THE MINISTER OF JUSTICE


Mr. STANLEY KNOWLES (Winnipeg North Centre):: Mr. Speaker, as members of this house I feel we would be remiss in our duty if we did not take this first opportunity to say how sorry we were to get the news last evening of the intention of the Minister of Justice (Mr. Ilsley) to retire from the government. In this house it is inevitable that among the different parties there will be differences of opinion, and that was so in this case. On the other hand I think I can say on behalf of members of this group and hon. members generally that there is no member on the government benches for whom the house as a whole and the country has had higher respect than the right hon. gentleman. He will be remembered in particular for the service he gave this country as wartime minister of finance. Even in that capacity people at times took his name in vain, but the job he did, particularly in the field of price control, will long be a monument to him.
Some of us might hope he could be persuaded to change his mind, but our experience with him has taught us that he is the kind of person who reaches a point where finality must be recognized. If it is definite that he is leaving us, we can only say that we are sorry indeed, but we wish him the very best.


Mr. JEAN FRANCOIS POULIOT (Temis-couata):: Mr. Speaker, this is an occasion on which I agree entirely with what has been said by the hon. member for Winnipeg North Centre (Mr. Knowles). I have known the Minister of Justice (Mr. Ilsley) for a long time. He is an old-timer in this house; and he must feel some comfort in hearing praise that is usually reserved until after a man is dead.
The Minister of Justice is a democrat. It is well known in this city that he does not blush when he gets into a streetcar. He does it naturally, without pose. He is a hard
worker and he is honest. I need not say he is a gentleman, because all hon. members of this house are gentlemen.


Mrs. STRUM:: No.


Jean-François Pouliot: With one exception, which proves the rule. The Minister of Justice is a remarkable debater with whom I have had to cross swords on many occasions. I very seldom agreed with his policies when he was minister of finance, but that has not affected our friendship. It is remarkable the way this house respects freedom of thought and of opinion. We may entirely disagree and yet remain good friends. By the way, the late Colonel Ralston probably never understood why the Minister of Justice and I were friends, and neither could I understand how the minister could be friends with Mr. Ralston; but that did not affect our good relations.
When the Minister of Justice gives his opinion, it is clear cut; and then he has the great merit of acting accordingly. There is no possible mistake about the choice he makes. For a time he had the most thankless job of all cabinet ministers. As minister of national revenue, and as minister of finance in wartime, he was the goat of everybody in respect to his legislation, but no one ever suspected him of having a wrong intention. He meant well, in his own view. Now he is in the Department of Justice, which is supposed to be the kingdom of peace and calm. He is also the Attorney General of Canada, both positions of great responsibility, which he is filling very well. I wish him every success in life. I wish him in the practice of his profession the same success he had in politics, and at the same time I express my very best wishes to his charming wife and to his children.


Mr. GORDON GRAYDON (Peel):: Mr. Speaker, I should like to join in the tributes paid this afternoon to the Minister of Justice (Mr. Ilsley). Long after the days of political differences have been forgotten, the basic foundations which support men in public life will remain. One of the things most of us will never forget is the sterling character of the
4602

Tribute to Right Hon. J. L. Ilsley
Minister of Justice, both in private and in public life, while he has been a member of the House of Commons and of the government.
Character in public men is always remembered. To the minister's attributes of integrity and honesty, and his generally sound approach to the many matters which came before him in his various capacities, the public will pay tribute long after he has left this chamber. Let me say to him that if in his presentations before the bench he adheres as strenuously to his point of view as he has in respect of arguments made by the opposition, I fancy we shall witness either a succession of judgments in his favour, or a series of resignations by judges; because there will be no compromise. His arguments will be clear-cut and well advanced.
When the resignation of the Minister of Justice becomes effective it will be a heavy loss not only to the government but to parliament and to the country. With hon. members who have preceded me, I wish him every success in the practice of the profession to which he is soon returning.


Right Hon. W. L. MACKENZIE KING (Prime Minister):: Mr. Speaker, if I did not rise first in the house this afternoon to express what I know is the general regret concerning the announced intention of the present Minister of Justice (Mr. Ilsley) to resign his portfolio at the end of June, it is because I felt that, happily, the time for valedictories had not yet come. The minister will be with us for another month at least, and will have further measures to introduce. I hope when he places them before parliament hon. members who have shown their esteem by their words and applause this afternoon will realize how important it is that they recognize his wisdom and judgment in matters of the kind.
May I say however, as I said last night when I was asked by the press to express my views respecting the announced intention of my colleague to retire from the ministry, that I know there will be general regret throughout all Canada that the Minister of Justice has found it necessary to consider retiring from his position as a minister of the crown to resume the practice of law.
To his colleagues in the cabinet, certainly his resignation will mean a very great loss indeed. It is one which will be deeply felt personally, and on public grounds by every member of the government. I cannot express too strongly how deeply I personally feel the loss.
It has been a pleasure this afternoon to realize that what I said last night, to the effect that I believe the minister's proposed retirement would be regretted by all parties

in the house, irrespective of their political affiliations, has already been manifested. I would say more at the moment were it not that, as I say, the time for farewells has not yet come. There is still opportunity for my colleague to change his mind. We on this side of the house would be very happy if he did; and I hope that, should the minister return to the ministry at some later time, hon. members will recall what they have said this afternoon with regard to his exceptional ability, great integrity and fine record of public service, all of which is more than merited so far as my colleague the present Minister of Justice is concerned.


Mr. J. H. BLACKMORE (Lethbridge):: Mr. Speaker, at a time like this it is important that we have at the head of affairs in the country and as members of the House of Commons men of wide experience and proven character. Because of these two considerations, among others, we in this group regret that the Minister of Justice (Mr. Ilsley) has found it necessary to withdraw from the government. We wish him the greatest success, and trust that the work upon which he is about to enter will not prove such a heavy drain upon his physical strength as the duties of the offices he has occupied during the last few years.


Mr. T. L. CHURCH (Broadview):: Mr. Speaker, the Minister of Justice is a great public servant. While those from my native city of Toronto may not have agreed with everything he has done, let me tell him that he has the admiration and respect of the people of that large commercial and industrial city. Speaking personally, I have found the minister most courteous in any contacts I have had with him. He is a man of sincerity, of modesty, and of great ability. I wish him well in the years ahead.


Right Hon. J. L. ILSLEY (Minister of Justice):: Mr. Speaker, I am most grateful to hon. members for the kindly sentiments they have expressed this afternoon. Naturally I had not expected that anything of the kind would occur in the house. Nevertheless I should like to express my gratitude to the hon. member for Winnipeg North Centre (Mr. Knowles) for his remarks at the outset, and I deeply appreciate the words of my old friend, the hon. member for Temiscouata (Mr. Pouliot), who was in the house when I became a member of it in 1926, and with whom my relations have been on the friendliest footing ever since.
I appreciate too what has been said by the hon. member for Peel (Mr. Graydon) and

Flood Relief in British Columbia
also what he said last night in his message to the press. May I express my pleasure at the few words uttered by the Prime Minister (Mr. Mackenzie King), by the hon. member for Lethbridge (Mr. Blackmore) and by my old friend, the hon. member for Broadview (Mr. Church).
Naturally it is with feelings of regret that I sever my connections with the House of Commons, where I have been a member for twenty-two years, and thus terminate an experience which, on the whole, has been a pleasurable one.
As the Prime Minister has said, I shall be in the house for another month, and the time for valedictories has not yet arrived. Nevertheless may I say again how pleased and how touched I am by the remarks made this afternoon by hon. members from all parties in the house.



VETERANS AFFAIRS


[Stage Direction]
Hon. LIONEL CHEVRIER (Minister of Transport) moved,
That the name of Mr. Bryce be substituted for that of Mr. McKay, and that the name of Mr. Matthews (Kootenay East) be substituted for that of Mr. Moore on the special committee on veterans affairs.
Motion agreed to.


[Stage Direction]
On the orders of the day:
William Lyon Mackenzie King: Mr. Speaker, I should like to say a word to the house about the government's position with respect to flood conditions in British Columbia.
Yesterday I was asked a question by the hon. member for Kootenay East (Mr. Matthews) with respect to the financial assistance which the government might be prepared to give to a certain municipality which he named. The hon. member had sent me a notice of his question in advance, and I had an answer prepared dealing specifically with the point he raised, namely, financial assistance by the government to a municipality.
I notice from accounts which appear in some of today's papers that an interpretation has been placed upon my answer which is not at all justified in the light of what the government has been doing, and is prepared to do with respect to meeting the very serious situation in British Columbia. I would refer hon.
5849-292J
members to the question which appears in Hansard and to my reply thereto. They will see that my reply was directed solely to a matter of procedure and of method. I made it quite clear that what I said related solely to financial assistance. I stated that if there were need for financial assistance to British Columbia or any part of that province, the request for assistance from the dominion should be made through the government of the province. A municipality should make its needs known to the province, and the province would make its representations to the dominion. I shall read the last paragraph of my statement. It will be found on page 4553 of Hansard, as follows:
I assume that if the situation is such that the provinces in which these disasters occur would feel the necessity of financial assistance from the federal government, the government would be so advised by the provinces themselves. I do not believe we would be expected to act on communications received from municipalities. Municipalities would communicate with provinces in the first instance, and our action would be taken in the light of representations that might be made by provinces concerned.
I want to make it quite clear that my reply was to a question which was handed to me by the hon. member for Kootenay East. His question was supplemented by one from the hon. member for Kamloops, asking me to reply in reference to the situation generally. My reply was in reference to the situation generally in so far as financial assistance to municipalities was concerned. I had no other thought in my mind but to deal with the specific matter of financial assistance by the federal government to municipalities which had suffered injury.
May I say that from the beginning of the disastrous floods, our government has taken action, and that on a considerable scale, in co-operation with the government of British Columbia. Possibly the best manner of informing the house as to what has been done would be for me to have my colleagues who have been in touch with the premier of the province and with the situation there state to the house exactly what has been done by their respective departments in the last few days, and what the government is prepared to do.
Let me make this quite clear. From what I have been able to ascertain, I am sure the flood conditions in British Columbia constitute a very serious and grave situation. The federal government should be and is prepared to co-operate to the utmost with the province and help to meet it. We are prepared so to do, but in so doing we must seek to avoid confusion with respect to matters which will come up for subsequent settlement with respect to financial outlays involved.

Flood Relief in British Columbia
For example, hon. members will have seen that the premier of the province has been giving directions to different branches of the armed services. That action would be altogether irregular and impossible under existing conditions without the consent of the Minister of National Defence (Mr. Claxton). I think I should ask the Minister of National Defence, in the first instance, to indicate to the house what has already been done by the armed forces, and then I should like my colleagues in some of the other departments to state just what has been done by their respective departments jp to the present time.
May I make it perfectly clear that with respect to any request that comes to us from the province, that request will be immediately considered. The government of Canada is prepared to do all that it possibly can do in the way of co-operation with the province to meet the appalling situation that exists at the present time and which I am afraid may grow even worse.


Gordon Graydon: Before the Prime Minister calls on the other ministers, may I ask him to comment on the question which was raised in the house yesterday with respect to the suggestion made by the Minister of Trade and Commerce (Mr. Howe) when he was out there. I think the Prime Minister was going to look into that.


William Lyon Mackenzie King: As my hon. friend knows, reference was made to some remark which the Minister of Trade and Commerce had made. I have not been in direct touch with the Minister of Trade and Commerce since, and I cannot say whether he was correctly reported. I am not in position to answer that.


Hon. BROOKE CLAXTON (Minister of National Defence):: Mr. Speaker, I should be glad to supplement the rather short statement I gave the house last Friday in connection with the work being done by the armed forces in relieving the flood conditions. From the outset of this serious and difficult situation the Royal Canadian Navy, the Canadian army and the Royal Canadian Air Force, in accordance with instructions from national defence headquarters in consequence of my directions, have been co-operating in every way possible with the provincial and local authorities.
This began on May 23 when the first reserve army unit to get to work was activated at Kimberley. Since then a very considerable proportion of the reserve army units and virtually all the active army forces on the Pacific coast have been working full time.

I have kept in close touch with the situation and am receiving reports several times a day. There is continuous radio and teletype communication between the units in the Fraser valley and national defence headquarters. Last night I had two long-distance telephone communications with Premier Johnson. On the first of these he suggested that in order to co-ordinate relief activities it would be desirable to have them directed by Colonel Snow, the area commander of the Canadian army on the spot. Instructions were accordingly given by myself, both to Colonel Snow in a later conversation and through the chief of the general staff at national defence headquarters. I was also in touch through the night with further developments.
Perhaps I might briefly tell the house something of the activities of the three services so that hon. members will know the extent of the operations involved. As for the navy, these operations have been directed by II.M.C.S. Antigonish, a frigate at New Westminster, with Commander O. C. S. Robertson,
G.M., in charge. He has under him thirty naval craft, including tugs, a supply ship, six landing craft, yard craft, .motor boats and ships' cutters and whalers which are operating between the mouth of the Fraser river and Agassiz. Officers of both the Royal Canadian Navy and the Royal Canadian Naval Reserve are engaged; in this operation.
The naval radio transmitting station at Sumas had to be evacuated this morning. That station is part of a network around the world, and it handles British commercial ship traffic in the northern Pacific. The job is being undertaken by the cruiser H.M.C.S. Ontario, at Esquimalt, which is handling the traffic from there. The R.C.N. have also established a complete communications network for the whole Fraser valley, centred at Aldergrove. It is in communication with Esquimalt and the army signal officer at Vancouver both by teletype and radio. All the various craft in the area are provided with walkie-talkies. These efforts in the field of communications are enabling local authorities to keep in touch with the situation and also enabling ordinary messages to be carried to and from the people concerned.
The army similarly has been doing a very considerable job in connection with signals. It is handling all the ordinary commercial traffic into Prince Rupert as the other facilities have been washed out. The army has been working to set up with the other services a number of wireless circuits operating from Vancouver to Edmonton and from Victoria to

Flood Relief in British Columbia
Calgary to assist communications. Altogether 120 ranks in the army alone are engaged in this communications work and preparations are being made to handle all commercial traffic in the area should that become necessary. It is a very large undertaking. To assist in this, twenty-one army personnel were yesterday flown from Ottawa to Vancouver.
In addition, the army has been assisting actively in flood control by actual work on the reinforcement of dikes. It supplied all the sandbags asked for. Altogether 290,000 were flown into the area, and there are reserves of another 300,000 established at places between Winnipeg and Vancouver so that they can be flown wherever they are required. The army has made available to the Red Cross large numbers of tents, blankets, and equipment of various kinds, including pumps, assault boats, traction equipment, and so forth. It is working closely with the provincial and local authorities.
The air force has been supplying the air lift for sandbags and other materials, and in addition has been carrying considerable quantities of blood plasma, drugs, tents, signal equipment, water pumps, and so forth. All aircraft in the area have been made available to the authorities in the area for reconnaissance and relief work. A number of reconnaissance flights have been made, flying the provincial authorities over the area so that they can see what is being done. Altogether sixteen aircraft have been employed in the lifts, with five other aircraft engaged on the spot.
The R.C.A.F. has also been asked to make available hangars and other buildings for the reception of evacuated persons at Abbotsford, and the equipment depot in Vancouver; and it has provided cooks, cooking equipment and other facilities wherever required.
I am glad to say that Premier Johnson expressed great satisfaction at the co-operation being extended by the armed forces and it is a source of satisfaction that we should have been able to bring aid to the people in the area who need it so much. I can assure the house that anything further that can be done by way of co-operation with the provincial and local authorities will be done if it lies within our power.
Hon. members might be interested in a message I sent to the army and naval commanders on the spot last night:
I would like you to know that the great efforts being made by the members of the armed forces to assist provincial and local authorities to meet emergency are greatly appreciated.


Mr. PEARKES:: Will the minister give us some idea of the number of army troops
actually employed on the reinforcement of the dikes?


Brooke Claxton: I do not know just how many are employed on the dikes, but altogether, of the army there are 1,300 assisting in the work of flood relief; navy, 750, and air force, immediately on the scene, apart from those engaged on transport work farther back, 250.


Hon. ALPHONSE FOURNIER (Minister of Public Works):: Mr. Speaker, may I add a few words to what I said the other day with regard to flood conditions in British Columbia. At that time I mentioned that the deputy minister of public works was out there, and he returned to Ottawa yesterday. The situation as described in the newspapers is accurate, my deputy reports. He was out there to direct the work of the engineers of the Department of Public Works.
Our interest in these works on the Fraser river may be divided into two phases. The first is dredging from the gulf of Georgia on the north arm and west of New Westminster, and on the main river. We have been dredging for a good many years on the north arm and on the main river. That helps to increase the flow of the river. We have two dredges working continuously on that part of the Fraser river, and at different times have awarded large dredging contracts. This is one way in which we help to regularize the flow of the Fraser river.
The second kind of work to which we have contributed in the past has been to help in the construction of dikes at Agassiz, Kirkland island and other places. We have contributed through the diking commission of British Columbia to the erection and maintenance of some of these dikes, and we propose, after these terrible conditions are over, that so far as navigation conditions justify we shall continue to help in the construction of these -dikes. Our engineer out in British Columbia has been instructed to co-operate and offer his services and those of all his staff to the provincial and municipal authorities, and they are at the disposal of the people of British Columbia to give what help they may.


Right Hon. J. G. GARDINER (Minister of Agriculture):: Mr. Speaker, a few days ago when questions were asked with regard to the floods in British Columbia I said that Mr. L. B. Thomson, director of rehabilitation, P.F.R.A., was already in British Columbia. He had gone there in the first instance to check our engineers at Kamloops and elsewhere with regard to the work that is being done, but when the flood conditions developed we imme-

Flood Relief in British Columbia
diately asked him to report fully on all developments so as to make it possible for us to arrive at conclusions as to what might be done to avoid similar occurrences in the future. Since then inquiries have been made with regard to what assistance might be given in providing feed grain and feed for livestock and poultry generally. Wires started to come through about three days ago. Prior to that we had Mr. A. M. Shaw in British Columbia. He is the director of marketing and the member of our departmental staff who had charge of the distribution of feed grain throughout Canada during the war period. Under him Mr. Davidson was carrying on as the director or feeds administrator during that period. Recently he went to the wheat board at Winnipeg. He has been seconded back to the Department of Agriculture and is in British Columbia directing these activities toward maintaining feed supplies at present. The main feature of the directions has to do with export grain which is in the elevators at the coast, and orders have already been issued to retain that grain there until such time as we know that the supplies will be sufficient.
I am informed that there are about two or three weeks' supply of feed grain at most places but there is difficulty in making new shipment into these areas. Grain is being moved as near to the area as possible in order to have it available at any time that there may be shortages. Up to the moment we have replied to all requests that have been made for assistance, to make it certain that grain will be available for feed as time goes on.


Hon. PAUL MARTIN (Minister of National Health and Welfare):: When the flood conditions were made known last week I communicated at once with the minister of health in the province of British Columbia, and offered the services and the facilities of this department, both in British Columbia and here at Ottawa. I may say that judging from the telephone call I had this morning from Mr. Pearson, the situation under his direction and that of the deputy minister of health, Doctor Amyot, seems to be well in hand. The doctors and nurses, the ward aides and the hospitals of this department in British Columbia, have been placed at the disposal of the department of health of British Columbia for whatever use in the circumstances the authorities deem best. Everything that we can do to help will be done.


Hon. J. J. McCANN (Minister of National Revenue):: The assistance which the Department of National Revenue can render in an emergency of this kind may not be very 
great, but such as it is, it may be appreciated by those affected. The time for filing income tax returns expired yesterday, but in view of the exceptional conditions which prevail in many parts of British Columbia I wish to state that income tax returns of those affected by flood conditions in that province will be accepted up to the end of June, without penalty for late filing.


Mr. G. J. McILRAITH (Parliamentary Assistant to the Minister of Reconstruction and Supply):: I think I ought to say on behalf of the Department of Reconstruction and Supply that other activities that may be of assistance to those suffering by reason of flood conditions are being carried out. The Central Mortgage and Housing Corporation, through the emergency shelter administration, have made available to the Red Cross space in the Dunsmuir hotel and the old Hotel Vancouver for their work, and also for temporary shelter for evacuees from the flood areas. I might also add that Trans-Canada Air Lines have moved all available equipment into the area in an effort to help meet the transportation needs arising out of the emergency.


Mr. E. D. FULTON (Kamloops):: The people of British Columbia, and certainly those of us from there who are in this house, will be grateful I know for the assistance which has been given, and which has been detailed by the various ministers who have spoken.
I should like to ask the Prime Minister a question arising out of what he has said, and the general statements which have been made. The question is this: Are we justified now in assuming that this represents to some extent a change in the position which the Prime Minister announced yesterday, when he said-


Some hon. MEMBERS:: No.


Edmund Davie Fulton: -that the primary responsibility rested with the local authorities, and that the government felt-


Mr. SPEAKER:: Order.


Gordon Graydon: The hon. member should be allowed to say something.


James Horace King: The hon. member knows very well that in putting a question he should not make a statement. I suggest that he put his question.


Edmund Davie Fulton: I am trying to do it as briefly as I can. That is the general subject of my question. It is based on the Prime Minister's remarks which are to be found on page 4553 of Hansard. My other question is this. Is any provision being made or con-

Flood Relief in British Columbia
templated for the extension of financial relief by the federal government to those who have suffered loss as a result of the flood?


William Lyon Mackenzie King: Over a good many years I have had to consider problems which related to the provinces, the municipalities and the dominion government, and I have had enough experience in these matters to realize that unless some course is followed which is consistent there are bound to be difficulties arising in the matter of making settlements, especially in dealing with finance. There we are dealing with the people's money; it is certain to be most embarrassing to all concerned if there is any room for misunderstanding. When one is handed a question, or asked a question on the orders of the day, one naturally looks at what the intent of the question is. The question addressed to me yesterday by the hon. member for Kootenay East (Mr. Matthews) was in writing. It related specifically to financial assistance to a municipality. I came in the house prepared to give an answer to that question. The answer I gave was that in connection with matters relating to financial assistance, the dominion government would consider these matters when representations were made by the province, but that it should not be expected of us that we should deal with requests that came from individual municipalities, or give undertakings to municipalities. That is the substance of what I said yesterday.
In my reply yesterday the general question of what the government was doing in other directions did not enter my mind, because it was concentrated on the specific question. There is no change in the government's attitude from what it has been. I suggest that the hon. gentleman will see from what the ministers have said that we did not wait a day, in any of the departments of government that were in a position to give assistance, to render such assistance as we possibly could.
The hon. member for Kamloops (Mr. Fulton) has asked me about the financial assistance that we are prepared to give. I would reply to that question that when we receive from the Premier of British Columbia a statement in which the premier sets forth the need for financial assistance, we will take immediately that request into consideration, and will deal with it on lines which we believe will be considered fair and just by the province and by the dominion.


Mr. MANROSS:: In the budget debate the Minister of Justice said that the surplus could be used for a rainy day.


Mr. MATTHEWS (Kootenay East):: As one of the members from British Columbia may I say this. After listening to the statement made by the Prime Minister, and by the ministers of the various departments, I wish to express my appreciation on behalf of the people of the province of British Columbia for the helpful steps that have already been taken by the government and the ones they are taking now. It has been very interesting to hear what the various ministers have said, but I should like to have heard from the Minister of Finance (Mr. Abbott), because after all he is the one who has to do with the people's money.


James Horace King: The hon. member will understand that I cannot permit debate on this matter. If he has any questions to put to the government, he may do so.


James Herbert Matthews: I have no question: I am merely expressing my appreciation of the government's action.


Hon. DOUGLAS ABBOTT (Minister of Finance):: I want to interject one remark in reply to what my hon. friend has said. I made no comment because the Prime Minister has indicated a general statement of policy with respect to financial matters j therefore it did not behoove me to add anything to what he said.


Gordon Graydon: May I ask the Minister of Finance a question? As the member for Kootenay East has said, we have heard from all the ministers, and they have told us of the work that has been done in connection with the floods. What the people of British Columbia would like to know is just what this parliament and this government are prepared to do in the way of giving cash grants and assistance to take care of the tremendous loss which the province has suffered.


