Canada) tender their resignation from the board of directors of the said bank on account of a difference of opinion with its head office in England concerning a fundamental policy?
2.	If so (a) who were the said directors; (b) have they informed the finance department of the subject of such difference of opinion?
3.	If so, what was the subject of such difference of opinion?


Mr. MAYHEW:: 1. In accordance with the provisions of section 113 (1) of the Bank Act, Barclays Bank (Canada) advised the Minister of Finance that on August 6, 1946, the following directors had resigned: Mr. A. A. Magee; Hon. L. A. Taschereau; Hon. J. L. Ralston; Mr. Henry Borden; Mr. J. C. Cushing.
No reasons were given for the resignations.
2 and 3. Answered by No. 1.


VETERANS AFFAIRS
[Stage Direction]
Hon. DOUGLAS ABBOTT (Minister of Finance) moved that the house go into committee at the next sitting to consider the following resolution:
That it is expedient to introduce a measure to amend the Veterans' Business and Professional Loans Act to provide for the making of guaranteed loans to veterans already established in partnership businesses for expenditure by the partnership and to enable a veteran to include as part or all of his cash requirements under the act, moneys expended by him in connection with his business between the date of assent to the bill and the date of proclamation of the act.
He said:	His Excellency the Governor
General, having been made acquainted with the subject matter of this resolution, recommends it to the consideration of the house.
Motion agreed to.


[Stage Direction]
Right Hon. IAN A. MACKENZIE (Minister of Veterans Affairs) moved:
That the house shall meet at 2.45 o'clock, p.m., on Tuesday, June 10 instant, notwithstanding standing order No. 2 in relation thereto.
[Stage Direction]
Immigration
[Stage Direction]
He said: The reason for this motion is the observance of certain national and international courtesies.
Motion agreed to.


Clarence Decatur Howe: Mr. Speaker, I should like to bring to the attention of the house an order in council, P.C. 2180, relating to immigration. The order provides for the immediate admission to Canada of S,000 persons from the displaced persons' camps of Europe.
The'5,000 individuals to be covered by this order will include those displaced persons who have already been admitted. They need not be relatives of residents of Canada. The new order is designed as a further Canadian contribution to the solution of the general problem of the displaced persons.
In the selection of displaced persons, priority will be given to those persons who have skills and aptitudes which will make them capable of absorption in industries where there is a reasonable guarantee of steady employment. In the light of the existing housing situation, priority will also be accorded to single persons.
In discussing this matter in the past the Canadian government has taken the attitude that we would be prepared to do our full share, along with other countries, whenever an international agreement could be reached on the disposal of the persons in these camps. With that end in view, we have supported the work of the international committee on refugees and have taken a prominent part in the negotiations leading to the establishment of the international refugee organization.
We had hoped and expected that more rapid action would have been possible in connection with the organization of the I.R.O. and that this would have facilitated the early conclusion of an agreement on the disposal of the displaced persons. However, one delay after another has occurred and it now looks as though it would still be a matter of some months before the I.R.O. is established and is able to work out the terms of an international agreement.
Rather than wait for the initiation and the completion of the negotiations for a general attack upon the refugee problem, the government has decided to make this initial contribution to the solution of the problem.
The number of persons admitted as a result of this initiative will, of course, be deductable from any general quota that Canada agrees to accept following the international discussions on this subject.
As has been repeatedly pointed out, the greatest present difficulty in the way of a major immigration movement to Canada is the lack of shipping. I am now glad to be able to report that the government hopes to be able to arrange for the conversion for immigration purposes of a vessel received on reparations account from Germany. In addition, we are continuing our efforts to obtain more space for immigrants on vessels under the control of the I.G.C.R. or provided by the British ministry of transport.
With regard to the plans for the selection, transportation and distribution within Canada of the	persons	covered	by	the new order,it has been arranged that the handling of these matters outside Canada will be under the control	of the	immigration	branch of	theDepartment of	Mines	and	Resources;	andwithin	Canada,	under	the	control of	the
Department of Labour. In carrying out its work of selection and transportation the immigration service will be assisted by representatives of the Department of Labour, and in arranging for the distribution of the new immigrants throughout Canada the Department of Labour will receive assistance from the officers of the immigration service within this country. It is expected, for example, that the immigration buildings in several of our larger cities will be used as distribution centres in which the new immigrants may be initially received, and from which they may be sent on to their ultimate destination.
The government does not, of course, consider that this initiative will meet the full Canadian responsibility in relation to the displaced persons. We do believe, however, that it is a contribution towards the solution of this very grave problem and is a recognition of our moral obligation to contribute to a solution.


Mr. GRAYDON:: Can the Acting Minister of Mines and Resources tell the house when the immigration of the Dutch farmers is likely to begin? Prominent Ontario agriculturists have asked me about it. They think there is undue delay in these Dutch people coming in. Can the minister make a statement?


Clarence Decatur Howe: The matter is entirely one of transportation. I shall be glad to make inquiries as to the present position and reply to my hon. friend tomorrow.

Inquiries of the Ministry


Mr. GREEN:: I should like to ask a
question arising out of the minister's statement. Will the cost of transportation be paid by the Canadian government?


Clarence Decatur Howe: No. The cost of transportation by ship is paid by the international relief organization.


Major James William Coldwell: The intergovernmental committee?


Clarence Decatur Howe: Yes.


Mr. HACKETT:: Will the Acting Minister of Mines and Resources state whether any of the 5.000 immigrants to whom he refers will be suited by training and inclination for domestic service?


Clarence Decatur Howe: Ways and means of obtaining suitable persons for domestic service are now being studied. I think I can assure my hon. friend that immigrants of that class will be among those who will be brought here.


Major James William Coldwell: May I ask the minister if the agreement with the intergovernmental committee to pay transportation applies from now on, or whether it is in any respect retroactive?


Clarence Decatur Howe: I understand that transportation by ship has been available from the organization since the commencement of the movement, and was available, as a matter of fact, to the extent of the cost of transportation by ship in the movement sponsored by the hon. member for Beauce (Mr. Dionne).


John Bracken: The Minister of Reconstruction has intimated that 5,000 immigrants are being allowed to come in from the displaced persons camps in Europe. Has he the latest estimate of the number of displaced persons in Europe now; and can he-perhaps not today, but later-give us some idea of what other countries are doing to help solve that problem?


Clarence Decatur Howe: I understand that the number of displaced persons in camps is about 850,000. Ours is a small contribution towards Canada's share of the problem. I shall be glad to make a further statement after I have consulted with officers of the department.



PARLIAMENT HILL


[Stage Direction]
On the orders of the day:
Mr. KARL HOMUTH (Waterloo South):: I wish to ask the Minister of Public Works if something cannot be done to stop cars from 83166-250J
speeding around the parliament buildings and on the roads leading to the gates of the parliament buildings. Automobiles come around those curves at high speed. Some of us are not as young as we used to be and cannot step in as lively a manner as we could a few years ago. This is really a serious matter; I have seen some near accidents.


Hon. ALPHONSE FOURNIER (Minister of Public Works):: I will take note of the remarks made by the hon. member and give instructions that if there is any speeding it is to be stopped. ,


Major James William Coldwell: May I ask the Minister of Public Works if he will at the same time take into consideration the strengthening of the hands of the mounted police who look after the automobiles around this building? They tell me they have not the power to supervise their disposition.


Alphonse Fournier: There is a statute, which was passed in 1930, regulating traffic on government-owned property. We never had any difficulty until this year, when some people complained about the parking space which was allotted to members and officials. One went so far as to say that the statute did not give the mounted police authority to prosecute those who did not follow the regulations. I myself am not too sure whether the statute does give the mounted police the power to regulate motor vehicle traffic on parliament hill. I am having the officials of my department study those regulations. They have also been submitted to the Department of Justice. If we are not empowered under the actual statute to control or regulate automobile traffic on these grounds, we shall have to bring in a new statute which will give us that power.


Gordon Graydon: More legislation.



P.E.I. CAR FERRY

[Stage Direction]
INQUIRY AS TO CHRISTENING OF S.S. "ABEGWEIt"
On the orders of the day:
Mr. J. W. MacNAUGHT (Prince):: I wish to direct a question to the Minister of Transport. Can he say when the S.S. Abegweit will be christened?


Lionel Chevrier: The present plans are to have the naming ceremony for the new Prince [DOT] Edward Island car ferry on Saturday, June 28, next.
Privilege



PRIVILEGE


[Stage Direction]
On the orders of the day:
Mr. VICTOR QUELCH (Acadia):: I rise to a question of personal privilege. On Saturday, June 7, the Ottawa Journal contained the following report:
Mr. Quelch said that he was becoming convinced that there was to be war with some country . . .
That is not my view, and I quote from page 3896 of Hansard of Friday, June 6, in order to show what I actually said:
To listen to some hon. members one would almost come to the conclusion that a war with some countries is imminent.



MR. MCIVOR-REFERENCE TO PRESS REPORT OF JUNE 7

[Stage Direction]
On the orders of the day:
Mr. DANIEL McIVOR (Fort William):: I rise to a question of privilege. On Saturday, June 7, a report in the Globe and Mail, refers to something that I was not guilty of. Speaking of my speech, it says: "He sat down and turned his back on Mr. Pouliot." The hon. member for Temiscouata is an independent Liberal member and lives up to his reputation. I am often proud of him, and while I do not always agree with him I have nothing but respect for him.



MR. POULIOT-REFERENCE TO &quot;GLOBE AND MAIL&quot; OF JUNE 7

[Stage Direction]
On the orders of the day:
Mr. JEAN-FRANCOIS POULIOT (Temiscouata) : I thank my reverend deskmate for his kind reference, and I rise to a question of privilege with respect to the same article in the same paper. The report says:
Deputy Chairman Ross Macdonald (L. Brantford City), had to call for order several times as first jean-Francois Pouliot (L. Temiscouata) and then several Social Credit M.P.'s insisted on discussing matters which- were not before the house.
Then again he says:
After calling Mr. Pouliot to order several times, Deputy Chairman Macdonald pointed out-
And so on. Then the reporter repeated the same thing a third time in regard to the hon. member for Lethbridge (Mr. Blackmore). There are several mistakes in that. In the first place I was not called to order by the hon. member for Brantford City. He was not in the house; and he is not deputy chairman. Therefore the Globe and Mail does not inform its readers properly.

[Stage Direction]
On the orders of the day:
Mr. JEAN-FRANCOIS POULIOT (Temiscouata) : I have another question of privilege, Mr. Speaker, on a different matter. It concerns a question of mine which has been mutilated to the point that it is unrecognizable, and is no longer one of my brain children. On Friday of the week before last I gave this question to the clerk:
1.	Referring to the government statement at page 1997 of Hansard (April 14, 1947),that an application for a passport is a confidential document, why is it so, since w'hen, and in virtue of -what authority?
2.	Is the passport itself a confidential or public document, and why?
The only part of that question I see in Hansard, at page 3708, June 2, is:
Why is a passport a confidential document?
I say it is not fair to mutilate a question to that extent, to carve it up and put my name to it. The question that appeared in Hansard is not at all the question I asked. What I want to know is why an application for a passport is a confidential passport, while the passport itself is not.


[Stage Direction]
Right Hon. L. S. ST. LAURENT (Secretary of State for External Affairs) moved the third reading of Bill No. 253, to make provision with respect to forces of the United States of America when visiting Canada and with respect to the exercise of discipline and to the internal administration of such forces.
Mr. ANGUS MacINNIS (Vancouver East):: Mr. Speaker, I want to say a few words on this measure before it is given third reading. I am not going to deal with the principle of the bill, because that was settled on Friday when we voted for second reading. When the bill was being considered in committee of the whole a statement was made that to me is somewhat disturbing. The hon. member for Regina City (Mr. Probe), in discussing certain aspects of the bill, made this statement:
I propose to ask the minister a question which he may or may not care to answer. I believe that it should be asked and that some definite statement should be made with respect to it. This committee should be informed as to how many United States troops are in this country at the present time. We should know what they are doing in Canada and what their disposition is, that is to say, in what parts of the country they are at the present time.

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That is at page 3876 of Hansard. In reply, on the same page, the Secretary of State for External Affairs (Mr. St. Laurent) mentioned that the number of United States troops stationed in Canada was not very large, and that wherever they were stationed they were fewer in number than the Canadian troops who were with them. His statement was:
They are less numerous than our own personnel. It is by design and arrangement that they are kept less numerous than our own. That is the way in which the policy is being carried out.	.
But in regard to United States troops in other parts of Canada the minister said:
There are a few others at other places, but I would not feel at liberty to disclose that information without conferring with the chief of staff and ascertaining whether it would be proper to do so.
It seems to me an amazing state of affairs that a member of the cabinet, asked a question in this house, cannot answer that question until he refers the subject matter to the chief of staff. That sort of answer might have been satisfactory when the country was at war, but certainly it is not a satisfactory answer at the present time, when the country is at peace. I believe-and in this matter I think the precedents in British countries hold with me-that the members of this house should be informed not only as to where foreign troops are, when they are on our soil, and what they are doing, but also where our own troops are, when they are under arms, and what they are doing. That should be so in time of peace. If we are secretive about these matters surely we are bound to create suspicion not only in our own country but outside as well. So I would suggest to the Secretary of State for External Affairs that even now, before this bill is given third reading, he should give a full and complete answer as to the number of United States troops in this country, where they are stationed and what they are doing. Parliament is entitled to that information, and nothing less; and I believe that in the interests of world peace and the elimination of suspicion in these affairs the answer should be given before this bill receives third reading.
Mr. ST. LAURENT: The reason for my statement that I would wish to Confer with the chief of staff before answering that question was not that I wish to have the opinion of the chief of staff about it; but as it had to do with the presence here of men in uniform from our neighbour to the south, I wished to be informed by him whether it might be embarrassing to him in his relations with them to have that information published. The hon. member will realize that these matters are not of very great consequence at the present time,
because there are only very small numbers who are cooperating; but I did not feel at liberty to answer without being sure that when the arrangements had been made for a few men to come to such and such a place, it was with the express or implied understanding that the particulars could be made public. I think the hon. member will agree that we are under some obligation of courtesy in that regard, and it was for that reason that I stated perhaps in general terms what I should have stated a little more precisely, that I wanted to be sure there would be no violation of courtesy in giving that information.


Major James William Coldwell: May I just add one word to what my hon. friend from Vancouver East (Mr. Maclnnis) has said. It is not a matter of courtesy. May I say to the minister that we are prepared to extend all the courtesies possible to our great American neighbour. But throughout the ages-at least ever since the execution of Charles I-the right of parliament to know what troops or armies are within the borders of the country, and under whose command they are, and what they are doing, has been a fundamental principle of our British parliamentary practice. It is not because we wish to be discourteous to our. great neighbour to the south, but rather because we believe this parliament has a right-indeed a duty-to inquire into the movement of foreign troops in this country in peace time-and I say "in peace time" because when we are at war and allied with another nation, circumstances are entirely different-we have a duty, I say, to ask what troops are on our soil. We have a duty in relation to our own troops to see to it that no outside individual or group shall have control in our own country. If it is true that this parliament has entire control of military arrangements within our own country, then parliament should know exactly what troops, other than our own, are on the soil of Canada at a given time. That is the point at issue-not	the matter of courtesy or
discourtesy.


Brooke Claxton: Mr. Speaker, the hon. member for Rosetown-Biggar (Mr. Coldwell) has referred to the time-honoured rule which, he says, is observed in the British parliament, that information as to the number of troops in the country must be disclosed at all times.


Major James William Coldwell: To parliament.


Brooke Claxton: Yes, to parliament. I can refer my hon. friend to a refusal to indicate to the British parliament the number of

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British troops in Great Britain, which was given, by their minister of defence on March 4, 1947, as reported at page 43 of their Hansard. I have looked into this matter and I can refer the hon. member to a number of other answers in the debates of the House of Commons at Westminster in the course of which ministers of the crown have refused, on the ground of public interest, to give information as to the detailed disposition of their own forces in Great Britain or outside Great Britain.
The hon. member for Rosetown-Biggar is familiar with the discussions which took place before the united nations as to the desirability of full disclosure by all nations of information of military value; and he knows how far that suggestion got before that body. He must know that in these matters, if you give all the information you have to other countr.es, you have very little chance of getting any information in return. I will be frank with the house and say that in this instance the information is not of any genuine military significance, because the numbers are so small and the operations are of such a routine character that they would not be of any great significance to any country.
We hope that the international situation will not deteriorate; we hope that it may be possible to exchange information on terms of complete and guaranteed reciprocity with all countries. But we are not certain that that day will come. Until it does come we do not feel it is in the interests of Canada or of the defence of this continent to establish the precedent of making disclosures not only to members of parliament-because there is no difficulty about that-but to the public and to other nations, of the detailed disposition, purpose, location and numbers of our forces or those of any friendly country within our boundaries, because of the significance that might be attached to changes and developments that might be made.
The situation as it exists today is, as I say, not at all significant or serious. But let us suppose, for example, that three more weather stations or five more loran stations are built, and let us suppose that the number of men serving those stations, partly Canadian and partly American, has increased. That can be played up in this or in other countries as a dangerous and threatening sign, whereas everyone in this country knows that it would be nothing but the most reasonable step in the defence of our own country and to prepare us for any emergency that may arise.
These matters of defence have changed greatly since the period between the two wars.

Now we have inventions like radar, loran and inventions of other types which are of use principally for defensive purposes. Their location and number may be of some interest, and until we can secure an exchange of information on a guaranteed reciprocal basis we do not propose to give that information away to anyone who wants to get it. But as for hon. members in the house, let me say that we should be glad indeed to give them the fullest possible information as to the situation.
What I have said does not apply to the total of forces or to matters which are of common interest and common knowledge in Canada. But we do not believe it is a good thing to give information as to the disposition, location, purpose and strength of these forces in detail, not because of what exists today, but because of some significance which may be attached to changes in the future-and which almost certainly would be attached, judging from our experience.
The hon. member for Rosetown-Biggar and the hon. member for Vancouver-East deplored the debate; and I think the Secretary of State for External Affairs went some way in agreeing	with	them.	I	too	would	like	toexpress regret at	some	of	the	things	said	in
the debate; but I would call attention to the fact that many of them, which I believe many of us would regret, were occasioned by the amendment moved by the hon. member for Regina City (Mr. Probe) representing the C.C.F.
When later the hon. member for Rosetown-Biggar said	that	some	of	the	things	said	indebate did	not	represent	the	point	of view
of parliament or of the country, I must say the question arose in my mind whether some of the statements of the hon. member for Regina City, as reported at pages 3795 and following, the hon. member for Winnipeg North Centre at page 3835 and the hon. member for Swift Current at page 3846, represent the views of the C.C.F. That they did not represent the views of parliament or of the country I am convinced, but I think it is of interest to learn if they did represent the views of the C.C.F.
As a further word in conclusion I would point out that some thirty speakers took part in the debate, of whom thirteen were members of the official opposition and nine were members of the C.C.F. while only six speeches were made by representatives on this side. Of those six, two speeches were made by the minister who introduced the bill, and one by myself in explanation of some of its features. It cannot be said that this debate was in any way occasioned or carried on by members

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on this side, it can be said to the contrary that more than two-thirds of the time of parliament was taken up by representatives of the opposition.
In our view this bill was not a bill of great significance. It was designed to enable Canada to extend in peace time a privilege that it had been found useful to accord to the troops of the other country in war time. It does not infringe on the sovereignty of Canada or on the jurisdiction of our courts. It simply gives visiting forces tc our country the privilege of trying their own men for offences under their own military law. It is a privilege extended by the United Kingdom to the United States and Canada. It is a privilege extended by the United States to the United Kingdom and Canada. It is a privilege extended already by Canada to the rest of the commonwealth, and it seemed to us to be a reasonable provision and in accordance with our common interests that we should extend the same privilege to the United States that they had already extended to us.
Hon. members have spoken throughout this debate as if the advantages of our common participation in joint defence1 in accordance with the arrangements announced by the President and by the Prime Minister on the 12th of February were entirely one-sided. The arrangement was spoken of as if Canada were the only beneficiary. This arrangement was made in the interests of Canada, of course, but it was made by the United States in the interests of the United States. It is in our common interest, and that is why it was made. Further, the cooperation extended under the arrangement is by no means one-sided. On account of the fact that the United States has some twelve times our population and many times our wealth and many times our power, she naturally has the most to contribute. But it is by no means a one-sided arrangement, and I can assure the members of the house that we intend to have this arrangement carried' out, so far as lies within our power, on a reciprocal basis, by means of which we would give to the United1 States the full advantage of such inventions, discoveries and works as we have-there is much we can claim to our credit in these fields-and we shall also engage with them in common measures of joint training and the like.
Hon. members spoke as if it were contemplated that there would be large numbers of United States troops drilling and training here. The Secretary of State for External Affairs has made it clear that that is not contemplated at the present time at all. This is entirely, I would say, at the staff, liaison,
testing and experimental level. So there is no considerable group of United States troops in Canada and no group of Canadian troops in the United States at the present time receiving training for training's sake, that is, which will be of primary value because its primary purpose is directly to increase their military skill. This is an extension of the kind of arrangement friendly countries have carried on throughout the ages, the exchange of staff information, the exchange for training purposes of staff, the exchange of matters of common interest of one kind or another. No other two adjacent countries, I think, on the face of the earth have ever before had such close and intimate relations as the United States and Canada, and have such common interests in their common defence. It is because of that that this arrangement was made, born of the statement of the President and the Prime Minister in 1938, carried through in the declaration of Ogdensburg on August 19, 1940, and the basis for so much of the allied cooperation which contributed to victory. It seemed to us that this arrangement should be carried on in peace. It seemed to us to be the merest act of common sense in the common interests of two good neighbours.


Major James William Coldwell: Mr. Speaker, on a question of privilege, the minister referred to some remarks of mine on Friday in his criticism of myself and those associated with me. I want to tell him that he should have gone farther afield than the members of this group. The whole tenor of the debate was unfortunate, and that was occasioned by the secrecy concerning the movement, not of our own troops, but of foreign troops within the borders of our country.