Some hon. MEMBERS:: Order.


Gordon Graydon: I do not think it is enough for the Prime Minister to say that he is going to consider it.


James Horace King: Order.


Gordon Graydon: Some policy should be announced by this government.


Douglas Charles Abbott: I am not going to make a political speech about that, Mr. Speaker.


Gordon Graydon: You have made some
before, so you are experienced at it.


James Horace King: Order. I must remind the hon. member for Peel that the rules of the house apply to everyone.
Excise Tax Act


Gordon Graydon: But surely, Mr. Speaker, the rales apply to ministers as well as to the opposition. We are only trying to get some policy from the government, but they will not give us a policy.



H.M.C.S. &quot;MAGNIFICENT&quot; KEFEBENCE TO ARRIVAL AT HALIFAX JUNE 1

[Stage Direction]
On the orders of the day:
Mr. J. H. DICKEY (Halifax):: Mr. Speaker, I should like to direct a question to the Minister of National Defence. Has the minister's attention been called to the fact that today is the day on which Canada's new aircraft carrier is to arrive at her home port, Halifax?


Brooke Claxton: I am glad indeed to say that the ship Magnificent lands in Halifax today. She is the first aircraft carrier to be equipped with a squadron of Sea Furies and also a squadron of Firefly IV aircraft. The ship is winterized and will make a trip this summer to the arctic as far as Hudson strait. The R.C.N. will welcome her joining them.


Gordon Graydon: The hon. member should have given notice of the question.



WAYS AND MEANS

[Stage Direction]
The house in committee of ways and means, Mr. Macdonald (Brantford City) in the chair.

[Stage Direction]
Resolved, that it is expedient to introduce a measure to amend the Excise Act to repeal, effectii e on and after May 19, 1948, the excise duty on spirits used in the production of vinegar.
Mr. FRASER:: Under the budget as it was presented to the house I was pleased to see that the minister took the tax off alarm clocks, flatware, and Braille watches, though he should^ never have had a tax on these watches, since they are for the blind.


Douglas Charles Abbott: This is the Excise Act, and it
deals with the tax on vinegar.


Mr. FLEMING:: In what order does the minister intend to have these different resolutions called?


Douglas Charles Abbott: Actually I had intended to take the Excise Tax Act, but the chairman called the Excise Act first. Since he has called the Excise Act we will proceed with that; then the Excise Tax Act; then the tax on Braille watches and one thing and 
another; then the Dominion Succession Duty Act, the Income War Tax Act, and finally the Customs Tariff.


[Stage Direction]
Resolution agreed to.

[Stage Direction]
Resolved, that it is expedient to introduce a measure to amend the Excise Tax Act and to provide, effective on and after May 19, 194&;
1.	That the sales tax on the following list of articles be repealed: (a) shortening, soups, rice, yeast, yogurt, barley, split peas, peanut butter, biscuits, cookies and similar articles, pastry, cake, biscuit and similar mixes, cereal breakfast foods not including beverages, foods prepared and sold exclusively for feeding infants, fruit, canned, frozen, dried or evaporated, fruit juices which consist of at least ninety-five per cent of pure juice of the fruit, jams, jellies, marmalades and preserves, corn syrup, table syrups and molasses, meats and poultry, cooked, canned, frozen, smoked or dried, canned fish, spaghetti, macaroni, and vermicelli, vegetables, canned, frozen or dehydrated, but not including pickles, relishes, catsup, sauces, olives, and similar goods, vegetable juices; and (b) hay presses and complete parts thereof; auxiliary internal combustion engines incorporated into agricultural implements or agricultural machinery, and complete parts thereof; crushed stone or crushed gravel; articles imported by or for public museums, public libraries, universities, colleges or schools, and which are to be placed in such institutions as exhibits; wheel chairs and complete parts thereof specially designed for the use of invalids;
2.	That the excise tax on the price of admission to places of amusement be repealed;
3.	That the excise tax on charges made in places of entertainment be repealed;
4.	That the excise tax on bets on horse racing be repealed;
5.	That the retail purchase tax on watches specially designed for use of the blind, alarm clocks selling to the user at not more than ten dollars each, and plated table knives, forks and spoons, be repealed;
6.	That the special excise tax of three per cent on goods imported into Canada from general tariff countries be repealed;
7.	That the rates of excise tax on matches be amended to provide for a proportionate rate of tax on packages of smaller sizes; and
8.	That the excise tax of 25 per cent be repealed on 16 mm. projectors for slides, films or pictures, and that the tax be extended to cover projector mechanisms, sound equipment, arc lamps, lenses, bases, and film magazines or reels for moving picture projectors.
Mr. JACKMAN:: Will the minister indicate to whait articles in the form of processed foods the sales tax is still applicable?


Douglas Charles Abbott: Broadly speaking, spices, pickles, relishes, mayonnaise and other specialty articles of the kind.


Mr. ADAMSON:: I wish to ask a question with regard to which I have had some correspondence with the Minister of National

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Revenue, who has probably discussed the matter with the Minister of Finance. I ask it for the purpose of clarification so that other concerns in a like position will know what the situation is.
I have been corresponding with a major producer of canned soups in my own riding, who has stated that while the sales tax had been removed from the final product, at the same time the tax had been imposed on ingredients of the final product. I understand that if the final product is produced under a sales tax, a licence number is given to the concern in question, and if that licence number is given, the component parts of the final product are tax free. When, however, the final product is tax free, these components are taxed. The concern I have in mind wished to announce reductions in the prices of certain products in order to pass on the savings to the consumer. This being so, I think the minister should make a statement on the matter.


Douglas Charles Abbott: I am familiar with the case which my hon. friend refers to. I am told that the great majority of the ingredients in the soup are exempt from sales tax. The container is of course exempt from sales tax, and the officials inform me that the content of these prepared soups which is subject to sales tax is relatively insignificant in value. I am told that in one way or another, under the licence system, or otherwise, certainly the major portion of the ingredients of these prepared soups is exempt from sales tax, as is the finished product and the container in which the product is put up.


Agar Rodney Adamson: The minister mentioned mayonnaise and other things. Are the artides that are subject to sales tax taxable because of United States content, or because they are considered a luxury item? For what reason are they taxed? It seems strange that any part of a food, even flavouring or spice, should be subject to sales tax.


Douglas Charles Abbott: Well, they are not exempt from the sales tax. They are looked upon as coming within the category of specialty goods or imported goods. A large number are imported; but it is fair to say that with the changes proposed here virtually all, and certainly all the staple food products, some of them even processed or manufactured, as in the case of breakfast foods, are exempt from sales tax.


Mr. TUSTIN:: I notice the list of articles on which the tax has been repealed includes canned vegetables and fruit juices, but the list does not include catsup and vegetable juices. Why should they not be placed in 5849-293
the same category as canned vegetables and fruit juices?


Douglas Charles Abbott: Vegetable juices are included.


George James Tustin: Vegetable juices are in the same line, immediately under catsup.


Douglas Charles Abbott: It is a question of punctuation. The exclusions relate to vegetables, canned frozen or dehydrated, but not including pickles, relishes, catsup, sauces, olives and similar goods. Then there is a semicolon; and then come vegetable juices. It may not be entirely clear, but vegetable juices are exempt and the qualification relates to pickles, relishes, catsup, sauces, olives and similar goods.


Donald Methuen Fleming: When the minister was introducing his budget he said, at page 4068 of Hansard, that the exemptions which are the subject matter of the resolution now before the committee would result in a revenue loss for an entire year of about $20,000,000. No one in the house will object to these exemptions; the criticism has been that they do not go far enough. The concern of the public will be, I think, that the reductions in taxes levied in the first instance should be passed on to the consumers just as soon as possible. May I ask the minister if his department or the wartime prices and trade board is interesting itself in that question? There were a good many newspaper articles on that point just after the budget speech. In an article in the Globe and Mail I noticed this:	"Biscuit makers pass on tax cut.
Reduction of two to five cents on a package of biscuits made possible by the elimination of the eight per cent sales tax is being passed on to the consumer." That was an announcement made by the sales manager of McCormick's Limited. I think we all appreciate that it may take a while for some of these reductions in taxes to be translated into reductions in price to the consumer, as inventories move off the shelves. Has the minister any information to give the committee on that point?


Douglas Charles Abbott: That question received a great deal of consideration when thought was being given to the removal of this tax, because naturally we are all interested in seeing that the consumer should get the benefit of the tax relief; that it should not be absorbed in the prices or profit margins of manufacturers or distributors. The information I obtained convinced me the situation was such that in the great majority of these items the reduction would be reflected in the prices. Already it has been reflected in the prices of things like
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smoked meats. If hon. members or their wives have been purchasing these commodities they will have noticed a definite reduction. In cases where inventories were low, that reduction would be reflected quite promptly.
The big items in this $20,000,000 saving will be in the field of smoked meats, that is ham and bacon, and in the canned vegetables and fruits. Those are the items in which there is the large revenue loss; and I am informed that the competition feature there is such that the reduction would be reflected in the prices. I have made no purchases myself to. see if that is true, but I have every reason to believe that these savings will be passed on to the consumer.


Mr. KNIGHT:: I am sorry to have to differ from the minister, but out in our part of the country it is definitely conceded that there is practically no difference in price. I do not know about ham and bacon, but on ordinary items it is conceded that removal of the sales tax is making practically no difference, and people have written me to that effect.


Douglas Charles Abbott: It may be that the distributors have not yet got rid of their tax-paid inventory. We made no refunds.


Robert Ross (Roy) Knight: There is also the matter of freight rates. The extra freight must have made some difference, but they say they cannot notice any difference in their family budgets. I think it only fair to report this situation.


Douglas Charles Abbott: That may be true, but general statements of that kind do not carry a great deal of conviction. The effect on a can of peas or corn or something like that should be two or three cents, and people might not notice it, but it is there just the same.


Robert Ross (Roy) Knight: When you have the head of a great system of chain stores warning the people there will not be any reduction, I am afraid we have to take his word for it.


Gladys Grace Mae Strum: I should like to ask the minister how a consumer is to determine the amount of the reduction. Is the government taking responsibility for posting schedules or releasing information? If I go into a store to make certain purchases, how can I tell whether or not the entire reduction is being passed on?


Douglas Charles Abbott: So far as I know there is no way in which the individual can tell that, because there is no price control on the particular articles with which we are concerned here. I do not think that could be enforced

now. Therefore we must depend on the ordinary competition between stores. If the tax represented an additional amount of eight or ten cents a pound on ham or bacon, or whatever it may be, the normal forces of supply and demand will operate, I am sure, and the price will represent the cost to the merchant plus his margin of profit. Of course if he has to cut the price below that, he will go out of business. To answer my hon. friend's question directly, there is not, and there cannot be, any policing by the government on the individual grocer to see that he gives his customers the benefit of the lower cost made possible by the removal of the sales tax.


Gladys Grace Mae Strum: Then this is the list on which these cuts can be expected?


Douglas Charles Abbott: That is correct. There is a long list, but the main items are the cooked and prepared meats, a wide range of canned fruits and vegetables, and things like biscuits, to which the hon. member for Eglinton has referred1; macaroni, vermicelli, and so forth.


George James Tustin: There is quite a difference between the articles the minister has just mentioned. I would like to draw attention to the fact that all canned goods are packed in the summer months. These canned goods are now in the hands of the dealers, not in the -hands of the producers. Consequently in the great majority of cases the government collected the sales tax on these goods quite some time ago. But that is not the question I rose to ask. This paragraph does not seem very clear to me as it is printed. Am I correct in understanding that the sales tax is now repealed on tomato juice and all vegetable juices?


Douglas Charles Abbott: That is correct.


Mr. HACKETT:: I was going to ask the minister if he would mind restating, because I think he has answered the question in part, whether the articles mentioned in the two last lines of section- 1, subsection (a), are excluded from relief because during the war they were manufactured in Canada? I am referring to relishes and sauces, and I have in mind also mustard, which we formerly imported to a large extent from Britain. During the war these commodities were manufactured in Canada. Is the sales tax retained as a protective measure, or what is the reason for excluding these items from the relief which is given to other commodities?


Douglas Charles Abbott: Perhaps I did not make myself perfectly clear previously. The main consideration was that these are not looked upon as primary foods. They are manufac-

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tured articles. They are processed foods, somewhat in the nature of specialty or luxury products. It is proposed to remove the sales tax from all the staple foods, but it is felt that specialty products such as I have indicated contain a high value of processing cost and should remain subject to sales tax.


John Thomas Hackett: A moment ago an hon. member asked what happens to the merchant who has acquired these commodities and paid the sales tax on them. He could not very well charge it when he sells the article at retail. Is the tax exigible from the retail and final sale only, or is it exigible on the sale from the manufacturer to the jobber, from the jobber to the retailer, and from the retailer to the consumer?


Douglas Charles Abbott: The tax is imposed, as my hon. friend knows, at the manufacturer's or wholesale level. When the retailer buys his stock of vermicelli or breakfast food, or whatever it is, he buys it with the sales tax included. That represents his cost. No refunds are being made. I made that clear in my 'budget speech. The retailer will have an inventory on which he will have to get his costs, plus, I should hope, a reasonable margin. It is only after he has disposed of that inventory that he will, in fairness to himself, be in a position to pass on to the consumer the benefit derived from the removal of the sales tax. Business being what it is, some retailers may give the benefit right away. In getting a new stock they may average it out and give the benefit at once. In any event they will have a tax^paid inventory on which they can get no refund, and on which they will have to recoup themselves out of the prices of the goods.


Agar Rodney Adamson: It will effect only the current year's crop?


Douglas Charles Abbott: In respect of canned vegetables that is true, so far as they have passed out of the hands of the cannery into trade channels. But we are at a stage in the year when those stocks are approaching their lowest point; therefore, as my hon. friend says, on the new crop it will apply in its entirety.


Mr. ROSS (St. Paul's):: The minister says that the tax was imposed on the manufacturer and wholesaler. It is only against the one, is it not?


Douglas Charles Abbott: I said it was at the manufacturing or wholesale level.


Douglas Gooderham Ross: Why is there a difference between the manufacturing and the wholesale level? The manufacturing level would represent a lower price, would it not?
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Douglas Charles Abbott: The difference between the two is that a licensed wholesaler who buys from a manufacturer can quote his licence number, but the tax is still computed on the manufacturer's price.


Douglas Gooderham Ross: I see reference to breakfast cereals and breakfast foods, not including beverages. What beverages could be included? Does it refer to tomato juice?


Douglas Charles Abbott: It is to exclude such things as Ovaltine or Yi-Tone, if by any stretch of the imagination they could be interpreted as being breakfast foods.


Douglas Gooderham Ross: Celery juice is not included.


Douglas Charles Abbott: I pointed out that it is exempt.


Douglas Gooderham Ross: Is there any tax on spectacles? Is there a tax on hearing aids? I am not sure about that, but if there is, then there should not be.


Douglas Charles Abbott: I am informed that there is at the present time.


Douglas Gooderham Ross: I notice that the tax is being taken off wheel chairs and complete parts thereof specially designed for the use of invalids. For the life of me I cannot see why people who are wholly or partly incapacitated should be charged for such things as hearing aids. They are expensive enough now. The average price is about $100, and then an additional $8 must be paid for the privilege of having that help, to say nothing of the duty on them when they come in.


Douglas Charles Abbott: The tax would be paid at the manufacturer's price.


Douglas Gooderham Ross: I do not see why there should be any tax, especially on articles used by people who are incapacitated or who have not the full use of their faculties. Many persons have to wear glasses. Why should they have to pay an excise tax as well?


Douglas Charles Abbott: I have been following my hon. friend's remarks, and I shall give them consideration. I cannot give any undertaking that action will be taken this year, but his observations may bear fruit at some later time.


Douglas Gooderham Ross: I notice that the tax on wheel chairs is being taken off; yet they do not cost any more than a hearing aid. Why take the tax off a wheel chair and leave it on a hearing aid? It is only within the last little while that people have realized
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they can get relief through the use of hearing aids. We know that there are institutions to help the deaf, and they are doing good work. I suggest that as a gesture of good will, and as an indication that the government is willing to help these people who are doing a fine job, it should take the tax off hearing aids. It has been found that many who have not made a full measure of success in business or in their work have been suffering from loss of hearing. Those people are being rehabilitated, and one is surprised at the progress that is being made.


Douglas Charles Abbott: I shall give consideration to the hon. member's remarks.


Gladys Grace Mae Strum: I should like to support what has been said by the hon. member for St. Paul's, and I suggest that the minister should do in connection with hearing aids what he is doing in connection with wheel chairs, including parts and repairs. I have had occasion to go with friends of mine when they were buying parts for hearing aids, and I know that they are delicate and expensive, and the upkeep is fairly heavy. If one is to keep them in operating condition, in the course of a year it will run into a considerable sum of money. As the hon. member for St. Paul's has said, a person who is hard of hearing is under a handicap, and will find it difficult to obtain and to keep certain kinds of employment. This means continuous expenditure for batteries and replaceable parts, which in the beginning are extremely expensive. In my view the cost is out of all proportion to what is put into them. These bits of plastic, wire and batteries add up to about $100-and you can hold one in your hand. Certainly I think there should be no tax, and no duty, because hearing aids involve not only a heavy initial cost, but continuous expenditures for upkeep.


Douglas Gooderham Ross: I should like to give my own experience in this connection. I use a hearing aid, although I do not use it all the time. They are expensive to operate. One has to buy batteries, and, while one of the batteries costs only thirty cents, it lasts about two weeks, or possibly not that long if it is used continuously. The other battery costs about $2.50 or $3, and lasts about a month if used all the time. In addition, repairs have to be made. I had mine repaired only recently, and it cost $40. There was sales tax on that. These articles do not last for ever. They have to be adjusted, and they wear out. They are delicate machines. When one considers the disadvantages of lack of proper hearing and what is being done by the institutions which take care of those who are hard of hearing in an effort to make them

economically independent, it is obvious that it is not fair to tax the apparatus which persons who are hard of hearing must buy. To my way of thinking it is no more logical to take the tax off wheel chairs than it is to take it off hearing aids, or spectacles for that matter. I cannot make my representations too strong. Those who are not hard of hearing do not know what it is like and the amount of expense that is involved.


Mr. LOCKHART:: I wish the minister would consider some amendment there. While he is doing that, would he also clarify the situation in connection with special bed equipment for invalids? Are they exempt from the tax?


Douglas Charles Abbott: I am informed that they are.


Norman James Macdonald Lockhart: There are special types of hospital beds for invalids which are being purchased by certain fraternal organizations to be furnished t-o people in the community for use in their homes. Is that type of equipment tax free?


Douglas Charles Abbott: That would be exempt from tax when purchased by a hospital. If purchased by a private individual it would be subject to tax the same as anything else.


Norman James Macdonald Lockhart: There are fraternal groups which purchase this type of equipment, not just for their own members but for community work. I am told that these special beds are taxed. Mention has been made of hearing aids, and I would like the minister to do something in this connection. I know of three instances in which extensive distribution is being made of special bed equipment.


Douglas Charles Abbott: I have listened with a great deal of interest and sympathy to what has been said, particularly about hearing aids and hospital beds. In considering these I must look at the whole field of equipment used for the care of invalids. That is why I would not want, to give any special undertaking to exempt hearing aids. Wheel chairs happen to be an item in connection with which we have received a number of representations, and strangely enough I do not recall that we have had representations in connection with hearing aids.


Douglas Gooderham Ross: You had them two or three years ago.


Douglas Charles Abbott: I had forgotten about them, if that is so. I shall have to take a look at the whole field of invalid equipment and supplies. I cannot give any assurance that we shall be able to do it at once. If these items are to be exempt, they should be exempted as a whole and not in bits and pieces.

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Mr. FAIR:: I want to concur in what has been said by other hon. members with respect to hearing aids. I have had representations made to me in this connection. I hope the minister will not need a hearing aid, that his hearing will be good and that results will follow from the representations that have been made today.


Douglas Charles Abbott: I hope most hon. members of the house will not have to pay the tax even if it stays on.


Robert Fair: There are a number of producing wells in my constituency, and I have been asked to find out whether the government would consider reducing the tax on petroleum products.


Douglas Charles Abbott: I take it that my hon. friend is referring to the sales tax on petroleum products, which is a large item. While no special consideration is being given to this matter at the moment, I shall take note of my hon. friend's remarks.


Mr. DIEFENBAKER:: I was not present when the budget was introduced. I realize that there will be a loss in revenue from sales tax, and I should like to know what the loss will be in connection with the items covered by paragraphs (a) and (b) of this resolution.


Douglas Charles Abbott: The estimate I gave in the budget speech was $20,000,000 in connection with exemptions on food products. While the exemptions on the other items will be important to the people who use them, the amount of revenue is quite small. My officials did not attempt to make any specific estimate for the
(b)	portion of the resolution, partly because they did not have too accurate statistics as to sales during the preceding year. The statistics in respect to the food items were more nearly accurate.


John George Diefenbaker: We can take it that the loss of revenue for these two items will not run more than $20,000,000?


Douglas Charles Abbott: That is the best estimate we have.


John George Diefenbaker: To what extent has the experience of the last few days shown that the withdrawal of the sales tax on these food products has been passed on to the consumer? The total saving to each individual in Canada by the removal of the sales tax will be approximately $1.80 a year and I should like to know to what extent since May 19 the cost of these various items to the consumer has been reduced. Apparently nothing has been done to assure the passing on to the consumer of any reductions of this kind. What are the
obstacles to ensuring that reductions will actually be passed on to the consumer, to the end that the cost of living will be reduced?


Douglas Charles Abbott: I do not know whether my hon. friend was in his seat a moment ago when I answered a similar question put by the hon. member for Qu'Appelle. First., as to-the reflection in the loss of revenues; as hon. members know, this tax is imposed at the manufacturer's level and the manufacturers or wholesalers make monthly returns. Therefore it is too soon for us to have any accurate idea of what the difference in sales tax remittances will be.
As to the effect on domestic prices, we have no official information, but through the wartime prices and trade board we happen to know that a number of firms passed on the saving immediately. For instance, the morning after the announcement was made Steinberg's reduced their prices on smoked meats and canned goods.
As to how this can be policed, as I said before, under our system it can be policed only by the operation of supply and demand and the forces of competition. The alternative would be a rigid over-all price system with inspectors going into every store to investigate the cost, the mark up, and the margin of profit on any particular item. I think it will be readily appreciated that that is impracticable. The only effective way under our system in which these things can operate is through the forces of competition, by dealers assuring that the price which the consumer pays represents the cost plus a reasonable margin of profit. That is the only assurance we have that this will be passed on to the consumer. It is true of many other taxes, as my hon. friend knows.


John George Diefenbaker: Naturally I am in agreement with what the minister says. The minister must 'have made some investigation beforehand; he must have statistics covering the experience of the past showing the extent to which reductions in the sales tax have resulted in a decrease in the cost of living. There have been a number of occasions in the past on which the sales tax has been reduced. My criticism of what he has done in respect to the sales tax is that he has not gone far enough, and has not seen to it that at a time such as this, when the people as a whole are complaining about high prices and the high cost of living-now higher than ever before in the history of this country-any reductions made shall be passed on to the consumer. The government, having regard to the tremendous surplus that it has, should have gone a long way further. I sometimes wonder
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whether the members of the government realize the feelings of the people as a whole regarding the high cost of living. I take it that the sales tax was reduced on these items of food to enure to the benefit of the people of the country as a whole, to reduce the cost of living. Is the government conducting the kind of campaign it conducted during the war, to arouse those in business to a realization that the reduction should be passed on?
The prices committee-and I speak of that body with the greatest respect-has been sitting now for three months, and the longer it sits, the higher go prices. What proceedings are being taken against the small minority in business, and I emphasize those words, are taking advantage of present-day conditions to boost prices?
Certainly, if this action on the part of the government is merely a step in the direction of securing in this countiy a reduction of prices, it will not be very favourably received. Talk to the man in the street and you will find that the general attitude is that this is merely a sop, that it is actually meaningless in its results. I ask the minister, is he in a position to say to the committee, on the basis of previous experience where the sales tax has been removed in whole or in part, that, apart from the operations of the law of supply and demand, the saving effected will be passed on to the consumer? I know that my hon. friends to my left talk about ceilings. They say that all you have to do is: Do not touch wages; do not touch the prices of farm products; put a ceiling on prices to the consumer and then everything will be well in this country. When I hear those arguments advanced I think of the fact that in the province of Saskatchewan-


The CHAIRMAN:: I hesitate to interrupt the hon. member, but we are considering the sales tax.


John George Diefenbaker: Yes, and I am arguing that it is being reduced because of a desire on the part of the government to see that prices of the things that the people require shall be maintained at a minimum level. The minister asked in the course of his remarks: Are we to police every business in this country? We in this party believe that one of the ways of reducing the prices of the necessities of life is the removal of the sales tax, and I was just mentioning that my hon. friends to my left say that all you have to do is to put a ceiling on prices and then all our difficulties will disappear.


Mr. NICHOLSON:: Mr. Chairman, if my hon. friend is to be allowed to refer to the election in Saskatchewan the same privilege must be allowed to us all.


William Ross Macdonald: I think the hon. member for Lake Centre realizes that whatever leeway he is allowed must be allowed to all members, and I would ask him to confine his remarks to the reduction in the sales tax.


John George Diefenbaker: I have found my hon. friends to my left generous in the expression of their viewpoint but equally jealous of the rights of others to place the facts before the committee. However, I do not want to transgress, Mr. Chairman. When we in this party face an issue such as this, my hon. friends ,to the left always rise and say that they wish the opportunity to answer. If you rule, Mr. Chairman, that I cannot point out that in Saskatchewan there is a law on the statute book permitting the control of prices, and that it has not been used by the government of that province, I shall not refer to it.
Possibly the minister will be able to answer in general some of the questions that I have raised, because the Canadian people as a whole are demanding that something be done to stop the ever-increasing cost of living in this country, and if this be one method of doing it I want the assurance from the minister that the saving effected will be passed on to the consumer.


Douglas Charles Abbott: I do not know that I can deal in other than a general way with the question my hon. friend has puit. Before deciding on the removal of the sales tax on these items, I did make extensive inquiries as to the probable effect it would have on prices. I was particularly concerned with the two big items, smoked meats such as hams and bacons, and canned vegetables and the like, and the inquiries I made led me to believe that the removal of the sales tax would be reflected in lower prices for these articles. That has been borne out by experience in the short time since the tax has been removed.
My hon. friend will understand that in a period of rising prices, unless prices are absolutely stabilized, the removal of a tax of this kind, particularly at the manufacturer's level, cannot be directly related to the price of the article. Under these conditions it is very hard to say whether the full benefit of the tax has or has not been passed on. There is where the competitive forces come into play, as I say. Unless you have a rigid ceiling policy and say that, at the time the tax was taken off, the ceiling on a can of tomatoes was so much a can,

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and the tax taken off amounted to ao much, and therefore 'the ceiling is lowered by so much, you have no means of definitely assuring that the benefit has been passed on. However, in the canned goods field particularly I did make pretty extensive inquiries of what the effect would be, and I am satisfied that the benefit will be passed on. I am satisfied particularly, because I have been assured that the competitive position in the field is such that it is bound to happen; but I could not say that you can pinpoint a particular article, say a package of oatmeal, which is included in this list, and say that the full benefit of the tax exemption has been passed on. The information I have been given, and my own inquiry into the matter, satisfied me that by and large that is being done.
The hon. member is quite right when he says that the purpose of taking this tax off was the desire to have the basic staple foods sold at as low a price as possible, and that the tax content should be reduced to a minimum.


John Thomas Hackett: I wish to ask the minister to consider for a moment a question that is possibly ancillary to the one that he has been discussing. He has told the committee that there will be no refunds of taxes on goods that are listed in subparagraphs (a) and (b), and I may say that these are items of relatively small cost, and relatively small consumption. But when he is dealing with items of very great cost, and I am thinking in terms of cosmetics, tobacco, malted goods and distilled goods, it seems to me that the department will have to devise some principle other than that which is being applied here, or subject those who manufacture those goods to great losses, and quite possibly to bankruptcy. Take, for 'instance, a carload of wine going across the continent. I do not know whether cosmetics are shipped in carloads, but let us take a carload of tobacco. The time after the goods have left the possession of the vendor and reached the consumer is sometimes a week, or possibly two or three weeks. Cigarettes, for instance, could never be sold over the counter and the tax or duty exacted if it had been diminished in a budget speech; if there is no means provided for protecting the manufacturer or distributor against these huge losses, a disaster may result for those who would be affected by the change. My question is as to whether the minister is willing to give consideration to some principle other than that applied to subparagraphs (a) and (b), which will protect those interested against great losses.


Douglas Charles Abbott: I am, of course, thoroughly familiar with the grave problem that a reduction in tax on articles of that kind will involve.
I am not sure about this, but I think the principle in the past has been that where the tax is increased the man who has the goods on his shelves gets the benefit of the tax. Where the tax is reduced he has to bear the loss. So far as I am aware, that has been the principle which has been consistently followed with respect to the excise tax on such goods as tobaccos, spirits and so on at the time such taxes were imposed. It arises, of course, not only in connection with these items but on a great many other things such as automobiles and all the other goods on which the excise tax is imposed. I am told that the same principle applies to changes in the customs duty. Where the duty has been increased the man who has a stock on hand gets the benefit of the increased duty, and is expected to take it, and conversely when the duty is lowered he loses the benefit. I will give further consideration to the question which has been raised.


John Thomas Hackett: I think that is the answer which is relied upon by some of the departments, but I doubt whether it is a complete or satisfactory answer. As regards customs duty, there may be something to be said for it; but where a certain commodity is liable for the payment of certain taxes, surely the merchant cannot sell the commodity, collect the tax and keep it when he sells the commodity. He collects the tax as agent for the government and must remit it. It would seem to me that the converse does not hold. The tax was on when he shipped the goods, and the consignee getting the goods a week or ten days later is not going to pay the tax because it has been abrogated during the period that the goods were in transit. I do not wish to add to the perplexities of the minister at the present time, but I wish that he would give careful consideration to this aspect of the question because, despite recent bitter experiences, we all live in the hope of a better day.


Douglas Charles Abbott: My hon. friend will appreciate that I am keenly aware of the problem and I will give it further consideration.


Gordon Knapman Fraser: The minister mentioned before that beverages were not included, but that certain powdered goods were. Does that include powdered malted milk which is sometimes used for baby food?


Douglas Charles Abbott: Answering offhand, I am inclined to think it would, but I would have to look into the matter.


Gordon Knapman Fraser: It is also used for making icing for cakes.


Douglas Charles Abbott: No, that would be taxable.
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Gordon Knapman Fraser: Why is it called a beverage? To the average person it would be a soft drink.


Douglas Charles Abbott: Well, it is something similar to cocoa, malted milk Ovaltine and Vi-Tone.


Gordon Knapman Fraser: Is cocoa covered by this?


Douglas Charles Abbott: Cocoa remains subject to tax; so do Ovaltine, Vi-Tone and all these drinks.


Robert Ross (Roy) Knight: In answer to the hon. member for Lake Centre, the minister made a good deal of the free play of competition and its effect upon keeping down prices. I should like to hear him comment on this question. Is it operative to that extent in a market -where the goods are scarce, the public clamouring for them and there is not sufficient supply to go around?


Douglas Charles Abbott: That depends on the goods. There is no shortage of ham, bacon or canned vegetable goods. In my judgment the competitive forces have free and full play on these articles today, and these are the big items here.


Robert Ross (Roy) Knight: My question related to the items where there was not that supply.


Douglas Charles Abbott: There are not many of these items that are not in ample supply in Canada.


Robert Ross (Roy) Knight: The minister is still not answering the question.


Douglas Charles Abbott: I will answer it directly by saying, yes. The situation in connection with the articles on which the sales tax is being removed is that they are in ample supply in this country.


Robert Ross (Roy) Knight: The other point I want information on is this. The hon. member for Lake Centre suggested to the minister that there should be prosecution of those people who charged a profit which, in the expression I have heard the minister use very often, was more than just and reasonable. I know nothing about this question at all. I should like to ask the minister or the hon. member for Lake Centre if there is in Canada a definite law under which such people can be prosecuted. Is it not perfectly legal to charge 100 per cent or 200 per cent, or whatever the market will bear?


Douglas Charles Abbott: At the present time, so long as the wartime prices and trade board order remains in effect, there is a provision that no one shall charge a price beyond that which is just and reasonable. There have been, I understand, investigations in certain cases, and

one or two prosecutions have been started. There was one early in the war in connection with sugar, I think it was, under that particular provision. Lawyers in the house know it may not be too easy to convince a magistrate that a price which has been charged is greater than is just and reasonable, but that is a matter for appreciation by the courts.


Robert Ross (Roy) Knight: What we appear to need is a definition of the term "just and reasonable", in terms of figures, or something mathematical.


Douglas Charles Abbott: There is only one way in which that can be done. Someone might declare that a just and reasonable price for so-and-so is the price which was charged in December, 1947, let us say. That was done in 1941. It was decided that a just and reasonable price was the level established in November, 1941, and an over-all ceiling was put on, and also a ceiling on salaries and wages. That was the system during the war. I do not know, however, that anyone could pick out this or that item across the country today and say that a just and reasonable price is so-and-so.


William Ross Macdonald: With all due respect to the minister and the hon. member for Saskatoon City, I doubt very much whether this discussion is in order. Any discussion must be directly related to the sales tax, and a general discussion on the cost of living cannot be in order at this time.


Robert Ross (Roy) Knight: I need just one line to complete my thought, Mr. Chairman. Lacking omniscience, I suggest that we, might as well quit talking about prosecutions. There is no such thing as prosecutions for high prices anyway.


John George Diefenbaker: I did not discuss the budget when it was brought down, and I am trying now to get some information from the minister. If the removal of the sales tax from certain food products was believed to be a method of reducing the cost of living, why was not that principle extended to other necessities such as clothing, shoes, and the like? Why was it restricted to the items in the resolution? I believe that the general feeling is that the budget as introduced by the minister provided for a disappointing reduction in taxation which is totally inadequate to meet the needs of present-day conditions.
As a matter of fact, the reductions such as are made in this section, which, after all, is the only pertinent section in connection with reductions in the excise tax, constitute so infinitesimal a saving to the people, if passed

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on to them, as to amount to only $1.80 for every man, women and child in Canada.
I ask the minister this question: What were the reasons that caused him in preparing this budget, to restrict himself to these few items? Why was it, if he was not prepared to go a long way in the removal of the sales tax, that he did not cover other items so material in the cost of living, and in particular such necessities as clothing, which bear this tax, and from which the people as a whole would naturally like to be relieved?
I think the country is entitled to a more complete explanation for the course he has followed than the minister has yet given. He has not explained why, with costs of living constantly mounting, something more along this line of sales tax reduction was not done. Our people find themselves squeezed between a salary level and wage level, which is not rising in proportion to costs, and an increasing cost of living. They find themselves squeezed between taxation, which is very little lower than it was in the days of the war, and a cost of living which is increasing materially from day to day. In the face of this, all that is done to help the average person is the removal of the sales tax on food products.
I submit that the country is entitled to an explanation from the minister, giving in detail the reasons why it would have been economically difficult or impossible to extend these reductions in the sales tax beyond the items actually covered. If designed to ensure some reduction in the cost of living, in the staple products of food; if it was good in that direction, with a surplus as large as there is, would it not have been proper to remove the sales tax entirely from other necessities, and generally reduce it throughout?
I have read the minister's budget speech, and I find there no complete explanation. What was the actuating reason? Why was not this commendable step carried forward so that this government would by its own action contribute a maximum to the reduction in the cost of living as a whole?


Douglas Charles Abbott: My hon. friend was not here when I delivered my budget speech, but he was good enough to read it, as he says. In that speech I devoted a great deal of time to explaining why I felt that the inflationary pressures in this country were still strong and why I did not think this was a year in which there could be any substantial or general reduction in commodity taxes. In that connection, I said, as reported at page 4067 of Hansard :
In the field of commodity taxes, I have felt it necessary to frame my proposals in the light
of the government's general fiscal program, and am, therefore, not proposing any sweeping or drastic reductions in tax rates. I have considered, however, whether anything might be done by way of a direct contribution toward reducing the cost of living at one of those points where it has been felt most acutely, that is, in the cost of food, and where it would create little additional inflationary pressure.
As I mentioned, in reply to the hon. member for Saskatoon City a moment ago, the articles on which the tax is removed are in relatively good supply and I did not think the removal of the tax would result in an inflationary price movement in respect of these articles. Whether my hon. friend found my reasons convincing, as set out in the budget speech, or whether he did not, I must say there is not much that I can add to them now.
Among other reasons, the food articles were selected because already, by virtue of previous amendments or because of the form in which the original sales tax was imposed, a very large number of food items were exempt from tax; and it seemed to me desirable if I could do anything at all, even if it were rather minor relief, to complete that job and take the remainder of the staple food products out of the sales tax schedule. And may I say that once one takes things out of the sales tax schedule, they do not go back in. Any minister of finance must bear that in mind in deciding whether or not to remove certain articles from the schedules. As was pointed out the other day, building materials were taken out from under the schedules within a week or ten days after V-E day. Now we are moving a step further and have taken out the remainder of the staple foodstuffs, so to that extent we are relieving the pressure on prices.
I cannot give my hon. friend any other reason or explanation. I went into the matter in very considerable detail in my budget speech, as to the economic forces which I considered made it desirable not to effect now any substantial reduction in commodity taxes. If that were done I felt the effect on prices would be adverse rather than favourable, that it would create greater inflationary forces in this country which would push prices up and not hold them down. I concede that these are economic reasons, but they were the reasons behind the budget I presented this year.


John George Diefenbaker: Can the minister give the total amount collected in sales tax on clothing last year?


Douglas Charles Abbott: I am afraid I have not that figure here. It is readily available; I can get it and send it to my hon. friend. Perhaps
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I should correct that statement; the officials tell me it is not segregated undler that heading.


John George Diefenbaker: What is it under?


Douglas Charles Abbott: The total sales tax. The total eight per cent sales tax collected last year was $383,012,443; but it is not segregated under the heading of "clothing" and so on.


John George Diefenbaker: How is it segregated? Would the minister give the general computation?


Douglas Charles Abbott: I am told there is no segregation.


John George Diefenbaker: Has the minister no estimate of the amount of sales tax collected on clothing?


Douglas Charles Abbott: We could have one prepared, but it would be only an estimate.


John George Diefenbaker: No estimate is
available at the moment?


Douglas Charles Abbott: No.


John George Diefenbaker: Then it can be taken for granted that no direct consideration was given to the removal of the sales tax on clothing?


Douglas Charles Abbott: I can assure my hon. friend that no consideration whatever was given to that question.


Douglas Gooderham Ross: The tax still remains on chocolate bars and pop, does it?


Douglas Charles Abbott: That is right. We get a lot of money from those.


Douglas Gooderham Ross: How much did you get from them last year?


Douglas Charles Abbott: I do not know about the sales tax, but from the excise tax on candy and confectionery last year we got $16,398,663, and from soft drinks we got $23,767,353, which was up almost $5,000,000 from the year before. That is about $40,000,000 from those two taxes. And it is taken from more than the kids, too,
I may say.


Douglas Gooderham Ross: A great deal of that was taken directly from the children, right out of their hands. One of the minister's arguments for not removing the tax from some commodities is that he will not remove the tax from things that are in short supply, but there is an ample supply of chocolate bars and pop. That $23,000,000 certainly does contribute to the high cost of living.


Douglas Charles Abbott: Everyone who has a Scotch and soda contributes to that tax.


Douglas Gooderham Ross: It is not a tax on luxuries; these things are more than that.


Mr. MILLER:: We have one of these so-called pop factories or soft drink establishments in the city from which I come, and I habitually pester the Minister of Finance with letters concerning the removal of the tax on those drinks. As yet I have never heard the minister give the real reason for not taking oS the tax on soft drinks.


Douglas Gooderham Ross: He just told us; he gets $20,000,000 from that tax.


Calvert Charlton Miller: If that is the *reason I wish he would say so, because every time I go home I am questioned about this tax, which means a great deal to that little industry.


Douglas Charles Abbott: Perhaps we are getting a little outside the resolutions before the committee. I have discussed the soft drink tax at some length in this house on other occasions, as hon. members will recall, and I do not think we should discuss it now because we are not touching it this year.


Calvert Charlton Miller: Why not take it off?


Douglas Charles Abbott: I will answer in a general fashion. The revenues of this country have to be raised; they cannot just be picked out of thin air. Hon. gentlemen want me to spend money on this thing and that thing, and we have to raise the revenues in order to pay the shot. For the time being we are raising them to the extent of more than twenty million dollars by a tax on soda water, Coca-Cola, and so on.


Harry Rutherford Jackman: What about the surplus?


Mr. CAMPBELL:: I do not know whether the minister will be alble to answer the question I want to ask, but I am interested in the sales tax on petroleum products, because it enters definitely into the cost of production of the people in my constituency. I would ask the minister how much revenue was raised through the sales tax on petroleum products, and if there are any exemptions. Is any industry or any group of industries exempt from the sales tax on petroleum products.


Douglas Charles Abbott: As I said to the hon. member for Lake Centre, I do not have any breakdown of the total sales tax revenues from different items. An estimate could be prepared, of course; one could take the volume of sales of the different petroleum products such as gasoline, fuel oil, kerosene and so on, and estimate what the sales tax would be, but the figures with respect to the sales tax revenues are not broken down in such a way that I could give my hon. friend how much

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revenue was derived from that product. It would be substantial, of course, because the sale of those products in Canada is substantial.
I could have an estimate made, perhaps, but it would be only an estimate.


Alexander Maxwell (Max) Campbell: Are there any exemptions? Is anyone exempted?


Douglas Charles Abbott: I am informed by the officials sitting before me that they know of no case in which an exemption from the sales tax on petroleum products is granted.


Alexander Maxwell (Max) Campbell: For instance, would crude oil used in locomotives be subject to that tax?


Douglas Charles Abbott: Yes.


Alexander Maxwell (Max) Campbell: Is the minister considering relieving the farmers and primary producers of the sales tax on petroleum products in the near future?


Douglas Charles Abbott: Well, of course every year consideration is given to all these taxes in drawing up the budget plans, but it is extremely difficult to exclude a particular type of consumer from the operation of the sales tax, for reasons I think my hon. friend will appreciate. The sales tax is not a retail tax like the gasoline tax in the provinces, for instance. It is put on at the manufacturer's level, and when he is producing his product and selling it he does not know who will be the ultimate consumer. So the only way to do that would be through some system of refunds.
I should think the better way to approach that subject would be a complete exemption from sales tax, instead of trying to administer it by not making it applicable to a certain class of user. In any event, I am told none of these products is exempted from the sales tax now, and certainly there are no cases where a particular purchaser or user is exempted.


Alexander Maxwell (Max) Campbell: Fuel oil for tractors could be coloured in such a way that it would not be hard to keep separate.


Agar Rodney Adamson: On several occasions it has been stated that the sales tax on building materials was removed shortly after V-E day. Being one of those unfortunate people who are trying to build houses, I can assure the minister that a great many building materials still pay the tax. I notice that here he is including crushed stone or crushed gravel. This is one of the basic, and perhaps the most basic, of all building materials. I should like to ask the minister and his department to give a list of the building materials excluded from the sales tax. I know definitely I had to pay a sales tax on copper pipes, bathtubs and things like that only last year.


Douglas Charles Abbott: Not on bath tubs; I do not think so. The crushed stone and crushed gravel items are for use in roads. I am informed they have been exempted when used in building construction. They are exempted under the heading of "building stone". Shower baths, bathtubs, basins, faucets, lavatories, sinks and laundry tubs are exempt from sales tax now.


Agar Rodney Adamson: I received an invoice quite recently where I had to pay in respect of copper sheeting for flashing. That is definitely a building material. If the sales tax is still being collected, may I suggest that serious consideration be given to widening the group of building materials on which sales tax is not to be collected.


Douglas Charles Abbott: I shall take note of my hon. friend's remarks. I have no doubt that flashing of the type he has described would be subject to tax. It is used, of course, for purposes other than building. However, prepared roofings are all exempt from tax. Items of this kind, while they are expensive, are comparatively minor when compared with the total cost of any building. The major items are, and for some time have been exempt from sales tax.


Mr. McLURE:: Before we leave the food items, I should like to refer to meats and poultry. Does this mean that all cooked, canned, frozen and smoked or dried meat products are exempt?


Douglas Charles Abbott: That is right.


Winfield Chester Scott McLure: I notice that in connection with fish the words "cooked, frozen, smoked or dried" are not included, and that mention is made only of the canned variety.


Douglas Charles Abbott: They were exempt before. The only type of fish which was not was canned fish, and that is now included.


Winfield Chester Scott McLure: Then there is a matter which I believe the minister forgot when he was making up this item. I suggest that he did not give consideration to the double taxation in connection with raw furs, especially silver foxes. This matter has been considered for several years, and is one of the many unjust taxes. This is the most unjust of all.
A farmer receives, we will say, $60 for a certain type of fox skin. Then it goes to the processing plant to be processed. The processing plant must pay the government $5 on that skin for the privilege of processing it. The actual processing cost may be only $3 or $4. However, if it costs $5, that brings the skin up to $60. Then it goes to the manufacturer, and his cost would be about $25,
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bringing the article up to $85. Then a retail mark-up is decided upon, and the article reaches $120. Then the government says, "We must have an eight per cent sales tax on that." This article, which costs originally $50, when it goes into the retail trade is taxed at the rate of about 32i per cent. It seems ridiculous that there should be double taxation, once for processing and again for manufacturing. I believe this eight per cent sales tax on an article of that kind should have the minister's careful consideration.


Harry Rutherford Jackman: Would the minister answer my colleague?


Douglas Charles Abbott: I understood that he was just bringing the matter to my attention. I know there are two taxes. There is the tax of ten per cent imposed on the processor and dyer, and then the eight per cent sales tax on the manufacturer's price to the retailer.


Winfield Chester Scott McLure: It seems so ridiculous to have a processing tax. I believe the way it originated was that the people who were imposing the tax did not keep in mind that there was a difference between processing and manufacturing. I believe they thought processing was manufacturing. The fact is that processing is the procedure of getting the article ready for manufacture. The manufacturer then prepares the article for the consumer. I believe, if the minister would ask someone in his department to look into the matter, it would receive consideration. Instead of having an eight per cent sales tax, the consumer is paying about 32J per cent, which is really ridiculous.


Harry Rutherford Jackman: Why has the minister retained cocoa in the classification which continues to pay the sales tax? Surely it is not a luxury item. It is preferred by many people, and particularly young children, as a beverage to be used in place of tea, coffee, or milk taken alone. Furthermore, I understand that cocoa is the basis for chocolate, and in view of the fact that there is a tax on chocolate bars, and perhaps other forms of chocolate in its manufactured state, there does not seem to be much reason for retaining cocoa in the class which is subject to eight per cent sales tax.


Douglas Charles Abbott: Beverages have not been included in the schedule as being exempt. Tea, coffee, cocoa, Postum, Vi-Tone, Ovaltine and these other beverages are still subject to sales tax. We felt that for this year we were not going into the beverage field, so far as that is concerned.


John George Diefenbaker: Are tea and coffee subject to it?


Douglas Charles Abbott: Yes. The hon. member will
recall that last fail customs duties were lowered on tea and coffee; but they are subject to sales tax.


Harry Rutherford Jackman: I would suppose that cocoa would come in first in the form of a bean. It would .be imported in that form, and would not be a beverage.


Douglas Charles Abbott: I am told that it is not subject to sales tax when used in the manufacture of chocolate, or these other things.


Harry Rutherford Jackman: But it is, when it is bought in a can, for household use.