Mr. MACKENZIE:: That is an argument, not a question of privilege.
Mr. JOHN T. HACKETT (Stanstead): Mr. Speaker, nearly everyone who has taken part in this debate has assured the house that he had not intended to speak. I on the contrary, Mr. Speaker, have intended to speak from the very beginning; I have waited long for an opportunity to address the house.
I am not going to approach the question from the point of view of international politics, nor shall I criticize the purpose of the bill. It seems to me however that the bill is without purpose unless it anticipates the presence in this country of the troops of a friendly nation in substantial numbers. Week-end visits, excursions by boat or by rail of military or naval units, even a week's outing here by United States forces, would not give rise, in my view, to the enactments that are found in this bill. The
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purpose of the bill has been, stated by the Secretary of State for External Affairs (Mr. St. Laurent) and it is not my intention to question the accuracy of his statement. I would, however, like to dwell for a short time on the results of passing the bill.
We recall that the party of which I am a member has found the going in the province of Quebec very rough for the last thirty years because that party was looked upon in Quebec, and was held up forsooth by the party which constitutes the government, as a war party, as an imperialist party, as a party which desired war; as a party which whenever there was any possibility of electing as between domestic interests and imperial interests always neglected the domestic interests to favour the imperial interests. I need not assure you, Mr. Speaker, that I felt and still feel that those charges were wrongful, that they were without basis; nevertheless they did find credence in the minds of a large number of the electors of my province.
All through the years there never was a general election that a great war was not hatched for the purpose of compelling the vote of Quebec into the support of the party which constitutes the government opposite. I can turn to newspapers printed and published on the eve of each general election and establish beyond any doubt that the Conservative party was branded by the Liberal party as a party of warmongers; and coupled with that charge was the assertion that if the people of Quebec did not want their children to be conscripted and sent away to fight an impending war in which they had no interest whatsoever, they should eschew the opportunity of supporting the Conservative party.


Brooke Claxton: Does the hon. member remember the Drummond-Arthabaska byelection of 1910?


John Thomas Hackett: The hon. gentleman
remembers the Drummond-Arthabaska byelection very well, and is willing to discuss it. He remembers other elections, too; and if the hon. minister wants him to name the ministers on that side who took part in these other elections and made statements that are shameful, he can do so. I believe that this debate, whatever its purpose, will have the result of making it clear to the people of Quebec that there are times when the people of Canada have to take on the defence of Canada, and at'no time has. any other policy been that of the Conservative party. I go further and say that when we have a debate of this kind-*


Ian Alistair Mackenzie: I must rise to a point of order. This discussion has nothing to do with the question before the house.


Howard Charles Green: You can't take it.
Mr. A1ACKENZIE: I detest interruptions. It is interesting to listen to my friend's discussion, but it has nothing whatsoever to do with the motion for third reading of this bill.


Mr. DEPUTY SPEAKER:: I was under the same impression as the Minister of Veterans Affairs. I was going to ask the hon. member for Stanstead if he would relate his remarks more directly to the bill under discussion, which makes provision with respect to forces of the United States of America when visiting Canada. At present I cannot see how his remarks are related to this bill. May I ask him to relate them to the bill?


John Thomas Hackett: Mr. Speaker, if it will not put too great a burden on your patience I intend to show that my remarks are very directly associated with the bill, and that they are pertinent to it. It is my aim to establish that whatever the purpose of this bill, its result is to show to the province of Quebec that there are occasions when preparations for war have to be made, and I was merely leading up to the point by showing that in the past it had been the policy of the party which constitutes the government of today to preach at all times that there was no reason to prepare for war or to anticipate war.


Ian Alistair Mackenzie: That is not correct.


Douglas Charles Abbott: That is nonsense.


Ian Alistair Mackenzie: I want to challenge that statement from my own experience.


Some hon. MEMBERS:: Sit down.


Mr. BROOKS:: That emphasizes only the correctness of it.


John Thomas Hackett: If the hon. gentleman will bear with me for a moment I will be very happy to accept his challenge. I am not going to talk about what happened in 1914 or 1915 or 1916, or in the election of 1921 or 1925 or 1926 or 1930.


Air. GAUTHIER (Portneuf):: Or 1911.


John Thomas Hackett: I am going to talk of the period when disaster was dripping from the clouds; I am going to talk of the period after Munich; I am going to talk of the period when everyone knew that war was inevitable, and I am going to read to him a passage from a speech of his own leader delivered in the House of Commons on the 30th day of March, 1939.


Brooke Claxton: How are you going to relate that to the bill?

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Mr. HACIvETT: These are the words of the Prime Minister of Canada on that occasion, as reported at page 2419 of Hansard:
The idea that every twenty years this country should automatically and as a matter of course take part in a war overseas for democracy or self-determination of other small nations, that a country which has all it can do to run itself should feel called upon to save, periodically, a continent that connot run itself, and to these ends risk the lives of its people, risk bankruptcy and political disunion, seems to many a nightmare and sheer madness.
That is the statement which was made in the house by the Prime Minister of Canada in March, 1939, when everyone knew that war was inevitable. I follow that up with another statement, when the Prime Minister, a few years later, was criticized and condemned for making no preparation whatever for the war that everyone knew was coming. He said in the house on the 11th day of August, 1944, that previous to the statement which I have just read, in 1937 forsooth, he had gone to Germany and to Hitler, and this is what he told Hitler at that time. Said the Prime Minister on August 11, 1944, as reported at page 6275 of Hansard:
But I do tell this House of Commons today that my visit to Germany had as its objective to make it perfectly clear that, if there was a war of aggression, nothing in the world would keep the Canadian people from being at the side of Britain. That was known to the German government at that time, and my action in the matter was fully known to the British government; but I did not talk about it at the time, for it is just as well that some of these matters should not be spoken of until later years.
Mr. DEPUTY SPEAKER; Order. I still cannot see what the last statement has to do with the bill under consideration.


Ian Alistair Mackenzie: Tory propaganda.


Some hon. MEMBERS:: Oh, oh.


Mr. KNOWLES:: Is that quotation Tory propaganda?


William Ross Macdonald: I cannot see how the statement that has just been read has any relation to the bill under discussion at the present time, which relates to the forces of the United States of America which are now visiting or which may hereafter visit Canada. The hon. member should confine his remarks more directly to the bill.


John Thomas Hackett: I am merely showing that there are times when people have to prepare for war, and I think it is a very proper thing that the people of this country should finally be told in all frankness that there is a possibility of participation in a war. I am not suggesting for a moment that there is to be aggression from this or from that nation;
but I do believe that when there is uncertainty of aggression today as there was certainty in 1939, when it was denied by the government that there should be any preparation made, that we should today instruct our people as a whole-


Ian Alistair Mackenzie: We got a lot of help from you and your party at that time.


John Thomas Hackett: It was-


Ian Alistair Mackenzie: They cut down our estimates; that is what they did. You had better read your history.


John Thomas Hackett: Mr. Speaker, is there any order in the house?


Mr. POULIOT:: Human rights.


John Thomas Hackett: Is there no order in the house?


William Ross Macdonald: May I ask
hon. members not to interrupt?


Ian Alistair Mackenzie: They ruined the air force estimates.


Jean-François Pouliot: Human rights.


William Ross Macdonald: Order.


Ian Alistair Mackenzie: Remember your history.


Jean-François Pouliot: Human rights.


William Ross Macdonald: Order. I must insist that hon. members do not interrupt the member who has the floor.


Ian Alistair Mackenzie: Let him stick to the facts.


Jean-François Pouliot: Human rights.


Karl Kenneth Homuth: The only thing is you cannot take it.


Ian Alistair Mackenzie: You read those debates.


Jean-François Pouliot: Human rights.


Ian Alistair Mackenzie: You ruined the air force.


Jean-François Pouliot: Human rights.


John Thomas Hackett: Mr. Speaker, I can assure the right hon. gentleman from Vancouver that I am accustomed to interruption of this kind. If he thinks that by making his mellifluous and highly sonorous voice heard above mine he can discourage me he is in error. I would ask you, Mr. Speaker, to deduct, from the time allotted to me that which has been unduly usurped by the right hon. gentleman.


William Ross Macdonald: May I in turn
ask the hon. member for Stanstead to direct his remarks to the bill under consideration, and try to keep within the limits of the bill.
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John Thomas Hackett: I am directing my remarks to the bill, and so pertinent have my remarks been that they seem to have aroused some disturbance opposite. I was merely endeavouring to point out the results of this enactment. At last the decent and God-fearing people of my province are going to be brought face to face with the facts as they never have been in the past. They have been told, without contradiction by a unanimous party press and by a very vocal representation in the house, that wars are made by members of my party and that there is no fear or possibility of war so long as gentlemen opposite sit on the treasury benches. That is the story that has been told and reiterated in Quebec for thirty odd years. I am glad to know that at last the people of that province are going to learn that such is not the case. I am glad to know that we are going to have an era in which fear of conscription and1 the dastardly agencies of propaganda which have been known and which have been summoned to the aid of the Liberal party at every election in the last quarter of a century will no longer be available to any party in Quebec.
The people of Quebec are decent and law-abiding people, a people as loyal to Canada as a people can be, but they have been told by Liberal leaders for thirty years that any war which was not waged on Canadian soil was a *war in which they had no interest whatever. Apparently we have now reached the point where it has become necessary to call in neighbours, or to make provision for calling them in to defend our own heritage. I ask you if when the Canadian people took up arms in the wars of 1914 and 1939 it was not just as much in defence of their own land, of their own country, of their own lives and of their own liberties as could be any anticipated war for which this bill makes provision?


William Ross Macdonald: I glanced
through the bill again and I cannot see that it makes provision for war; it does not discuss war in any way. It relates only to the discipline of the forces of the United States while in Canada, not while they are at war with Canada or while Canada is at war with any other country.


Karl Kenneth Homuth: We are making shells, but they are not necessarily to kill people.


William Ross Macdonald: The hon. member says we are making shells, but not necessarily to kill people. This has nothing to do with making shells; this is an arrangement which is being made with respect to the discipline of the forces of a friendly country,
[The Deputy Speaker.]
the United States, while in Canada. I do not think it calls for a discussion on war generally, such as the hon. member is carrying on at the present time.


Karl Kenneth Homuth: What are soldiers for?


John Thomas Hackett: I am very grateful to you, Mr. Speaker, for enlightening me. I did not know that these troops were to come here from another and friendly land on a Sunday school picnic or for a week-end. I had understood from the statement made on February 12 by the Prime Minister and from what the minister of external affairs had said that there was to be between Canada and the United States some uniformity in arms, equipment and military organization; that there should be some uniformity in technique; that we should learn something of how the United States operate their armies and how we operate ours. While I admit that there was no direct mention of war in the bill, I was under the illusion, until you corrected me, that it was in anticipation of mutual defence against armed intrusion that this united effort of our soldiery and that of this friendly power was being arranged. I am most grateful to you, Mr. Speaker, for the correction.


William Ross Macdonald: I do not want to interrupt the hon. member unduly. The remarks which he has made may be correct, but this bill has nothing to do with the training of those forces in Canada. This bill deals only with the discipline of troops while in Canada. No doubt there will be an opportunity afforded to hon. members at some other time to discuss the training of troops and other matters to which this bill does not refer.


John Thomas Hackett: I am very grateful to you, Mr. Speaker, for pointing this out to me, but I am forced to regret that some thirty-one hon. gentlemen who have preceded me in this debate had not the benefit of your advice.


Douglas Charles Abbott: Better late than never.


John Thomas Hackett: It might have helped curtail the debate and get on with the estimates of the genial Minister of Finance.


Douglas Charles Abbott: Nothing will do that but hot weather.


John Thomas Hackett: I do not think that anyone who wishes to be at all serious can believe that this bill is anything other than what it purports to be. It anticipates something that none of us can foresee without a renewed prayer for peace. This bill anticipates joint preparation for war, or it has no significance

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at all. Whatever may be my appreciation of the wisdom of the government, I cannot believe that its sense of futility would permit it to introduce a bill like this unless it has some real use; and the only use to which it could be put is to provide for the forces of a friendly country who enter upon our territory in great numbers. If that be not anticipated-


Brooke Claxton: I should like the hon. gentleman to allow me to rise to a rather important question of privilege, because what he has said is misconstruing the statement made by the Secretary of State for External Affairs and by myself. If I may say so, I also think it is casting an exceedingly provocative reflection on a bill which has but one simple purpose.


Howard Charles Green: The minister himself made a provocative speech.


John Thomas Hackett: I am glad of enlightenment from another source, but I still maintain that unless this bill anticipates the presence on Canadian soil-possibly not today, possibly not tomorrow, but in some emergency- of large numbers of the armed forces of a friendly nation, who are to discipline their own delinquents, it should be withdrawn, because it has no other purpose. We know that legislation of this kind was introduced in England in war time, and there was some difficulty in getting it through, even there. In fact, it did not pass until many millions from that great country which aided so vigorously in the pursuit of the enemy had landed on the shores of Britain.
But again, Mr. Speaker, my point is that at last we are in the open. At last it is admitted that our country may be obliged to defend itself, that we are seeking allies in that defence, that that defence may take place on the seas or on another continent. The bill puts an end to the era when a great political party can be accused of disloyalty and chauvinism because it believes in the possibility of war, war which has come twice within my generation, and which God forbid should ever come again. When it does come I hope that debates such as this will have made the Canadian people a united people, a people that will not be forced to go through periods of disunion and distress, largely provoked by unfair and inaccurate statements concerning war which were showered upon this country between 1914 and 1939. I may say that the reason for these unfair and unreasonable statements was just for political power. It was to achieve it that a party was willing-[DOT]


Ian Alistair Mackenzie: Is that what caused the vote in 1917, the distortion of ballots?


John Thomas Hackett: -that a party was willing to make such statements on the eve of every election so that a substantial element of the electorate would be led to believe that its dear ones were being exposed to unnecessary military service if it exercised its franchise freely. I think we have at last written finis to a dark era in Canadian politics. I for one am glad of the debate, and I am glad that the bill has had its second reading, because from now on, all sections of the country must know that we have got to defend this Canadian land.
Mr. J. 0. PROBE (Regina City): I take this opportunity to rise on the third reading of this innocuous bill, which has been discussed by so many speakers and the statistics for which were so readily outlined by my much respected friend, the Minister of National Defence (Mr. Claxton). I regret that at this time the minister took occasion to lash out in the rather acrimonious and unnecessary manner in which he did at my leader, the hon. member for Rosetown-Biggar (Mr. Coldwell), doubting whether he concurred in the remarks which were made during the debate on the second reading of the bill by the hon. member for Winnipeg North Centre (Mr. Knowles), the hon. member for Swift Current (Mr. Bentley) and myself as mover of the amendment. I just want to emphasize now, both to the minister and to the House of Commons, that when I rose to move the amendment I was speaking after consulting with and having received the approval of every member of our group.


Major James William Coldwell: That is right.


Mr. PROBE:: There is no qualification about that fact. Therefore it was not necessary for the minister to make the suggestion he made in that regard.


Major James William Coldwell: And a fact which escaped me when I rose.


Brooke Claxton: I asked the question and it has been answered.


Major James William Coldwell: It escaped me or I would have answered. The amendment was agreed upon by all of us.


Brooke Claxton: I asked the question and it has been answered.


Mr. CRUICKSHANK:: Which makes it all the worse.


John Oliver Probe: I believe the wisdom of the amendment has been eminently confirmed by the extreme latitude which was taken by the numerous speakers in this current debate, because the amendment simply-
Visiting Forces


William Ross Macdonald: Order. The amendment has been put to the house.


Ian Alistair Mackenzie: It has been disposed of.


John Oliver Probe: We insist, on the third reading of this bill, Mr. Speaker-


Stanley Howard Knowles: Insist on it?


John Oliver Probe: Let me finish. I will make the speech.


Mr. ROSS (Souris):: Was that agreed upon also?


John Oliver Probe: That was also agreed upon.


William Ross Macdonald: Order.


John Oliver Probe: May I repeat, Mr. Speaker, that we insist that in peace time parliament be kept fully informed of all the activities of the various branches of this government. That is a right which parliaments have had from time immemorial. It is up to the government to make information available to us in order to make it possible for us to discuss matters of external policy as well as of internal economy. It is up to the government to find occasion to make this possible, whether it be by referring matters to the external affairs committee for discussion and for questioning our military staffs, or otherwise. Therefore I do not think the Minister of National Defence needed to hide his, shall I say, stubbornness or opposition to our desire in that respect in a rather dense foliage of language akin to that made use of by many other speakers in the House of Commons when they wish to evade a point. The important point is that the house and parliament should have an opportunity in peace time to be fully cognizant of what goes on in this land, especially when it concerns the presence in this country of foreign troops in uniform, no matter how friendly they are to us.


Pierre Gauthier: Before taking his seat, the hon. member for Stanstead (Mr. Hackett) said, "At last we are in the open." I think we are. I remember very well in 1911 when the nationalists-[DOT] pardon me, the Conservatives-were playing nationalist, running as nationalists, being elected as nationalists, then coming into this very house, jumping on the seats and coming back as Conservatives, as they always had been. We are in the open. We, the Liberal party, have been labelled in Quebec as being pro-communist, by the Conservative organizer, Mr. Sabourin. That is the way in which the antis work in trying to put the Liberal party down. This afternoon my hon. friend tried not to speak as a nationalist. He was trying to save the surface by putting a little 
paint on the front of his own party. I do not blame him, but one thing should be said and I believe I am in a good position to say it. Is there one party in this country of ours that has not made nationalist declarations once in a while during an election or by-election? Too many nationalist declarations have been made.


Some hon. MEMBERS:: Order.


Pierre Gauthier: Wait a
minute. Too many nationalist declarations have been made. In 1911 it was the Conservatives. Later it was the Liberals, and it will be the C.C.F., the social crediters, the independents; everyone is playing nationalism.
As I understand this bill, we are trying to be co-defendents after having been cobelligerents. When you hear a member from Quebec speaking in favour of an accord with the United States, or in favour of privileges to be given the United States army, it is not because we in Quebec want to turn our eyes away from the British empire or the British commonwealth of nations and turn them toward the United States of America for good, leaving the former alone. It is just because we have the experience of the last war, because we want those two organizations, those two nations or groups of nations, to stand firmly on their feet right in front of the menace from without and from within. That is the way in which I understand it.
Motion (Mr. St. Laurent) agreed to on division and bill read the third time and passed.



INCOME WAR TAX ACT

[Stage Direction]
Hon. DOUGLAS ABBOTT (Minister of Finance) moved the second1 reading of Bill No. 269, to amend the Income War Tax Act.
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Macdonald (Brantford City) in the chair.
On section 1-"Child qualified for family allowance."
Mr. FLEMING:: I have one or two observations to make on this section, with a view to asking the minister to clarify the meaning of this definition, because, as I read it, it is anything but clear. It is not one of the amendments of which there was any specific warning in the resolutions; therefore we have to deal with it as it stands, without the

benefit of prior discussion. This section proposes to introduce an amendment to the definition section of the act, defining "child qualified for family allowance." If you read

Income War Tax Act
it through I think it will be found that there may be ambiguity in the second line, depending upon what the minister's intention is in reference to it. It reads:
"child qualified for family allowance" means a child that, in the last month of the taxation year in respect of which the expression is being applied, was qualified or might have been qualified by registration under the Family Allowances Act, 1944, so that an allowance under that act was or might have been payable in respect of that month or the immediately following month.
It will be recalled that the Family Allowances Act does not contain such a definition. This is a new definition, and the act itself is not clear on this matter. I should like to ask the minister whether this definition is to be applied in such a way that the expression "in the last month of the taxation year" will be equivalent to "at any time in the last month of the taxation year" or "throughout the last month of the taxation year." There could be, as the minister will understand, a change of status during the month. For instance, there might be the death of a child. Could this not be clarified?


Douglas Charles Abbott: The section is intended to mean "at any time during the last month." The purpose of putting the definition in the defining section is to simplify the drafting of section 4, which, as my hon. friend knows, is the charging section. The intention is that with respect to a child qualifying at any time during the month the provisions respecting a child qualified for family allowances will be applicable, even though the status may change during the month.


Donald Methuen Fleming: Would the minister clarify it by using the words he has just used instead of the word "in". Then his intention would be clear. I suggest that the language of the present section is capable of a different construction, and that he might change the word "in" to the words "at any time during". That would place the section beyond any doubt.


Douglas Charles Abbott: I am advised that none of the other exemptions use the word "during". There has never been any question raised that, when dealing with exemptions, the word "in" a given period means "at any time" during the period. The word "in" was used before, and it has always been interpreted as meaning "at any time" in the taxing year. As my hon. friend knows, under the old rule a child born on December 31 in any year entitles the parents to the child's exemption for the whole of that year. ' '


Mr. BLACKMORE:: Mr. Chairman, before we go any farther, I should like to add another word.


William Ross Macdonald: The hon. member for Kamloops has the floor.


Mr. FULTON:: Before this section carries,
I should like to ask either the minister or you, Mr. Chairman, for advice. I wish to make some observations respecting the taxation of breeding herds. I did not make my remarks in the debate on second reading because there would have been no opportunity for questioning. Would the minister prefer that I withhold my remarks until we reach the title of the bill, or would it be more convenient to speak on one of the sections?


Douglas Charles Abbott: The hon. member is referring to basic herds?


Edmund Davie Fulton: Yes. Shall I wait until we reach the title? It is difficult to find a place for what I have to say on one of the sections.


Douglas Charles Abbott: There is no title section, because it is an amending, not a new bill.


Edmund Davie Fulton: Is it not entitled, "and act to amend the Income War Tax Act"?