Douglas Charles Abbott: Cocoa for beverage purposes, put up in a can, is subject to sales tax in the same way as tea or coffee or other prepared drinks..


[Stage Direction]
Resolution agreed to.
2.	That the excise tax on the price of admission to places of amuseipent be repealed.
Mr. MoLURE: Was this taken off so that the seven provinces which had entered into an agreement with the government in respect of provincial relations might have an opportunity of placing it on? I notice that already several of the provinces have put this tax on at a rate higher than the federal tax.
Douglas Charles Abbott: It was not taken off in order that seven or nine provinces should necessarily have an opportunity of putting it on. It was taken off for this reason, that in April of last year during the course of the discussions with officials of Nova Scotia in particular-but it had come up with the other provinces-it was represented to me that this amusement tax and other taxes-there was the amusement tax and the gasoline tax and one or two others-were taxes which, because of t'heir nature, were appropriate for use by provincial taxing authorities. I wrote to the Premier of Nova Scotia at that time-and the letter was tabled in the house-stating that I recognized that the provinces had a special interest in this type of tax, and that it would be the policy of the dominion government to withdraw from this field as soon as it was practicable to do so. It was in pursuance of that statement of policy that it was decided to withdraw from that field this year. I did venture to express the hope in my budget speech that, wherever it was possible to do so, the provinces would not go into the field and the taxpayers would get the benefit. As far as I know, my own province of Quebec has not done so, but in some of the other provinces .they have.

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Douglas Gooderham Ross: It was recognized by the government that this was a provincial field of taxation.


Douglas Charles Abbott: No, it was not. It was not recognized as a field to which the provinces could claim exclusive jurisdiction. If I remember correctly, the language I used was that this tax among others was a tax in which the provinces had a special interest by reason of its nature. For that reason we proposed to withdraw from the field as far as it was practical to do so.


Douglas Gooderham Ross: The point I am getting at is that the request came from the premier of one of the provinces that it was a field of taxation which they would like to be in. As a consequence, the request was made by the Premier of Nova Scotia that the federal government should get out of this taxation field; that was done because it was understood that the Premier of Nova Scotia wanted to get into the field himself.


Douglas Charles Abbott: No, and I do not think he has.


Douglas Gooderham Ross: What I say is perfectly logical. It has not been done by the federal government with any thought of saving money for the public. In his statement the minister said that he hoped the provinces would not impose the tax again, but this tax was collected by most provinces before the dominion government stepped into the field. I am perfectly certain that when the Premier of Nova Scotia asked the dominion to get out of this taxation field he did so because he wanted to get into that field himself.


Douglas Charles Abbott: I do not think so. This tax was put on during the war and we have now withdrawn it. If there were another war we might have to go into this field again. Whether a province does or does not go into the field again I think would be a matter for the province to determine in the light of its revenue position. If it does not need to impose the tax it should not take it from its citizens.


Douglas Gooderham Ross: This was a tax field of the provinces before the war and it was taken over by the dominion by mutual consent when the war came on.


Douglas Charles Abbott: I think I am correct in saying that virtually all the provinces were already in the field. It is simply a question of whether they will increase the rate when the dominion withdraws and take the extra amount.


Gordon Knapman Fraser: Quebec has its own tax?


Douglas Charles Abbott: All the provinces have.


Gordon Knapman Fraser: Is not the Quebec tax thirteen per cent?


Douglas Charles Abbott: I do not know what the rate is.


Gordon Knapman Fraser: It runs from three per cent up to fifteen per cent.


[Stage Direction]
Resolution agreed to.
3.	That the excise tax on charges made in places of entertainment be repealed.
Agar Rodney Adamson: What is the difference between a place of amusement and a place of entertainment?


Douglas Charles Abbott: I understand that it is defined in the act. This is the tax imposed on the price of meals in places such as the Chateau Laurier grill where there is music and dancing. I remember the hon. member for Qu'Appelle asking a question about this tax. She was concerned over the fact that the price list carried an extra twenty-five per cent excise tax. I told her that she must have been dancing, but she assured me that she was not.


Agar Rodney Adamson: Entertainment is something in which you participate yourself while amusement is something you are shown.


[Stage Direction]
Resolution agreed to.
4.	That the excise tax on bets on horse racing be repealed.
Alexander Malcolm Nicholson: Would the minister
indicate the loss to the treasury and also what agitation has taken place to have this tax repealed?


Douglas Charles Abbott: This tax is in exactly the same category as the one to which I referred a moment ago. The dominion broke into this field during the war. It was represented to us during the course of discussions with the provinces that this was a field particularly suitable for the provinces and that we should withdraw as soon as circumstances allowed. I said that we would. The revenue last year was $2,518,585.


John George Diefenbaker: Has the minister the figures by provinces?


Douglas Charles Abbott: I have not at the moment, but I could get them. As is natural, the bulk of the tax would come from the provinces of Quebec and Ontario. I did hear that the highest per capita revenue was obtained in Prince Edward Island, which rather surprised me.
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Winfield Chester Scott McLure: Will the superintendent in charge of horse racing and betting lose his position, or will he just continue to carry on? He has a very good position because he goes around to the different race tracks. He has a good time and is paid a good salary.


Douglas Charles Abbott: I am told that the superintendents referred to were under the Department of Agriculture. I assume that they will continue to carry on their valuable function of encouraging the breeding of horses.


Agar Rodney Adamson: What was the amount bet on horse racing last year?


Douglas Charles Abbott: It would be twenty times the figure I gave, which was roughly $2,500,000.


Agar Rodney Adamson: That would be $50,000,000. Resolution agreed to.
5.	That the retail purchase tax on watches specially designed for use of the blind, alarm clocks selling to the user at not more than ten dollars each, and plated table knives, forks and spoons, be repealed.


Gordon Knapman Fraser: I want to thank the minister for taking the tax off alarm clocks and flatware; but I am wondering, and so are Canadian manufacturers of cheap working men's watches, why it was not taken off that type of watch. In one industry alone about one-third of the production is made up of non-jewelled watches which sell for less than $5. Their total production is about 6,900 clocks and watches. These inexpensive watches are made in Canada, while the jewelled watches are imported. This means jobs for workers in Canada. One plant in my own riding employs over 700 workmen. As a sample of the type of letter received, I have one here which asks them to cancel any orders for items which are still subject to the excise tax.


Douglas Charles Abbott: What is the date of that letter?


Gordon Knapman Fraser: May 21. As the minister
knows, watches and clocks are carried by hardware, jewelry, drug and all kinds of stores across the country. These stores do not want to have in their stocks anything that carries a twenty-five per cent tax, because it means a lot of bookkeeping and is just a headache all the way through. I was wondering if it would not be possible for the minister to take the tax off these low-priced watches.
The other watches come in from Switzerland and, as I have said before in this house, in many cases they are being manufactured in plants which manufactured for the Germans 
during the war. This plant in Canada is the largest of its kind in the British empire, and I feel that it should have some consideration. The protection in the way of duty is not really enough to protect the workmen in the plant.


John George Diefenbaker: I should like to say a few words in regard to the retail purchase tax in so far as it affects the jewelry business. Representations have been made to the minister from time to time by the thousand or more jewelers across this country with a view to the removal of this tax, which was first applied in 1942 as a war measure. I remember well, when it was introduced, that it was stated by the then minister of finance that the reason for its introduction was to divert wartime earnings into war savings. It has been continued since the war, and has had the result of discriminating against those engaged in the jewelry business.
It might be pointed out that if one sets up housekeeping a diningroom can be equipped with furniture that is not subject to tax, whereas the silver dishes and plates on the table are subject to the tax. I do not know whether the minister realizes the degree to which many jewelers generally throughout the country are experiencing a falling off in business since the end of the war. During the days of the war their business incident to the departure of men and women into the armed forces was satisfactory. Of late jewelers in my constituency and throughout the province of Saskatchewan have informed me that their businesses are shrinking in total sales and that one reason is the continuance of the purchase tax. Having regard to the fact that this tax was introduced during the days of war for one purpose, I would ask the minister if the time has not come for the removal of this tax in the interests of one specialized form of business which alone is subject to its effects.
Taxation is necessary, as the minister has pointed out, and must be secured by him in order to meet the cost of government but surely one business in our country should not be singled out for discrimination. If we believe in the maintenance in this country of private business and private enterprise, everything possible should be done to equalize taxation among all classes of business, instead of placing on the shoulders of one group performing and discharging, as do the jewelers, a necessary function and service, a tax more grievous to be borne than that borne by any other business. I ask the minister whether he will not even now give consideration to the removal of this tax which rests so heavily on this one business.

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Robert Ross (Roy) Knight: I should like to endorse all the things which the hon. member for Lake Centre has said.


John George Diefenbaker: Except private
enterprise.


Robert Ross (Roy) Knight: I did not specify, but I endorse most of the things the hon. member said. The jewelers in my constituency, and particularly in my home town of Saskatoon, have been writing to me continually about this tax. They were, of course, tremendously relieved at the removal of the tax on silverware and on some clocks. I suggested to my correspondents that the Braille watch might be some relief. I did it with my tongue in my cheek and got the kind of answer that I expected. One jeweler said that he had not sold one in three years. I was surprised to find that Braille watches had ever been taxed.
I think that, like hearing aids, they should have been exempt from taxation. I would ask the minister what revenue he has been getting per annum from these Braille watches?


Douglas Charles Abbott: Actually we have been remitting the tax by order in council.


Robert Ross (Roy) Knight: One other point. Some of my jeweler friends complained bitterly that they were facing competition from some of their own people who were not as honest as they might be in the matter of the collection of this tax. Where is the tax collected? On a retail basis?


Douglas Charles Abbott: From the retailer.


Robert Ross (Roy) Knight: This man said that an honest jeweler was under a distinct disadvantage because certain competitors were saying: Just forget about the tax. The result was that they were getting all the business, and my honest friends were losing out by that. I suggested a more thorough system of inspection, and they told me that they were supposed to be inspected but had not seen an inspector for three or four years. I do not know anything about the authenticity of these statements but I thought I should draw them to the minister's attention.


Douglas Charles Abbott: This is a tax which I should like to get rid of just as soon as it is feasible. In common with a good many other members, I have had letters and representations and have met delegations from the jewelers' association, who presented their case objectively and very fairly, but I did not feel that this was a year in which I was justified in removing the tax. Last year they said the tax was having an adverse effect on their business, but that is not borne out by the facts. The hon. member for Lake Centre said he understood
that sales were falling off. But here are the taxation receipts for the .last three years: 1945-46, $6,883,130; 1946^17, $8,165,293; 1947-48, $8,413,875. The monthly figures continue to show a rise in tax receipts.


John George Diefenbaker: Has the minister the provincial figures?


Douglas Charles Abbott: No. As I said, I should like to get rid of the tax at the earliest appropriate time, but this is not a year in which I felt the tax could be removed, inflationary pressures being what they are and the volume of public spending being what it is. The figures show that people are still purchasing these articles in pretty substantial volume. The removal of the tax on flatware will, of course, reduce our revenues appreciably. That is the sort of article from which I should be glad to see it removed. I do not know that one can quarrel too much with the twenty-five per cent tax on such goods as costume jewelry and the like at the moment.
The hon. member for Saskatoon City is quite right when he says it is the type of tax that lends itself to evasion by the small dealer who is not too honest. That is one of the reasons why it is the sort of tax that I personally would like to get rid of as soon as I could, but I do not think that in a budget such as I am bringing down this year, a budget in which there is no substantial reduction in taxes, and by which we are trying to counteract inflationary forces and pay off debt, I could go out of the jewelry tax. That is the reason which prompted it. I say frankly it is one of the taxes that was put on during the war, and one which I would like to get rid of just as soon as circumstances will permit.
Mr. ROSS (St. Paul's)1: The removal of the tax would not be inflationary, would it? It would be anti-inflationary.


Douglas Charles Abbott: I say it would be inflationary. My hon. friend may have his own opinion as to that. He and I differ there.


Mr. JOHNSTON:: I should like to say a word about this tax in view of the fact that when I was home at Easter I called at one store in Calgary and at another in Drumheller. I did mention at that time that a presentation would be made to the minister when his estimates were before the house. In the stores in smaller towns where jewelry is sold it is quite a hardship to have a twenty-five per cent tax charged on these items. It will be generally agreed, though, that the reduction on silver-plated articles will do a good deal to relieve the situation; but, generally speaking, the jewelers in the small places are finding it extremely difficult to compete in markets where
Excise Tax Act

other items are available. Particularly do you find that in western Canada.
So far as I could, I have endeavoured to get a comparison between the jewelry business in the east and the west. It is a pretty difficult thing to look at stores and try to estimate where the greater amount of business is done. In my opinion much more business is being done in the city of Ottawa than in the city of Drumheller. I think the reason for that is that Ottawa is what might be called a government city. There is a steady payroll in this city. On the other hand, in the western country most of the trade of the jewelry stores comes from the country areas. This tax imposes a great deal of hardship on the smaller communities, and they have made strong protests against what they call a discriminatory tax. I quite appreciate the minister's view in expressing the opinion that he had to get revenue from somewhere, but some of these businesses are pretty hard pressed. Some of them find it difficult to keep going. If some relief could be given to them I am sure that they would all appreciate it. If the minister would give consideration to it, even in this budget, it would be of great benefit to many business people.


Donald Methuen Fleming: The minister has indicated that this is the kind of tax he would like to get rid of if the time were ripe. I wish to suggest to him in all seriousness that he will never have a better opportunity to get rid of it than now. He does not need it for revenue purposes, and the discrimination which was so abundantly proven last year, has been proven again this year. It has been established that it will continue unless he greatly expands the scope of the present budget proposals. As a matter of fact, his recognition of the problem presented by this discriminatory tax is manifested in the fact that he has brought in this resolution at all. But the resolution is in such restricted terms that very little relief will be given by the proposals. After all, it is confined now simply to plated flatware and to alarm clocks that have a retail selling price of not more than $10. I suggest that the problem which is recognized by the minister, but for which there is no adequate solution in the budget resolution, is one that does call for re-examination of the situation.
It has been pointed out here, as it was pointed out last year in the budget debate, that this luxury tax, as it has been called from the outset, owed its origin to government wartime policy, which was a deliberate policy on the part of the government to siphon off production from this class of commodity into those commodities which more directly assisted the war effort. That entire situation which occasioned the imposition of the tax in the 
first place is gone. The whole basis of the case offered by the government in support of the tax when it was first imposed has gone. We should remember the words used by the Premier of Nova Scotia in a communication to the government on April 21, 1947. Speaking of these taxes, he said:
These taxes, along with a considerable number of other taxes such as those on gasoline, soft drinks, candy bars, luggage, clocks, jewelry, furs and the like, were imposed by the dominion during the war emergency. I imagine that most governments are more anxious to take taxes off than, to put them on.
I commend these words of the Premier of Nova Scotia to the Minister of Finance. I urge upon him that the time has come-some of us think the time has long passed-when this tax ought to be removed in its entirety.
Mention has been made of the discrimination that it creates as against the jewelry trade. That has been abundantly shown. The hon. member for Peterborough West has shown how it operates so unfairly against manufacturers of watches and other forms of jewelry. There is also quite a broad range of articles that perhaps do not lend themselves to classification, directly speaking, as jewelry, but are nevertheless handled through the same outlets as jewelry. The minister has referred to costume jewelry, but there are a great man3r other things to which this tax applies. There are all the leather goods, and luggage of all kinds. If my recollection is correct, luggage bears a thirty-five per cent tax.


Douglas Charles Abbott: That is not the same tax.


Donald Methuen Fleming: No. I am dealing with the taxes that are imposed upon goods that are handled through the same outlets in many cases. If I remember rightly, the tax on luggage is thirty-five per cent. To that you add the eight per cent sales tax, which makes forty-three per cent right there.


Douglas Charles Abbott: That is at the manufacturer's level.


Donald Methuen Fleming: Yes, and with the pyramiding that goes on, I am informed by those who are dealing in these goods that it is nearer sixty per cent or seventy per cent by the time it reaches the consumer.
With respect, Mr. Chairman, I should think there is no occasion now to continue taxes of that kind; there is no occasion for such heavy and harsh taxes being continued into peacetime. Pens and pencils are another example. Surely to goodness we are not going to say that fountain pens and pencils are a luxury in 1948 to which a luxury tax of a heavy amount should be applied. These taxes keep on pyramiding and pyramiding.

Excise Tax Act
Then, there are very unfair applications of these taxes. Last year in my remarks on the budget I drew attention, or sought to draw attention, to the way in which this indirect tax was collected from the consumer. In the case of purchases from florists, this is the situation to which I drew attention. If you buy cut flowers in a florist shop today you do not pay the luxury tax, but if you buy flowers in a vase you pay tax, not only on the vase but on the flowers as well.
That has a counterpart in connection with leather goods. A wallet or billfold, if there is a pad of paper included with it, even of cheap quality, can be sold todlay as an article of stationery and does not pay the tax. If the same wallet or billfold did not have the cheap paper pad inside, it would bear the thirty-five per cent luxury tax imposed on leather goods.
This kind of tax has been called discriminatory, and it is so in many respects. It is discriminatory as against the retail vendors who sell goods of this description. It bears heavily upon them, and in that sense they are being singled out for the imposition of the tax. Those who are purchasing this kind of goods are also singled out. Along with that, you have a number of anomalous situations created by the effects of this discriminatory tax.
I suggest to the minister that the way to correct the anomalies is to go to the root of the problem and eliminate the tax. He has expressed his dislike of it, and I think it is fair to say he has expressed disapproval of this kind of tax. I urge him to go the whole way now. He has recognized the problem, and he will never have a better opportunity of eliminating a tax of this kind, which has no legitimate excuse for continued existence. I urge him to go the whole way and cut the tax out.


Mr. GIBSON (Comox-Alberni):: The minister himself has conceded the possibility of evasion of the tax and I am curious to know what his estimate may be. Do we get half of what we should get, or a quarter, or what?


Douglas Charles Abbott: That is anyone's guess. I do not know how many dishonest people or how many dishonest merchants there are in the country. I have proceeded on the assumption that the majority of people are honest and pay their taxes and their bills, and I should think that, in proportion to the amount of tax collected, the loss would be small. But there is no means of forming a particularly accurate estimate. The officials of the department inform me that there have been a considerable number of prosecutions, and that
always has a salutary effect in helping people to maintain their naturally honest instincts. I have no doubt that it is helping in the collection of the tax.


John Lambert Gibson: Has the minister considered putting it on the manufacturer's level? The minister would be sure of collecting it; it would ease the burden on the consumer, and he would get as much money.


Douglas Charles Abbott: Speaking generally-I do not wish to have the words I say twisted-I prefer a tax of this kind, on the manufacturer's level, to a retail tax, if only to avoid the sort of thing suggested by the hon. member for Saskatoon City, that it is obviously harder to collect it from a large number of retailers, and to police it, than where taxes are imposed at the wholesale level. On the other side of the picture, where you impose a sales tax at the wholesale level, it tends to pyramiding a bit, and the retailer takes his margin of profit on cost plus tax. I cannot say that I disapprove this tax, as the hon. member for Eglinton suggests, but it is the type of tax I should like to eliminate at the earliest available opportunity. This budget, however, does not present that opportunity.


John Lambert Gibson: Does the United States tourist pay the tax?


Douglas Charles Abbott: Oh, yes. It is a retail purchase tax.


Gordon Knapman Fraser: That is what is hurting Canadian business.


John Lambert Gibson: If the
Americans allow their people to take back $400 worth of goods, this would be an excellent way to export things Americans want to buy, in the line of jewelry. They could take back $400 worth, and anything we could do to encourage them would be all to the good. If this type of goods could be exported through the mails without payment of tax that would be helpful.


Douglas Charles Abbott: I am told that can be done. The tourist can purchase an article and have it shipped to his home town and it will be free of tax, but I do not know whether he could avail himself of this tourist exemption of $300 or $400, because my understanding was that he had to take the goods back with him when he returned. I would not be sure, but I do not think it applies to goods shipped out.


John Lambert Gibson: Is English fine china subject to taxation?
Excise Tax Act


Douglas Charles Abbott: Not if it is for serving food or drinks.


Mr. ISNOR:: I take exception to the loose manner in which the minister and other members speak of pyramiding. It is not fair to the retailers of Canada. They are doing business under conditions that are harder than ever before. They are using closer markups today than in years gone by, -owing to increased prices, and there is no such thing as pyramiding a twenty-five per cent increase. The -buyer goes in and looks at an article. It is sold at SI, $1.50, $2.00, and it is easy to compute the twenty-five per cent. There is no pyramiding of any kind so far as that is concerned. I certainly think it is unfair for so many members, as well as the minister, no doubt unintentionally, to use the word "pyramiding" in a -wrong sense. I think I should say that in fairness to the retailers.


Douglas Charles Abbott: My remarks were not intended as a criticism of the retailers, and perhaps the word "pyramiding" was unfortunate. It is proper and necessary for the retailer to add his mark-up or margin of profit -on cost, which includes the tax involved; and I was simply saying that, in the case of a retail tax, the retailer puts the tax right on and the purchaser knows what he is paying, whereas, when it is imposed at the wholesale level, of necessity it is collected by the manufacturer and there must be a percentage mark-up by the retailer; otherwise he could not stay in business.


Donald Methuen Fleming: ''Pyramiding" is a proper term to apply to -what happens, and it is not used in criticism of the retailer, the wholesaler or the jobber. They all do the same. It is inherent in that kind of tax. It is no use talking about an eight per cent sales tax as though that were the tax the consumer pays, because in practically all cases it is about doubled by the time the article is sold over the counter to the consumer, since the wholesaler has his mark-up and so have the jobber and the retailer. No criticism of the retailer is intended.


Gordon Benjamin Isnor: That is a lawyer talking.


Donald Methuen Fleming: The minister has not yet dealt -with the question presented by this kind of tax, namely the discrimination involved. Why should he continue for another year a tax on such things as fountain pens, watches, trunks, billfolds and shopping bags as a luxury tax, when oil paintings, oriental rugs and expensive furniture are not and have not been subject to such a tax.
At six o'clock the Speaker resumed the chair and the house took recess.

After Recess
The house resumed at eight o'clock.



DAIRY INDUSTRY ACT


[Stage Direction]
The house resumed from Tuesday, April 20, consideration of the motion of Mr. Sinclair for the second reading of Bill No. 4, to amend the Dairy Industry Act.
Mr. EUGENE MARQUIS (Kamouraska):: Mr. Speaker, on April 20 last, before moving the adjournment of this debate, during the few moments at my disposal I placed a few remarks on record. May I recall to you that I then brought to the attention of the house the necessity of protecting and maintaining our dairy industry, which has been established and developed in Canada for three centuries in conformity with the geographic and climatic conditions that exist here, as well as the nature of our soil, so that today the production of milk and butter can be increased to an extent beyond the requirements of Canadian consumers. I also urge that the huge amount of money invested in livestock, buildings and equipment for the maintenance of the dairy industry should be taken into serious consideration, and that, as a matter of principle, artificial production should not supersede natural production.
Having this in mind, let me go on to point out that most of the vegetable ingredients used in this new, so-called good and nutritive margarine have to be imported, with the greater part of the oil seeds required being grown in the United States. Soya beans are grown in Canada on only a very small scale, and they are neither the best nor the cheapest source of oil for margarine. In the United States today the chief sources of oil are cottonseed and peanuts, neither of which is produced in Canada. Even if we tried to do so, it is hardly likely we would succeed in cultivating cottonseed and peanuts here. So the greater part of the oil seeds used in the fabrication of oleomargarine cannot be acclimatized to our country. On the other hand, if soya beans or any other oil seeds that are grown here should be used in the manufacture of margarine the result would be a greater shortage of oils for other domestic uses.
Can we forget, Mr. Speaker, that a few weeks ago this house adopted a measure im-

Dairy Industry Act
posing restrictions on a long list of commodities, which until that time we imported from the United States. If we were to abolish the ban on the importation of margarine we would also have to permit the importation of oil seeds, thus directly contravening the intention of a measure adopted by this house for the conservation of our currency.
What would happen in future if margarine should be thrown on the Canadian market? In a short time we would have a surplus of perhaps 100,000,000 pounds of butter for which we would have no market. In the United States, approximately one pound of margarine is consumed for every two pounds of butter. A similar trend in Canada would result in the displacement of over 100,000,000 pounds of butter, with a milk equivalent of two and a half billion pounds. It would then be a disaster not only for the dairy industry but for the economy of the whole nation.
Perhaps one may answer that the surplus should be converted into cheese; but this market would not be unlimited, and then we would have a surplus of cheese unsold and unconsumed. Canada has never been an exporter of butter, except spasmodically, because of her inability, on account of geographic and climatic conditions, to compete against countries with lower production costs. In some other dairy export countries the economy is based upon butter. For Canada the only reliable market for our export surplus of milk products in volume is the United Kingdom market for cheese, where Canada has the top rating and commands the highest price. If, however, surplus milk were provided through the decreased consumption of butter in Canada the result would be a corresponding increase in the production of cheese for export to the United Kingdom; and with larger supplies in prospect from New Zealand and Australia that market would be over-supplied and unable to absorb the additional supplies from Canada. Under such circumstances, the dairy industry in Canada would be demoralized, with the inevitable result that dairy herds would be cut and farm income reduced.
Let us assume, Mr. Speaker, that the present situation is caused by a world shortage of foods, especially grains. One or two good world harvests would bring relief; but to make a revolutionary change in the economy of the dairy industry in the present temporary emergency would have disastrous effects upon that industry and upon the general economy of the country. There are some 500,000 dairy farmers in Canada engaged in an industry contributing over $400 million to the national economy. To depress the standard of living of this large
portion of our population, together with their families and other people engaged in agriculture, could not avoid having far-reaching effects upon their ability to purchase manufactured goods. In the province of Quebec, the dairy industry furnishes thirty-five per cent of the income of the farmers. It is the backbone of our rural economy. Here is a natural process of converting into milk products our yearly crop which otherwise could not be sold or consumed. On our individual farms each member of the family contributes to the production; and milk production is intimately connected with cattle and hog raising, ensuring to the country more and more livestock to meet the needs of our urban population.
Any policy tending to decrease the production of butter will naturally reduce the output of milk, which is a most essential food for the 'health of the nation. If, in some cases, margarine can be substituted for butter, oil cannot replace milk. As to the present situation of oils in Canada, it is as follows:
Minimum import requirements for the current year to supply Canadian needs of edible oils for shortening, mayonnaise, etcetera, are approximately 123,000,000 pounds, divided as follows:
Pounds
Peanut and sunflower	oils	 70,000,000
Soybean oil	 15,000,000
Cottonseed oil	 13,000,000
Edible palm oil	 11,000,000
Coconut oil	 14,000',000
In addition, this	year's estimated domestic
production is:
Pounds
Soybean oil	 6,000,000
Sunflower oil	 2,500,000
Rapeseed oil	 5,000,000
Despite heavy imports, Canada is still short of supplying the domestic demands for these commodities. The question arises, therefore, where further quantities are to be obtained, in view of the world shortage. The statement has been publicly made by the chairman of Lever Brothers in London that he estimated the world shortage of oils and fats at 4,000,000 tons annually, and that controls in one form or another must continue for some years. Allocations are still made by the food advisory council. If our allocation is increased, it should be distributed to meet the needs of workmen in lumber camps or in similar trades. They are frequently making demands for a larger supply of oils and fats to be used in cooking.	.
It would appear that the efforts to legalize the manufacture and sale of margarine in Canada, resolved themselves into trying to have a product, for which the raw materials
Dairy Industry Act

are not available now; and when the day comes that these raw materials are available, other products, including butter, will also be in full supply. History and logic indicate that butter prices move with those of other commodities, and at that time butter will be available to consumers at a relatively low price.
I take exception to the opinion of those who state that this question is a matter of freedom. The first principle of economic freedom is to protect and maintain the well balanced economy of the country and consequently the farming industry. The physical and economic health of the nation depends on it.
Butter is a superior food and natural product of milk. Margarine is an artificial imitation of butter. Those who advocate the manufacture or importation of margarine should offer this so-called food, as it stands when made with oil without any colour and flavour for the imitation of butter, as shortening and lard are used in food. Shortening is used as shortening. Seed oil should be used as such in cooking. Margarine may be called "butter under false pretences."
Some people object to the actual price of butter. But what about the other commodities? Here is a list of commodities with comparative prices from the basic period to October, 1947. Mr. Speaker, if I have permission I should like to place this table on Hansard.


James Horace King: Has the house any
objection to giving the hon. member permission to place the table on Hansard1


Some hon. MEMBERS:: Agreed.


Eugène Marquis: This is the table:
		Retail;	prices
Commodity	Basic period	Oct- ober, 1947Strawberry jam ..	cents 24	cents 60Marmalade 	21	42Canned peas 	11	19Eggs 	43	64Canned tomatoes .	12	28Canned salmon ...	20	37Coffee 	41	59lea 	84	1.14Corn starch 	S	17Bread	[DOT] 24-ounce loaf	6	13Peanut butter . ...	16	40Corn syrup 	29	35Butter 	35	62Sunlight soap ....	5	10Beef, boneless roll	35	49Lamb, leg	26	51Bacon 	44	64
And what about clothing, shoes, automobiles, et cetera?

Consumers have to remember that for many years milk and butter prices were far from being on a parity with manufactured products.
The same conditions existed during many years for farm and sea products, which w-ere at such a low price that their owners were obliged to dump a great part of them as a total loss. Nobody complained at that time that the consumers did not give an adequate payment for farm products, and it would then have been of the utmost stupidity to qualify dairy industry as a monopoly. Today, the nature of this industry is the same. Those interested in it are men and women who work with their own hands and toil, from dawn to dusk, to feed our population.
Far from being a monopoly, the dairy industry is the prototype of private and individual enterprise. When butter was sold at twenty-five cents a pound, it was because the dairy industry was obliged to accept the prices fixed by monopolies. But what would be the nature of the margarine industry? Oil seeds would be for the greater part imported when only a small part of them would be grown here by farmers. But the industry would be operated by one or two powerful companies which would be the exclusive manufacturers. They would control the price paid to oilseed growers and the price of margarine. There is a real danger of creating a monopoly.
I wish to say a few words concerning the needs of the consumers. During and since the war, there has been a shortage of many commodities on account of the fact that we are contributing largely to the relief of European countries. Milk products in the form of cheese and concentrated milk are exported. Our allocation of oil and fats is insufficient for the needs of our own people. This is one of the reasons why butter was not available to all consumers during a short period of time. AVhen I object to this bill, my view is not to refuse food to the consumers but to secure for every class of our nation, and particularly workers, butter in sufficient quantity and at a reasonable price, and to supply them with oil and fats in an adequate proportion. If, by the introduction of margarine into Canada, the production of butter be curtailed, then, in the near future, a serious shortage of butter will happen, leaving manufacturers of margarine free to sell their imitation of butter at the price of their choice.
Margarine is indeed a compound of oil and fats, which can be consumed in a form other than butter.
Some advocate that we should consume more vegetable oils and that, on this point, the United States standard of living is higher than

Dairy Industry Act
ours. Let us compare the fat consumption in the United States and Canada for 1945:
Pounds per capita
	United States	Canada
Butter 			 10-5	28-6
Margarine 			 4-2	
	14-7	28-6
Lard 			 11-9	4-7
		 9-9	7-9
Other fats 	
6-2	1-4Grand total ...	
42-7	42-6We see that our	consumption of	butter isnearly twice that	of butter and	margarine
combined in the United States. Would it be preferable to increase the consumption of imported lard and oil and decrease our farm production? I sincerely think this proposition would not resist a serious analysis.
A statement has been made that the high price of butter has caused a reduction in consumption. This is not in accordance with the facts. On the contrary, consumption of butter in Canada has increased about 33,000,000 pounds to the end of October, 1947, compared with the same period in 1946.
Some advocates of artificial butter contend that this false-coloured fat would be cheaper and consequently available to the consumers in the lower income brackets. I do not think it is fair to keep good natural butter for the more fortunate citizens and offer a substitute to the workers. Every citizen of this country is entitled to consume our best Canadian food.
Actually they consume shortening and lard, oils and fats in their daily meals. What would be the use of adding oil to oil and to discard such a good Canadian food as butter? On the contrary, we should encourage the consumers to use more and more milk products. It would be the best way of increasing the production and decreasing the price. But even at the actual rate milk is cheaper than other drinks, particularly beer, wine and alcohol. Indeed, the cost of milk is $6 a hundred pounds.
Let us see now what is spent for alcoholic drinks. From April 1, 1944, to March 31, 1945, the consumption of alcohol, wine and beer in
Canada was as follows:
Alcohol, 3,7:19,918 gallons at $21 a gallon or $210' a hundred
pounds, valued at	 $ 78,118,278.00
Wine, 3,712,456 gallons at $3 a gallon or $30 a hundred
pounds, valued at	 11,137,368.00
Beer, 1:10,223,815 gallons at $1.90 a gallon or $19 a hundred pounds, valued at ....	209,425,248.50

This represents for each of the Canadian families an average expense of about $120 a year. If we compare the consumption of butter with that of beer, wine and alcohol we find that the whole production of 1946, 325,591,000 pounds at the rate of about seventy cents per pound, would cost $227,913,700, that is over $70,000,000 less than the disbursement for beer, wine and alcohol.
These figures are cited in order to show that propaganda is often made against farming products, when publicity is intensified to favour some other high-priced commodities. The price of butter has attained its peak on account of the fact that the production is rather small and more expensive during the winter. The price will decrease during summer, but it should not decrease to the low level known in the past.
If there is a surplus of oleomargarine in countries which grow oilseed on a large scale, this quantity should be diverted toward European areas which need fats and oils. We are now sharing our food with those who are menaced with starvation. Why should we import margarine which is absolutely necessary to feed those who cannot have fats and oils for their own living?
There is an open market for the exportation of such a product. It we want to support other countries we must maintain the stability of our national economy in order to produce a larger bulk of our own commodities and supply them with cheese, powdered or evaporated milk, and even butter, if possible.
In conclusion, I sincerely think members of both sides of the house should join together to protect the dairy industry in Canada. If a multilateral trade pact is agreed upon for the security of our future economy, steps should be taken to guarantee the maintenance and the development of our farm industries.
Such an agreement would probably be of great benefit to the farmers, but its acceptance does not imply the obligation of repealing the ban on the importation of margarine. An opinion has been given by legal experts, stating that in a country where the law prohibits the importation of a certain commodity it would not be necessary to amend the existing law in order to comply with the requirements of that multilateral pact.
Should the provision of the agreement be interpreted in a different way, I would urge this government to impose then very high duties on margarine. Personally, I am opposed to the principle of importing or manufacturing a substitute for butter.
I sincerely believe that God created cows for the production of milk and butter and has never put on the earth such a species as "vegetal cows".
Total
Dairy Industry Act

(Translation):


Mr. J. OMER GOUR (Russell):: Mr. Speaker, I take pleasure in protesting against the enactment of this bill which would allow oleomargarine being manufactured in Canada or brought in from outside because such a measure would be detrimental to the interests of farmers and of Canadians as a whole.
It is fitting that I should say a few words on the bill since in that fine constituency of Russell, which I have the honour of representing in this house, the number of electors in the rural areas is approximately the same as in the towns. In my opinion, if the cost of living is on the increase, it is not due mainly to the price of milk and butter. Some people say it is terrible to pay 15, 16 or 17 cents for a quart of milk or 70 and 75 cents for a pound of butter. However, they do not complain when buying large quantities of soft drinks at from twenty-five to forty cents a quart and liquor at anywhere from $5 to $10 a quart.
Theatres are jammed with people who spend anywhere from seventy-five cents to $3 for tickets. People think nothing of paying $1 to $5 for admission to a wrestling or hockey or a boxing match, and so on. Ladies are quite content to pay $5 to $50 for a tiny wisp of some sort of material, trimmed here and there with a few flowers which, when put together, they call a hat. Well and good, but current prices for milk and butter are considered dreadful.
I shall now tell you a little anecdote about an incident that happened when I had a visit from one of my friends who was bitterly complaining of the price of milk and butter. I said to him:	"We will see if you are right.
Your wages are $1.50 an hour, with three weeks holidays with pay and time off with pay for sickness. I will order my chauffeur to drive us to a good farm owned by one of my nephews, and if you are able to milk enough milk in one hour to produce $1.50 of butter value, I will give you the cow, the pail and the barn too".
(Text):
May I tell hon. members wiho do not understand French a little anecdote? Not long ago I had a visit from one of my friends who was complaining of the price of milk and butter. I said to him, "We will see if you are right. Your wages will be $1.50 an hour, with three weeks holidays with pay, and time off with pay for sickness. I will order my chauffeur to drive us to a good farm owned by one of my nephews, and if you are able to milk enough milk in one hour to produce $1.50 of butter value, I will give you

the cow, the pail, the bench on which you sit, the milk, and the barn too." He refused the offer, and I now make it to any hon. member. (Translation):
I make the same offer to any hon. member of this house. A hundred pounds of milk, in the form of butter, quality 3-4 brings only $2.45. As a liquid, it sells from $3.25 to $3.75 a hundred pounds, according to the fat content, that is about 8 to 10 cents a quart. That is all it brings to the farmer. The difference between 8 and 16 cents pays for distribution to homes in cities or towns.
I wish to assure my hon. friends that the importation of margarine would harm Canadians in general. Indeed, because they do not earn enough from the sale of butter, our farmers would reduce their herds and, having no milk substitute to feed calves and piglets, they would have to quit raising them.
What would happen to city people if farmers lacked means to buy manufactured goods? It would mean a slump in the manufacturing industries as well as in agriculture, and the country would go bankrupt, as it did from 1930 to 1935 under a conservative administration.


Mr. MICHAUD:: Hear, hear!


Joseph-Omer Gour: Mr. Speaker, I would like to say rural families buy four times more manufactured products than urban families, in proportion to population. Farmers buy implements of all kinds, vehicles, tractors, harrows, ploughs, cars, building materials, fence wire, threshing-machines and a great many other products necessary on a farm. They need more clothes than city-dwellers because of the variety of chores they have to do.


Benoît Michaud: That is true!


Joseph-Omer Gour: I believe that every hon. member knows all about the different kinds of clothes the farmer needs to work in the rain, in the mud, in the stables and so on. Farm work is hard work, and so shoes, clothes and all other garments wear out much more rapidly than elsewhere. We must not forget that our farmers work 300 days a year-


Mr. GAGNON:: Only 300?


Joseph-Omer Gour: 300 days a year . . . Just a moment, it is my turn to speak . .. from twelve to fifteen hours a day, and five to eight hours on Sundays and feast-days in order to look after the cattle, etc. That totals 365 days.


Benoît Michaud: Hear, hear!


Mr. HARTT:: Give them a bit of encouragement!

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Joseph-Omer Gour: These people have no holidays-[DOT]


Mr. RINFRET:: That is true!


Joseph-Omer Gour: Their children begin to help them on the farm when they are nine or ten. Their salary is also quite small. Many of them earn fifteen, twenty or twenty-five cents an hour.


Benoît Michaud: That is true!


Joseph-Omer Gour: Not 75 cents or $1.50 or S2 an hour as certain labour organizations request; egged on by communists. Workers often demand salaries of even $2 to $2.50 an hour. In my opinion, if the remainder of the people in Canada and throughout the world worked only two-thirds as much as farmers do, production would increase and goods would sell for less-


Benoît Michaud: He is absolutely right!


Joseph-Omer Gour: This would help lower the cost of living. Goods cannot be cheap when people will not work.


Maurice Hartt: That is true!


Joseph-Omer Gour: I want it understood that by farmers I mean people who indulge in mixed farming, farming on a large scale, those who raise cattle and poultry and so forth, as well as those who have taken up general farming, including grains and vegetables. We cannot call these people "gentlemen farmers", the latter growing mainly grain, as do most farmers in western Canada, where I was last year.
In western provinces those people call themselves farmers. Now our hon. friends speak on behalf of such farmers, though less than half are genuinely that. They are "gentlemen farmers" who work only three or four months a year and forever request large sums of money from the central and eastern provinces.
Mr. Speaker, I believe that excess profits taxes should be reapplied, for statistics show that many companies are making too much profit by asking more than they ought for their goods, thus raising the cost of living still higher. Steps should be taken to put an end to this state of things. I feel that a labour code, under federal control, is necessary right now.
I congratulate the Minister of Labour (Mr. Mitchell) for introducing such a bill in the
house. I trust all the provinces will support it. Those who like the premiers of Ontario and Quebec refuse to come to terms with the federal government, are working against their province and the country as a whole.


Some hon. MEMBERS:: Hear, hear!


Joseph-Omer Gour: Through their stubbornness, they prejudice the interests of Canadians of all ranks who might profit from improved social legislation.
The provinces of Quebec and Ontario are richer than the others. All the more reason why they should help the needy provinces. When Quebec and Ontario were in need, they got help from the central government. Now that they are well off, let them not object to the need of other provinces. Let them rather co-operate with the central power which always assists needy provinces, as in the case of the recent floods in some of the provinces and the adoption of bills for the protection of New Brunswick and Nova Scotia. Those provinces were badly in need of help. I believe that we have reason to criticize the prime ministers of Ontario and Quebec for refusing to help the other provinces when they are in need.


Mr. THATCHER:: Hurrah for Quebec!


James Horace King: Order. I think I must call the attention of the hon. member to the fact that the bill we are discussing deals with the dairy industry.


Mr. DION (Lake St. John-Roberval):: Mr. Speaker, I believe that the hon. member is quite in order, since he meant to say that the two central provinces are milch cows for all the other provinces in this country.


Joseph-Omer Gour: Mr. Speaker, I cannot see anything in my remarks that can be detrimental to the interests of our country. This is the fourth time I have spoken in the three years I have been here. True, I might not be quite in order, but there are some here who take up three-quarters of the time of the house to say things which are of far less value to this country than what I am saying now.
I see nothing profitable in the import or production of margarine. To begin with, it has been proven that it is much inferior to butter and that there would be very little difference in its price and the present price of
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butter, and almost none in normal times. We must not forget that from 1930 to 1935 butter sold at from eighteen to twenty-five cents a pound here in Canada. I wonder what a margarine company could sell for less than that, except axle grease.
Are we going to permit the sale of a product which will be of no benefit to consumers while discouraging our farmers who are already only too prone to abandon their farms in order to live in cities where they increase the number of shelterless people.
I regret to be compelled to say that there are in my constituency over one thousand farms, with fertile land and good buildings, which have been abandoned by their owners and which can be bought for the price the house alone would fetch if it were located in a village or a town. I call upon city people who claim that our farmers are making such large profits to buy those farms; we shall welcome them and they will be in a position to find out by themselves whether there is really so much money to be made on a farm, especially with butter and milk.
I suggest that members of the consumer's delegation who came to Ottawa some time ago, submit their grievances to provincial parliaments who control these products, and ask them for subsidies on milk and butter. If provinces claim they lack revenue, let the delegation ask that part of the taxes on liquor and cigarettes be used to subsidize milk and butter.
The money used for paying those delegates, who instead of making useless trips and delaying us at the House of Commons, would be more profitably spent on dairy products for people of slender means.
Looking over the statistics, we can easily find out that almost as much money was spent on spirituous liquors in the province of Ontario alone during the year 1947 than is spent on butter and milk by the whole population of Canada. I mention my own province because I do not want to meddle with the affairs of other provinces where consumption per capita is just as large. Now, if it is found that in spite of the fact that there is plenty of money for purchasing that product certain families are still in straitened circumstances, since for a reason or another there will always be some in such a situation, it behooves first the province, and afterwards the municipality,

as well as welfare organizations to take whatever steps are necessary to provide milk and butter to those less privileged families.
(Text):
Now you will permit me, Mr, Speaker, to bring to this house the argument of some hon. members who have spoken in favour of oleomargarine, saying that its production would give work to the labourers of this country. We must not forget that the butter factories all across Canada give more work to labourers in Canada than a few factories or one factory manufacturing oleomargarine would give in large cities. What we want is more factories in small centres.
I may ask the financiers to come to my riding where we have the -best advantages in Canada, lovely little towns where they can build factories for the manufacture of some commodities that we do not produce or that we produce in too small quantity for the needs of this country, and therefore are obliged to buy from the United States, when we are always short of United States dollars. I could mention flax and linen factories, for example, which would give work to thousands and thousands of people. We are producing, and are able to produce, all the necessary fibres to manufacture all the linen we need for this country as well as for sale, for millions and millions of dollars, to other countries, and thus we shall be able to replace the linen and all other textiles that we are buying from the United States and other countries. This would render a better service to the Canadian people than the manufacturing of oleomargarine, which would destroy our farmers.
I know very well this product "oleomargarine", for I sold and ate some when it was permitted on the Canadian market. It was just better than nothing, and at 'that time most of the buyers preferred lard, for to keep it fresh it has to be kept at a very cold temperature; otherwise it is not eatable.
There are only a few of my electors who are in favour of this product, and after short discussions they agreed that it was not favourable to the welfare of the Canadian people as a whole. Why, if this product can at all be compared with butter, will the Americans pay $1 and more for a pound of butter when they are able to get a pound of oleomargarine for half the price? Do you believe, Mr. Speaker, that the American people do not know what is best for them to eat? And if there were as

Excise Tax Act
much butter in the United States, and at as low a price as it is in Canada, there would be very little oleomargarine sold there.
I believe that there should be more details and explanations given to our Canadian people, so that we may keep the farmers on the farms; and the people should not be so alarmed when, for a short period, the farmers have the advantage of making a little bit more money. You will admit with me, Mr. Speaker, that butter has been scarce only lately, and not for such a long period.
As usual, farm products are the last to go up and the first to come down. Some people try to convince us that inferior products are needed for those of smaller means, but everyone needs the best of food, especially those who are working hard. We in this country are proud to say that we have the best quality food for even the poorest class.
In conclusion, Mr. Speaker, I am sure that all our people, labourers and others, are such good Canadians that they would be glad if a measure of this kind were never put into force in Canada. They know it is necessary to help our farmers if other sections of the people are to benefit. The people in my riding are fifty per cent farmers and fifty per cent urban. There are as many electors in urban centres in my riding as there are farmers, and perhaps a few hundred more, and I am sure that they wish to protect the interests of the farmers. I have no doubt I speak for them on this question.


Thomas Langton Church: Mr. Speaker, the sponsor of this bill made a strong case for it. It seems to me that those who are opposing the measure we have before us tonight will hurt the dairy industry. This bill will not hurt it, but it is the attitude which we see exemplified tonight in the two speeches or essays to which we have listened. The industrial workers of Canada need some protection, and I suggest that we might as well regulate the production of the tea or coffee we use. Is this twentieth century liberalism which we see in the free trade party across the floor? I have always supported the bill. They have allowed two cases of oleomargarine to come in at the depot here from the United States, consigned to our parliamentary cafeteria, undelivered, and no one can use the product. In my opinion the government is. making a serious mistake, and I think the Minister of Agriculture (Mr. Gardiner) should adopt the principle of freeing the house, so far as this question is concerned, and allowing the members to vote, not from the party standpoint but from the 5849-294
point of view of the nation as a whole. I submit that we should consider the interests of the consumer as well.
On motion of Mr. Menary the debate was adjourned.



WAYS AND MEANS


[Stage Direction]
The house in committee of ways and means, Mr. Macdonald (Brantford City) in the chair.
William Ross Macdonald: When the committee rose at six o'clock it was considering section 5 of the resolution to amend the Excise Tax Act, which section deals with the retail purchase tax on watches, and so on. Does the clause carry?


Gordon Knapman Fraser: I would ask the minister to reconsider this tax as it affects non-jewel watches selling at less than five dollars. That is the poor man's watch.


Douglas Charles Abbott: I have considered the question and I cannot hold out false hopes. I am afraid I cannot make any change in the decision. It was decided to restrict the relief to alarm clocks and not to extend it to watches. However, my hon. friend's representations, needless to say, will be borne in mind in future budget considerations.