Douglas Charles Abbott: But there is no section setting out the title; it is an amending bill. I do not believe there is any section on which the hon. member's remarks would be strictly relevant. The discussion we had the other day with respect to basic herds was fairly comprehensive. I said at that time, as has been said before, that the matter was under active consideration-and has been for some time-by	the Department of National
Revenue. It is primarily an administrative problem, and I believe I did say in reply to a question by the hon. member for Calgary West, that some definite decision should be taken in the not too distant future as to what portion of the purchase price or sale price of the herd should be treated as capital, and what portion as income.
Since the termination of that discussion on the resolution, the matter has been, to use a standard expression, under active consideration and discussion. I consider that a solution will be found in the near future, a solution which may not be entirely satisfactory to everyone. In that event, no doubt fresh representations would be made. However I know the matter is being actively considered and the views of hon. members are well known. I assume my hon. friend would wish to voice somewhat along the lines of those expressed by the hon. member for Calgary West.


Edmund Davie Fulton: I am prepared to wait until
the third reading.


John Horne Blackmore: What I have to say is strictly in order. I submit that a most unjust thing has 'been done. The bill now before the
Income War Tax Act

committee was not available to hon. members until Saturday, and it was impossible for anyone to get a copy of it until then. The suggestion is made that we should have objected when the motion for second reading was made; but the noise in this chamber is so intense that it is almost impossible for hon. members to hear what is said from the Chair. In large measure we have to depend upon what is said the night before, if we are to know what is to take place. No word came from the minister to the Social Credit group regarding this matter, and I consider that the whole situation is exceedingly unfair.


Mr. NICHOLSON:: I support what has been said by the hon. member for Lethbridge. In my view the committee should rise and report progress.


Ian Alistair Mackenzie: The bill was in the hands of all hon. members last Saturday.


Douglas Charles Abbott: I do not wish to force this bill unduly, but I must point out that we had a fairly full discussion on the resolution stage. As the committee knows, the amendments this year are not extensive. Many of the amendments in the bill are of a technical nature. There is the qualifying provision respecting private companies, in accordance with the Ives report; then the new tax schedule is no surprise to anyone. The section with which we are now dealing is a technical one, referring to the definition of a child qualified for family allowance.
While some of the amendments may be a bit complex in drafting, I must point out that no new material, no new principle is involved. We have such a heavy agenda before us that I would hope we might make some headway with this bill. I am sorry hon. members in the Social Credit group were not informed this morning that it was the intention to proceed with this bill. We have been working on these bills for about a week to have the drafts completed, so that they would be available to hon. members, and so that we might proceed with them today.


Mr. LOW:: I have great sympathy with the load of work carried by the Minister of Finance. No one appreciates it more than I do. At the same time we must not overlook the rights of hon. members, and it seems to me that they ought to have adequate time to prepare themselves in respect of a bill as voluminous as this one. I can understand how I could have been overlooked in the notifications which went out, but may I point out that the leader of the C.C.F. party has only now received a brief note which was sent to his office by the house leader this morning.


Major James William Coldwell: Perhaps I should say it was my own fault.


Solon Earl Low: At the same time, the C.C.F. group did not know that this bill was coming up. They took the same meaning as we did from what was said by the minister on Friday night, where he pointed out that the government would like to follow the order of the three bills mentioned, and that probably this one might be available. But it was not available then, and did not become so until Saturday. If it could be held over for another day I would certainly appreciate it, because some hon. members would like to give some thought to it.


Douglas Charles Abbott: I dislike forcing the bill, but the Prime Minister has said time and again that the house should be ready to take up any matters on the order paper. While giving notice the night before or, as in the present instance, two or three days before, is an act of courtesy-and desirable, of course -it must be remembered that this will be a broken week. We shall have the visit of President Truman and, while I do not wish to make any personal appeal, I should point out that I have more legislation to bring in. If we could make headway in the committee stage today, I would appreciate it.
I shall give this undertaking, that if there are any sections hon. members feel they would like to have stand, where there is some point to which they would like to give further consideration, we could allow those sections to stand and proceed with others. In that way we could make headway today. I put that suggestion forward for the consideration of the committee.


Ian Alistair Mackenzie: May I point out what I said on Thursday night when announcing the business of the house. I said:
Tomorrow, if the budget bills are ready I might ask the consent of the house to have them introduced and read for the first time, kept over the week-end for consideration and discussed fully next week.
So that no member can complain of any lack of notice in regard to this bill.


John Horne Blackmore: That did not mean on Monday. The worst of this is that it destroys the confidence which ought to exist in this house. The minister speaks of being burdened. The members are burdened too, and extremely heavily, and they have a right to consideration. I will say no more about the matter, but I think this is one of the basest tricks that I have seen perpetrated in the house since I have been here.


[Stage Direction]
Section agreed to.

Income War Tax Act
On section 2-Security in lieu of interest or dividend.
Mr. MACDONNELL (Muskoka-Ontario):: I wish to say a word mainly by way of repetition of what I said at the resolution stage.
I must confess, since the minister has not seen the light up to now, it may be that we cannot persuade him to see it today. It does seem to me that a clause of this kind, which really undertakes to say that a document does not mean what it says it means, is unfortunate. Take the case of a man with a $100 bond which has been in default, let us say for ten years, as may well happen. If the arrears are all paid up in one year and the bondholder is taxed on one year's income that seems a hardship, and if it can be avoided I think we may fairly call it an injustice. If the minister is sure that it cannot be avoided I must confess that that would impress me a good deal, but I earnestly suggest that parliament should not pass legislation like this which says that a document, "notwithstanding the form or legal effect of the transaction," is to mean something entirely different from what was intended and from what it says it means. The effect will be to incite people, indeed drive people to various ways of attempting to get around such a provision. I am sure that the minister never in his legal practice did that, but there are other lawyers who do. I suggest also that the people who can take advantage of it are those who are well versed in these matters, not the ordinary man on the street. Without labouring the point or holding up the committee, I would ask the minister once more, is it not possible to do what I believe justice would suggest and as has been done in several other cases, to spread this over several years; in other words, to recognize that a situation of this kind can be a hardship, and an injustice if it can be avoided?


Douglas Charles Abbott: I did give consideration to my hon. friend's point, but there are grave difficulties in doing what he suggests. I do not believe there will be any substantial hardship, because, as he will notice on looking at the rates of tax, the brackets are fairly wide. Between $3,500 and $5,000 the rate is the same, twenty-two per cent, and it would take a substantial holding of bonds and fairly substantial arrears of interest to put the man into a higher bracket. Suppose a man did get $25 on a $100 bond, and suppose he had 1,000 of them; he would get $250, and that would not push him into the higher bracket unless he was on the edge of it. I think, upon reflection, my hon. friend would agree that
with the fairly wide brackets before the income tax rates change there is not much likelihood of any real hardship. A man would have to be a substantial holder of the particular bonds m arrears and would have to receive a very large amount of arrears in order to change substantially his rate of tax.


Donald Methuen Fleming: I should like to add my word of appeal to the minister to that offered by the hon. member for Muskoka-Ontario. I offer it, in the first place, on the ground of fairness. The arrears presumably have accumulated over a period of years and some rights are to be given by way of recoupment for the losses sustained over that period. Yet the proposal is that the rights, whatever they may be worth, shall be taxed in the first year. So, first on the ground of fairness, I urge the minister to reconsider this provision.
In the second place, may I urge, as did the hon. member for Muskoka-Ontario, that when a provision smacks of unfairness, as this will to many people, the temptation to find ways and means to get around it is very strong. It would be a bold member who would undertake to say that there will not be cases where the incidence of the tax as contemplated by this section may not be defeated by transfers in anticipation of the issue of such rights. When the tax smacks of unfairness from the beginning the minister would, I think, have to admit that many to whom he referred as being on the borderline of a higher tax bracket will be tempted to find ways and means of evading the tax.


Douglas Charles Abbott: This section in terms is substantially analogous to a section contained in the British act, which has been there for some time. I think it is a desirable section to have in our law because there was a loophole there which could lend itself to serious abuse. There are not a great many of these refinancing obligations. The one case that brought it to my attention was that of Abitibi Pulp and Paper Company, where there were substantial arrears. I do not think I could agree to amend the section this year to allow any such arrears to be spread over a period of years. As I said in answer to the hon. member for Muskoka-Ontario, I do not believe there will be any substantial injustice done, but I will give further consideration to the question and when we bring in our new bill which will be effective for the 1948 period, if I find that a real case can be made out for my hon. friend's suggestion, we can include it in the new bill.


James MacKerras Macdonnell: I thank the minister and would add just one
Income War Tax Act

word. As the hon. member 'for Winnipeg North Centre said, we often ask for things and do not get what we want the first time or the second but, if we keep on, we sometimes get it. The minister spoke of the unlikelihood of a payment of this kind forcing a man into a higher bracket. That may be true. But even a man with an income of $2,500 is going to pay twenty-five per cent upon any excess over $2,500. I am not going to labour the matter further. I thank the minister for promising to give it further consideration.


Mr. ADAMSON:: I realize that such a provision is in all the other acts and I realize the difficulties. A case that affects a great many citizens of Toronto is a refunded municipal bond that has been in arrears over a number of years and then the arrears are paid in one fell swoop. If that is paid in a lump sum it certainly puts the taxpayer into a much higher bracket. He could get around this by selling his bonds before payment is made through the municipal refinancing. If he sells his bonds, it is a capital gain and. is not taxable. If he holds on to his bonds and accepts the refinancing, then it is income. It is a difficult point; nevertheless consideration should be given to it. A man holding a bond of some of the municipalities which were in default in the last depression, having bought the bond at par or nearly par, finds that it is now selling at a considerable discount. The principal may be selling at $40 or $50. He has received no income from it for a period of six or seven years, which is a serious setback so far as income is concerned. Then he gets the whole thing at one fell swoop and is taxed at a much higher rate.


Douglas Charles Abbott: Probably not, because the brackets are so wide.


Agar Rodney Adamson: Two things mitigate
against the cases I have in mind. First of all, the man holds security for a number of years and does not get anything from it at all.


Douglas Charles Abbott: And therefore pays no tax.


Agar Rodney Adamson: That is so, but if he bought the security for income he gets nothing from it for years. I believe some of these bonds were in default for six or seven years. He gets nothing from it in that period of six or seven years; therefore he is penalized in those years. That is his bad judgment. The government cannot do anything about a man's judgment; but he is definitely penalized. Then he gets the income all at one time and is again penalized for those six or seven years during which he has been able to receive no income. He gets it two ways. First, he does not get his income and, then, he gets it in

one block and is taxed, despite the fact that in the bill this year the brackets are much wider than they have been. This is one of the things that must be given real consideration.


Douglas Charles Abbott: My hon. friend says that the problem is one that is pretty difficult; but he will appreciate, as will other hon. members of the committee, that the refunding which takes place from now on will be on a descending scale of taxes. The tax which will be paid for the whole of the bond on the accumulated income will, in all probability, be at a substantially lower rate than he would have paid had the interest been paid during the war when rates were at a much higher level. On balance, I think it will be found that the actual tax contribution on the accumulated arrears of interest will be less than the aggregate of the tax which would have been paid had the interest been paid as it went along and included in the individual's tax returns. In most cases I think it will be found that that is true.


Agar Rodney Adamson: I see the point with a decreasing scale. Let us pray that we have not seen the last of decreases in income tax; let us hope that it will be an annual thing and that every year we shall have less and less income tax. But my point is this: two things mitigate against it. One of the things is that municipal bonds-and there will be difficulties with municipal financing-are going to run into difficult times when municipal authorities ask for supervision or are unable to meet their interest charges. At that time the bonds will sell at a discount. Because of the government's policy, the hope that the bond will come back and that the interest will be paid on the years when the municipality is not able to service its bonds, has in many cases kept the security of the municipality at a reasonable level. But because of the continuation of this policy, we see bonds selling at forty per cent or fifty per cent of their par value, and men will hesitate to buy them and therefore support the market because, if the bonds are made good and the arrears are paid, or a substantial payment is made of the arrears, they will be taxed for it all in one fell swoop. In my opinion that will make municipal financing just that much more difficult. At the moment municipalities are able to borrow money at low interest rates. Their credit is extremely high, but there will be difficulties ahead, and this is one of the difficulties that must be foreseen.


Mr. WHITE (Hastings-Peterborough):: In
the explanatory notes and in the remarks of the minister the words "funding" and "refunding. are used. I wonder -whether this position

Income War Tax Act
will apply to a mortgage. Take a mortgage that had been - in arrears for a considerable period of years and a new mortgage was given to include both principal and interest. First, would the interest be taxable in that year? Second, take a case under the provisions of the Farmers' Creditors Arrangement Act, where default has been made, and after going through certain proceedings, the mortgage reverts to its former position before action is taken. There would then be a large accumulated fund and interest which would come due. Would that apply in the same way here?


Douglas Charles Abbott: To answer my hon. friend's first question, this section does not relate to mortgages as such. It relates only to security, funding securities in the nature of stocks, bonds, and so on, although the language is broad enough to cover securities in the sense that a mortgage is a security. That has always been the rule. Where a mortgage that is in arrears is paid up with arrears of interest and a new mortgage given consolidating the principal and interest, then I would think the portion of the new mortgage which represents the accumulated arrears of interest would be income in the year in which the new mortgage was taken. Therefore the answer there is in the affirmative.


George Stanley White: How do you know the new mortgage would ever be paid?


Douglas Charles Abbott: How do you know that
the new Abitibi bonds will be paid? You take them. The creditor takes them in satisfying the interest and the claim in the same way that stock dividends and other dividends under the Income War Tax Act are income in the hands of the person who receives them. He is getting only a piece of paper, it is true, but the earned surplus of the company is capitalized; the shareholder gets new stock certificates for the arrears of dividends, and that has been income in the year in which it is received.


George Stanley White: I
am sorry to hear the minister say that, because I am more convinced than ever that there will be all sorts of ways and means found to evade it.


Donald Methuen Fleming: There is one word in this section which calls for a word of comment from the minister. In line 24 we find the following: "The value of the security or other right." In the case of a security that is of doubtful value, how is the department to determine the value? Will it be determined in the face amount of the substitute or
supplemental security? Otherwise it will be a vague and uncertain kind of taxing provision.


Douglas Charles Abbott: As my hon. friend who is a capable lawyer knows, value is a question of fact, and sometimes it is extremely difficult to ascertain just what the real value, the current value of a particular piece of property, is. I think the best line to follow is to use the word "value" in the act and, in the case of dispute, to leave it to the courts to determine what that value is. That is the usual procedure in any other case where there is a dispute as to value. Under the succession duties law, for instance; there may be another adjective attached to "value"; I do not remember. The essential word is "value". I take it that the practice would be for the taxpayer to report the funding security and to place a value on it. If the income tax collector felt that the value was too low he would assess for the difference. If the taxpayer were dissatisfied with the income tax collector's assessment he would appeal in the usual way, and in the final analysis, if it were sufficiently important it would have to go through the exchequer court and perhaps the supreme court. I see no other satisfactory way of putting it in the law. It would be dangerous in this case, as in most others to attempt to define what is value in the case of a fairly wide range of assets. I think it would be better to leave it to the appropriate forum, namely the court. That is what the courts are for in cases of disagreement.


Donald Methuen Fleming: I think the minister will agree that the first duty of parliament in writing taxation laws is to be just and fair. The second duty of parliament must be to achieve clarity and certainty in the taxing law. Here we have a provision which, according to the minister's statement, is bound to provide much administrative difficulty and to give rise to many disputes between the taxpayer and the taxing authorities. Undoubtedly it will be the occasion of many appeals. I wonder if the result is justified by the end that the minister is seeking to attain here.
What the minister has just said buttresses the argument of those on this side of the house who have been talking about the unfairness of a taxing measure which arbitrarily imposes a tax in the year in which the obligation is created regardless of whether it may or may not ever be satisfied and regardless of the period of time for which the obligation in redemption or liquidation of which it is given has arisen. Are not those factors which ought to weigh seriously in the minds of members in legislating for a new tax of this kind?
I urge that it is a contradiction in terms for parliament to legislate an income tax act which

Income War Tax Act
says that something shall be income which may never come into the hands of the individual except perhaps as a piece of paper, which may never be translated into dollars and cents. It seems to me that by every canon of interpretation of income tax law, by every recognized rule, by the golden rule of interpretation, barring some special statutory definition, income is only- that which is received. It becomes income only when it is actually received.
Here parliament is being asked to say that when a man has been given a piece of paper which is payable over a period of years, which in fact may never be paid, it shall be considered as income, and be taxable in the year in which it is handed over by the debtor to the creditor. I have heard the minister's explanation, in which he has been fair with the committee, but it does seem to me that in treating such rights as income a taxing measure such as the minister has described is manifestly unfair.


Douglas Charles Abbott: As I say, I am fully conscious of the difficulties which are involved in this section. I gave it a tremendous amount of consideration when the Abitibi funding operations were on, for reasons which I think will be appreciated. At first I issued a statement that they would be taxed in the hands of the person who received them. Then I realized that that would be retroactive legislation which would be unfair, and I said it would be effective only from the time the budget was brought down. It is inevitable that we should have this sort of thing when we are dealing with intangible property rather than cash. It would be manifestly unfair to the taxpayer to use the term "face value".
I really think it is better to leave the matter for determination by the courts if necessary in the event of dispute. I venture to say that in ninety-nine cases out of 100 there will be no difficulty. In the case of publicly listed securities there are quotations on the market and those will establish the value for tax purposes. I imagine the difficulty will arise in the case of a private concern where there is' no readily available market. Those cases are not very numerous, comparatively speaking. There it would be a matter for determination, in the first instance, by agreement if possible between the taxpayer and the income tax authorities and, in the event of dispute, for determination in the usual way.
As I say, I am conscious of the difficulties that are inherent in this thing, but I have not been able to find any better solution. As I pointed out before, this is the method which has been followed in Great Britain for a number of years and, so far as we can ascertain, it appears to have worked reasonably well.


James MacKerras Macdonnell: As a matter of clarification and'administration, do I take it that if somebody happens to have securities in which the principal and interest are blended, it is perfectly clear that the principal comes out first? If the value were such as to show nothing over and above the principal, there would be no tax.


Douglas Charles Abbott: There is a legal question involved there which I do not know that I would care to give an opinion on off hand. I am thinking of the rules in the province of Quebec with respect to the imputation of payments when there is a payment on account of principal and interest. It might be that there would have to be some apportionment between the capital obligation and the interest obligation. Our rule in Quebec is that if payment is made and there is no designation of payment by the debtor, it is paid, first, on account of interest and second, on account of principal. I do not know what the rule is in the common law provinces.


James MacKerras Macdonnell: I would have hoped that the minister had stopped with 'his first answer, but he evidently thought it required clarification. It seems to me that hardship will occur if that point is not made clear. Does the minister not think that should not be made clear?


Douglas Charles Abbott: Apparently there was a case in Toronto where there was a large mortgage with substantial arrears of interest. A new mortgage was issued consolidating the principal and interest and then calling for the payment of principal and interest over a period of years. That case went .to the exchequer court and certain rules have been laid down with respect to apportionment, but I could not give them. Again that is a matter of law. There is no definition in the act.


James MacKerras Macdonnell: We are making law now.


Douglas Charles Abbott: This section will not make income of anything that would not be income at some time under some other provision of the act.


James MacKerras Macdonnell: I do not want to be too persistent, but if there is any doubt about that I should like to ask the minister whether he agrees, as I think he does, that perhaps we are imposing a considerable hardship upon people.


Douglas Charles Abbott: The language of the section is quite specific; it says that payment must be made in lieu of payment of or otherwise

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in satisfaction of an interest, dividend or other debt. That is the rule laid down here.
Section agreed to on division.
On section 3-Cooperatives.


Mr. JAENICKE:: If I interpret this section aright it provides for something for which the cooperative union asked in their submission to the government in April. I commend the minister for introducing this section, and I am sorry to know that no more submissions by the cooperative union have been adopted by the government.


Douglas Charles Abbott: There are two others.


Frank Eric Jaenicke: I intended to make a speech in support of the argument of the cooperative union, but in view of the work ahead of parliament I shall desist. I should like to ask the minister a question about the procedure in connection with the taxation of cooperatives. A few weeks ago I received a number of letters from cooperative associations in my constituency with respect to a directive that had been issued in connection with the filing of returns by cooperative associations.
I do not think I can do better than read one of those letters which contains the wording of the directive and also an argument as to why the directive should be abandoned. This letter is addressed to me under date of April 28, 1947, by the Eston, Cooperative Association Limited, and reads:
We have been advised of a recent directive of the Department of National Revenue,_ Ottawa, in regard to taxation of patronage dividends, reading as follows:
"Where a consumer cooperative sells to customers both 'cost of living goods' and 'cost of production goods' the onus is on the cooperative to make the division of the patronage dividend and show the amount that applies to each class of dividend on Form P.D. 5 supplementary otherwise, if no division is shown, the whole of the patronage dividend will be taxed in the hands of the recipient, instead of just the portion which applies to 'cost of production goods .
Our board of directors are convinced that it is impossible to comply with this directive, in some instances the co-op manager would know whether an item was "cost of production goods or "consumer goods," but in most cases it would be impossible for him to know. For instance, how could he know whether a pound of nails went into a dwelling or into a pig pen? Or, whether a gallon of gas was used in a tractor, ear, washing machine or stove? Groceries could even at times be "cost of production goods" if used to feed hired help.
We feel that .the task of complying would be impossible, but if the manager should attempt it, the members could rightfully ask, "Who gave the co-op manager the right to say what is my income and what is not?"
We would ask you to use your influence to have this directive cancelled and let each taxpayer decide what part of his patronage dividend is income, and what part is not. _
Hoping you will be able to help to straighten this out, we are,
Yours respectfully.
Eston Cooperative Association, Limited, per V. M. Hanson, Secretary.
The question I wish to ask the minister is whether he has received many complaints and whether he has considered the cancellation of this directive, because I think it is oppressive and almost impossible to be complied with.


Edmund Davie Fulton: Before the minister answers, may I associate myself with the question asked by the hon. member for Kindersley. I should like to remind the minister that I took up with him by letter this question along with several others affecting cooperatives, after having had the same point drawn to my attention, I wrote to the minister and received his reply of May 16, 1947. Since it is not marked "private", I presume there would be no objection if I at least gave the effect of it. I am glad to find that the minister said:
I am, nevertheless, giving consideration to the possibility of making changes in the act or m the regulations which will relieve cooperatives of tax for periods prior to January 1, 1916. It it is possible to make this change, notice will be given when the bill to amend the income tax act is brought d-own.
I read that into the record in order to ask the minister whether he is now in a position to say whether that change will be made.


Douglas Charles Abbott: The change to which the hon. member has referred is made by this section. That is the change which the section is intended to accomplish.


Edmund Davie Fulton: The point of the change was to relieve them of responsibility before 1946.


Douglas Charles Abbott: That is done in this section. Although the section may look a little bit technical in its drafting, I can assure my hon. friend that is done or will be done when this section becomes law. There is no tax on cooperatives for 1946.
To answer the hon. member for Kindersley, I am not familiar with the problem which he has just raised. It sounds to me as if it were an administrative decision or ruling in the Department of National Revenue. I will see that his remarks are brought to the attention of the appropriate officers. I shall see whether the ruling to which the hon. member refers can be amended or varied in order to meet the point he has raised. I myself am not familiar with it. After listening to my hon. friend, I do not believe it is a point which would require legislation in order to accomplish what
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he has in mind. That is not to admit, of course, that it is, of necessity desirable. But I do not think we should require an amendment to the act in order to allow that apportionment to which he refers to be made. I can assure my hon. friend that we would not need law to do that.


Edmund Davie Fulton: A letter which I wrote to the minister, to which his letter was in reply, had to do with the same matter to which the hon. member for Kindersley was referring, and the objection which I was making was that the income tax return required cooperatives to show "what portion of refund was on 'living expense' and what on 'production expense' The letter to me went on:
All this is entirely new and applies to 1945 business altho' paid in 1946.
The point made by my correspondent was this. After he had closed his books for 1945 and had not.kept books in such a way that he could say what portion was on one and what was on the other, he wanted to know how he could be expected now, in 1947, to go back to 1945. Business done in 1945 was reflected in the 1946 tax which was payable on April 30, 1947. I had intended to cover both points in my letter to the minister, and when I saw his answer saying that the matter would be considered and possibly a change would be effected in this bill, I thought he was referring to both points. It does seem to me that to make a distinction between what portion of a payment is on "living expense" and what portion is on "production expense", is really more than an administrative matter. Would that not require a definition? Could that not be covered by a definition in the act?


Douglas Charles Abbott: I am not too familiar with the particular practice to which the two hon. gentlemen have referred, but the officials assure me that this is a matter for administrative determination. The question of not being taxable in 1946 is taken care of in the amendment which is introduced in this section. The other question, I am told, does not require an amendment. The situation, as I understand it, is this. I think I made the statement in the house that a dividend from a consumer cooperative was not taxable, but a dividend from a producer cooperative was. There are some cooperatives which are both producer and consumer cooperatives. That is, I believe, correct. The difficulty arises in apportioning the patronage dividend which is declared and paid, as between the consumer part of the business and the producer part. That does not require specific law. That is a question of accounting practice, administrative determination, or whatever y.ou like to call it. Possibly 
the Department of National Revenue makes certain rules on apportionment and those rules may not be-and I say "may not be"- soundly based. But they can change them if they are not. That is the point which I think my hon. friend has in mind.


Edmund Davie Fulton: It is a matter entirely for the Department of National Revenue, is it?


Douglas Charles Abbott: It is an administrative decision of the Department of National Revenue in accordance with the facts; it is made according to accounting principles, on whatever the facts show.


George Stanley White: I should like to ask the minister one question while he is dealing with cooperatives, and I ask it purely' as a matter of information. It has to do with the great confusion which exists among cheese factories as to whether they are to be taxed in 1947. In eastern Ontario there are a great many of these cheese factories; some are incorporated as cooperatives, some as joint stock companies, and some have really no legal incorporation of any kind. But roughly, the cheese factory consists simply of a number of farmers who have joined together for the production and manufacture of cheese and butter; and after the deduction of costs of manufacture and other running expenses, the remainder of the money on hand is divided among the patrons according to the number of pounds of milk they have sent in during the year. I think it would be helpful if the Minister of Finance or his colleague, the Minister of National Revenue, could make some kind of statement as to these various cheese factories. I would point out to the minister that the only official in the factory who is paid is the president, who is generally also the secretary and treasurer. They have the idea, perhaps wrongly, that they are now to be taxed and be burdened with complicated returns, deductions and things of that kind. If the minister could make some simple statement, I am sure it would be very much appreciated.


Douglas Charles Abbott: That is perhaps right; if it were possible to make a statement which would cover all cases, it would undoubtedly be helpful. I am told that the conditions vary so much, as my hon. friend has indicated, in these different cooperatives that it is hard to make a short, simple statement covering them all. If they are a corporation, then, of course, they are subject to tax in 1947, the same as any other corporation. If they have paid out patronage dividends these are deductible as an expense before arriving at the net taxable income. My colleague the Minister of National Revenue points out that, in answer

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to a question asked two or three months ago by my hon. friend, he gave this reply. I do not know whether the committee wants me to repeat it, but the question was:
Will the Minister of National Revenue in the near future make a statement in the house outlining the interpretation of the deputy minister of taxation of the 1946 amendment to the Income War Tax Act in regard to cooperatives in so far as the amendment applies to cheese factories in the province of Ontario which operate more or less on a cooperative basis?
The reply, which appears at page 261 of Hansard, was:
In view of the fact that cheese factories conduct their affairs in varied manners, it is not possible to state specifically which sections of the 1946 amendments to the Income War Tax Act, in so far as they refer to payments to customers, would be applicable to any particular cheese factory. The manner in which a cheese factory would be taxed would depend on whether it was wholly a cooperative, partly a cooperative or a purely private operation. In the case of any particular company it would, of course, be possible to give a specific answer privately to the taxpayer.
If it is not a corporation, incorporated under the cooperatives act of Ontario, if there is such an act, or some other act, then, of course, it would not be taxable at all as a corporation. The individual members would be taxable on any profits they made; but I am advised that it is almost and in fact quite impossible to give a general statement with respect to cooperatives other than a statement such as that given by the Minister of National Revenue, because of the wide variety of conditions under which the cheese factories operate; some operating as cooperatives, some more or less as cooperatives, as my hon. friend has said, and so on.


George Stanley White: I want to point out that none of these cheese factories, as far as I know, pay any patronage dividends or anything of that kind. The only income a patron receives from his cheese factory is his share of the total proceeds which he receives, figured on the number of pounds of milk he sends during the year, after all the usual running expenses have been deducted. No one receives any dividend on his stock, or anything like that.


Mr. BOUCHER:: I think the hon. member has raised an important point. There is a great deal of confusion in my own riding. A number of farmers, without actually incorporating, lend money to a cheese factory and claim to hold shares. But they and others send milk to the factory, and they are. paid for their milk on this basis. The cost of production is estimated and deducted from the receipts, and the remainder is distributed
to the farmers in accordance with the volume of milk delivered, with no provision whatever for the financial interest of anyone in the company. They are in a sense a cooperative, but they get no dividends or premiums; what they receive for their milk is entirely commensurate with the volume they bring in, and has little connection with the capital of the concern. In other words, no matter how many shares a farmer may hold in the enterprise, he does not get a bit more per pound of milk than the farmer who does not hold any shares. Many farmers have had to do this sort of thing in order to keep their factories operating. Some factories even pay a small rate of interest on the money lent by way of shares, but many do not even do that. There is no incorporation. They are cooperatives in the sense that the total cost of production is deducted from the bulk receipts, and the remainder is distributed on the basis of the amount of milk sent in. If the minister could make a statement dealing with a case of that kind I believe he would enlighten a great number of farmers in this community, and probably would end a good many of the difficulties of the hon. member for Hastings-Peterborough.


Douglas Charles Abbott: I followed my hon. friend's remarks with some interest. As he stated the case, it seemed to me that this would be a sort of voluntary association, not incorporated. Perhaps it might be described as a partnership, and if so it would not be subject to taxation under this section. The individuals would be subject to tax on the receipts from their produce, but they would not be subject to the provisions of the Income War Tax Act with respect to the tax on corporations, which is the tax imposed on cooperative corporations the same as on all others.


George Russell Boucher: But they have been
assessed for tax as an association by the Department of National Revenue. Really they are only partners; they are not cooperatives in the strict sense of the word. I believe the farmers will very much appreciate being notified of what the minister has just said.


Douglas Charles Abbott: They might have been
subject to the excess profits tax, of course, because that applied to partnerships as well as individuals.


[Stage Direction]
Section agreed to.
On section 4-Exemptions and deductions.
John Oliver Probe: I wish to express once more my regret that there is no increase in the exemptions, which are indicated here as
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$1,500 in the case of a married taxpayer, and so on down the line. I believe the present exemption of $100 per child is also too low. If one has a taxable income within the meaning of the act he is allowed an exemption of $100 for each child under the age of sixteen; and, in effect, by this legislation you have taken away whatever benefits a family enjoyed when it first received the family allowance. Once the child passes the age of sixteen, the family allowance stops, and of course the exemption is then increased to S300. That would be perhaps nearer the cost of maintaining a child than the exemption of $100 plus whatever the family allowance amounts to. There is some attempt at grading the expense, as I see it, because, in effect, an infant gets an exemption of about $160.	Then, as the
child gets on toward sixteen years of age, the exemption works up to $196, when it reaches the maximum of $300. I believe the minister has set that figure too low.
There is one matter I should like to mention in connection with this question of exemptions, and I ask the minister's permission to introduce it here. I refer to the exemptions allowed to a class of people who receive a great deal more by way of platitudes than by way of income, and I have in mind our teachers. They are subject to the same taxes and exemptions as other wage-earners, with the exception that they are not permitted deductions for what I think are necessary expenditures to stay abreast of their profession and keep up with educational procedure. I have particularly in mind such things as summer-school courses, which it is most necessary for teachers to take from time to time, and the acquisition and maintenance of an educational library. These things are not considered by taxation officials as allowable professional expenditures in the case of teachers, and it seems to me that the department should reconsider its attitude in this regard. Representations have been made to the government from time to time, and I believe there is a definite injustice.
Before I resume my seat, I should like to mention a matter in connection with the expense allowance permitted in certain districts for the necessary use of an automobile in the conduct of business; and I wish to refer the minister to a particular case in which I had an opportunity to see the documents. This refers to a real estate salesman who required the use of an automobile in 1944. Because there was gasoline rationing at that time apparently he was permitted to put in a claim to the extent of 6,000 miles of travel at 4| cents a mile, making a deduction of $260, from which was deducted a quarter of 
the complete cost of the allowance, leaving his net deduction the sum of $202.50. That was the amount set down as his gasoline and car operational expenses for the year, despite the fact that there were vouchers in support of his claim which, in this instance, amounted to $328 for the year.
It seems to me that the treatment given by the minister's department to people who must necessarily use their automobiles in business differs considerably from the treatment the government gives its own civil servants who use their own automobiles and receive a mileage allowance running from eight cents to eleven cents, depending on the area in which they travel. If it is justifiable to give a higher allowance to civil servants who use their automobiles in their business, the same consideration should be given others, particularly those in receipt of incomes as modest as the one to which I have just referred, and which affects one of my own constituents.


Douglas Charles Abbott: I will take into consideration the representations the hon. member has made. However, the policy for many years has been that salary and wages are income, by definition, and that deductions are not permitted therefrom. That rule has been followed in the past, and I would not be prepared to depart from it in this particular bill.


John Oliver Probe: It applies in no other
provision.


Douglas Charles Abbott: It is hard to say. I believe I could make out as good a case for some other provision, although I cannot think of one offhand. My worry in these matters is always that if I do something in one instance, where does it lead me? I do not want to keep putting off all these questions until we reach ;he general bill which I shall bring in, but which shall not be put through this year. However, that is an important question of principle which could be well discussed under the general bill. I can say to my hon. friend that I would not be prepared to introduce such an amendment in the amending bill, now before us. Therefore it cannot be made effective this year. Whether the matter should be reconsidered when the general bill is before us is, of course, another matter.
I have had numerous representations from the teachers' federation. An old friend of mine, one of the officers of the organization, came to see me about the matter not long ago, and I had a long chat with him. I have had similar representations from other groups, including the medical profession.

Income War Tax Act


John Oliver Probe: Would the minister refer to the matter of the gasoline exemption?


Douglas Charles Abbott: I shall give consideration to both matters.


James MacKerras Macdonnell: Would the minister say something about the complicated provision in section 4 (2), either now or after six o'clock.


Douglas Charles Abbott: I have to cover this in two bills, both in the Excess Profits Tax Act and in this bill. However, it relates more particularly to the Excess Profits Tax Act because, as my hon. friend will recall, these special inventory reserves were available only as against the Excess Profits Tax Act. But it has to be in the Income War Tax Act, because the definition of "profits", for the purposes of the Excess Profits Tax Act, is income as determined under the Income War Tax Act. It has no bearing on the income tax payments by a corporation. So that perhaps it would be better if wre were to deal with the matter under the Excess Profits Tax Act, where there is a section relating to it, and where it will be clearer as to what is being done.


James MacKerras Macdonnell: I am prepared to accept the minister's suggestion that it would be proper to deal with it in detail under the other bill, but I have another question which perhaps I should ask at eight o'clock.


Douglas Charles Abbott: It will be possible for me give a full explanation under the Excess Profits Tax Act. However, if the hon. member would prefer to have this section stand, I shall let it stand.


James MacKerras Macdonnell: Perhaps it should stand until eight o'clock.
At six o'clock the committee took recess.
After Recess
The committee resumed at eight o'clock.


William Ross Macdonald: We are on section 4 of the Income War Tax Act, exemptions and deductions.


Donald Methuen Fleming: In view of the current increase in the cost of living-and I do not think anyone would care to say that the increase has ended-will consideration be given to increasing the exemption for dependents, say children?


Douglas Charles Abbott: I do not think consideration will be given to that this year.


Donald Methuen Fleming: Was consideration given?


Douglas Charles Abbott: Consideration was given to the whole picture, but the increased cost of living was not taken into account. The exemption structure has been worked out over a considerable period of time, and more effective relief can, I think, be given in the tax rate than by raising exemptions for children or for married status or raising the exemption to a level below which the income is not taxable.


Donald Methuen Fleming: If S300 a year was a fair deduction for children in times when the cost of living was not as high as it is today I suggest that, to maintain parity of treatment between those who have children dependents and other classes, some adjustment upward should be made in the exemptions for dependents.


Douglas Charles Abbott: That point could, of course, be argued. But these exemptions must be looked at over the longer period. The cost of living varies from time to time. It is true that in recent months, perhaps years, it has been tending upward, but I would not be prepared to say that is a permanent trend, for we may well see some reduction in the cost of living. I do not think one should adjust income tax exemptions for children from year to year in accordance with the cost of living. It would be pretty difficult to work out a tax structure on that basis.


Donald Methuen Fleming: I agree that it is not the only factor to be considered, but I wonder if the time has not come when the minister or the government should give some consideration to that.


Douglas Charles Abbott: I think subsection 2 was held over at the request of the hon. member for Muskoka-Ontario. I have an amendment to suggest simply for purposes of clarification.


James MacKerras Macdonnell: The minister had suggested that this might conveniently be dealt with in connection with the excess profits tax.


Douglas Charles Abbott: While we are on this section, I would ask one of my colleagues to move this draft amendment:
That immediately after the words "provided that" in line 44 of page 3 of the bill there be added the words "for the purpose of determining profits under the Excess Profits Tax Act, 1940."
The section would then read:
Provided that for the purpose of determining profits under the Excess Profits Tax Act, 1940, where a corporation or joint stock company-
And so forth.


Mr. MacKINNON:: I move accordingly, Mr. Chairman.
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James MacKerras Macdonnell: It occurs to me . that subsection 2 should stand and be considered when we are considering the excess profits tax so that we would not have to go over the same ground twice.


Douglas Charles Abbott: I would prefer to finish this bill first.


James MacKerras Macdonnell: - Has the minister anything further to say by way of explanation?


Douglas Charles Abbott: It is an intricate provision and difficult to explain. The provision of the law, as my hon. friend knows, is this, that special inventory reserves could, under the Excess Profits Tax Act, be set up out of liability for excess profits tax and then be charged back at a later date if and when inventory losses were established. As we shall see under the Excess Profits Tax Act, any amount left over must be charged back anyway. If a loss is established in, let us say 1946, and an inventory loss taken in the same year, a portion of that reserve can be taken and charged back in that year, thereby converting the year into a year of profit. To take a specific case, if the operating loss were $10,000, including inventory losses, and a reserve of $40,000 had been set up, then $40,000 could be taken off and credited to profit and loss account, which would result in a profit for the year of $30,000. Under the averaging provisions in section 5(1) (p), that $10,000 operating loss could be taken back into the previous year, could be averaged with the previous year; and, suppose the previous year had shown a profit of $50,000; that $10,000 loss could be deducted from the profit so that a profit of $40,000 would be shown for that year. This would mean that the income tax branch would reopen the assessment for the previous year and, in averaging the loss, would make a new assessment for income tax. That is perfectly all right so far as income tax is concerned. But the loss so established should not be taken into account when taken back for excess profits [DOT]tax purposes, because the reserve has already been taken as a deduction and should not again be taken in the averaging provision.
The purpose of this amendment is to assure that the loss which is taken back and averaged with a previous year will be for income tax purposes only, not for excess profits tax purposes. When you take back the figure and average for excess profits tax purposes jmu must take into account the figure arrived at for excess profits tax in the year in which the reserve is utilized in order that
it will not be taken twice. That sounds complicated but that is the exact position. The reason for inserting the provision in the income tax act is that the act as it now stands provides that for the purpose of computing excess profits tax and liability for excess profits tax the net income for income tax purposes will be taken. That is perfectly all right except in cases such as we are now considering where a special reserve is utilized for arriving at profits for excess profits tax purposes but not for income tax purposes. The purpose of the amendment is to assure that the reserve will be utilized for the purpose here but should not be utilized twice, averaging the excess profits tax in a previous year where the benefit has already been taken. As my hon. friend knows, there is not a self-contained definition of income in the Excess Profits Tax Act. The definition in the income tax act is incorporated by reference into the Excess Profits Tax Act.


Donald Methuen Fleming: The last lines of paragraph 3 of section 4 read as follows:
. . . and connected with him by blood relationship, marriage or adoption.
These words are not new; they are in the present act, but I should like to ask the minister if, in point of interpretation by the department, the word "adoption" is construed as applying only where an adoption order has been made under an adoption act of one of the provinces, or whether "adoption" in fact in such case that the taxpayer stands in loco parentis to the dependent is sufficient without a formal adoption.


Douglas Charles Abbott: I am advised that is adoption in fact, and that the exchequer court has recently so held. I am told that the contention of the income tax branch was that.it was adoption in a legal sense by formal order, but that the exchequer court has held adoption in fact qualified under the section.


Stanley Howard Knowles: One of the provisions of this section is to fix the exemption levels at $1,500 and $750. It is not my purpose at this time to discuss these levels as such, for we have alreadj' expressed our views with regard to that phase of the matter. I should like to know whether there has been any change made with respect to the point at which family allowances are recovered. My point in asking this is that last year some portion of the family allowance was recoverable in the case of a married taxpayer earning $1,300. As a matter of fact, at that point a married taxpayer with up to three dependents had to pay back five per cent of his family allowances. A

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married taxpayer earning $1,400 and having even as many as four dependents, according to last year's rates, paid back ten per cent of the family allowance that he received. If that has not been changed, my point is that the effect is to establish two different exemption levels, and it provides, as from these levels, two different scales of taxation.
It is generally understood that a married man with four children would have an exemption level of $1,900. That is true, if the $1,900 is income that he earns at his employment; but if a married man with four children is earning only $1,400 and receives family allowance, let us say, of $312 for his four children, putting him up to a total of $1,712 I contend that he pays what amounts to a tax of ten per cent on the $312 family allowance that has been given to him. May I make the point again? Here is a married man with four children whose total income is only $1,712, but because $312 of that is family allowance he pays tax on all he has received over the level of $1,400; he does not get the benefit of the $1,900 level that is accorded to the average taxpayer. I am anxious to know whether a change has been made in connection with this matter.


Douglas Charles Abbott: The recovery provisions do not apply any more since January 1, 1947. Since January 1, 1947, the structure is pretty fairly simplified. If a man has children of family allowance age he receives his basic exemption of $1,500, of course, for being married. Then, if he has four children of family allowance age he would be entitled to another $400 exemption, $100 per child and, as my hon. friend has pointed out, that would give him a total exemption of $1,900 before he pays any tax. But he receives his full family allowance for the four children and there is no refund whatsoever, no matter what his income may be.
In the other case cited by my hon. friend, a total income of $1,400 with four children, he pays no income tax, of course, because he is below the exemption limit, and he receives his full family allowance. On that basis, with four children, he could have an income up to $1,800. .


Stanley Howard Knowles: Up to $1,900.


Douglas Charles Abbott: Yes, up to $1,900 if he had that income; that is correct. But if his income were $1,400 he pays no tax; he is below the exemption limit, and he does not need any children's exemption because his income is below the limit where it would be of any use to him. He receives full family allowance, whatever it may be, with the four 83166-251
children; it is not taxable income, of course, and there is no question of any refund in that case.


Stanley Howard Knowles: I am very happy to hear that. Can the minister tell me how this arrangement was made? Was it by an administrative order?


Douglas Charles Abbott: No; it is in the law; it has been there since last year's budget. It started on January 1, 1947. It was as a result of careful study and the combining of the family allowance and the basic exemption. That was one of the reasons why it was felt necessary that everyone who had children of family allowance age should apply for and receive family allowance in order that everyone would be on a uniform basis of exemptions and that there would be no question of * these refunds or reductions of family allowance because of the income tax scale.


Stanley Howard Knowles: In other words, family allowance is now treated as income and one does not pay tax on it unless the family allowance puts him above the normal brackets.


Douglas Charles Abbott: Family allowance income is tax exempt income in the hands of anybody. If I have an income today of $1,900 and I have ten children, all of whom are eligible for family allowance, I get the family allowance for the full ten and I get my regular taxation exemption of $1,500 plus another $100 for each child. As a matter of fact, that would be $2,500 in the case I am giving. It would be a total exemption of $2,500 plus non-taxable income of whatever the family allowance would amount to for the ten children.