Harry Rutherford Jackman: It is not good enough to say the representations of the hon. member will be borne in mind. I understand that the jewelers' association waited on the minister not only one year ago but two years or more ago and left his office under the impression that this was a tax which had been put on for war purposes only and that it would disappear with the termination of the war. Last year's budget brought no relief, and in the budget this year there is no attempt by the minister to live up to the impression, if not the promise, he gave them.


Douglas Charles Abbott: No promise was given anyone, needless to say.


Harry Rutherford Jackman: I am sure the minister would not give a promise, but he left an impression with them which they took in good faith.


Douglas Charles Abbott: I am afraid I cannot be responsible for impressions which may be given. I am particularly careful, in connection with all delegations to see me in regard to budget matters, to make no commitments. I think that is an entirely proper attitude to take. 'I receive delegations sympathetically, I hope, and listen carefully to their representations; but I do my best to give no indication
Excise Tax Act

of what may be the result of their presentation. In this case I am sure the delegation were not mistaken as to the result.


Harry Rutherford Jackman: In this house we find no
doubt whatever left in our minds. The minister speaks with great clarity of expression and we know exactly what he has in mind. I have no doubt, however, the delegation did receive the impression, and rightfully so, that some relief would be afforded to them and to their industry, because the whole purpose of the tax has disappeared. It does seem a very great and grave discrimination that a luxury tax, if you want to call it that, or a retail sales tax of twenty-five to thirty-five per cent should be levied against a certain class of goods, particularly when there are so many other goods which come within the luxury class. You can spend your money one way, if you wish, which involves labour and materials; but you cannot spend it another way. The people of Canada, not only as purchasers but also as retailers and producers, are a little tired of having the government tell them what they can do and what they cannot do when it makes no difference to the national economy which alternative may be chosen. They can spend their money in certain ways which will perhaps involve United States exchange but not in other ways which would also involve United States exchange, all because some bureaucrat far removed from the people decides that they shall do this and they shall not do that. The Canadian people are sick and tired of it, certainly those in my constituency; and the merchants of Toronto are thoroughly disgusted with the treatment they have received in connection with jewelry.
I should like to say just a word about the so-called inflationary aspect were this tax to be removed. I suppose the minister will say that the government is taking in six or eight million dollars a year from this tax, and that if the tax were removed that much money would be available to be spent for other things. However I think the minister and his department overlook entirely the fact that the demand for jewelry, luggage, watches and articles of that sort would expand rapidly if the tax were not there. Indeed sensible people, unless they are in urgent need of a particular article, are postponing their buying until such time as this government will live up to its intentions, if not its promises; and now that the reason the tax was put on has disappeared, the tax itself should disappear. So I am suggesting to the minister that if the tax were not there the demand for these articles would not decrease; I am sure he would go with me that far.

The minister mentioned costume jewelry as one item. Certainly the amount of labour going into the production of costume jewelry cannot be very great. If the minister wants to divert a substantial amount of money from other channels, where goods are in short supply and where inflationary pressure is being exercised, then I suggest to him that as a hardheaded businessman he take a good look and see what would happen if this tax were removed and, as I suggest, more money went into the jewelry trade. Despite the figures the minister gave us, some jewelers, particularly the smaller ones, are having to take on other lines in order to keep up their volume of sales, pay their overhead and obtain some return on their investment.
So once more I suggest that if the tax were taken off the minister would find inflationary pressures removed from other and more necessary articles which are in short supply, and therefore he would substantially help our economy.


John Lambert Gibson: I wonder if we might revert to the point raised this afternoon by the hon. member for Peterborough West with respect to these non-jewel-ed watches selling for less than $5. I do not know whether the minister is familiar with retail outlets in Canada, but in many cases you do not have a jewelry store in your immediate vicinity. I am thinking of the hundreds of commissaries and small trading posts in the constituency I represent where the single item on which they have to make returns to his department may be these cheap watches; and it seems to me there would not be a great volume of tax involved. If it were possible to assist by having the tax paid on these cheaper watches at the wholesale level, for example, I believe these people would get away from a great deal of the difficulty they are now experiencing. So I would ask the minister to take this point under consideration and see if he cannot make it a little simpler. After all we have plenty of forms to fill out in Canada today, without going into this line of small stuff.


Douglas Charles Abbott: I do not think that could be restricted to watches. It is true that in some of the stores such as my hon. friend mentions the cheap type of watches are sold, but there is a great deal of what I roughly described as costume jewelry also sold, which is subject to tax.
I have said this is a tax I would like to get rid of, along with some others; but I must say this is not a tax with which we should start, in a year like this. The figures given me show that sales of these products have been rising

Excise Tax Act
steadily year after year. Today they have reached an all-time high, not only for this period but for the wartime years as well.


Harry Rutherford Jackman: Are you objecting to greater prosperity?


Douglas Charles Abbott: I do no't know that we need to give tax encouragement to stimulate the sale of jewelry. That may be desirable; I do not know; but if we were making broad, general tax outs we should start with some other things I can think of. Frankly I do not feel that this is a year in which we need to do this; and for reasons I have tried to make abundantly clear I can think of some other taxes I would want to remove at least at the same time as this one was removed.
This is not a matter to which I have not given consideration. Let no one be under any misapprehension. It is a great deal more pleasant for a minister of finance to take off taxes than to resist this constant urging to take them off. I am sure I would not be fooling anyone if I were to say I get pleasure out of resisting this urging to take off taxes. I know it is much more pleasant and much easier to do that; but for reasons I tried to give in my budget speech I do not think this is a year for a general reduction in taxes, and I do not think we should start with this jewelry tax.


Harry Rutherford Jackman: The minister says this is not the time to take the tax off these so-called luxury items, though some are not in that class at all. I would agree with him, but for the fact that this tax was put on this industry when it was not put on other types of industry. This was a discriminatory tax applied for the one purpose of diverting industry into war production and away from needless, if you like, or unnecessary production during the war. All we ask now is that the discrimination which this industry suffered during the war years should be removed. There are other restrictions Still in effect. They are only allowed to import a certain percentage in value of the watches they imported before, for instance; they cannot get certain synthetic stones and other materials to make their products. Why should a discrimination imposed during wartime, for war purposes, he continued in the third year of peace?
When it comes to a general reduction of taxes, which is long overdue, I hope that reduction will be made applicable to this business or industry to the same extent as to other industries and businesses. This is a special case, brought about by the war; but after three years the minister has not seen fit to relieve these people of the rank discrimination they have been suffering.
5849-294J


Gordon Knapman Fraser: I appreciate what the minister has said with respect to these cheap watches, and I feel quite sure he will do what he can in .this case.
I should like to bring up one other matter at this time, which was particularly brought to my attention last evening. I was informed by a dealer who is in the drygoods business that he has on hand some few hundred outboard motors he is unable to sell, even to companies that use them for commercial purposes. I do not mean just for pleasure. Outboard motors are used by the hundreds by guides who look after our tourist trade coming in from the United States. That trade is most valuable to us. Before this tax went on many of the Americans who came here would not bring in their own motors, but would buy them here, and then perhaps take them back with them. Now they will bring their own motors from the United States.
I was about to mention how these motors are used for commercial purposes. They are used by guides. The forest rangers throughout the whole of Canada use them day in and day out. They even carry them on their aircraft to take them to the different little lakes. Tourist hotels find that they must have a number of these motors for their clientele. They are used by motor taxis. Trappers use them all the time, as do fishermen and lumbermen. I believe some consideration should be given to the use of these motors for commercial purposes.
There is on the market a cheap motor which will be sold this year. But the high-class product will not sell, and the dealers throughout Canada will have them remaining on t'heir shelves. This is hard on the dealer, and extremely hard on the manufacturer. I believe I have not mentioned more than two or three times in fact that in my constituency we have the only outboard motor manufacturing company in Canada. That company manufactures a dozen or so different types. I hope the minister will give consideration to taking the tax off.


Douglas Charles Abbott: I know the hon. member has in his riding one of the best manufacturers of outboard motors in the country. I have one of its products myself. This is the type of tax we want removed as soon as we can. Indications so far would not show, however, that there has been any serious falling off in the domestic demand for outboard motors. It is difficult to have exemption for a special class of user, as my hon. friend will appreciate. If you exempt the guide in respect of the portable type of motor, I am afraid, to use a slang expression, it would soon develop into
Excise Tax Act

a racket. We would find people buying them ostensibly as guides and then passing them on to other people.
I am well aware of the handicap that this places upon manufacturers of outboard motors, under ordinary normal conditions, and my hon. friend can rest assured it will be taken off as soon as possible.


Gordon Knapman Fraser: On the tax alone it means an outlay of $50 by the guide, before he even gets the motor. That is a good many days' pay.


Douglas Charles Abbott: The guide who takes me out fishing has raised his price in the last couple of years. I suppose that is to take care of the added cost of outboard motors.


Gordon Knapman Fraser: He is taking care of his income tax.
Mr. ABBOT!': He does not pay a tax; he does a cash business.


Gladys Grace Mae Strum: I should like to ask the minister about the knives and forks mentioned in resolution 5. Does that mean that the tax now applies only on sterling?


Douglas Charles Abbott: Yes.


Gladys Grace Mae Strum: But it has been taken off all plated tableware?


Douglas Charles Abbott: Yes.


[Stage Direction]
Resolution agreed to.
6.	That the special excise tax of three per cent on goods imported into Canada from general tariff countries be repealed.
Resolution agreed to.
7.	That the Tates of excise tax on matches be amended to provide for a proportionate rate of tax on packages of smaller sizes.
Mr. HERRIDGE:: Would the minister
explain what this means?


Douglas Charles Abbott: We received representations from match manufacturers to the effect that the present arrangement of the schedule of taxation on matches prevented them from putting up matches in certain small-sized packages. There was a unit tax, whether the package contained fifty, seventy-five or 100 matches. I have forgotten the exact number. By merely altering the schedule of the tax the difficulty will be removed, with no significant loss of revenue. It is really just to make a smaller unit for the match package subject to tax. It may favour the use of book matches as against box matches, but I am not sure of that.


[Stage Direction]
Resolution agreed to.

8.	That the excise tax of 35 per cent be repealed on 16 mm. projectors for slides, films or pictures, and that the tax be extended to cover projector mechanisms, sound equipment, arc lamps, lenses, bases, and film magazines or reels for moving picture projectors.
Gordon Knapman Fraser: Are any motion-picture
machines made in Canada?


Douglas Charles Abbott: I understand there are. I am told there is a 16 mm. projector factory in Eastview, although I have not seen it.


Gordon Knapman Fraser: This is put on to protect our own industry?


Douglas Charles Abbott: No, it is not put on for that purpose. This was a special twenty-five per cent excise, and it was removed because I received representations from ministers of education in the different provinces and from different religious denominations to the effect that these 16 mm. projectors were used largely in connection with schools, churches and the like. It was pointed out that this added cost was a heavy burden on that type of educational work. While some are also used privately after going into the matter thoroughly it seemed to me that the better course to follow was to remove the tax completely since, quite clearly, the major portion of these machines was being used in schools, churches and places of that kind. That is the reason for its removal.


Gordon Knapman Fraser: In the latter part of the resolution it states "that the tax be extended to cover projector mechanisms, sound equipment" and so on. That is putting on a tax, not taking it off.


Douglas Charles Abbott: The reason for that is that they were coming in as parts, rather than as finished projectors. It was really a method of evading the operation of the tax, by bringing in half a dozen different parts, then putting them together and making a projector. So it was really a means of evading the tax.


Gordon Knapman Fraser: The projector now would be allowed in free.


Douglas Charles Abbott: This is not a tariff matter; it is a matter of excise tax. The twenty-five per cent tax would not apply to the assembled projector.


Gordon Knapman Fraser: It will not apply to the duty, or anything like that?


Douglas Charles Abbott: It has nothing to do with
duty.


Gordon Knapman Fraser: It applies to the excise tax?


Douglas Charles Abbott: Yes.

Excise Tax Act


Gordon Knapman Fraser: And they will be allowed in
excise tax free?


Douglas Charles Abbott: It is not a question of being allowed in, because it is not a customs tariff item. The twenty-five per cent tax will not apply to the completed 16 mm. projector.


Gordon Knapman Fraser: But they will be allowed to come into the country?


Douglas Charles Abbott: And it will not apply to 16 mm. parts.


Agar Rodney Adamson: I have an amendment to this resolution. I move, in amendment:
That after the words "16 mm." the words "and 35 mm." be added.
I note that at present the resolution reads:
That the excise tax of 25 per cent be repealed on 16 mm. projectors for slides, films or pictures, and that the tax be extended . . .
And so on. It is the first line in which I am interested, where reference is made to slides, films or pictures. The vast majority of slides, particularly for church and institutional work are shown on 35 mm. projectors. That is, the still projector is not a 16 mm. but is a 35 mm. machine. I believe the minister will recall that during the war these projectors were used extensively to aid in sales in various war loan campaigns. They are the machines which take ordinary commercial 35 mm. coloured film or still film, and they are used extensively in this type of work.
'As a matter of fact, I believe the Society for Visual Education, otherwise known as S.V.E., is the major manufacturer of this type of projector. I make a strong plea to the minister that this type of machine be allowed in, because they form a definite part in educational work in the showing of still pictures or slides. You do not show slides on a 16 mm. projector; your show them on a 35 mm. projector. I move this amendment.


Douglas Charles Abbott: I question whether the
amendment would be in order, because it would affect the balance of ways and means, being an amendment to remove a tax. If I may speak to it, the reason why 35 mm. projectors were not included in the tax relief given to the 16 mm. is that the 35 mm. projectors are used by the regular moving-picture industry. I have no doubt that, as my hon. friend has indicated, they are used for other purposes. My information is that the vast majority of the projectors used in schools, churches and the like are 16 mm. For that reason I do not feel that we would be justified in extending the tax relief to the other types of projectors which, incidentally, are imported from other countries, although that may not be particularly relevant
here. For that reason I am afraid that I cannot accept the amendment.


Agar Rodney Adamson: Apparently the minister does not understand the type of projector I am speaking of. I am referring to the projector for the showing of still films or slides, not a moving-picture projector. These were used extensively for the sale of victory bonds and they are used also to illustrate lectures and for church work.


Douglas Charles Abbott: I shall look into the representations made by my hon. friend and see whether tax relief of this kind can be given without letting in the other types of projector. Under the provisions of the act by which this twenty-five per cent tax is imposed, it can be done by order in council. I cannot accept my hon. friend's suggestion as a formal amendment because I think it is out of order, but perhaps he will accept my assurance that I shall look into his representations at once and, if the still projector as he calls it is not of the type used by the ordinary moving-picture commercial enterprise, if it is in the school and church category, I will consider including it with the others.


Agar Rodney Adamson: I withdraw my amendment after the assurance of the minister that it will be looked into.
Amendment withdrawn.


Douglas Charles Abbott: We might be able to do it when we bring in the bill.


Agar Rodney Adamson: The manufacture was
originally by the Society for Visual Education in the United States. They are really the modern equivalent of the old-fashioned magic lantern.


Douglas Charles Abbott: I know my hon, friend has a good deal of technical knowledge on these matters. I shall look into it at once.


Douglas Gooderham Ross: Were any representations made in regard to 8 mm. projectors?


Douglas Charles Abbott: No, we have had no representations on those.


[Stage Direction]
Resolution agreed to.

[Stage Direction]
Resolved, that it is expedient to introduce a measure to amend the Dominion Succession Duty Act and to provide, effective with respect to any succession upon the death of a person on or after January 1, 1948:
1.	That the general exemption of estates not over $5,066 be extended to estates not over $50,066.
Mr. HARKNESS:: Would the minister
explain exactly what this means? I have looked into the matter to some extent and I must
Dominion Succession Duty Act

confess that I am a little confused. According to the provisions already in force, this might mean that an estate of $49,999 would pay no succession duties, whereas one of $50,001 might have to pay succession duties of $3,000. I would like the minister to tell the committee whether that is the case.


Douglas Charles Abbott: That is correct. The exemption of $5,000 now in the act will be extended to $50,000. In view of the point raised by the hon. member, I might say that there will be included in the bill what is technically referred to as a notch provision. By that I mean that in the case of an estate in excess of $50,000, or $50,001, to use the example of my hon. friend, the tax would be limited so that the effect would be not to reduce the value of the estate passing to the beneficiaries below $50,000. I cannot say exactly at what point that would be, what the gross value of the estate would be, but after the tax is imposed in the regular way it would not reduce the net going to the heirs below $50,000. When the bill is brought in it will contain a notch provision of that kind.


Douglas Scott Harkness: Do I understand from the minister that the present section 7(4) will not be applicable as far as estates of $50,000 and those immediately above that amount are concerned?


Douglas Charles Abbott: That is correct. Section 7(4) to which my hon. friend refers contains the words "five thousand" and the amending bill will substitute the words "fifty thousand".


Alexander Malcolm Nicholson: Will the minister indicate what the loss of revenue will be?


Douglas Charles Abbott: I did that in my budget address. The best we can estimate is that it will amount to $5,000,000 a year and will involve about ninety per cent of the estates.


Douglas Scott Harkness: I am not quite clear yet on this. From what the minister has said, I understand that $50,000 of any estate will be completely exempt.


Douglas Charles Abbott: No. If an estate is $75,000 the tax will ibe assessed in the regular iway, but there will be a notch provision that if an estate is in excess of $50,000 the tax to be levied and paid will not reduce the net amount of the estate passing to the heirs below $50,000. In effect the exemption would not apply to an estate of $75,000, $100,000, $200,000 or whatever you like; in other words, the $50,000 is a starting point, not an exemption.


Douglas Scott Harkness: The effect will be that estates of $50,000 or $53,000 or $54,000 would all yield the same amounts to the beneficiaries?


Douglas Charles Abbott: I cannot answer that offhand, ibut quite possibly that might be the case.


Calvert Charlton Miller: No doubt the minister, like some of the rest of us, 'has had representations made to him with regard to exempting life insurance policies made payable to the receiver general or the crown. We used to have that in Manitoba, and I believe they had it also in some of the other provinces. Provision would be made for the payment of succession duties by the taking out of a life insurance policy made payable to the provincial treasurer. That was practically free of succession duty charges.
I did not know until recently that was not the case under the Dominion Succession Duty Act. I wrote to officers of the department to confirm that there would be no such exemption. Would it not be good business and sound policy for the minister to exempt life insurance policies which were specifically earmarked for the payment of succession duties up to the amount of the succession duties?


Douglas Charles Abbott: I am not thoroughly familiar with this procedure, but personally I am very much against it. It would be a splendid thing for the life insurance companies because it would be a good selling point. But, after all, the average life insurance policy represents the building up of a fund by the person who pays the premiums. There is a certain element in it to take care of the mortality risk, but the savings element in a life insurance policy is clearly determined. It is based upon time and the rate of interest. If I pay $200 a year as a premium for a certain number of years I build up a fund 'which, at an assumed rate of interest, will yield me a certain return at the end. I do not see any reason why the man who chooses to build up a fund to take care of succession duties by life insurance should be in any better position than the man who sees fit to build up a fund by depositing money in the savings bank or by buying government bonds. In either case you are allowing him a succession duty-free asset, and I do not think that is justifiable. That is my own personal view. In my own province of Quebec years ago we used to have succession duty-free bonds, which sold at a very low rate of interest. They have not been sold for years now, and I think properly so. With certain reservations, I think the same reasoning applies to a man who builds up a fund in a life insurance policy in order to pay succession duties. I am personally opposed to that type of succession duty-free assets.

Dominion Succession Duty Act


Calvert Charlton Miller: I am not worrying about the life insurance companies making money, but the succession duty rates nowadays is something to worry about, and it is only prudent financing for a person whose estate will have to pay succession duties to make provision for that contingency. I think also it would be sound business for the government to make certain that the funds to pay the succession duty will be readily available. I do not reckon it as an asset if it has to go to the government. Otherwise it seems to me you are depriving people of the means of taking care of this future liability which is hanging over their heads all their lives. I think it is well to make certain that the estate is not called upon to pay a large sum of money when it is extremely inconvenient to pay it, with the widow and family to be taken care of.
I consider it sound business judgment for a person to take out a life insurance policy payable to the receiver general to pay the succession duties, and good business for the government to have them taken care of in that way. I am not advocating this so that the life insurance companies can make money, but for the reasons I have given.


Douglas Charles Abbott: This does not deprive anybody of the right of taking out life insurance to pay succession duties any more than it deprives a man of the right to buy victory, bonds to pay succession duties. The man who sees fit to buy life insurance to provide for succession duty liabilities has to take into account what the duties will be. The point which I am making, and which I know cannot be successfully contradicted, is that it is a method of creating a succession duty-free asset out of which to pay the succession duty liability, and in my view that is not justified. I am a great believer in life insurance. It is one of the best means by which professional men like myself can save money, and I carry as much as I can afford, but I do not think any form of asset of that sort should be succession duty-free. There is this privilege, that earnings of life insurance policies are exempt from taxation, and properly so. I can only repeat that I do not think a man should be permitted to set aside money to purchase a life insurance fund which will be exempt from succession duties.


Calvert Charlton Miller: It is not set aside; you are taxed on that.


Douglas Charles Abbott: You are taxed on any savings.


Calvert Charlton Miller: It is not equivalent to setting aside $10,000 in victory bonds. You are gambling with the insurance company. You pay the
insurance company so much a year and gamble that you are going to win, and they gamble that they will gain. You may pay only one premium.


Douglas Charles Abbott: My hon. friend is a good enough lawyer to know that the business of life insurance is not gambling but a business based on averages. If it were gambling, life insurance companies would be out of business next week. I may pay only one premium, but my neighbour may pay twenty. The whole thing is based on mortality tables. I have studied life insurance law in my time and know something about it. A life insurance policy contains a saving element, whether you pay quarterly or annual premiums. It also contains an item for the mortality risk. But it is a form of saving. If you take out an endowment policy and reach the stipulated age the amount you receive represents the amount you have paid in, plus 3-1 interest, or whatever the rate may be, for that period of years. It is just another way of building up a capital fund, and it was never anything else.


Donald Methuen Fleming: Would the minister
enlighten the committee further as to how this will operate in connection with provincial succession duties? There are two aspects of the problem. First there are those provinces which have not a succession duty but simply share in the dominion duty. Then there are provinces which have their own succession duty laws and collect succession duties, but in whose cases the dominion permits an exemption from the dominion succession duty to the extent of one-half, whereas the provincial duty is sometimes .in excess of that. The resolution does not make clear how this will work out in connection with the provinces in these two different classes. Would the minister make a statement on that?


Douglas Charles Abbott: We are simply increasing the exemption limit from $5,000 to $50,000. As I said in my budget speech, the dominion, in effect, is going out of the succession duty field with respect to estates of $50,000 or less. The two provinces which still impose succession duties will continue under their laws to collect succession duties at whatever rates and with whatever exemption limits may exist in those provinces, and the dominion will collect no succession duties in those provinces, because this exemption will apply to every Canadian, no matter in whatever province he may be domiciled. In the case of the other seven provinces there will be no succession duties collected on estates of $50,000 or under.


Donald Methuen Fleming: The last point is, I think, of interest to the committee. Will it mean in
Dominion Succession Duty Act

the case of those seven provinces that the dominion, by abandoning the field of succession duties on estates of $50,000 or under, will thereby reduce to some extent the revenue of those seven provinces from succession duties?


Douglas Charles Abbott: No, they are not collecting
succession duties at all now.


Donald Methuen Fleming: They are not getting any direct benefit from succession duties out of the agreements they have signed with the dominion?


Douglas Charles Abbott: They have the option of remaining in the succession duty field if they wish to do so, and the dominion in that case would give credit for the provincial duties paid up to fifty per cent. As a matter of fact, none of the seven provinces which have tax agreements with the dominion is collecting succession duties, so that the practical effect of this will be that in those provinces there will be no succession duties collected on an estate of $50,000 or less.


Donald Methuen Fleming: Is this clear, that those seven provinces will not lose any revenue by reason of the dominion's abandonment of the succession duty field up to $50,000?