Stanley Howard Knowles: So that the provisions that applied to the taxation year 1946 do not apply to 1947.


Douglas Charles Abbott: Do not apply now. Since January 1, 1947, the new system has been in effect.


Stanley Howard Knowles: That is fine.


Mr. SHAW:: Before section 4 is disposed of, I should like to direct attention to one important matter. Residing in Canada we have quite a number of married men who entered this country as immigrants during the late twenties or at other times. Owing to adverse economic conditions which prevailed during the thirties, these persons were unable to contribute substantially, if at all, toward the maintenance of their families which were domiciled outside this country. With the commencement of the war and the general improvement in economic conditions, these persons, while able to contribute toward the support of their families, were not permitted

Income War Tax Act

to do so because of war conditions. However, since the war, government regulations have permitted the transmission of funds abroad to provide for the wives and children; yet today we find that the department is refusing to recognize these persons as married persons. Even where receipts are produced showing that amounts of money are being forwarded for the support of these families, they are still not regarded as having married status. Does the minister regard that as completely fair; if not, what does he intend doing about it?


Douglas Charles Abbott: I thought I must be dreaming or something, but that is the purpose of the present amendment; that is what the section is being amended to provide for. I thought for a moment that my hon. friend was suggesting some other case. The proposed amendment to the section provides that the restriction which formerly existed, that they must reside in any part of His Majesty's dominions or a country contiguous to Canada, or, residing elsewhere, be a subject or citizen of a country associated or allied with Canada in the conduct of the war, shall be removed. All that will be necessary under this bill will be for a person in Canada claiming married status to establish that he has a wife living, let us say in Czechoslovakia, and is remitting funds to support her.


Frederick Davis Shaw: Will this apply to all countries or just to those countries which were allied with us?,


Douglas Charles Abbott: It will apply to all countries. We are removing the restriction now in the act that it must be His Majesty's dominions or a subject or citizen of a country associated or allied with Canada in the conduct of the war. There is now no limitation.


Mr. HAZEN:: When we were in committee on the resolution I brought to the minister's attention what I considered to be discrimination against domestic servants in the maritime provinces. At that time I pointed out that a domestic servant in New Brunswick was obliged to add to his or her income $26 a month for board and lodging, while in the province of Quebec a similar domestic servant was obliged to add only $15 a month to his or her income. If my information was correct this meant that in certain instances a domestic servant in New Brunswick would have to pay income tax-this would apply also to the other maritime provinces-while a domestic servant in Quebec would not be obliged to do so.
At the same time I also brought to the minister's attention that porters, waiters and certain other employees on the Atlantic division of the railroad were obliged to add $300
to their incomes in lieu of tips, while in other railway divisions the same employees did not have to add this $300 to their income when making out their income tax returns. The minister stated at that time that there was no discrimination, but he said he would look into the matter.


Douglas Charles Abbott: I think the Minister of National Revenue has information on that matter and one or two others that were brought up. I do not know the wishes of the committee, but I had thought that, after we had concluded the specific sections of the bill, the minister could then deal with the questions raised by my hon. friend. I think the point he raised could appropriately be discussed under this section and he may prefer to have the information now.


Douglas King Hazen: It makes no difference to me.


Douglas Charles Abbott: Perhaps we might as well give it now.


Mr. McCANN:: With regard to the first matter brought up by the hon. member, the answers which we have received from the several districts are to the effect that the allowances vary from $180 to $360 a year. The reports indicate, however, that there is no hard and fast rule and that every effort is made to take into account the type of home in which the domestic is employed and the nature of the board and lodging received. The amount of the wages and the nature of the board and lodging received really have to be taken together. The employer, in dealing with the employee, sometimes will offer a nicely furnished independent room, and a more than ordinarily luxurious table may be kept. A domestic may accept a lower monthly wage for steady employment in such a household than he or she would where the accommodation is on a minimum basis and tenure of employment less secure.
In general, the amount added in the majority of cases tends to run about $20 a month, and in the average case this is rather low having regard to present-day conditions and cost of living.
It is the belief of the administrative officers that this is a matter which should continue to be left to the judgment of the assessors and officials in the district offices familiar with the individual cases, and that to set any hard and fast rule may impose a hardship in some instances and allow unduly favourable treatment in others. Living conditions in various provinces and homes in Canada vary considerably and the assessors are required to make a fair-minded appraisal of the facts in each individual instance.

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The second question which the hon. member asked had to do with tips paid to railway porters, stewards and waiters operating between Halifax and Montreal. I think the claim was that m the maritimes S300 was added, but that nothing was added in the case of the Montreal district. The consensus of the reports which we have received from our district offices throughout the country is that the cases are dealt with on their merits, much depending on the nature of the run upon which the employee may be engaged. A waiter attending people in the luxury class travelling, say from Toronto to Vancouver, would undoubtedly receive much more in the way of tips than a waiter on a train, say from Montreal to Sherbrooke or Quebec, where only the casual businessman would have a meal in the club car. In this, as in other matters, the heads of the district offices attempt to deal on a factual basis, which means that they make due allowance for differences in circumstances of the individual taxpayer.
The problem of income by way of tips, however, is difficult. It is in the category of income of which there is no record and in all cases our assessors have to be governed by some attempt to determine probabilities.
Their general attitude where they set arbitrary allowances for tips is to set them safely on the low side. Three hundred dollars a year for a waiter with a run on a transcontinental luxury train would be about $1 a day or thirty-five cents per meal hour. I do not think anyone with any familiarity with the facts would complain that this was excessive as a yearly basis for tips which such a man might receive.


Douglas King Hazen: Do I understand that the amounts charged for board and lodging would vary in different cases in New Brunswick, or are they the same in all cases?


James Joseph McCann: It would vary in different cases, but the average is approximately $20 a month.


Gordon Knapman Fraser: 
Douglas Charles Abbott: Perhaps that could be
answered a little later on this evening. In any event, it would be covered by an administrative regulation.


Mr. McKAY:: Family allowance payments stop at the age of sixteen years. Is the taxpayer allowed an exemption of $300 in the year the allowance stops for a youth of sixteen? If not, what is the taxation method employed in such cases?


Douglas Charles Abbott: In the case of a child attaining the age of sixteen, I am advised that if at the end of the year the child is sixteen years of age or older, the $300 exemption may be claimed, although family allowance payments may have been received for part of the year. There is a little edge there in favour of the taxpayer.


Mr. FAIR:: In the early part of the discussion I asked the Minister of Finance a number of questions and he promised to give an answer on some section of the bill.


Douglas Charles Abbott: I have those questions. They do not relate to any particular section of this bill. They were the ones I had in mind giving the answers to at the conclusion of the committee's discussion. I have the data here and I thought I would perhaps give it when we reached the last section of the bill.


James Joseph McCann: To answer the question asked by the hon. member for Peterborough West, I might say that at the present time section 92 of the act requires eveiy employer to remit the amount of tax deducted or withheld at the source within one week of the day when he became liable to pay the relative salary or wages, or at such other time as the minister may prescribe by regulation. Administrative experience proved, however, that it was more advantageous to have remittances made monthly. A regulation was therefore issued requiring employers to remit such amounts by the seventh of the month following. Generally speaking, this has been found to be satisfactory. It has been our practice to grant reasonable extensions of time to employers who, because of unusual circumstances, such as irregular mail delivery, are unable to remit within the time prescribed.
With regard to the letter from the county clerk of Peterborough to which the hon. member referred, our Belleville office advise that they have experienced very little difficulty with this taxpayer, but have on one or two occasions had to mail out our form letter, TDL 1, which is used as a warning in instances where remittances are not received within the
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time prescribed. They have no record of having imposed any penalty for non-compliance and feel that the fine referred to in the letter must apply to some matter other than tax deduction.
They are not aware of having been requested by this taxpayer to grant an extension of time, but are most anxious to cooperate and will certainly give the matter every consideration if a request is received.


Gordon Knapman Fraser: Wall the minister consider showing the time to extend to the fifteenth of the month, in stormy weather?


James Joseph McCann: As has been stated, consideration will be given to meet extraordinary conditions as they arise.


Mr. ARCHIBALD:: I should' like to raise again a question that I referred to during the resolution stage with respect to people living in northern, out of the way areas. Could they have transportation expense to a doctor included in the exemption? I have experience of cases which are sent south, say from the Queen Charlotte islands, to Vancouver. They are dismissed from the hospital but must live in a rooming house near the hospital in order to go there for treatment each day. Yet that expense is not exempted, and it is making it absolutely impossible for fishermen, for instance, who live in villages at out of the way points along the coast, to take treatment. They would like to go to live in Vancouver but it is economically impossible. I bring this to the attention of the minister in the hope that he can do something about it.


Douglas Charles Abbott: As I understand my hon. friend's question-and I remember when he asked it before-it was to extend the application of extraordinary medical expenses to the cost of board and lodging when, of necessity, people have to come from remote points to get hospitalization. I promised to give consideration to that, and I will do so, but it is a big question. You cannot just say you can give that exemption without consideration, because you have to see where these things lead you. This is importing an unusual principle into the income tax law when it is suggested that we allow board and lodging as an expense. I can see that it would be an expense which relatives would necessarily be put to, or even the people who were going down to undergo treatment. But I do not believe that I should be prepared to introduce an amendment in this year's bill without giving the matter much more consideration than I have been able to do up to the present time. I doubt whether the present

provisions of the act are broad enough to cover it. I think it would require an amendment to the law.


George Stanley White: I should like to ask the minister a question w'hich affects married veterans attending university. Take the case of a veteran attending a university, who is married and is drawing only $60 a month allowance, but is not drawing the extra allowance for his wife, and his wife is working. Suppose she is earning $2,000 a year. In that case is the wife entitled to a $1,500 exemption? If, during the summer months, the husband earns, say $500, what would be the amount which would be deducted from the wife's exemption?


Douglas Charles Abbott: In the case given by my hon. friend, I am advised that the wife would be entitled to take the married exemption of $1,500. The $60 a month, or whatever it is which the veteran would be receiving-that would be a matter of $720 a year-while it is not taxable in his hands, is taken into account in calculating the wife's married exemption; and it would probably have the effect of reducing it by the amount which it exceeds $250. The extra $500 odd would reduce the wife's $1,500 exemption by a corresponding amount. It works in just the same way as it would if the husband were in receipt of the income and the wife in receipt of the smaller revenue.


George Stanley White: Has there been some change, or do I understand the minister correctly? Suppose the veteran gets $600 or at the rate of $60 a month. Do I understand the minister correctly as saying that from the $600 he deducts $250, and the remainder over $250 is deductible from the wife's exemption?


Douglas Charles Abbott: That is correct. There was one point I overlooked in answering my hon. niend's question. If the veteran earned extra money during the summer, that would have to be included as well in calculating the wife's final exemption.


George Stanley White: Then I would suggest to the minister that, at that rate, this $60 a month which is a part of the reestablishment credit, is really being taxed?


Douglas Charles Abbott: No, there is no tax on it.


George Stanley White: It is the same thing. His wife has to suffer. It is deducted from her exemption for married status.


William Ross Macdonald: Shall the amendment
carry?

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George Stanley White: Just a minute. I should like to ask the minister a further question. Take the case of a child attending university. Is that child still allowed to earn up to $400 during the summer and the parent still get exemption?


Douglas Charles Abbott: That is correct, if the child is under twenty-one years of age.


George Stanley White: Under twenty-one, of course. Then I suggest to the minister that it is hardly fair that the child can earn up to $400 and the parent can still get exemption, while the husband who is also in this case going to school, will really have part of his reestablishment credit deducted from his wife's exemption of $1,500. I think the minister will agree that is hardly fair.


Douglas Charles Abbott: Logically, of course, when providing the $250 rule in the case of a married woman we should have done the same thing in the case of dependents who are going to college; but I am advised that would make it unnecessarily complicated, and it was decided to leave that just as it was. There was one point I overlooked, which I should have mentioned: that the wife gets the $1,500 exemption on the assumption, of course, that she is supporting the husband.


George Stanley White: She is assisting to support her husband.


Douglas Charles Abbott: That is right; but the whole basis of the marital exemption for anyone, as I have had to point out time and again here, is that the spouse who is getting the exemption is supporting the other spouse. If the husband or wife, as the case may be, is only partly supporting the other consort, then the exemption is correspondingly reduced. That is the basis of the exemption.


George Stanley White: But I would point out that there seems to be a certain amount of discrimination against the veteran who is getting $60 a month. You take the various other benefits allowed under war service act, or under the Veterans' Land Act. A veteran who takes up land under that act gets extensive benefits by way of loans for the purchase of stock, and so on, which he does not have to pay back; and then a certain amount is written off. In that case there is no question of any part of the grant being taxable in any way. But here is a veteran attending university; he is really being taxed on his reestablishment credit.


Douglas Charles Abbott: There is no tax on the reestablishment credit of the veteran. If the veteran is not married he supports himself, presumably, out of the allowance he gets under
the provisions relating to veterans attending university. He gets his university fees paid, and works in the summer. If he has a wife who is able to earn income which is taxable, then he lives a little better than the veteran who is single; but the wife is entitled to an exemption as a married woman only if she is supporting her husband, if her husband is dependent upon her for support. So that there is no tax on the husband's allowance as a veteran. As to there being any discrimination as between the veteran attending university and the veteran going on the land, I think anyone who knows, as my hon. friend does, the monetary value of a college education will realize that the money cost is very much more than in almost any other branch of veterans benefits, because a man who is capable and qualified to go to university can get the equivalent of five or six or seven thousand dollars in veterans benefits over the course of his university career.


George Stanley White: I would not altogether say that. It depends upon the length of time the veteran spent in the armed forces. If he has been in the army for only a year he gets credit only for twelve months at university.


Douglas Charles Abbott: That applies to the other benefits also.


George Stanley White: Yes; and it is only in a few cases that a veteran who has been in the army for only six or twelve or eighteen months is going to have his tuition and fees paid for the full course.


Douglas Charles Abbott: That is right; but the point is that proportionately the veteran who is able to qualify to go to university gets a higher benefit than almost any other class of veteran.


Ian Alistair Mackenzie: As to potential benefits for boys going to university, there is discretion in the minister to continue their courses into post-graduate work; so that those benefits can be much greater than the $2,300 odd they get under the Veterans Land Act.


Alfred Johnson Brooks: I did not intend to refer to that point, but I think the minister will agree that those benefits are extended only to those who come within the seventy-five per cent average.


Ian Alistair Mackenzie: Yes.


Alfred Johnson Brooks: And I believe they are very few.
The question I wished to ask the minister was in relation to a farmer or other person who might have a woodlot on which the lumber had been growing for a long period of years. We know that during the war,
Income War Tax Act

when prices were high, much of tihis lumber was cut; and many farmers and others who owned these small woodlots were very much surprised to find themselves taxed for the full amount they received for their lumber. If they realized five or six or seven thousand dollars they had to pay t'he tax on that amount as income for that particular year. This was felt to be quite a hardship. I believe the question of exemptions comes in here again. As I have said, this lumber was growing for perhaps twenty-five or thirty years; and if the amount realized had been spread over a number of years, these men would have received the benefit of the exemptions for each year. I believe what applies to lumber applies also to a man who sold his herd of cattle. The amount he received from the sale of his herd, which had taken a good many years to build up, was taxed as income for that one year. I should like to have the minister's opinion on these points.


Douglas Charles Abbott: My hon. friend is asking a large question which, of course, involves a difficult administrative decision as to what is capital and what is income. If the taxpayer in question were a farmer, I do not know whether lumber could be included in the averaging which is now available to farmers.


Alfred Johnson Brooks: It is not a yearly crop.


Douglas Charles Abbott: That is true. Certainly if he had any losses he could average them against it. I am afraid I could not give my hon. friend an offhand opinion as to what the ruling of the income tax branch would or should be in the case of a sale of wood or lumber. Obviously there is a point at which the line has to be drawn between capital and income; and I would think the case is analogous to that of the basic herd, wthich we are discussing here.


Alfred Johnson Brooks: I think there is some unfairness.


Douglas Charles Abbott: This is a point where I can see there would be room for unfairness.


Victor Quelch: Does the minister wish to leave all the questions raised by the hon. member for Battle River until the end?


Douglas Charles Abbott: That was what I thought. I have a memorandum in which I have covered the various points the hon. member raised, and I thought it might make for more orderly discussion if I handled them all, say on the last section.


Mr. ASHBY:: These income taxes are, I assume, a method of attaining some end. What is the aim, the end in view in connection with these income taxes?


Douglas Charles Abbott: The main end in view is to help pay the country's bills.


Patrick Harvey Ashby: Why do you tax the people ; and if you do tax the people, what is it you desire? Do you desire paper money, bills; or pieces of metal, coins; or do you desire signs or symbols, units of account which are dollars? I should like the minister to answer.


Douglas Charles Abbott: Well, we are not too particular. We want something the public will take in payment of the country's liabilities.


Patrick Harvey Ashby: Then would the minister answer this question. Why are the people taxed? The people are neither the creators, the source of paper money, nor the source of coins, nor the source of these signs or symbols which are dollars. Would the minister tell me why the income tax officials do not go to the source of money to obtain it?


Douglas Charles Abbott: I am afraid I am not able to answer my hon. friend's question. My own view is that the only source from which we can collect taxes is people.


Patrick Harvey Ashby: I did not hear what the minister said; he was talking away from me.


Douglas Charles Abbott: Yes; I was addressing the Chair. I said that from my experience the only source of taxation is people. You cannot tax inanimate things.


Patrick Harvey Ashby: Why tax at all? You see, I do not create any money except my own turkey money. The source of money is definitely not the people, and I claim that all taxation is downright robbery. I am just waiting until the people are sufficiently awake to this robbery that they will demand the immediate resignation of all officials who are imposing these penalties upon them.
I spoke to the deputy minister of taxation on the sixth floor of this building, and I introduced him to my wife as the commander in chief who engaged the troops to rob us on our own farms of money which we did not create and which we require for production. I claim that today production is being deliberately restricted, because I know that on my own farms, if it were not for this income tax I would wire my sons and tell them to get busy and produce to capacity. Yet on my own farms, where I can produce 500 to 1,000 hogs a year, not a single hog is being born because of this downright robbery. I can

Income IFar Tax Act
produce a ton of butter at present a month, but I am not producing a single pound of butter for sale. Agriculture throughout Canada can produce all the wool we require if we could cut out this damnable robbery. I claim the Minister of Finance will be held personally responsible for this insecurity he has created.
This robbery must cease. I am telling my people, and telling them bluntly, that until they revolt against this robbery they will never obtain their freedom. And I claim this income tax is introduced and imposed upon the people for no reason other than that of bringing them down to the status of slaves.
The minister does not know why people are taxed, when all the money, all the figures in the world can be created at will. I rode down on the train with a couple of senators, and I asked those old senators why in the world they permitted this robbery to continue. They said to me, "Where is the money coming from?" "Why", I said, "do you really want to know?" "Yes," they said. "Well now", I said, "don't resist what I am going to tell you. You sit right there and I will tell you where the money comes from." Then I pulled a bill out of my pocket, and I asked them, "What is this?" They said, "This is ten dollars." I said, "It is not ten dollars, because it says right on the bill 'will pay to the bearer on demand ten dollars.' "
I say, if we want bills, we can create all the bills we want, all we desire. All we have to do is to get the authority and call up the British American Bank Note Company. I believe that is the company which printed this one I have in my hand; yes, I see it was the British American Bank Note Company. They make them. This is a perfectly good bill; it is perfectly good money; there is nothing wrong with it. The British American Bank Note Company is an absolutely reliable company.


George Alexander Cruickshank: On a question of privilege, when an hon. member produces a document, does he not have to table it?


Patrick Harvey Ashby: I am perfectly willing to have :t tabled.


Some hon. MEMBERS:: Page boy!


Some hon. MEMBERS:: Table it.


James Joseph McCann: Sticky fingers.


Patrick Harvey Ashby: I said to these senators, "All we have to do is to instruct this reliable company to print all the bills we require, if it is paper money we need. They can bring them to us by the bale. All we have to do is to ask them how much they charge for running these through." Then, if they say they charge
a thousand dollars, I can peel a thousand dollars off the bale and pay them. The remainder costs us nothing.
Then, when it comes to coins, I say we can produce all the coins we want, absolutely free. If a lump of gold, silver or copper, or whatever it may be, were brought and placed upon my desk, and if I had the authority I could obtain it all, absolutely free. I do not know how I can get it otherwise, except absolutely free. I can say to the man, "Here, take $10,000 out of the bale, and I will buy it." The bills cost me nothing. The man would say, "Well, I am not going to lug around a bale of bills on my back. I do not want to take bills in exchange for this gold." I can say, "Well, fill up a couple of gunny sacks of coins, get a wheelbarrow, and I will pay you in coin." He will say, "No, I don't want to go down the street wheeling a wheelbarrow full of coins."
Now, how else can I buy gold? Well, the legitimate way is to turn over the pages of a ledger, enter the number of his account at the top of the page, put down the date and credit his account with ten thousand units of account, or dollars, or the symbols we call dollars. And I can give him a little bankbook; I think I have one in my pocket. They cost us nothing.
I merely enter his name in this little bankbook which I have taken out of my drawer, and I enter in it the sum of $10,000-a perfectly legal procedure. There is nothing wrong with it. I have created this ten thousand units of account, or true dollars.


Mr. MITCHELL:: If what the hon. member says is true, why does he not sit down and write each one of us in the House of Commons a cheque for $10,000? We would all be rich then.


Patrick Harvey Ashby: I can do that. But if we all did that, confusion would result. I say this is perfectly legitimate. There is nothing wrong with it. There is nothing wrong with these bills.


George Alexander Cruickshank: Send them over so that we can see.


Patrick Harvey Ashby: And there is nothing wrong with our coin. There is nothing wrong with entering these units of account, or dollars, in this ledger. I am certain there are no people in the world who are greater experts on these matters than are the bankers themselves; and it is done every day in this manner.
I should like the Minister of Finance to give me a definite answer as to why the government does no>t go to the source for dollars, instead of impoverishing the people.
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Douglas Charles Abbott: Before I could recommend that I would have to believe in my hon. friend's theories-which I do not. So that I am afraid what he suggests will not be brought into effect until his party is in power, and he is Minister of Finance.
I do not wish to limit the discussion, but I would recall to the attention of hon. members, through you Mr. Chairman, that we are dealing with an amendment to the Income War Tax Act which relates to permissible deductions from income. I would hope that hon. members might confine their criticism to the amendment proposed.


The DEPUTY CHAIRMAN:: There is an amendment to section 4 (2) now before the committee.


[Stage Direction]
Amendment agreed to.
Agar Rodney Adamson: Then I understand that we are still on section 4?


Douglas Charles Abbott: There are various subsections to section 4. It might make for orderly discussion if we were to consider them one by one. We have passed subsection 2 of section 4; what about subsection 3?


Agar Rodney Adamson: I wish to make only one comment, with respect to subsection I (e) (ii) (C):
(C) under twenty-one years of age and a student at a secondary school, university, or other educational institution.
I leave this suggestion with the minister; and I do not expect, of course, that he will carry it out this year. However I would expect the department to give it consideration. Let me point out that our universities and our higher educational establishments, despite the extraordinarily heavy enrolments which have taken place, are having a progressively more difficult time to make ends meet. I suggest to the department and the government that consideration be given to a direct deduction for secondary and higher education. I think that is important. The present situation is not peculiar to Canada but is happening all through the United States as well. Tuition fees are going up and almost every educational institution finds that its revenues are not sufficient to meet its charges. I would suggest that educational fees, fees paid for sons and daughters attending these educational institutions, be allowed as a deduction from income tax. I suggest that, not only because it is a good thing to encourage higher education, but because of the difficulties in which the universities find themselves. The university of Toronto, while its endowment is heavy, will face serious difficulties in the years to come in regard to higher education.


George Alexander Cruickshank: Do you include Rhodes scholars in that?


Agar Rodney Adamson: I would not be surprised-


George Alexander Cruickshank: Why?


Agar Rodney Adamson: Are you a Rhodes scholar?


An hon. MEMBER:: That will hold you, George, for a while.


Agar Rodney Adamson: Subsection 3 (iii) (B) reads:
(B) on underground development by a taxpayer operating a mine in a period of twelve months ending not later than the thirty-first day of December, 4950.
In that case one-half of the expenditures made during exploration is allowed. I suggest that here again one-half is not sufficient. I would ask that all the exploration charges be allowed as a deduction. I may be in error as to the exact intent of this clause, but it appears to me that here we have one-half of the expenditures made on underground development by a taxpayer developing a mine allowed as a deduction, and there are two or three things of which I believe the government is not fully aware. The United States experience- and they have suffered more or less in the same way as we have-is that not only are all the expenses of rehabilitating a mine allowed but that congress has passed an act actually bonus-ing a mine to get back into operation.


Douglas Charles Abbott: This is a special deferred maintenance provision. One-half can be charged back to a different period.


Agar Rodney Adamson: I appreciate that. This is not exploration.


Douglas Charles Abbott: What I mean is that this is a special provision in the law for deferred maintenance. The full cost of underground development by a taxpayer operating a mine can be taken at some time or another. This is a special provision given to taxpayers to make expenditures in a certain period, some time prior to 1950, and to charge half back to another period, say 1946, 1945 or 1944. The other half will presumably be charged in the year in which the expenditure is actually made.


Agar Rodney Adamson: Therefore, if a mine is badly behind in its development, as every mine with one or two exceptions is, and is able to get sufficient labour to catch up with its development and put its development into shape it can say in 1949 or 1950: We have spent so many thousands of dollars on back development work which we should have done in 1944 or 1945, and therefore we can take that development as a direct charge against the excess profits taxes we paid in 1944.

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Douglas Charles Abbott: That is it exactly. They can take half of it then and the other half in the year in which the expenditure was actually made.


Agar Rodney Adamson: And get a refund of the excess profits tax paid?


Douglas Charles Abbott: Yes. It is purely optional. They can take it all in the year in which the expenditure was made, or they can take it back into 1944 and reopen the year 1944 and get a refund of the excess profits tax that has been paid.


Agar Rodney Adamson: I think that will be helpful. One expects the excess profits tax to come off at the end of the year.
Clause (5) (W) reads:
(W) such amount as the governor in council may, by regulation, allow for amounts paid in respect of taxes imposed on the income, or any part thereof, by the government of a province by way of tax on income derived from mining operations or income derived from logging operations.
Will that include royalties? Let me give an example. The Helen mine is a low-grade iron deposit that cannot develop without a certain amount of assistance and I understand that there was some talk of a royalty being given to the mine because there was great difficulty in sintering this low-grade ore. There was some talk of the province of Ontario assisting in this operation by lending them some money and having the thing put on a royalty basis. If a royalty was payable of so much a ton on the ore treated, would that be considered a tax under this section?


Douglas Charles Abbott: This has always been
allowed. The only purpose of the amendment, which is indicated by the underlined words, is to make sure that the provincial profits tax will be imposed on the same income as the dominion income tax against which the provincial profits tax is taken as a deduction before calculating the dominion tax. This is to make sure that it is not a tax on previous years that is claimed as a deduction in the particular year in which the mining profits are subject to tax under the dominion act. Royalties such as my hon. friend suggests are always taxable as an expense of the operating company before arriving at the net taxable income under the dominion act.


Agar Rodney Adamson: I had this out with the minister's predecessor and it was never quite clear just what the position was. Several properties paid royalties to the province and they were not allowed them as a deduction. I merely want to have it made absolutely 83166-252
clear that a royalty paid to the province is allowed as a tax deduction or allowed as an expense.


Douglas Charles Abbott: That is the case if it is a royalty in the true sense of the word. If it is the return of an advance that has been made by somebody and is called a royalty that would not be an expense of operation, but the ordinary royalty in the true sense of the term is an expense of operating a mine or timber limit or whatever it may be, and as such is deductible as an expense from gross income before arriving at the net taxable income under the act. That, I understand, has always been the case.


James Arthur Ross: If a farmer employs casual labour is it still necessary for him to deduct the tax if the labourer is working at a rate that would bring him into the taxation bracket? Are the farmers supposed to deduct the tax and send it in?


Douglas Charles Abbott: I believe that is correct; they are treated in the same way as any other man.


James Arthur Ross: There is one other point I should like to take a minute or two on, because on his estimates the Minister of Agriculture said that it should be discussed when the income tax bills were before the committee, and this is a case where it is actually in order. The minister has made several statements pointing out that the deduction of S500 for the production of hogs and dairy products would really not work out as was suggested. On several occasions he said that the figures showed that only seven per cent of the farmers in Canada were paying taxes. That may be true in the general picture; but, according to the 1941 census, there were about
650,000	farmers in Canada. In 1945, some 27,411 farmers were assessed income tax. Out of those 27,411, 20,372 were from the three prairie provinces. Not many days ago we received another return showing that, out of 108 inspectors assessing farmers' income tax in Canada, seventy-nine were employed in the three prairie provinces, compared with twenty-nine in the other six provinces of Canada. The point I am coming to is that in these three prairie provinces for some reason there has been a great decrease in the production of hogs and of beef cattle. The other evening I asked the minister if he could tell us the position of beef cattle between the prairie provinces and the rest of Canada. I have the figures now for Canada in 1945, which was the last year I could get, showing 6,760,000 beef cattle in Canada. Of this number, 3,596,000

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beef cattle were in the three prairie provinces, again a greater number than in all the rest of Canada.
In the matter of hog production, the greatest year in history showed a total of some
8,863,000	hogs. Of this number, 5,768,000 odd were produced in the three prairie provinces. They have now practically gone out of hog production in the three prairie provinces. While the figures given by the Minister of Agriculture may be generally true of Canada as a whole, these figures give some idea of the great decrease in the production of essential foodstuffs, at least in the three prairie provinces. Yet for some reason or another the department has come to the conclusion that the inspectors should move into these particular provinces. I am not saying that they should not do that; probably they should do . it all over Canada, but I think it proves conclusively that in a very short period of time, for some reason, if not income tax-I think it certainly enters into the picture- we have lost the production of some millions of hogs in these three provinces.
The situation is not as set forth by the minister the other night that, in driving through Ontario and Quebec, one finds that in each of these provinces the bulk of the production came from places where you found two or three brood sows on the farm and maybe up to a dozen or twenty steers. That is not the situation. The bulk of the beef comes from the three prairie provinces, and in the years of heavy production the great majority of the hogs came from the three prairie provinces. I wanted to put that on the record to support the request which has been made by several hon. members that serious consideration be given to some further exemption for such production as that. On the facts I have given, one can say that the request was well taken and should be seriously considered. If these figures can be refuted I should be glad to hear it.


Douglas Charles Abbott: I am afraid I am not competent to discuss the reasons for the reduction in hog production in western Canada. I doubt whether it is due to the income tax law, although that may have some little effect on it, but I would say that it must be due to other causes. I dare say that on his estimates or at some appropriate time the Minister of Agriculture will deal with the subject.


James Arthur Ross: I hope it will be in order at that time.


Robert Fair: The Minister of Finance and the Minister of National Revenue are the ones to deal with income tax. I believe that the hon. member for Souris is quite correct in the

statements he has made. These statements can be obtained from any number of farmers in my part of the country and from many others with whom I have come into contact in Ontario and in other parts as well. I believe that the Minister of Finance is the man who has to find the money to pay the country's bills. If he will not go to the proper sources for it, if he will not do what was suggested by the hon. member for Souris, then he is helping to cut down the production on Canadian farms.


Mr. CARDIFF:: How much money are you supposed to pay a hired man before he comes under the income tax brackets? Is there a stated amount?


Douglas Charles Abbott: It depends on whether he is married or single. It is all set out in the tables and I shall read it. If he is working a certain number of days which produces an income in the case of a single man in excess of $750 and in the case of a married man in excess of $1,500, taking into account the value of board and room and so on, then the deduction must be made.


Lewis Elston Cardiff: If you are hiring the man only for a day or for a few days is it necessary to make the deduction? Is there a stated number of days that you must pay him before you take anything from him?


Douglas Charles Abbott: The daily rate is set out in the new table. For a single man, the rate is $2.70 to $2.79 a day. If you pay a man that amount or in excess of that the table of deductions starts and it is at that rate. If he is a married man the wage- could be large without the requirement for a deduction. The income tax deduction tables, which are available in the Department of National Revenue, show the point at which it starts.


Lewis Elston Cardiff: I understand that the deduction would start after you pay him over $2.79 a day.


Douglas Charles Abbott: If he is a single man.


Robert Fair: Is the minister aware that, in many cases, if a farmer tells his hired man that he is going to take income tax from him he puts on his coat and goes on to the next farm where he does not have to pay income tax. If the minister is not aware of that, how is he to take care of it?


Douglas Charles Abbott: I dare say that is true. There are a lot of people in this country-I suppose it is human nature-who do not like to pay taxes and who try to avoid paying them; but somebody has to pay them if they do not pay them. If the particular man that

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my hon. friend is referring to does not pay them somebody else has to pay the shot. We try to catch up with him; but, human nature being what it is and with the shortage of enforcement staff, of course we do not get them all. The fact of the matter is that there is a responsibility on every citizen of this country who gets the benefit of the country and the protection that the law affords to pay their proper share of the taxes. I have no sympathy for those who take advantage of one means or another to avoid the payment of taxes. That is what it is, evasion, and nothing else.


Mr. SMITH (Calgary West):: I am sorry I did not get in until quite late. Does the word "mine" here include an oil well? I am not speaking of deferred maintenance or anything like that.


Douglas Charles Abbott: This is the first time the question has been raised. I do not believe it does.


Arthur Leroy Smith: We get in through some other back door.


Douglas Charles Abbott: I think so, yes.


Victor Quelch: Keeping in mind the
exemptions in this section, I am interested in the reply that the minister gave to the hon. member for Edmonton East, namely, that the purpose of taxation was to provide revenue. I think he will admit that that is only part of the answer because, during the war, we were told that the main purpose of taxation was not merely to provide revenue but to curtail expenditure; in other words, to prevent inflation. I take it that in setting up this schedule the minister has in mind that the present rate of taxation is necessary in order to prevent inflation. The point I am interested in is this: If the situation that he pointed out in his budget speech develops whereby our income becomes lower, demand falls off and unemployment increases, then I should imagine it would be necessary to try to stimulate spending. The deputy minister of finance, Doctor Clark, made it quite clear and I quoted from his speech where he said that during the war the main purpose of maintaining heavy taxation was to curtail spending. Then, for exactly opposite reasons after the war it will be necessary to reduce taxation in order to expand spending. I take it that the present rate of taxation is the rate the department considers necessary to stabilize demand and supply. What will be the point when we reach the period which the minister envisaged in his speech where demand starts to lag? Will the government then still further 83166-252J
reduce taxation in order to encourage spending or, on the other hand, will they then be willing to create the money required to expand the purchasing power of the people? I think that is an interesting point.
I have in mind the fact that Mr. Graham Towers, during a broadcast on post-war finance, admitted that the time may come when demand falls off and for that reason it will not be desirable to increase taxation. We may have unemployment and it may be necessary to finance national projects. Obviously you could not finance those national projects by increased taxation because that would reduce still further your demand in relation to supply. Mr. Graham Towers admitted that, when that time comes, he would advocate the creation of money to finance worth-while projects. Would the minister agree that the present scale of taxation is not merely for the purpose of providing revenue but is for the purpose of maintaining a balance between demand and supply?


Douglas Charles Abbott: I was very much interested in the observations of my hon. friend who has a good grasp of this question, but I do not think this is the proper time to discuss theories of taxation, the economic effects of taxation or the use of the income tax or any other tax as a fiscal weapon. I will content myself with saying that the primary purpose of taxation is to raise the necessary revenues to pay the current expenses of the country, to provide for the servicing of its national debt and, if possible, to reduce that debt. Of course it has an incidental effect in that it is a powerful fiscal weapon; it is an anti-inflationary weapon.
It is perfectly true that during the war we were spending a great deal of money and producing a great deal. Goods were being paid for but were not being consumed. In that case high taxes were a potent fiscal weapon in order to prevent inflation. However, I do not think this is the time to discuss these questions. We are on a specific section of the income tax act and I do not think this is relevant. On an appropriate occasion I shall be glad to debate and discuss these questions with my hon. friend on which, as I say, he has a wide and specialized knowledge, but I do not think this is the time.


Victor Quelch: In the past we have not considered it necessary to try to raise enough revenue by taxation to balance the budget, because in the eighty years since confederation we have had only sixteen balanced budgets. This shows that we have not considered it necessary to try to balance revenues with expenditures. Therefore I am wondering why at this time the government are not willing
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to raise the exemptions. I take it that the only reason the government are not prepared to raise the exemptions is that, if they do that, it will cause inflation. Naturally, when you increase the purchasing power in the lower income brackets you are creating a greater demand for goods than you could by increasing the purchasing power of any other class. It is the people in the lower income brackets who largely spend their incomes on goods.


Douglas Charles Abbott: I deny the statement of my hon. friend that the only purpose of maintaining the income tax at the present level is to prevent inflation; the purpose is to raise the necessary revenues to pay our bills this year and, while conditions are good, to make a reasonable contribution toward the reduction of the national debt. I am not one of those who believe that you can indulge in deficit financing year after year, although there may be years when it is necessary. I repeat that I do not intend to be drawn and I do not think I should be drawn into a discussion of these questions. If we are, there will be no end to it because there are a great .many other members who would like to voice their views. I suggest that it is not relevant to the section we are discussing.


Arthur Leroy Smith: On what
authority does the minister say that a drilled oil well is not a mine? Mines are used for the production of minerals and oil is classified as a mineral. When we reserve rights in the crown for mines and minerals we also reserve oil, the basis being that oil is considered a mineral. That may be wrong in fact; nevertheless that is the interpretation which the courts have given. I should like to know why the man who drills a small hole in the ground in order to get a mineral is any different from the man who digs a shaft as large as the aisle between us. They are both in the same position as far as I can see. There is no doubt that oil is a mineral and there should be no difference whether you dig a small shaft or a large one.


Douglas Charles Abbott: My hon. friend may be
perfectly right. So far as I am aware, this is the first time the question was raised and I just gave it my off-hand opinion. Perhaps an oil well is a mine.


Mr. CASTLEDEN:: Is the Department of
Finance or the Department of National Revenue doing anything with regard to the many requests which have come from agricultural bodies throughout the country asking that a broader interpretation be made of the regulations in order to make it possible for a farmer whose whole family is taking part in the production of a certain income not

to be the one against whom the whole income is assessed? I think there is a general realization that farming is different from ordinary business. The income tax forms are evidently made out to take care of the ordinary business operating from year to year. Farming is quite a different thing. Farmers and farm organizations have protested and urged that something be done. I understood the minister to say that something was being done and I should like to know if that is so. At the same time could he tell us if anything is being done to simplify tax forms for farmers. The T.l supplementary is quite simple and it can be filled out by most farmers who have any records at all. It seems to me that that would be quite sufficient for the large majority of farmers.


Douglas Charles Abbott: The second part of my
hon. friend's question relates to the Department of National Revenue. As to members of a family working on a farm, the same position obtains there as with any other group. If a farmer's sons are working for him he can pay them wages and he can deduct those wages as an expense of his own.


George Hugh Castleden: If they are over sixteen years.


Douglas Charles Abbott: I have forgotten the
administrative rule. Of course, if he pays them too much he loses the benefit of the exemption which he is entitled to claim under the income tax act, of $300 in the case of a child over sixteen years. The same rule applies to the man with a business or store who has sons working for him.


George Hugh Castleden: If a man operating a business in town requires any help he hires it from other people around; they come in and assist him. I suppose it would be possible for his children to go and work for someone else. In the case of a good many farm families children of eight or nine years of age help feed the hogs and milk the cows. The wife on the farm helps in the production by milking the cows, taking care of chickens and working in the garden. The income earned by the woman in western Canada who raises a couple of hundred turkeys, hundreds of pounds of chickens, eggs and cream, is all placed on the one man. I understood the minister to say that something was being done about the matter, and I wanted to know what has been done or what has been contemplated. Then there is my other question about the simplification of the tax form.


Mr. MICHAUD:: If I understood the
minister correctly, he said that a farmer is entitled to pay wages to his son. It seems

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to me that I did hear him add, "And if he is over sixteen years of age, can claim exemption." Is that a fact?


Douglas Charles Abbott: He cannot claim both.


Benoît Michaud: I wanted to be clear on it.


Douglas Charles Abbott: As I have said, he cannot claim both.


Benoît Michaud: In other words, if he pays his son wages in excess of the exemption, I gather that he cannot claim any exemption. Is that correct?


Douglas Charles Abbott: That is correct.


Benoît Michaud: I was not quite clear. I might have misunderstood the minister.


Douglas Charles Abbott: That is right.


Benoît Michaud: I should like an answer to the question raised by the hon. member for Yorkton with respect to the farmer's wife. Is there anything on that? Is there any relief?


Douglas Charles Abbott: Of course the same question comes up year after year. The farmer's wife is in the same position as a small storekeeper's wife who helps him in his store, or a man's wife who has a little garden at his home, who works in the garden, keeps chickens, and so on. It has never been felt, either by my predecessor or by myself, that a special income tax provision should be made for the farmer's wife as distinguished from other groups in the community.


Alfred Johnson Brooks: There was another question I should like to ask the minister with reference to veterans and the exemption for students. In the case of a student under twenty-one years of age, the parent is exempted if he is supporting the student. As the minister knows, there were a good many young men of eighteen or nineteen years of age who were in the army for only one and a half or two years. They get their $60 a month, but they are now over twenty-one years of age, and are being supported at the universities by their parents. I think there should be a clause exempting the parent who is supporting those sons and daughters, and providing for the same exemption for them. The principle of exempting them under twenty-one is exactly the same principle as should apply in exempting them over twenty-one. Has any consideration been given to that?


Douglas Charles Abbott: Yes, quite extensive consideration has been given to it. I dealt with
this matter at some length when we were at the resolution stage. I explained that the age limit of twenty-one was fixed with this idea in mind. That is the age at which, ordinarily, young people finish their arts course or their ordinary university course. If they are going on to take specialized professional training to become lawyers, engineers, or whatever it may be, it is felt that the income tax exemption for the parents should not continue beyond that age. In other words, it is felt that there should not be a special income tax exemption for those who are carrying on postgraduate studies. That does not run into very large figures. As my hon. friend will appreciate, a $300 exemption, with a taxation rate of twenty per cent, which carries one up to the type of income of something of the order of $5,000, is worth only $60 a year under the new schedule of tax rates, so that it is not a substantial proportion of the cost of education. The costs, of course, run very much more than that, and they must be found from other sources. So that if one takes the case of parents who are helping to send their children to university, in the average income group of $5,000 a year, which perhaps is putting it high, the tax value of that to the parent is, in any event, only $60 under the new act.


Alfred Johnson Brooks: I was not speaking of the general application. I was speaking only of the young man who is in the army.


Douglas Charles Abbott: You had reference to
veterans.


Alfred Johnson Brooks: Yes.


Mr. HANSELL:: I do not intend to just ask a question here, and I do not intend to say anything on this section except what I wish to say right now. We are on section 4 of Bill No. 269, an act to amend the Income War Tax Act. This is a large section with a good many subsections, divisions, subdivisions and a few sub-subdivisions. The whole thing is on the matter of income tax, exemption and some details in administration. What I wish to say is this, and it is in respect to the two questions that were asked by the hon. member for Edmonton East and the hon. member for Acadia. These questions could have been asked on the resolution stage of the bill but we are always met with this reply, "Well, now, if you will wait until the bill comes down, I will be able to answer it then." By obliging the minister, we let the resolution pass and wait till the bill comes down. Surely, when we are discussing a section like this we should be able to ask the minister a few questions as to why all this income tax is necessary. The hon. member for Edmonton
Income War Tax Act

East asked, what is the purpose of this taxation? Why take it out of the people? Why not go to the very source from which money comes? The minister evaded that question


Douglas Charles Abbott: No. He answered it.