Douglas Charles Abbott: None whatever.


Agar Rodney Adamson: An estate of $60,000 will
pay succession duties at virtually the same rates as today?


Douglas Charles Abbott: At exactly the same rates.


Agar Rodney Adamson: But they will pay on the whole $60,000? This is not an exemption?


Douglas Charles Abbott: That is correct. It is a starting point, except, of course, for the notch provision I mentioned a moment ago.


Mr. HAZEN:: I would draw the attention of the minister to a matter that perhaps does not arise directly out of this resolution. It has to do with the gift tax. The rate of the succession duty tax is provided in the act we are now amending. The gift tax, I think, comes under the Income War Tax Act. There is a difference in rate between the succession duty tax and the gift tax. It seems to me that if a person wants, during his lifetime, to dispose of what he owns, he should not have to pay any higher tax on it than if he disposed of it by will, or if he died intestate and it passed in succession to his next of kin or his heirs at law.
What I should like to direct the minister's attention to is that fact. If he will examine the two acts he will find that the rates are different. It seems to me that the Dominion War Tax Act should be so amended as to conform with the Succession Duty Act so far as

rates are concerned. I hope the minister will look into that. By bringing this matter to his attention, I am not suggesting that he should raise the succession duty rates, but I suggest that he bring the gift tax rate down to the succession duty level.


Douglas Charles Abbott: I shall have to look at that. I imagine there are some differences.


Harry Rutherford Jackman: Is there any restriction on the amount of gift one may make to a charity in any particular year? You have to stay within your limitation?


Douglas Charles Abbott: Under the Income War Tax Act, as my hon. friend knows, there is a limitation to gifts which one can make and deduct for income tax purposes. There will be no limit under the Succession Duty Act; there never has been under the succession duty acts of the various provinces. There is now in the succession duty act of the province of Ontario or of Quebec. The result of the proposed amendment here will be to bring our act in line with the laws in the provincial jurisdictions.


Harry Rutherford Jackman: There is a limitation on the amount which one can give without being subject to gift tax.


Douglas Charles Abbott: That is in the other act.


Harry Rutherford Jackman: Perhaps there are two
things. First of all, you may give away only ten per cent of your income and get a tax deduction; but if you want to give away additional amounts so that it might exceed the statutory limitation under the gift tax provision, is there a tax on the amount that you may give to charity?


Douglas Charles Abbott: There is no gift tax on a gift to charity out of capital.


Harry Rutherford Jackman: May I ask the minister a question with regard to the notch clause? It is not quite the same as giving a gift to the crown in excess of $50,000. Does it work as severely as that?


Douglas Charles Abbott: I do not know whether it will work out the same way. I will not go into the details here, but the effect of what is described as the notch provision is this. Let us say that the gift is $51,500 or $52,000. You have passed the point at which the tax on the amount passing would be less than the excess over $50,000. Well, at that time the so-called notch provision ceases to apply, but up to that point all the excess over $50,000 would be taken in taxes.


Harry Rutherford Jackman: It is much the same as a gift to the crown of the excess.

Dominion Succession Duty Act


Douglas Charles Abbott: Obviously the point at
which it is reached would depend on the degree of relationship. I am informed that the maximum point would be somewhere around $60,000 in the case of a stranger, and it would be very much less for someone in the direct line, a wife or children.


Harry Rutherford Jackman: I am referring to this expression, "the general exemption of estates not over $5,000 be extended to estates not over $50,000." I am not very familiar with succession duties-


Douglas Charles Abbott: You are pretty young yet.


Harry Rutherford Jackman: Yes, but one has to think of them, unfortunately. The general exemption there refers to the bulk of the estate, not to the tax on the recipients.


Douglas Charles Abbott: No, the general exemption refers to the figure of $5,000, which is now mentioned in section 7, subsection 4, and which was referred to by the hon. member for Calgary East.


Harry Rutherford Jackman: An estate of $50,000, if it goes to a stranger in blood, let us say, has a larger tax.


Douglas Charles Abbott: No, the exemption is
$50,000. That is the starting point.


Harry Rutherford Jackman: No matter who gets it?


Douglas Charles Abbott: That is correct.


Charles Edward Johnston: The minister says that $50,000 is the starting point. Suppose the estate was $55,000. Would the succession duty apply only to the $5,000?


Douglas Charles Abbott: No; I have been trying to explain that the succession duty would be on the full amount, but it would not reduce the estate of $55,000 below $50,000, if the whole estate of $55,000 were left to a complete stranger. I may just say this. If the duty were in excess of $5,000-1 am told it would be about $8,000-*


Charles Edward Johnston: Not on the full $50,000.


Douglas Charles Abbott: -nevertheless the amount ' of duty that would be payable would be only $5,000. The estate would pay $5,000 and the stranger would get $50,000. You maintain that starting point of $50,000. In the case of the estate of $55,000, in effect it is just as though the estate consisted of $50,000. We do not touch that at all for succession duty purposes.


Mr. WRIGHT:: If I understood the minister aright, he said that gifts out of capital were exempt.


Douglas Charles Abbott: To charity.


Percy Ellis Wright: To charitable institutions. But that there was a limit on the amount of gifts out of income.


Douglas Charles Abbott: Yes.


Percy Ellis Wright: How do you determine whether it is out of income or out of capital?


Douglas Charles Abbott: It is very simple. A person cannot claim deductions from income for tax purposes in excess of ten per cent in the case of an individual. If I have an income of $15,000 I can claim up to $1,500 for charitable deductions. If I were a corporation I could claim only up to five per cent.


Harry Rutherford Jackman: If you were a farmer you would not know the difference.


Donald Methuen Fleming: Will the minister tell us what the estimated saving is to the taxpayer on resolution 2? In his budget speech, the minister gave a figure of $5,000,000 for resolution 1.


Douglas Charles Abbott: It is very hard to estimate. The estimate I have been given is that this will cost the treasury about $250,000 to $300,000 a year in tax.


[Stage Direction]
Resolution agreed to.
2.	That the limit on exemptions for gifts to charitable organizations of 50 per cent be removed; and-
Resolution agreed to.
3.	That for the purpose of the act, shares of companies incorporated in Canada shall be deemed to be situated in Canada.
Mr. TIMMINS:: Will the minister explain the purpose of this resolution? Is it for the purpose of curing some law that has been decided, because we have all had the experience of having a company such as the Canadian Pacific Railway Company with head office in the province of Quebec and also having its stock registered in New York, and there has been a conflict. It has taken us some time to have the matter cleared up. Is that the purpose of this resolution?


Douglas Charles Abbott: Yes, that is the purpose of it. All of us lawyers are pretty well acquainted with situs of shares, and how they could be effectively dealt with and so on. Under our tax treaties which we have entered into with the United Kingdom and the United States, it has been established as a rule for situs of shares for succession duties that the situs will be the country in which the corporation is incorporated. Therefore it seemed appropriate that we should incorporate that definition in our law. Of course that would have no effect so far as possible provincial succession duties

Dominion Succession Duty Act
are concerned, but it will make our law conform with the treaties which we have entered into with the principal countries in which there is a foreign holding of shares.


Harold Aberdeen Watson Timmins: Where do we find that; where does it come in-in our trade treaties?


Douglas Charles Abbott: No, in these reciprocal tax agreements. W"e have only two at the moment which have been ratified by parliament. We have one with the United Kingdom and another with the United States. Another one is being negotiated with France, and another with New Zealand. I am sorry, it is only an income tax one which has been negotiated with New Zealand. I imagine there are not many foreign holdings in New Zealand. The two we have at the moment are with the United Kingdom and the United States. We are negotiating one with France which I hope will come before the house for confirmation at an early day.


Harry Rutherford Jackman: There used to be a great many companies created in Canada which were held entirely by outsiders, non-resident-owned companies and others. Does this section mean that in the case of the beneficial owner of the security in such a company as that which merely has a head office in Canada, has merely a Canadian charter, Canada will collect the succession duty and not the country where the man is domiciled? Does it go that far? It must be important for us, or important to the countries where the beneficial owners have their domicile.


Douglas Charles Abbott: That is correct. We collect the tax at the source, and in the case of persons in the countries to which I have referred, they are given a tax credit in their own jurisdiction. It works both ways.


Harry Rutherford Jackman: Is this not too much of a good thing for our country? I am surprised that we were allowed to negotiate such a treaty with other countries, because surely Canada is the only country that has a great many of these charters under which people outside the country own all the shares of the company. Or is it pretty well on a reciprocal basis? How did we manage it?


Douglas Charles Abbott: I would say it is not to the disadvantage of Canada. The United States have that as a general ride, apart from treaty provisions with us. We have this effectively dealt with rule, and I am familiar with it, because I had a case in which it was invoked, which went to the privy council, so that I know all the arguments pro and con. I think this is a sensible sort of rule and it is certainly not to the disadvantage of Canada.


Harry Rutherford Jackman: How does it work out in respect of a Canadian who may hold shares with a Bahamas company that holds all the securities?


Douglas Charles Abbott: We would tax him on all his assets, wherever he was domiciled. The only practical effect is in connection with Shares of non-residents, persons not resident in Canada, who own shares in Canadian companies. Under the rule laid down, the transfer place could be established in Bermuda or the Bahamas and the shares effectively dealt with there, and Mr. Smith, who lived in Czechoslovakia, could have his shares registered on the Bermuda registry and he would not be subject to succession duty in Canada. Under the proposed amendment that will not apply. If he lives in the United Kingdom or the United States it wil not have a practical effect because, while we will collect the tax at the source, he will get credit for it in the jurisdiction of his domicile.


Harry Rutherford Jackman: Suppose a man has shares in a company incorporated in Bermuda. That is where the situs is.


Douglas Charles Abbott: It is in virtue of the legal maxim mobilia sequntur personam. It would be taxable at the domicile of the owner.


Agar Rodney Adamson: I should like to bring up an income tax matter in connection with charitable organizations. As the minister knows, there are a number of arenas and war memorials of different types that are being erected across Canada today, and I have had considerable correspondence and several interviews with the department in regard to deduction from income tax for the erection of such structures. I noticed in the paper-


William Ross Macdonald: Order. There is a resolution dealing with the Income War Tax Act which has not yet been considered by the committee, and I believe the remarks of the hon. member would be more appropriate under that resolution.


Agar Rodney Adamson: That is all right if I am given an opportunity there.


Douglas Charles Abbott: We could discuss it there.


Agar Rodney Adamson: I just want the chance to discuss it; that is all.


Harry Rutherford Jackman: I am not clear as to resolution 3. As I understand it, if a Canadian dies owning shares in the Standard Oil of New Jersey, those shares will be taxed in the United States jurisdiction and the Canadian gets credit for it.


Douglas Charles Abbott: Yes.

Dominion Succession Duty Act


Harry Rutherford Jackman: Is that due to a treaty of reciprocity between the two countries?


Douglas Charles Abbott: Reciprocity helps out. If it were not for our treaty with the United States, the Canadian would be taxed there and would get no credit in Canada, because the Americans proceed on the principle that they collect succession duties on the shares of a company incorporated within the United States. Under our treaty with the United States, the United States authorities would collect succession duties at the source, on Standard Oil of New Jersey, but the heirs of the deceased would take credit for it on his tax liability in Canada, and the reverse would be the case.


Harry Rutherford Jackman: If the shares were owned by a Canadian but belonged to a Bermuda corporation, who collects the tax there?


Douglas Charles Abbott: In that case a man might be subject to double taxation. This statute would have no bearing on that case at all. In the case of a man who lived in Ottawa and dies domiciled here, owning shares in Bermuda, or in Tanganyika or anywhere else


John Thomas Hackett: The shares being situate here.


Douglas Charles Abbott: Because he is domiciled here he cannot get away from that tax, so that what he is exposed to is double taxation. Bermuda may impose a tax; he may then have to pay a tax to Ontario, to the dominion and to Bermuda. We have no control over outside taxation jurisdictions. This proposed section does not affect in any way a person dying domiciled in Canada, because all his assets, no matter whether they are shares of Bermuda companies, or English companies, or French companies, are subject to tax in Canada.


Harry Rutherford Jackman: This section, then, is just to catch foreigners who hold shares of Canadian corporations. They will be taxable in Canada?


Douglas Charles Abbott: That is right.


Harry Rutherford Jackman: There is a reciprocal provision, working vice versa, with the United States and Great Britain?


Douglas Charles Abbott: And within a short time we hope to have one with France.


Calvert Charlton Miller: I wish to raise a point which is not pertinent to the matter we are discussing ; but there is a cause of grievance in Manitoba, and it is true of all the provinces except perhaps Ontario and Quebec. I do not know what can be done about it except for the suggestion I am going to offer, which the minister may not wish to adopt. Take the Canadian 5849-295J
Pacific Railway Company. Many people in the west own Canadian Pacific shares and, when they die, we have to transfer the shares at Montreal, the registry office being there. Before we do so, we have to file succession duty papers in the province of Quebec and pay Quebec succession duties, which is not justified. The man may have lived in Manitoba all his life, never having seen Quebec, and I do not see why his heirs should pay succession duties on his estate because he has shares transferable on the books at the point of registry in Montreal. In fairness to the citizens of other provinces, the dominion should put in the Dominion Companies Act, or in the acts of companies incorporated under a dominion act, a provision to meet this situation. The Canadian Pacific Railway Company has a special act; other companies come here for incorporation, and I think it should be provided that they should establish registry offices in the other provinces so that shares can be transferred in the province in which a man dies and in which he has resided. I do not think tribute should be paid to another province from which he received no benefit and in which he had never lived.


Douglas Charles Abbott: The banks do that. The suggestion is an interesting one. I sympathize with the position of those who pay double duties in that way. I have done my best for some time to eliminate that evil, but only with partial success.


[Stage Direction]
Resolution agreed to.

[Stage Direction]
Resolved, that it is expedient to introduce a measure to amend the Income War Tax Act and to provide:
1. That, in addition to other deductions, a deduction from income for the 1948' taxation year of $500 be allowed to an individual who has attained the age of 65 years prior to the end of the year.
Gordon Knapman Fraser: I have received many letters as well as resolutions from different organizations and societies asking that people, especially in the low-income brackets, be given a little more relief. I have a communication from the county council of Peterborough asking that the exemption for single persons be raised from $750 to $1,500, and for married persons from $1,500 to $3,000. This year the minister has given no relief whatsoever.


Alexander Malcolm Nicholson: You voted against it.


Gordon Knapman Fraser: I did not vote against it. I have always been in favour of giving the fellow with the small income a decent break. They have not had a break this year.
Income War Tax Act


Stanley Howard Knowles: That was our amendment, and you voted against it.


Gordon Knapman Fraser: I never voted against anything of the kind. The men and women who are hit hard this year are those in what might be called the white-collar class. They have not had a break at all. Their incomes have remained at the same old level, with no chance of an increase, but the income tax goes on forever. I feel, and I am sure the people across Canada feel, they should be given a break. So I hope the minister will see fit to bring in some sort of amendment to give these people some relief this year, particularly in view of the high cost of living.


Douglas Charles Abbott: I have received a great many letters myself-


Gordon Knapman Fraser: I'll bet you have.


Douglas Charles Abbott: and a good many representations. Again in this regard I did my best in my budget speech to explain why this year I felt it was not desirable or in the interests of the Canadian people as a whole that we should give any further income tax exemption. I reiterate that since the high point of income tax during the war there have been three substantial income tax reductions amounting on the average to fifty-one per cent; and for reasons it is not necessary for me to repeat now I came to the conclusion, and the government came to the conclusion-


John Thomas Hackett: Fifty-one per cent of what?


Douglas Charles Abbott: Reduction in tax from the beginning of 1941. That is not generally appreciated; the public memory is very short.


John Thomas Hackett: I know my income taxes have not been reduced by fifty-one per cent.


Douglas Charles Abbott: But my hon. friend is in a very high bracket, and I am speaking of the average. I do not know that my taxes have been reduced that much, either, and I am not in nearly as high a bracket as my hon. friend. In any event, I indicated why I did not feel this was a year in which we should make any general reduction in income taxes. A substantial reduction was made last year, which it is true in 1947 was effective for only six months, 'but for the current year will be effective for the twelve months, and which on the average was a reduction of some twenty-nine per cent. That reduction was much higher in some of the lower brackets; and even up to such appreciable incomes as $15,000, $18,000 and $20,000 the reduction was as much as twenty per cent last year. But in view of the economic situation existing today, and for reasons I gave in my budget

speech, I felt that this was not a year for further income tax reductions.


Gordon Knapman Fraser: The minister said the income tax had been reduced by fifty-one per cent. He must also realize that from 1939 on the income tax went up like a skyrocket; and fifty-one per cent of that very high income tax does not mean very much. Certainly it does not get us back to pre-war levels.
I should like to mention another matter at this time, which was brought to my attention the other day. I do not know whether it should come under this item, but it has to do with income tax and if I do not bring it up now I may not have another chance. This man owns a grocery store. In his return he listed the amount that should be allowed for the food of one kind and another he took out of his store for his own use. Then the inspectors came along and said, "You have taken that out at the wholesale rate. You should have taken it out at the retail rate."


Douglas Charles Abbott: Quite right.


Gordon Knapman Fraser: No, it is not right. I would not doubt but that the minister himself buys at the wholesale rate in some cases.


Douglas Charles Abbott: No.


Gordon Knapman Fraser: Well, other people do. If you buy in a chain store you may pay a different price from that in another store. Many people buy at wholesale, and in a store of this kind they should be allowed to charge the price they paid for the goods. Otherwise it is not fair to the man in the grocery store or meat store or whatever it may be.


Gladys Grace Mae Strum: This most peculiar kind of social security I think violates all the ordinary tax procedure we have been taught to expect from the Minister of Finance. Income tax is usually calculated on the basis of income, not on the basis of age. This sort of exemption may permit a man to drop into another category, which will let him off and save several hundred dollars, if he happens to be in the right place on the scale. But it does not put a dollar into the pockets of the people who do not have money. Therefore I think it defeats its own purpose. I am sure the minister was thinking of people in terms of social security when he adopted this method, just as he used the excise tax as a kind of rationing to discourage people from buying things which required United States dollars. I think, however, this is a departure and a contradiction in method in the approach to income tax.

Income War Tax Act
Furthermore, as has been said in this house, this proceeds from the wrong end of a person's life. Today money has shrunk to a degree which scares me. When I go into a grocery store, as I do several times a week to buy simple things like milk, bread, eggs and the ordinary things people eat which are not luxuries-


An hon. MEMBER:: Butter.


Gladys Grace Mae Strum: Yes, and butter-the value of money seems very small. And look at shoes. The shoes for which you used to pay $9 are now 815, and the shoes for which you paid $4 or $5 are $8 and $9. Shoes are not a luxury in this country. So this sort of thing does not benefit in any way the people who need money most. I believe the whole income tax structure is wrong, because the government has permitted the decontrol of all the things people eat and wear and use, not as luxuries but just in order to exist. If we are to permit prices to go up I believe exemptions should have gone up as well; but not at this end of a person's life, when his children are married and independent and no longer require consideration, and the grandchildren have begun to arrive. So I believe the minister should be severely criticized for this kind of social security legislation. It is to the wrong group; it is at the wrong age, and it does not do a thing for the people who need social security the most, those who are struggling with young children, those who are on old age pensions, those who are living on small annuities, who come within the income tax brackets but who are not paid at that level.


John Thomas Hackett: I do not think the minister would want a false impression to go out. He made some reference to a reduction of fifty-one per cent. I do not think he intended the public to understand that the receipts from personal income tax have been reduced by fifty-one per cent, did he?


Douglas Charles Abbott: Oh, no, of course not. Perhaps I did not put it in this way, but this statement has been made publicly; it was made in my budget speech last year. I said the average income tax rate on the average Canadian is down fifty-one per cent from the peak of 1942. Of course the income of the average Canadian is away up. The aggregate national income this year will be something like 815,000 million or so, I am told, as against something in the order of $6,000 million in 1939. So that, while the take as far as income tax receipts are concerned is higher, what is left in the hands of income tax payers is still greater.


Harry Rutherford Jackman: I think it would be interesting to learn just how the minister makes up that figure of fifty-one per cent. It would be comforting to some of us who do not feel quite that way about it to realize that the figures are arithmetically correct. As the hon. member for Stanstead said a moment ago, direct taxes on individual incomes amounted to $813 million in 1943-44; and it is estimated that for this year, with the fifty-one per cent cut, they will amount to practically $660 million. That is a reduction of about eighteen per cent. So I think we should know exactly how the fifty-one per cent, which undoubtedly is a figure arrived at somehow, has been reached. Obviously it did not take into consideration the total taxation on incomes then and now, and say there has been a reduction of fifty-one per cent, because that is not so. The reason the minister gave may be sound, that the total income of the people has gone up during that period. I think we should know exactly how the percentages were taken, so that we can understand what that figure means. Perhaps it will redound to the minister's glory, and perhaps he will be glad to put it on the record.


Douglas Charles Abbott: I do not care particularly whether or not it redounds to my glory. I am interested in the income tax itself, and I know my own income tax is down appreciably. I cannot tell my hon. friend how the computation was made.


Harry Rutherford Jackman: I did not think so.


Douglas Charles Abbott: But it was made by officials of my department, and very carefully too. They took the number of taxpayers in the latest year and worked out what the same number of taxpayers, having the same incomes would have paid in 1942. The same number of taxpayers, with the same incomes would have paid fifty-one per cent less tax in 1948 that they paid in 1942. I approve the fashion in which those computations were made. It is perfectly true that in the higher brackets the reduction no doubt has not been as great as fifty-one per cent. But if my hon. friend will take his income for 1947 and relate it to his income for 1942, and figure his tax on the two rates, he will find that there will be an appreciable percentage reduction in his tax. And, incidentally, the fifty-one per cent excluded the refundable portion of the tax in 1942.


Harry Rutherford Jackman: And also excluded the increased cost of living.


Douglas Charles Abbott: Well, that is another topic, altogether.
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Mr. KNOWiLES: When the minister tries to answer my hon. friends to the right, by saying that the fifty-one per cent figure is worked out as an average, I am reminded of the interesting and forceful speech made by the Minister of Justice a few days ago when he replied to the hon. member for Muskoka-Ontario, and tore his averages all to pieces.


Harry Rutherford Jackman: The Minister of Justice was wrong in his computations.


Stanley Howard Knowles: As the Minister of Finance knows, nothing could be more deceptive than an attempt to talk about averages.


Douglas Charles Abbott: A great many taxpayers have had a 100 per cent reduction in the lower brackets. Some 500,000 taxpayers were taken right out of the income tax brackets last year.


Stanley Howard Knowles: Because their incomes are so tragically low. The minister also mentioned taxpayers in the upper brackets not getting the percentage reduction in income tax that people in the lower brackets have had. That is true when you talk in percentages. But when you talk in terms of dollars and cents, those in the upper brackets have had a much greater reduction than those in the lower brackets.
I wish to support, however, the contention of those who have been arguing that these increases in exemptions afforded in resolution 1 should have been afforded right across the board, rather than to a particular age group. My colleague the hon. member for Qu'Appelle has already pointed out that this introduces a principle completely foreign to the whole theory of taxation, which is supposed to be based in some way upon ability to pay.


Douglas Charles Abbott: It is in both the United States and United Kingdom income tax laws. Your labour friends ought to take it out, I suppose.


Stanley Howard Knowles: That still does not necessarily make it desirable income tax legislation, or necessarily desirable in this country.


Douglas Charles Abbott: I agree.


Stanley Howard Knowles: I feel strongly that if the government were anxious to donate some small portion of its huge surplus to the older people of Canada, it could have done so in a much fairer way. The minister said in his budget speech that this provision would reduce the revenue of the government by about $5,000,000. In other words, in 1948 the government proposes to let Canadians of sixty-five years of age and over retain $5,000,000 that they did not have for their own use in 1947. Well, surely the logical way to donate $5,000,000 to

Canadians sixty-five years of age and over is to give it to those who have the least, rather than to give it on the basis of a schedule which means that the more you have, the more you get.
I have gone to the trouble of working out a table showing how this applies under the scheme proposed by the minister. I worked it out by myself, and hence-


Donald Methuen Fleming: I am trying to follow the hon. member's argument. However I have been unable to follow his last remark about this proposal being based upon the theory that the more one has, the more he should get. It is based upon age.
Mr. KNOW'LES: I am saying that with reference to those in the age group of sixty-five years and over the effect of the minister's proposal is that the more one has, the more he gains.