Ernest George Hansell: -by saying he did not want to get involved-


Douglas Charles Abbott: No, he answered it, and answered it directly.


Ernest George Hansell: I will accept the
minister's statement, but I am quite confident that when he reads Hansard tomorrow he will find that it was not answered directly. The hon. member for Acadia asked a subsequent question, and I think these questions are fundamental because they get down to the basis of taxation. The hon. member for Acadia asked, are these exemptions set in order to avoid inflation or to create revenue? The minister gave what I contend to be an answer similar to what I have indicated, namely, "Well, I do not want to get into a technical discussion of the philosophy of money", or something of that kind. All I say is this, Mr. Chairman, and I will sit down. If there is one place where we have a right to know what the taxation officials or what the Department of Finance really know about money and the reason for having or not having taxation, this is the place. If all this taxation is not necessary we, the people's representatives, have a right to know; and I take it that the officials are not able to answer. I take that from the answer which the minister has given. I say these things kindly. We in this corner of the house do not believe that there is need for such great taxation. Our position is that the only time when taxation is needed is when there is a surplus of money over and above production, so that it must be drawn off. We claim that the government could go to the source from which money originally comes and get it from there for the purpose of revenue.


William Henry Golding: Shall clause 4 as amended carry?


Robert Fair: I am still confused about the situation with respect to the payment to a farmer's family in relation to farm produce. We have been given what I consider to be contradictory explanations in connection with this, and I should appreciate it very much if the minister would tonight give us an explanation which would stand up year after year. On some occasions we have been told that a farmer can pay his family without affecting the allowance as dependents. Again

we have been told we cannot do that. I should like very much to get a definite statement by which we can go from year to year.


Douglas Charles Abbott: I thought I had given that answer a few minutes ago. I am told that the age is sixteen; apparently that is an administrative ruling.


Robert Fair: Then children below sixteen can or cannot be paid?


Douglas Charles Abbott: I am informed that below sixteen they can be paid and the payment can be deducted from the farmer's income as an expense if the payment is in cash, the same as he would pay any other hired help.


Benoît Michaud: What about the $100 exemption, now?


Douglas Charles Abbott: That is very simple. If a man hires one of his children to work for him and pays that child more than the amount which renders him totally dependent upon the father, he cannot claim the exemption. In other words, as I understand it, by administrative practice in the Department of National Revenue a so-called dependent can have income up to $400 and still be classed as a dependent of the father or parent claiming the exemption. That would mean, I take it, that a father could pay his minor child, provided that he paid him in cash, up to $400 for his work on the farm. At the same time he would have to include the value of board and room, I suppose, if he were claiming the exemption; and if the cash payment plus the value of board and room ran over $400, then the parent could not claim the $300 exemption or the $100 exemption, as the case may be.


Robert Fair: Now may I ask the Minister of National Revenue whether he concurs in that statement by the Minister of Finance?


James Joseph McCann: 
Eric Bowness McKay: Is any maximum put on that?


James Joseph McCann: Cases in which a farmer's wife devoted eight hours a day or three hundred days in the year to out-farm work would be rare exceptions, not worth calling for any major change. That is, rvhere it is a side-line on the farm, and the farmer's wife obtains an amount of money, we have not been asking them to put that in as a return of income.


Robert Fair: I am under the impression that today a farmer is assessed, on the average, $50 for every member of his family, for garden produce and other things of that kind. Is that correct?


James Joseph McCann: That is right.


Mr. WRIGHT:: Then, in towns and cities during the war many people had victory gardens, and many people have gardens today. Is a similar charge made against those people?


Douglas Charles Abbott: I think the answer to that is that they are not deriving their living from that work, and of course the farmer is.


Robert Fair: That is not quite correct. The farmer is deriving his living from the sale of grain, live stock and other things of that kind. He is in exactly the same position as the people in cities and towns who have gardens, from which in many cases they get a good share of their living. I am not for a moment advocating that people in towns and cities who have gardens should be taxed on anything they grow, because I believe they should have some .slight pay, whatever it might amount to, for the work they do in the garden. These things should be taken care of, but they are not taken care of satisfactorily at the present time.


Howard Charles Green: There is one question I should like to direct to the minister in connection with the married veteran attending university. In some of these cases the wives are working, and I understand that some difficulty has arisen in that, while the husband's allowance is not taxable-


Douglas Charles Abbott: If my hon. friend will permit me, I think he was not in his seat when I dealt with this matter at some length earlier this evening, in reply to the hon. member for Hastings-Peterborough.


Howard Charles Green: Was it the case of the allowance preventing the wife from being granted the status of a married person?


Douglas Charles Abbott: Not preventing her from getting the status; but if the allowance ran over a certain amount and the husband also earned something during vacation, it would reduce her $1,500 exemption to a lower level, depending upon the amount by which her husband's allowance exceeded $250. The reason for the wife's exemption of $1,500 under those circumstances would, of course, be the assumption that she was fully supporting her husband, because that is how it applies in reverse. I dealt with this question at some length earlier in the evening.


Howard Charles Green: Is the allowance paid the husband considered as part of his income? I can quite see that any money he earned during vacation would be considered income.


Douglas Charles Abbott: It is not taxable in his hands, but it is considered a source of income in so far as his wife's $1,500 exemption is concerned, if she is earning money and supporting him.


William Henry Golding: Did the hon. member for Restigouche-Madawaska have a question to ask?
Income War Tax Act


Benoît Michaud: I got my answer from the minister privately, and I am satisfied.


Mr. SINNOTT:: I am not going to take up very much time, but I want to say in the most kindly way and most constructive way that here as members of parliament, we are all interested in trying to do what is best for our country. We are attempting to discourage inflation and, at the same time, get production. I have been on a farm for twenty-five years, and no one knows better than I do what farmers' wives and families do in connection with the production of farm products. If we are to have the increased production we want, then we must discourage deflation. Nothing is more likely to keep the boys on the farm than to encourage them to make a little money on the side. Those boys who have been brought up on the farm, and at the ages of four or five years can drive horses, or at eight or nine years of age can drive tractors, are the ones who will make constructive farmers. If we have to depend upon some of these people from the city, then let me say that they do. more damage than they are worth. They let the horses run away and they damage more machinery than would equal the value of their services. So that at this time we must encourage the income tax branch all we possibly can to give the man who produces a chance where he can get away from income tax, and thus encourage production. I hope the minister will give every possible attention to this matter.


Mr. ROWE:: I think there was confusion between the Minister of Finance and the Minister of National Revenue.


James Joseph McCann: Not a bit.


William Earl Rowe: There is not?


James Joseph McCann: No.


William Earl Rowe: Well, I am glad there is not on this issue, because on many issues I know there is. I thought I heard the Minister of Finance say that if a boy on a farm earned $400, that is all he could be allowed as exemption from income tax. Yet the Minister of National Revenue said, that he could be paid the same wages as any other member of the staff. If there is no difference, then I should like to find out what happens if he received $800, because in my district the wage is about $100 a month. If a boy is to be forced to leave his own home and go out to earn $100 a month from a neighbour, rather than have that exemption from his own family, then surely, if there is unity between the ministers, they should get together.
JTbo Deputy Chairman.]


Douglas Charles Abbott: There is no conflict. The $400 has relevance only to this extent, that that is the figure which is taken in the Department of National Revenue as being the figure up to which a child1 can have income and still retain the status of dependency upon the parent. So that the farmer can pay his son cash wages, and if those cash wages, taken together with the value of his board and lodging, do not run over $400 the farmer can still claim the full $300 for that child as a person fully dependent upon him.


William Earl Rowe: That is over and above $400?


Douglas Charles Abbott: If it runs over $400, or if, for instance, he pays his son $700 and the cost of board and lodging is worth another $25 per month, that makes $1,000. The taxable income for tax purposes of the son in excess of the $750 exemption will be $250, and the farmer will lose the $300 exemption which he could claim if the child were a person totally dependent upon him.


Robert Fair: I have one more question for the minister to answer. We are getting more satisfactory answers tonight than we have ever been able to get before. In hundreds of instances across the prairie provinces a farmer's wife will milk three or four cows. She will do that work herself, ship the cream to the creamery and receive the cream -cheques. The same farmer's wife may possibly have 75 or 100 chickens, and sell eggs. She has that for her own spending money. Does a farmer have to pay income tax on those amounts? The farmer's wife does all the work herself; the farmer does not have a thing to do with it. She receives the cheques and spends the money. What happens in a case of that kind?


James Joseph McCann: Individual cases have to be considered on their merits. If the money she receives in proportion to the full income of the farm is not out of keeping with what she might have by way of pocket money, it is not taxable.


Robert Fair: There is a principle there; I do not think it should come down to individual cases. If a principle were laid down we would know where we stand, because, as I said before, the imposition of this tax has considerably cut down production of cream, milk, butter and eggs.


James MacKerras Macdonnell: I thought the subsections were to be called. If not, I should like to ask a question about section 4 (4). What is that order in council?


Douglas Charles Abbott: That is the order in council which fixes the period of twelve months commencing January 1, 1946, and terminating

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December 31, 1948, within, which this deferred maintenance could be taken. My hon. friend may recall that when the resolution was under discussion I made a statement in the house. I was engaged with preparation of the budget at the time the order in council was passed and, after carefully reconsidering it, I felt that the rule, should be as is contained in this section which I am now introducing, namely that it is to be a twelve-month period to be determined by the governor in council ending not later than December 31, 1950. The advice of the Department of Justice was that we could make a statutory provision that the order in council which specified the period under the old section should1 be revoked.


James MacKerras Macdonnell: These are strong words-"shall be deemed not to have come into operation or to have been made." Does that mean nothing was done under it at all?


Douglas Charles Abbott: That is right.


James MacKerras Macdonnell: It is just as if it had never been passed?


Douglas Charles Abbott: Yes.


James MacKerras Macdonnell: Just one question with regard to subsection
5.	What is the reason for this being dealt with by regulation? Surely that is unusual. Why does this particular case have to be dealt with in that way, and is it the intention to continue to leave it that way?


Douglas Charles Abbott: Yes, I think it will remain that way. That language is now in the act. The only change is in the words which are underlined, to assure that it will be profits imposed with respect to the same income in both provincial and federal jurisdictions.


James MacKerras Macdonnell: I am raising a broader question. Why is it necessary to have this left entirely to regulation? Am I not right in thinking that is an unusual way of giving exemption, and what is the reason for it?


Douglas Charles Abbott: As my hon. friend will
appreciate, this is a concession which is given, not to a province, but to taxpayers who are subject to tax in a province on the same profits. In the agreements with the provinces with respect to taxation, which existed during the war, it became necessary to specify what were profits derived from mining operations or on income derived from logging operations. I believe the committee will appreciate that there is a difference between mining operations as such, and the processing of ore. There is a difference between revenues from logging operations and operations in connection with
the finishing of lumber. It is difficult to spell this out in a statute and, as is the case in a number of these situations, it is desirable to leave some latitude, some flexibility. But rather than leave it in the discretion of the minister, it was provided in the law that the condition would be fixed by the governor in council and would be known to all who are interested. It provides a more flexible way of amending the provisions, if they are found to be unsatisfactory.


James MacKerras Macdonnell: I suggest that it might give rise to another kind of log-rolling.


Donald Methuen Fleming: I should like to speak
with respect to subsection 5, about which there has already been some discussion. What reference has this to matters under discussion between the dominion and the provinces? As I understand it, in the negotiations with reference to new tax agreements the position taken by the provinces was that they should have those six so-called minor fields of taxation yielded up to them exclusively, and that, in addition, they should have priority in the fields of mining and logging, because in that instance it was the development of natural resources which was being taxed, and for that reason they felt they should have priorities in those fields. Would the minister make a statement as to the relationship between this amendment in section 4 (5) and those matters that were under negotiation between the dominion and the provinces.


Douglas Charles Abbott: This provision permitting a deduction from income tax for this particular purpose applies whether or not a province enters into a taxation agreement with the dominion. Ordinarily the general rule is and always has been that, for purposes of dominion income tax, the taxpayer is not entitled to deduct profits tax, a tax in the nature of income tax paid to a provincial jurisdiction. There is an exception, however, in the case of mining and logging profits, and that applies whether or not a province enters into a taxation agreement with the dominion. In other words, all provinces are entitled to impose taxes on mining and logging profits, and those taxes may be deducted as an expense by the taxpayer as though they were an expense under the dominion income tax law. But in order to protect the dominion treasury in respect of this special deduction which is allowed for this type of income, it must be clearly income derived from logging and mining operations, and not income derived from processing operations, or income derived from manufacturing the logs, for
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instance, after they have been cut. The only purpose of this amendment is to make it clear that the profits tax or income tax imposed should be on the same income in each case, and not, for instance, on the income of a previous year, although paid in the same taxation year.


Donald Methuen Fleming: I thank the minister for his clear statement. Will he say to what extent the terms of this amendment go in meeting the views* of the provinces as set out in the negotiations? I gathered from the minister's statement that it goes a substantial way, but that there still remains a field perhaps in connection with processing where the demands of the provinces have not been fully met by the amendment.


Douglas Charles Abbott: I am not quite sure to what negotiations my hon. friend is referring.


Donald Methuen Fleming: I am referring to the position taken by the provinces a year ago in this building at the dominion-provincial conference, when they asserted their claim to the six minor taxation fields and priority in the fields of logging and mining. This amendment, I gather from the minister's statement, does go some way in recognizing the claim of the provinces to priority in mining and logging.


Douglas Charles Abbott: This amendment does not change the position at all. Paragraph (w) as contained in the law last year extended the principle that logging and mining profits taxes imposed by any province could be deducted from gross profits before computing dominion income tax. The amendment this year is a minor one to ensure that the profits tax will be calculated on the same set of profits, not on other profits.


Arthur Leroy Smith: In this subsection the term "mining operations" is a different expression from that used in subsection 3. I would ask the minister whether mining operations covers the drilling of an oil well.


Douglas Charles Abbott: I would have to give very much the same answer I gave in the other case. I do not believe it is. But if drilling an oil well is mining I suppose it would be covered.


Arthur Leroy Smith: Can the minister tell me why it is not? Drilling an oil well is clearly a mining operation. It cannot be anything else. It is going into the ground for minerals just as all mining is. 
'Mr. ABBOTT: I am told that no provincial government in Canada imposes any income tax on oil well companies. It all takes the form of a royalty, and that, of course, is clearly deductible. So that the question has not arisen as a practical one so far.


Arthur Leroy Smith: The minister is quite right about that. But let us look to the future. I live in a place where, if I may say so, with great respect, they may tax anything.


Douglas Charles Abbott: It might encourage the imposition of a profits tax by provincial governments. I do not know whether we should do that or not.


Arthur Leroy Smith: I take it that the simple answer is this. The minister says that he does not know whether mining operations covers drilling for oil or not.


Douglas Charles Abbott: I do not believe it does.


Arthur Leroy Smith: My opinion is so contrary to his. Oil is a mineral and drilling for oil is a mining operation. You go into the ground to get it. Gold is a mineral and you go into the ground to get it. The only difference is the size of the hole you put down.


Douglas Charles Abbott: My hon. friend is an expert on oil wells and I am not.


John Horne Blackmore: Before we pass this section, I wonder if it would not be a good thing to ask the minister what he would consider an appropriate occasion upon which we might discuss this whole question of taxing people for money rather than having it created by the dominion government itself. He suggested a while ago it might be a good thing to discuss it on an appropriate occasion. What would he suggest as an appropriate occasion?


Douglas Charles Abbott: My experience, in my seven years in the house is that, during the course of a session, numerous occasions arise in which this matter is debated at length. One occasion would, I suppose, be the estimates of the Department of Finance. I do not know; I do not want to put any ideas into the hon. gentleman's head, but I suppose that would be an occasion. Certainly in the course of the seven years I have been here I have found there have been many occasions such as the second readings of various financial bills and a variety of other occasions when the question has been discussed at some length whether we can finance without imposing taxes. What those other occasions may be I cannot think of many of them offhand, but I know that the amendment to this section of the Income War Tax Act is not the appropriate place.

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Ernest George Hansell: When would the minister like to be engaged in such a discussion, because we shall be glad to suit his convenience?


William Henry Golding: Order.


Mr. MacNICOL:: Following up the inquiry of the hon. member for Calgary West as to whether the production of oil is a mining operation or not, what is the minister's view of the operations of those who are planning to produce oil from the sands of the Atha-baska river? That is definitely a mining proposition. Will they have any consideration in the matter of exemption?


Arthur Leroy Smith: It is absolutely a mining operation, done with shovels, mining the oil from shale. It is mining and nothing else.


Douglas Charles Abbott: I repeat again what I said before, that the question only has significance in the case of a profits tax being imposed by a provincial jurisdiction. There is no provincial jurisdiction which imposes a profits tax on the production of oil today. That is my information. Therefore at the moment we are discussing a hypothetical question. It is an interesting one, and I always like to discuss hypothetical questions, but it has no practical significance in connection with this amendment.


Arthur Leroy Smith: But once something gets on the statute books and is interpreted, it stands that way. I agree with the minister that what they get is a royalty, in our province one of 12J per cent. The minister generously said that he allows them that, and I appreciate his generosity in that particular. Of course it is none of his business anyway because the province owns the resources. I am not suspicious of the minister; I am suspicious of the government of the province in which I live, and I should like the views of the minister perhaps a little more expertly directed than he has shown up to the moment as to why the drilling of an oil well is not a mining operation.


Douglas Charles Abbott: That is a question to which I would have to give the most careful consideration. I would hesitate to try to give a snap answer this evening.


Arthur Leroy Smith: I will accept that; I have been stalled quite often and I have become used' to it.


John Ritchie MacNicol: I have not yet received an answer to my question.


Arthur Leroy Smith: You never will.


John Ritchie MacNicol: Does the minister consider the production of oil from the tar sands of Alberta the same type of business as the production of oil from an oil well?


Douglas Charles Abbott: That is a question I am not really competent to answer. The answer is the same one I gave to the hon. member. It has no practical significance, because I believe that there is no profits tax as such imposed by the province on the particular development to which my hon. friend refers, and I have never had to consider it.


Arthur Leroy Smith: You spent millions of your own money up there.


Agar Rodney Adamson: Is it true that there are only two provinces, namely the provinces which have not come into agreement with the dominion, which impose corporation profits tax on mining operations? Is that so?


Douglas Charles Abbott: No. I believe there are other provinces. I would have to check, although I am told that Saskatchewan has a type of taxation which is called a royalty, but which is, in fact, on a net basis.


Agar Rodney Adamson: I know the circumstances of that tax which operates on a particular property. The point I am making is purely and simply directed to exempt taxes paid by mining and logging companies which pay corporation profit taxes to the provinces.


Douglas Charles Abbott: Not necessarily corporation profits taxes. This is profits tax or income tax on income derived from logging or mining operations, and it would not necessarily have to be a corporation; it could be an individual who has engaged in that type of work.


Agar Rodney Adamson: An individual engaged in cutting trees? I have never heard of a case like that. If he paid taxation it would be on a stumpage basis, would it not?


Douglas Charles Abbott: Probably it does not exist today; but suppose a provincial government imposed an income tax, as it is free to do. It could impose it on a man who was engaged in logging and mining operations. It would have to be a special tax imposed with respect to these two types of operation; but it would be clearly within the rights of a provincial government to impose such a tax. I do not know that they do now.


Agar Rodney Adamson: Therefore you are getting to this; you are exempting from double taxation mining and logging? That is the basis?


Douglas Charles Abbott: That is correct.


Agar Rodney Adamson: Mining and logging are exempt from double taxation?
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Douglas Charles Abbott: Yes.


Agar Rodney Adamson: If, as and when applied by a province?


Douglas Charles Abbott: That is correct.


[Stage Direction]
Section agreed to.
On section 5-Deduction not allowed on sertain taxes paid to provinces or municipalities.
Donald Methuen Fleming: Reference is made in the explanatory note to the dominion-provincial taxation agreements. It reads as follows:
The amendment repeals the definition of "corporation tax" now in the act to permit it to be kept in conformity with the dominion-provincial tax agreements.
Heretofore the committee knows nothing concerning the contents of the dominion-provincial tax agreements. Perhaps the minister would say a word in explanation of this note.


Douglas Charles Abbott: Of course there will be legislation introduced in the house later to authorize the execution of the agreements so far as the dominion is concerned. The terms of the agreements with these other provinces have been made public, and if my hon. friend has had an opportunity of examining them he will see that a corporation tax is defined in the terms of the agreements, and it is necessary that it should be defined because the agreeing provinces have undertaken to go out of the corporation tax field by the terms of the agreements. A corporation tax was defined in the wartime tax agreement. I cannot say that the definition is identical in the new agreement, but it is similar. I am advised that there have been a few minor changes.


Donald Methuen Fleming: But it would be much more desirable to have the definition, if it is an accepted definition, written into the act instead of giving the governor in council the right to define. We are back to the same old business of ministerial acts and discretions, to the same sort of thing I understood we were trying to get away from.


Douglas Charles Abbott: The difficulty is, as one finds when he looks into this, that it is a question of what may be a corporation tax. There is such a variety of differences that it is almost impossible, or we felt it was almost impossible, to set up a comprehensive definition which would include every type of tax that should be classified as a corporation tax. There are a good many ways of levying it, but the accepted types were, of course, taxes paid on capital and taxes on head office. My hon. friend is familiar with the types that 
were in force before the war; but we find that in the different provinces there is a great variety of these taxes which were imposed on corporations and they are corporation taxes, so that this is the deduction which we are disallowing but which requires definition of what will be included and what will not.


Donald Methuen Fleming: I appreciate the difficulties to which the minister refers, but I am coming back to this. There must be a definition at some time by somebody. What the government now proposes is that it be reserved to the governor in council. That is not going to make it any easier. Surely this is the place where definitions of this kind should be written.


Douglas Charles Abbott: Another is that it may have to be varied from time to time and it may have to be varied as other provinces come in and raise new points. We found in the discussions with the provinces, with which discussions have already been carried on, that a great number of points are raised, and each province has had its own particular types of taxes and its own particular cases that it has to put up. After giving the matter pretty full consideration, we came to the conclusion that the most satisfactory way was to set up in tue law that the governor in council, that is to say, the government of the day, shall have the right to define by regulation what constitutes a corporation tax for the purpose of not being allowed as a deduction from gross income for purposes of arriving at liability for federal income tax.


James MacKerras Macdonnell: Following what the hon. member for Eglinton has said, it does seem to me that there is great force in his point, and also that it is unfortunate, particularly when the question is one between the dominion and the provinces, that this should be done entirely unilaterally.


Agar Rodney Adamson: There is one thing about this section which seems to negative a previous clause. The side-note says:
Deduction not allowed on certain taxes paid to provinces or municipalities.
It does not specify any type of industry. This, presumably, is for an industry. I have not subsection 6 of section 6 of the old act before me, but you could here have one authority saying your mining or logging industry was exempt from a tax and another group advising the governor in council, saying it was not. It seems to me that this is the sort of draftsmanship which leads to confusion. This is something that will cause the federal and provincial governments a great deal of trouble a little later on, and I am referring to the northern mining municipalities. Under the

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provincial law, a mine pays a royalty to the municipality-I have forgotten how it works- and the municipality can tax certain surplus works. There is a definite part of its tax to the municipality on certain of its surplus works, but nothing on production. The working out of that arrangement is causing serious financial embarrassment to many northern municipalities. I would refer particularly to the township of Teck which has an extremely serious municipal problem. I wish the minister would clarify this section 5, because it seems to me that a decision under section 4 might exempt a corporation and then a tax could be reimposed under section 5.


Douglas Charles Abbott: Section 5 is really the repealing and reenacting of paragraph (o) of subsection 1 of section 6. In an extreme case, a province or a municipality could impose a tax which would take fifty, sixty, or seventy per cent of the corporation's income. If that were deducted as an expense, then the dominion would be left with only thirty per cent of the total revenue on which it could impose a tax.


Agar Rodney Adamson: You are cutting the province's throat there.


Douglas Charles Abbott: That may be.


[Stage Direction]
Section agreed to.
On section 6-I.T. paid to a country other than Canada by subsidiary non-resident company.
Douglas Charles Abbott: There is a drafting amendment to section 6 which I will ask one of my colleagues to move. It is:
That subsection 2 of clause 6 of Bill 269 be amended by inserting before the word "company" in the second line of subsection 2 C the word "non-resident" and by adding a new subsection 2 E as follows:
"2 E. A company entitled to make deductions from its taxes as provided in subsection 2 B of this section shall not be entitled to make a deduction from its taxes under subsection 2 A of this section."


Ian Alistair Mackenzie: I move accordingly.


[Stage Direction]
Amendment agreed to.
James MacKerras Macdonnell: This section goes beyond the terms of the budget resolution to some extent, does it not?


Douglas Charles Abbott: I do not know that it does. It certainly does not go beyond what the budget resolution intended. The budget resolution was drafted in rather general terms, but it goes down through the subsidiary of a subsidiary as my hon. friend will see by looking at clause 2 C.
Section as amended agreed to.
Sections 7 and 8 agreed to.
On section 9-When amount of income is $2,000 or less.


Douglas Charles Abbott: I have a drafting amendment here which I will ask my colleague to move. It reads:
That clause 9 of Bill 269 be amended by deleting "section thirty-three" in line thirty on page seven and substituting "section thirty-five" and by deleting "time when it made" in lines forty and forty-one on page seven and substituting "day on or before which it is required to make" and by deleting "when it made" m line three on page eight and substituting "on or before which it is required to make" and by deleting "at that time" in lines five and six on page eight and substituting "forthwith after receiving the notice of assessment."


Ian Alistair Mackenzie: I move accordingly.


[Stage Direction]
Amendment agreed to.
Agar Rodney Adamson: I should like to have some clarification of section 7. I know we have passed it, but I ask the minister's indulgence. This refers to foreign-owned corporations. The explanatory note says that it is a corporation owned entirely outside Canada. I should like the minister to explain this, because it seems a little involved. I am thinking of corporations such as the International Petroleum Company, which is a Canadian corporation holding considerable foreign securities.


Douglas Charles Abbott: This is the section which imposes a tax of five per cent on non-resident corporations in respect of dividends received after April 30, 1947. The United States revenue act has a corresponding provision imposing a tax of five per cent on Canadian parent companies with respect to dividends received from United States subsidiaries. We are imposing a similar tax on United States parents with respect to dividends received from Canadian subsidiaries paid after April 30, 1947. This is a taxing section.


Agar Rodney Adamson: A Canadian corporation having a wholly owned subsidiary in any foreign country is liable to this five per cent tax?


Douglas Charles Abbott: No; it is just the reverse. The Canadian company may be liable to a five per cent tax imposed in a foreign country, and in point of fact I understand the United States does impose such a tax on Canadian parents with respect to dividends received from United States subsidiaries. Of course the Canadian company may take credit here for that tax. We are imposing the same tax on United States parent companies with rbspect to their Canadian subsidiaries.
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Agar Rodney Adamson: The United States company with a subsidiary here would pay the five per cent tax?


Douglas Charles Abbott: Yes.


Edmund Davie Fulton: Has the minister any estimate of the number of cooperative taxpayers that are likely to be affected by the new provision?


Douglas Charles Abbott: We have no figures; it would have to be a guess. There is quite a large number of these small producer cooperatives whose income is not large. We have received representations that it is difficult for them to estimate in advance the amount of tax that they will be liable for and to make instalment payments. This was one of the submissions made to us on behalf of the cooperatives and it was considered to be a reasonable request.


Edmund Davie Fulton: It seems to me that the whole question of taxing cooperatives is giving rise to great difficulty. That is probably inevitable because of this new effort which is being made and the new principle which has been introduced into the act. It seems to me that it is hard to assess that interest. It is hard to assess that interest at four per cent between, as I understand it, the date when they make their first payment of tax and the time when the final assessment is sent to them. For the very reason that it is difficult for them to decide on how much tax they will have to pay, and provided that they make a bona fide effort to arrive at that amount, why should they be charged interest while they are waiting for the final word from the assessing authority as to how much they are allowed?


Douglas Charles Abbott: They can tell pretty well
at the end of the year, when they file their return, how much tax they are liable to pay. This is intended to relieve them of the obligation of making an estimate month by month as the ordinary corporation has to do in making an instalment payment on account of tax. These small cooperatives can wait until their year is closed, close up their books, have their accounts entered up. Then they know, if their bookkeeping is accurate- and I assume it is

the amount of their tax liability, if any, and they file their return the same as any other corporation, and pay their tax. If they have underestimated their tax, then, when the assessment is made, they will have to pay interest on the amount of excess tax, if any, which was due, the same as any other taxpayer or the same as the individual.


Edmund Davie Fulton: I think that provision for
penalty is unfair whether it is applied to a cooperative, an individual or a corporation, because so frequently there is delay in the final assessment. That may not be the fault of the department; it may be simply because it is understaffed. But it is not the fault of the taxpayer. It is an honest error on his part. This is a new provision, and I regret seeing this penalty extended to cooperatives.
With regard to the whole question of the difficulty that cooperatives experience in arriving at their liability for taxation, I have a letter which just came in today from a cooperative in my constituency. It appears that a new form, PD 1, has been designed and it is for the use of taxpayers claiming deduction from income for payment to customers such as these cooperatives claim as a result of paying dividends to patrons. The form refers to the incidental brochure re cooperatives which it states must be used for the instruction of the taxpayer in filling out his form and with it is an accompanying letter from the department saying that this brochure would be found of great assistance. My correspondent says that when they wrote to the department asking for the brochure, the department replied that, owing to the large number that had been asked for, it was temporarily out of print and would be forwarded as soon as available. This was on May 19. My letter is dated June 5. In other words, the cooperatives are finding it difficult to know just how to assess their tax. There is this brochure which the department got out to help them, and the brochure is not available. I should like to ask the minister what, if any, steps are being taken to speed up the preparation of further copies and get them into the hands of the cooperatives?


Douglas Charles Abbott: I will make inquiries into that and see what the cause of the delay is. As the committee will appreciate, we are still in the trial and error stage so far as returns from these cooperatives are concerned. I feel sure that, as regards any difficulties which crop up as a result of this year when the first returns are being filed, if it is something which can be corrected by administrative action, we shall see that it is corrected. If it is a proper case and is something that requires legislative action, we can take care of it in that way.
I will make inquiries as to why the brochure is not more readily available.


[Stage Direction]
Section agreed to.
On section 10-Regulations.
Douglas King Hazen: I regard this section with some alarm. I consider it most objectionable,

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if I understand it correctly. I refer to the first part of it which reads as follows:
(3) The governor in council may make regulations not inconsistent with this act
(a) prescribing the evidence required for any purpose under this act.
It seems to me that the evidence required in the case of a prosecution under this act should not differ in any way from the evidence that is required in a court of law in any case that comes before it. It seems to me that the evidence required in any legal proceeding under this act should be subject to the same rules of evidence as are required to be complied with in a court of justice in any legal suit or proceedings in that court. It is a well established principle of law that a person who alleges must prove; and it is also a well established principle of law that a person charged with a crime is presumed innocent until he is proved guilty according to the rules of evidence of the land. To prove a person guilty of an offence, laws of evidence have been gradually developed, through trial and error, in the interests of justice. Hearsay evidence and secondary evidence are not, in most cases, permitted. It is now proposed by this section, as I read it, to give to certain bureaucrats powers to make their own laws of evidence. I see no reason why this should be permitted. I see many reasons why it should be opposed. Why should we make it easy for these officials to set aside the well established rules or laws of evidence, make it easy for them to get along by setting aside those laws and, in consequence, obtain convictions against persons who may be innocent?


Douglas Charles Abbott: There is no intention of that kind here. If that is the case, we would not put it in. There is no intention to affect the rules of evidence in prosecutions. It is merely in the administration of the act.


Douglas King Hazen: I may be altogether wrong in the way I have read this section. I trust that I am.


Douglas Charles Abbott: Unless you are, we should certainly amend it. I think it relates only to administration. I should like to say a word of explanation, after my hon. friend is through, as to what the purpose of this is; because it is simply to facilitate administration. It is under the heading of "administration". Will my hon. friend allow me to give an example of what I have in mind?


Douglas King Hazen: I know what you have in mind, but does the wording of the act confine you to what you have in mind?


Douglas Charles Abbott: Well, the courts would never be bound, in a criminal prosecution, by anything like this. We want to be able to get the best evidence. If a man says he is the father of ten children living in Czechoslovakia, we want to be able to take a declaration to that effect.


Douglas King Hazen: Where do you find this is only for administration?


Douglas Charles Abbott: It is under the heading of "administration". You have to take it in the context. It is sub-section 3 of section 75. It is the third sub-section in part 10. Part 10 is headed "administration". Under section 75, there are now two sub-sections, 1 and 2. This is added as sub-section 3. My hon. friend may be right. It is intended to be purely to supplement the administrative provisions of the act and to facilitate its ready administration. As the committee will realize, in a great many cases, evidence of dependency, evidence of the extent of medical expenses, evidence as to all other kinds of odds and ends of that kind, if you followed the strict legal rules of evidence, requiring the best evidence, it might impose an onerous burden on the taxpayer. It was intended that, under this provision, there should be considerable latitude whereby the governor in council could set up a code of rules under which statutory declarations would be accepted as evidence of certain claims made for exemptions, and that sort of thing. There is no intention that this should have any application for prosecutions for offences under the act; and if it could be interpreted in that way, certainly the section should not go in. But it was submitted to the Department of Justice, and I am told we were advised that was not the case. Frankly I had not considered that phase of it until my hon. friend raised it.


Douglas King Hazen: What struck my eye when I glanced at it previously was section 75, subsection 2, which definitely says the minister may make any regulations deemed necessary for carrying this act into effect. It seemed to me that those words were wide enough to give him power to make any regulation he saw fit. Now you go on and add this new clause saying that the governor in council may make regulations not inconsistent with this act. It does not say "not inconsistent with the administration of this act", but "not inconsistent with this act", prescribing the evidence required for any purpose under this act, not merely for the purposes of administration.


Douglas Charles Abbott: Certainly there is no intention to have it cover any such field as my hon. friend suggests. It does not seem to me it does, but if there is any doubt, perhaps we had better let the section stand. I can drop it if
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necessary, but I think it is a useful section to have and it was put in at the suggestion of the [DOT] department to facilitate the setting up of a code of which all those interested could be advised, under which they might derogate from the strict rule of the best evidence.


Douglas King Hazen: I was going to move that it be deleted, but if it could stand-


Douglas Charles Abbott: Perhaps we had better let that section stand, and I will get an opinion from the Department of Justice as to whether it could be extended in the way my hon. friend suggests.


Donald Methuen Fleming: If the minister is going to let that clause stand, does he wish to hear any further representations on it? It is objectionable from another point of view.


Douglas Charles Abbott: I have no objection to additional representations on it, if hon. members want to make them.


Donald Methuen Fleming: The hon. member for St. John-Albert has dealt with the first subsection. It seems to me that sub-section 3 (b) may likewise go farther than is strictly necessary. We may be including here, in the class of persons who may be required to make information available, people who have no present liability under the act to make returns. I am quite sure the minister will tell us it is not his intention; nevertheless we are not legislating in those terms; we are legislating in terms of the language of the act and the powers it may give; and this conceivably could be used to enable the minister to conduct inquisitions in the case of persons who are not under obligation to make returns.


Douglas Charles Abbott: I can give consideration to that, too.


James MacKerras Macdonnell: Might not the minister reconsider both subsections for the reasons given and perhaps make an alternative suggestion tomorrow?


Douglas Charles Abbott: Yes, I shall be very glad to reconsider them. I do not want to ask for any powers that are unreasonable. All we are trying to do is get a section which will provide reasonable flexibility and more efficient administration of the act. As I said before, if there is any question of paragraph (a) in particular going to the extent suggested by the hon. member for St. John-Albert I would drop it like a shot. I do not think it does go that far, but we can 
let the whole section stand and I will look at both (a) and (b) and see how far they go.


Gordon Knapman Fraser: How far back can the department go when they ask for evidence? Is there any regulation? I could not see any in that regard.


Douglas Charles Abbott: Evidence of what?


Gordon Knapman Fraser: Evidence that a tax has or has not been paid, or that funds have been received for which a return has not been
made?


Douglas Charles Abbott: There is no limit in law. I do not think they very often go back once the return has been assessed and the notice of assessment issued. I do not believe cases are often reopened unless there is some allegation of fraud or concealment, or something like that; and of course fraud is never outlawed.
Section stands.
On section 11-Refunds.


James MacKerras Macdonnell: In sub-section 2 of section 11 there is a definite time limit, in these words:
. . . the minister may, upon an application made on or before the thir.ty-first day of December, nineteen hundred and forty-eight . . .
Is there any escape clause at all, or is that adamant?


Douglas Charles Abbott: The section provides that they have until the end of December, 1948, to get in their application for refund. That is an additional relaxation. Then they will be subject to the general rule.


Lewis Elston Cardiff: Is it necessary for a person who has paid more income tax than he is liable to pay to apply in writing before that extra money will be refunded?


Douglas Charles Abbott: If he has filed an income tax return, no; because that of itself constitutes a request for a refund. If he has not filed an income tax return, then the onus is upon him to notify the tax department that he claims to have paid more tax than he should have paid, and ask for a refund.


Lewis Elston Cardiff: What length of time does he have to wait before he gets back that money?


Douglas Charles Abbott: He can make application as soon as the year is over. He would have to wait until the end of the year; if it were the calendar year 1947, for example, he would have to wait until the end of 1947. Then he would

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know what his income was for the year, and would know that it did not bring him into a taxable bracket.


Lewis Elston Cardiff: I can tell the minister that plenty of people have been waiting for three or four years to have this money paid back.


Douglas Charles Abbott: My hon. friend is referring to delay in refunds. That is because the Department of National Revenue, owing to staff shortage and for other reasons, has not been able to catch up with the work.


George Stanley White: Has the minister ever considered that when assessments are made showing that a further tax is payable, some explanation should be placed on the assessment notice saying what the extra tax is for or what the mistake was? I think the minister will find that in the district offices when the assessment is made, often only a figure is mentioned. If there is a mistake, or anything of any importance, the solicitor has to communicate with the tax office. I think it would save a great deal of time and would satisfy a great many people if some explanation were given.


Douglas Charles Abbott: My hon. friend is quite right. I am told that during the war, because of the shortage of staff and in their hurry to get out the assessments, that work was curtailed; but instructions have gone out to the districts that, where an assessment is to be made, there is to be an explanatory statement reconciling the new assessment with the original assessment. It is important that this should be done.


Stanley Howard Knowles: I welcome three words in this section which were not in it before. I refer to the words, "without application therefor", as they appear at line 34. That seems to give the government power to make refunds, even if application has not been made for them. Does that signify anything effective?


Douglas Charles Abbott: It is to bring it into line with the other section. That deals with the period prior to the issue of the notice of assessment. It uses the words, "without application therefor, or on application ini writing therefor by the taxpayer within two years from the end of the calendar year." In the case of the income tax payer who files a return, the department has to check that return; and if it develops that overpayment has been made, power is given here to make a refund at or prior to the issue of a notice of assessment.


Stanley Howard Knowles: This section comes under part 16 of the act, which relates only to tax deductions at the source. In the first part of
this sub-clause it says, "under this section", so that we are dealing only with tax deductions at the source.


Douglas Charles Abbott: It brings it into line with section 56.


Stanley Howard Knowles: I was wondering whether it meant that the department might reach the point where people who had deductions made at the source, which should not have been made, would receive them back automatically, without application?


Douglas Charles Abbott: It would happen, if we had any means of checking what the overpayment was. But it is almost physically impossible to do it.


Mr. JACKMAN:: In respect of a man, or the returns of a taxpayer, where there has been overpayment for some years, and underpayment for other years, before the final assessment is made, is the taxpayer charged at a certain rate of interest? What is the rate of interest for the deficiency years, and is no credit allowed for the surplus years?


Douglas Charles Abbott: That is correct. The rate that is payable on the underpayment would be the rate fixed under the act.


Harry Rutherford Jackman: What is that? Is it five per cent?


Douglas Charles Abbott: It is four per cent until one month after the assessment is issued, and then there is a three per cent penalty on top of that, if it becomes overdue.


Harry Rutherford Jackman: Why does the rule not work both ways, particularly if it is the same taxpayer and he happens to have overpaid through error, if you like, or through some change in understanding of the tax law? Why is he not given the same break in respect of underpayment?


Douglas Charles Abbott: I am not familiar with the internal administration, but I understand that these returns are assessed from year to year, the earlier returns being taken first. Let us say the year which is reached is 1943. It is assessed, and it is found there is an underpayment. An assessment notice is issued and the underpayment is collected with interest. Then it passes on to 1944 and the same thing happens there. The assessment is paid, with interest. Then you reach 1945 and find there is an overpayment. In that instance there is a refund; but no interest is paid on it.


Harry Rutherford Jackman: It seems to me that it is not a matter for jocularity. If someone wishes to collect interest when there is an innocent deficiency, particularly when the same tax-
Income War Tax Act

payer is involved, why should he not be allowed some credit for surplus payments in other years?


Douglas Charles Abbott: I am advised that where several years are assessed at the same time and overpayment is found in one year, with underpayment in another, no interest is assessed from the time overpayment was made, if it is credited to the other year.


Harry Rutherford Jackman: But that still does not answer the question. I do not know why a taxpayer should not be allowed a credit for overpayment. The crown wishes to have the money. I do not ask the crown to get into the same position as occurred in the United States administration where people purposely overpaid in order to collect the six per cent interest. But where there is an innocent overpayment, the crown should allow some compensation for it.


Douglas Charles Abbott: I do not know what rate should be suggested.


Harry Rutherford Jackman: You had no difficulty in assessing a rate of three or four per cent.


Douglas Charles Abbott: But that is done for a very real purpose. That is the type of penalty imposed on a taxpayer, who has control himself. He can estimate his tax accurately. If you do not impose an interest penalty there is a tremendous temptation to borrow money without interest from the public treasury.


Donald Methuen Fleming: There is another angle to the matter of penalty which, in fairness, the minister must acknowledge. So long as the situation continues as the minister concedes it to be, namely with a considerable backlog of work in the Department of National Revenue, is it fair to go on assessing interest at the rate of four per cent per annum-and it was formerly eight per cent-on people who have not deliberately made any error or underpayment, but who may have made a simple error?
There may have been misunderstanding in connection with interpretation of the statute; and I am bound to say that these amendments do not make the statute any easier for interpretation by the man on the street. It will be more and more difficult for more and more people to interpret it, and they will have to go to experts for advice.
In the light of these facts, it seems to me either that drastic steps must be taken in the Department of National Revenue to speed up this work and thus to reduce this considerable backlog or, in fairness, some step must be taken to reduce the interest charge. If the

situation were as we would like to see it, namely the department following up quickly with its assessments of returns made, then there would not be any great complaint about the rate of four per cent, on a short period. But when you have assessments running behind four or five years it is a heavy burden. In the early years the penalty is still eight per cent.
In all fairness, I put it to the minister that an interest rate of four per cent is still too large a rate, so long as there is a considerable backlog. And from what we can tell, there is no prospect of any substantial reduction in that backlog in the near future.
The Minister of National Revenue indicated on an earlier occasion that he hoped some headway was being made-and probably so-in some tax jurisdictions in the dominion. But certainly in the one with which I am most familiar there is still a tremendous backlog. So long as that backlog persists, will he not have regard for a reduction in the interest rate, which I say, is grossly unfair if people are to be kept waiting for years.


Douglas Charles Abbott: The rate of interest can be considered. There is a limit of twenty months on it now.


[Stage Direction]
Section agreed to.
Progress reported.
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Tuesday, June 10, 1947