Douglas Charles Abbott: That is true of any exemption. It is true of increasing the exemption to $1,500 or $2,000.


Stanley Howard Knowles: This proposal adds to the insult which has already been given this further injury in the age bracket where the concern of the Canadian people is mainly over those who need help.
I am going to read this table to the committee. It is not a long one, but I have worked it out myself, and I would not for one moment ask to have it placed on the record without reading it. It shows the results of the minister's proposal. This table is in two parts, the first of which relates to single taxpayers or single persons sixty-five years of age and over, and the second part of which refers to married couples sixty-five years of age and over or where the taxpayer is that age. I have divided the table into four columns, the first of which shows the income per year; the second, the amount of tax at the old rate, or with the old exemption; the third gives the amount of tax with the new exemption, and the fourth shows the net gain. The table is as follows:
Single Persons 65 Years of Age and Over
Amount of Amount of
Income	tax with old	tax with new	per year	exemption	exemption,	Net gain$ 750 or	less Zero	Zero	Zero850 ...	$ 10. OO	Zero	$ 10.00950 ...	22.00	Zero	22.001,050 ...	36.00	Zero	36.001,150 . ..	52.00	Zero	52.001,250 ...	70.00	Zero	70.002,000 ...	220.00	120.00	100.006,000 . ..	1,055.00	945.00	110.0015,000 ...	4,152.50	3,940.00	212.5020,000 . ..	6,515.00	6,205.00	250.00
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Married Couples 65 Years of Age and Over
Amount of Amount of
Income	tax with old tax with new'		
per year	exemption	exemption.	Net gain$1,500 or	less Zero	Zero	Zero1,600 . ..	$ 10.00	Zero	$ 10.001,700 .. .	22.00	Zero	22.001,800 ...	36.00	Zero	36.001,900 . . .	52.00	Zero	52.002,000 . ..	70'. 00	Zero	70.002,750 ...	220.00	$ 120.00	100.006,000 ...	890.00	770.00	110.0015,000 ...	3,840.00	3,640.00	200.0020,000 ...	6,140.00	5,890.00	250.00It will be noted that	in the table	for single
persons the term "zero" appears in the three columns following the initial amount of $750 or less. This bracket includes perhaps the largest number of Canadian people of sixty-five years of age and over. They receive no gain whatsoever, although they are the people who need it most.
It will be noted, further, that I give the computation for the amount of $6,000 with respect to both single and married persons, because this is an amount concerning which hon. members in this chamber and in another place have some knowledge.
I presume that, since I have read that table, Hansard will reproduce it in tabular form so that it will be easier to follow. It simply points out that this proposal of the minister gives nothing at all of this $5 million to single persons of the age of sixty-five years earning $750 a year or less, and it gives nothing at all to married persons of age sixty-five years earning $1,500 a year or less. But it does give these increasing amounts to those who move up into the higher brackets.


Gordon Knapman Fraser: Did the hon. member figure in the surtax?


John Thomas Hackett: It would not make much difference.


Gordon Knapman Fraser: It would be misleading unless surtax was included.


Stanley Howard Knowles: It would not change the basic saving. If you took in the surtax it would change the total that is now paid and the total that will be paid, but it would not change the net gain.


Gordon Knapman Fraser: It would not change that, but it would show the payment for income tax.


Stanley Howard Knowles: That is right. It would show the payment for income tax as being slightly different in columns 2 and 3, but the net gain in column 4 would be the same.


Harry Rutherford Jackman: Whose money was it that the minister stated he was giving to these people?


Stanley Howard Knowles: The minister said that this provision will cost the federal treasury $5 million. In that sense it is $5 million which was collected from these people last year but which will not be collected from them this year. In other words, the people in these upper brackets in particular will get these gains. They are not great because, as I said, in no case will it amount to over $500, but the principle is there. These people will get these gains at the expense of the federal treasury, whereas we contend that if the federal treasury is to make this contribution of $5 million it should have been made to those in that age group who need it.


Harry Rutherford Jackman: Whose money was it that the state is giving to these people?


Stanley Howard Knowles: It is money which, by virtue of our general income tax laws, is collected by the state for use by the state in the interests of the people as a whole. There are some other figures I should like to have, but I am afraid I shall have to ask the minister for them. He said in his budget speech that this would cost the government about $5 million. I assume that he must have had some basis for arriving at that figure.
I find that in 1941 there were 767,815 persons in Canada of the age of sixty-five years and over. That figure is probably higher now; it would be at least 800,000 and more likely
900,000.	Of the 800,000 or 900,000 persons who are sixty-five years of age and over, 275,000 are in receipt of old age pensions. They would all be down in the lower brackets and would not get any of this benefit at all.
I should like to know from the minister how many of the 800,000 or 900,000 Canadians who are sixty-five years of age and over are taxpayers; how many of those who are taxpayers are down in the lower brackets, say $1,000 or less for single and $2,000 or less for married, and how many are in the upper brackets. In other words, can he tell us how this $5,000,000 is being distributed.


Douglas Charles Abbott: I cannot break it down quite as far as my hon. friend would like, but the best estimate that the income tax statisticians were able to give me was that this proposed exemption would be of benefit to between
80,000	and 100,000 Canadian taxpayers.


Harry Rutherford Jackman: I think I should say to the committee that I can assure them that there are no members of the C.C.F. over sixty-five years of age who are single and who receive more than $1,250 or who are married and over sixty-five years of age and members of the C.C.F. who receive over $2,000.
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Gladys Grace Mae Strum: How do you know?


Harry Rutherford Jackman: Or you would not be talking that way.


Alexander Malcolm Nicholson: Could the minister
explain the machinery that will be used to determine the age of persons applying for this benefit Most hon. members know the difficulties old age pensioners have in getting birth certificates and proof of age. What will be the requirements? Will a person who attains the age of sixty-five years during the tax year be entitled to the benefit for the full year?


Douglas Charles Abbott: He will require the usual proof of age. The taxpayer who now claims exemptions for taxable children must state their ages and they are subject to proof. I presume that in most cases the department will take the taxpayer's statement, but no doubt there will be the usual spot check to see whether they are correct and the taxpayer will have to prove his age if it is questioned. Whether a person is sixty-five years of age or over is a question of fact; the taxpayer is entitled to the exemption only if he is in fact sixty-five years of age or over. If the income tax inspectors are in doubt as to his bona fides when he claims that he is sixty-five years or over he will have to prove what age he is.


Alexander Malcolm Nicholson: Before a person gets an old age pension, a birth certificate or some proof of age must be supplied. Will everyone have to submit proof of age before he can claim this benefit?


John Thomas Hackett: That should be on the record already.


Douglas Charles Abbott: I could not answer that offhand. I imagine the administration will work it out in a sensible sort of way. I doubt if they will ask every income taxpayer to send in a birth certificate.


Alexander Malcolm Nicholson: I do not recall any form that I have ever signed in connection with income tax that contained my age. I am sure that some women taxpayers, particularly those in the thirties, would object very much to giving their ages.


Douglas Charles Abbott: I cannot say just how it will be administered. It will be recalled that during the war people over sixty-five years of age were exempt from paying the refundable portion of the tax and the income 'tax people apparently were able to administer that without serious difficulty.


John Thomas Hackett: Do not the ages of most people already appear on the returns because they would be given when deductions were claimed for them as children?


Douglas Charles Abbott: If an individual was a child
at the appropriate time after 1917 that would apply, but some of us were pretty close to being twenty-one years of age at that time and so that record might not exist.


Calvert Charlton Miller: I did not speak on the budget and there are two or three items I should like to bring up. I have not any particular objection to this exemption of $500 for people of sixty-five years and over, but I think it should apply to other classes of people such as have been referred to this evening. When the average man gets to be sixty-five years of age his family generally has reached the stage where they are no longer his responsibility, but the middle-aged man of forty or in the late forties usually has a family at a most expensive stage. It is practically his last chance to make provision for his old age. I feel that the exemptions allowed to them are not nearly adequate; in fact they are not adequate for people of any age. I take strong objection to the fact that the exemptions were not raised this year.
It is not hard for the minister to say that the government have to have the money. If you have to get money from Canadians who are struggling for the bare necessities of life and are getting no more than $2,000 a year, then Canada is not as great as I have always thought it was. There must be some other way. Tax collections have increased largely in the last twelve months. Wages have increased, but that means little because the cost of living has also gone up, and the increased wage hardly offsets the increased cost of living. Then, lo and behold, when next April comes around, or before that if you are working for wages, you have to pay increased income tax on your increased wages, which means that the little bit of extra money the wage earner got to help meet the increased cost of living went in income tax. This question of greater income tax exemptions cannot be dismissed lightly, because the income tax takes the cream off what men and women are earning, and they have no more chance, particularly those of middle age, of saving money for their old age than they have of flying to the moon. Apparently the only way in which a person can make money and keep it nowadays is to buy something on capital account, like a farm; one day you may wake up and find it is worth $10 an acre more than you paid for it, and that capital gain is not taxed by the Minister of Finance.
The minister in his budget speech made a plea for budgeting for a surplus for a rainy day. If it is sound policy for the country to budget for a surplus, which I am not prepared

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to dispute tonight, it is equally sound policy for the minister to permit the ordinary common individual in this country to budget for a personal surplus. The minister says he dare not do that because, if he let the people have any money over and above what he takes from them, they would waste it, spend it in such a way as to put more pressure on scarce articles. I say to the minister, and he knows it just as well as I, there should be greater income tax exemptions for the people for whom I am pleading, because they are not the class of people who, if given increased1 exemption, will be buying goods in the luxury class, or scarce goods, or spending their money in such a way as to contribute to inflation. No, that type of person today is scraping night and day trying to get enough money, not to put pressure on scarce commodities, not to increase inflation, but to get enough to eat and wear for his wife and children and himself. If the minister answers that increased exemptions for this class must result in modifications for those in the higher income tax brackets, that is his worry. I maintain that the man who does not get more than $2,000 a year should not pay a nickel of income tax.
So far as those sixty-five years of age are concerned, I do not object particularly to the exemption that is being provided for them, but I say a substantial proportion of them are in no more need of additional exemption than the young people who are coming along with young families and are faced with high rentals and the high cost of living today. Many of these young people are worried to death to know how to make ends meet, and it is like tossing a wet rag in their face to suggest that if they get $2,000 income tax free they would waste it or contribute to inflation. It would mean an additional few dollars in their pockets to help them in the purchase of the necessities of life, food, clothing and shelter and, in spite of the determined stand which the minister has taken, I think he should consult with his colleagues and work out some system whereby men and women in this country, particularly those in the low-income brackets, will be granted an additional exemption. I know what I have said is not being said for the first time, but I have always taken this position, and no doubt the minister has heard it until he is sick.


Douglas Charles Abbott: Year after year.


Calvert Charlton Miller: But I believe it is of sufficient importance that, until the minister acts upon it, we should continue to drum it into his ears. So far as I am concerned, I owe it as a duty not only to myself as a member
of the house but to the people I represent, and before whom I have time and again advocated the principle of increased income tax exemtpions, to bring this matter to the attention of the minister and the committee, because I believe it is an urgent necessity in the economic life of our country today, particularly in western Canada, which I know best. I am making this plea tonight with the minister, because I believe it is my duty to do so and to place my views on record.


William Ross Macdonald: Before we proceed, may I draw the attention of members to the fact that we are considering clause 1 of this resolution, which deals with an additional exemption of $500 to those who have attained the age of sixty-five years. This clause does not permit a general discussion of income tax or of exemptions generally. That was permissible in the budget debate, but I do not think it is permissible now.


Gladys Grace Mae Strum: I should like to give the minister some advice on how to draw his budget next year to give the greatest assistance to people of sixty-five years of age, whom I think he sincerely desires to help. I think the minister had in mind that when you are sixty-five, old age seldom comes alone, but people of that age are often ill and need surgery or special treatment for the ailments that come with advancing years. As the hon. member for Winnipeg North Centre so clearly illustrated in his table, the great majority of the people who are sixty-five years of age and over have no security, either for medical benefits or for earnings or for meeting living costs.
I would suggest to the minister that next year he make provision in his budget for universal health insurance for all the Canadian people, and then we shall know that these people do have health security. I would also urge that he bring in at sixty-five years of age universal superannuation, so that we shall put a floor under income as New Zealand has done, and that he use the ordinary tax structure which applies to everyone to recover excess income. We already do this with the family allowance. Regardless of the income of the members of this house, the family allowance is paid out to everyone and any excess income is recovered through the ordinary tax procedure. If we did that, we would know that the people who had the greatest need, those of sixty-five years of age, would be covered in their medical needs, in their food needs, and in their housing needs, that they had shoes and clothing, and that the ordinary decencies and comforts of life were
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not beyond the reach of the pioneers who, in their earlier years, had helped to build up this great nation.
We know that the national income is up; we know that in terms of the value of the gross national product it is sometimes misleading, but when you look at it on a unit basis it is still pretty good. There is no one in this house who has not tremendous faith in Canada as a great and growing nation. If we use this other approach, and put a floor under income to take care of the medical needs of this group who need it far worse than the younger people, and see that we would not have poverty, privation and despair in the hearts of people sixty-five years of age and over, and then use the ordinary income tax mechanism to recover excess income, we would have gone a long way toward establishing a tax structure of which we could be proud.


Donald Methuen Fleming: One observation made by the hon. member for Winnipeg North Centre deserves some comment. In his attack on this budget proposal, he did not content himself simply with his argument that it was unfair to apply this to persons of the age of sixty-five years and over. He went on to attack the idea of the increase in exemption, because the people who were going to draw most benefit from such an increase in exemption would be those who had more income than those just over the present exemption.
In attacking the proposal on that basis, he has attacked the whole idea of increases in exemption at their very foundation.


Stanley Howard Knowles: Not at all; I asked for it for all ages-right across the board.


Donald Methuen Fleming: The whole point of the table put on the record by the hon. member for Winnipeg North Centre was that the people who had a somewhat higher income derived very much more benefit from the increase in exemption than those who had just a very little over the amount of exemption. That argument, if it is sound, applies to every increase in exemption, regardless of amount, regardless of the nature of it, and regardless of the people who receive it. What the hon. member has just succeeded in doing is levelling an attack, as far as his conception of logic would carry him, against the very idea espoused by his party in its amendment to the main budget resolution. You will recall, Mr. Chairman, that in the amendment introduced by the hon. member for Rosetown-Biggar on May 21, which will be found at page 4255 of Hansard, the budget was attacked, and properly attacked, on this among other bases, first, that the minister had failed to increase the amount of

exemption for income tax purposes from the present level to $1,250 for single persons and $2,500 for married persons.


An hon. MEMBER:: Did you vote for it?


Donald Methuen Fleming: I certainly said that I advocated increased exemptions.


Stanley Howard Knowles: I voted for it; you voted
against it.


Donald Methuen Fleming: The hon. member says that he voted for it; but tonight he has made a direct attack on the idea of increased exemptions which certain members of this house have proposed for a long time.
It is too much to expect consistency from hon. members of the C.C.F. party. Perhaps it is too much to expect them to see the same problem on June 1 in the same light as that in which they appeared to see it on May 21. The fact remains that if there is soundness in the argument that the exemption should be increased-I for one say there is-then undoubtedly an increase in exemption will have the very effect that the hon. member for Winnipeg North Centre deplored in his remarks tonight.
My quarrel with the present resolution is not on that basis at all. I say certainly the exemption should be increased for those who will be benefited by the increase here proposed. My quarrel with the proposal is that it does not go far enough and include others. It would be a vastly improved budget proposal if the minister would change the word "sixty-five" in the last line to "fifteen." If he did that he would greatly help those who badly need assistance in the way of increased exemption at the present time, the people referred to by my colleague, the hon. member for Portage la Prairie, the married people, the people with families, the people on whom the brunt of the cost of living is being cast so heavily at the present time. They badly need increased exemptions.
In his resolution the minister has not done anything wrong. The only trouble is that he has stopped so far short of a desirable objective. There can be no quarrel with this resolution as far as it goes. The quarrel that the committee would like to have with it, if it were free to speak its mind in all quarters, is that it does not go nearly far enough.


Herbert Wilfred Herridge: In order to abide by your ruling, Mr. Chairman, I want to suggest a method by which the minister might avoid in future giving a special exemption to people over sixty-five; that would be by giving a satisfactory exemption to people in the lower income groups at a lower age now. I support

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the proposals put forward by other hon. members in that respect. I am not one to rise in my place and demand social services, and things of that type, and at the same time suggest that we can get those services without paying for them. I know we have to be taxed, and that we have to pay for social services in this country. But I suggest that we have to put our taxation on a more equitable basis if it is to be fair at this time to all concerned.
Just briefly, Mr. Chairman, take business in this country at this time. Its profits were never higher. Professional men in this country are doing very well, but most of the working people are just making a living. When it comes to business, it is allowed to charge costs and depreciation. Anybody who knows anything about manufacturing establishments knows there is a great amount of capital investment put into business. That is charged up to maintenance and costs. Professional men have their costs and certain allowances. The principle we work upon is that business is allowed its costs before its profits are shown; and then depreciation and all that goes with it; but when it comes to the human machine, we do not even allow the worker enough exemption to pay for the costs of running the human machine or reproducing the human machine. I suggest that our system of taxation would be much more equitable, particularly at this time, if the government commenced to raise the exemptions so that at least the working people of this country would get an exemption large enough to pay for the cost of running the human machine and maintaining it properly.


Charles Edward Johnston: I do not want to keep the committee long on this matter, but I do want to say a word about it. I want it to be cleai'ly understood that I am not objecting to the resolution as it stands in so far as it relates to the age limit of sixty-five years and allowing those in that particular class to have a further $500 tax exemption, but I cannot quite see the logic of the minister's remarks. It seems to me that a married man who is. earning a maximum of only $1,500 and who has a family to keep, young children to send to school, to clothe, to feed and to shelter, is just as deserving of an increase in his tax exemption as a person sixty-five years of age or over. I would think it would be much more commendable if the minister had seen fit, provided that he did not have the revenue, to continue the tax on horse-racing and betting, in other words, gambling, or night-club entertainment. I think it would have been much more preferable to retain the gambling tax and the night-club tax. If he had done that,
perhaps he would have had sufficient revenue to increase the exemption, not only of those of sixty-five years but also of all people, raising the tax exemption to $2,000. I think the minister's conscience must bother him a little bit in that regard. I would suggest to him that he sleep on this tonight, and if he can come back here tomorrow and tell us that he has not had any bad dreams I will support him, but I am sure he will not be able to do that. If he sleeps on this tonight I think he will soften up a little bit and give an increased tax exemption to all married people up to $2,000, and to single people as well.


Stanley Howard Knowles: Mr. Chairman, I think the strongest argument for the picayunish nature of this concession was given by the minister himself when 'he indicated in reply to my question that it would benefit to a greater or lesser extent only some 80,000 to
100,000	persons. As has already been pointed out, there are 800,000 or 900,000, perhaps
1,000,000 Canadians sixty-five years of age and over. In other words, this benefit will go to only one in ten Canadians of sixty-five years of age and over, and it goes to the one in the ten needing it the least, not to the nine who need it, as has already been made clear from the table I have given to the committee.
The second thing I wish ito say is this. I do not think the minister took as seriously as he might the question asked by my deskmate, the hon. member for Mackenzie with reference to proof of age; or perhaps I should say I hope that, after he has had some experience in this and has found that one can be sensible and reasonable about it, he will pass on the benefit of his experience to his colleague, the Minister of National Health and Welfare.
There are under this provision people who will benefit this year to the extent of $100 and $250 in some cases, and $250 is more than the old age pension was when it was first put on the statute books; yet, in order to get that original pension of $240, or the present $360, the applicant has to give definite proof of age.


Douglas Charles Abbott: Why does my hon. friend not raise this question on the estimates of the Department of National Health and Welfare?


Stanley Howard Knowles: Because I am talking about the minister's treatment of the question asked by my colleague. The minister seemed to think there was nothing in it. I submit that if such stringent regulations are made for those who secure a benefit of $240 or $360 in another department, so far as proof of age is concerned, then the minister should either make the regulations the same as his col-
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league's or get his colleague to follow suit to him.
The other thing I want to do is to make a brief comment on the interesting remarks made by the hon. member for Eglinton. Apparently the hon. gentleman let the cat out of the bag as to why he and his hon. friends argue so much for increased tax exemptions. Apparently they are aware all the time that if you simply raise the exemption level, without making any other change, the greatest benefit goes to those in the upper brackets. Apparently that is what they wanted all the time. My hon. friend the member for Eglinton did not vote for it when he had a chance a few days ago.


Douglas Scott Harkness: It was covered with a lot of socialistic nonsense.


Stanley Howard Knowles: That same socialism seems to have fared pretty well in Yale yesterday.


Harry Rutherford Jackman: We have heard that several times.


Stanley Howard Knowles: The hon. member for Eglinton tried to make out that there was something inconsistent between my voting for our amendment which asked for an increase in the exemption level, something inconsistent between my supporting my leader in that request, and the table I put on the record tonight. Apparently he did not listen to the speech made by my leader, or he has not read it, because on page 4252 of Hansard my leader made it clear that, along with raising the exemption levels, he felt and we felt that the rates of taxation on corporations, and on personal incomes at the higher levels, should be retained at their present figures. The hon. member for Rosetown-Biggar made it clear-


Donald Methuen Fleming: He said he would keep the present rates.


Stanley Howard Knowles: He would maintain the present rates in the various upper brackets so as to make it possible-that is the only way in which it can be done-


Donald Methuen Fleming: You cannot have it both ways.


Stanley Howard Knowles: That is the answer to my hon. friend. You cannot use the money that he would use to save income taxes in the upper brackets and use the same money for the benefits he advocates for those in the lower brackets. My leader made it clear that, in order to provide exemption in the lower brackets, which we were asking for, it would be necessary to retain the rates in the upper levels,
bracket by bracket, and that is the point the present Minister of Finance and other ministers of finance have made from time to time, that you have to consider the effect of raising the exemption level on the upper brackets, as well as on those you take out of taxation altogether. My leader made it clear that we want the rates retained in the upper levels, to make it possible to give a worthwhile benefit to those in the lower levels. Perhaps that is why my hon. friends did not see fit to support our amendment.


Robert Fair: Many of us did not take advantage of the main budget debate to say some of the things we wanted to say; and lest anybody, particularly the Minister of Finance and the Minister of National Revenue, should feel that I am satisfied with the income tax exemption, I wish to make it plain that I am not satisfied. I am satisfied of course, to some extent, with the increase for those over sixty-five years of age. But, like the hon. member for Bow River, I feel that the exemption should be increased materially. By that method we shall increase the production of the country to a great extent and reap benefits that will far exceed those which are being reaped today under the excessive income tax levels and under present exemptions. I see that you wish to call it eleven o'clock, Mr. Chairman. When this discussion comes up again I shall have more to say.


Douglas Charles Abbott: Perhaps we can pass this section.


William Ross Macdonald: Shall resolution 1 carry?


[Stage Direction]
Resolution agreed to.
William Ross Macdonald: Shall clause 2 carry?


Agar Rodney Adamson: I have remarks to make on this general clause.


William Ross Macdonald: Clause 2 stands.
Progress reported.



BUSINESS OF THE HOUSE

Alphonse Fournier: Tomorrow we shall continue the consideration of the budget resolutions, and take up the second reading of Bill No. 228, to amend the Excise Act, Bill No. 229, to amend the Customs Act, second reading of Bill No. 327, to amend the Canada Evidence Act, and second reading of Bill No. 329, to amend the Judges Act. If we conclude these items we shall go into supply, agriculture.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
[Stage Direction]
Wednesday, June 2, 1948