[Stage Direction]
Hon. J. L. ILSLEY (Minister of National Revenue) moved for leave to introduce Bill No. 67, to amend the Customs Act (Canadian waters).
Some hon. MEMBERS:: Explain.


Mr. ILSLEY:: It will be remembered that earlier in the session a bill was introduced to amend the Customs Act and that a number of sections were withdrawn. This bill is designed to serve the same purposes as it was intended those other sections would serve. This bill defines the word "officer" as used in the Customs Act and contains a definition of Canadian waters and Canadian customs

waters. It imposes certain obligations on ships and masters in Canadian waters and in Canadian customs waters. It confers upon the preventive officers certain powers and1 defines other powers of these officers. Generally it is designed to strengthen the preventive arm of the customs service.


Mr. CAHAN:: Do the definitions apply exclusively to the administration of the Customs Act, or does the bill define Canadian waters for purposes other than for the purposes of the Customs Act


James Lorimer Ilsley: I do not think the terms
"Canadian waters" and "Canadian customs waters" are used in any other act than the Customs Act. The terms used in other acts are such terms as these: "the territorial waters of Canada," "the waters of the territory of Canada," "the three mile limit," "the marine league," and so on. But here we are framing definitions for the purpose of use in the Customs Act.
Motion agreed to and bill read the first time.



CARRIAGE OF GOODS BY WATER

[Stage Direction]
Hon. C. D. HOWE (Minister of Marine) moved for leave to introduce Bill No. 68, respecting the carriage of goods by water.
Some hon. MEMBERS:: Explain.


Mr. HOWE:: Mr. Speaker, the purpose of
this bill is to repeal the Carriage of Goods by Water Act of 1910, and to substitute for it an act modelled on the British Carriage of Goods Act of 1926. The United States has recently adopted the British act instead of its former Carriage of Goods Act, and there seem to be many reasons why Canada should do likewise. I may say that every shipping interest in Canada has applied to the government to take this action. The position has been accentuated by the Samiadoc case, in which the owner was not able to collect insurance due to the insurance company taking advantage of the "seaworthy" clause in the act, although "seaworthiness" had no relation to the nature of the loss.
Motion agreed to and bill read the first time.



QUESTIONS

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

Mr. PERLEY (Qu'Appelle):: With respect to question answered on April 27 last, regarding the retirement of Mr. Anderson from the farm loan board at Regina:

Questions
1.	In what detail were his services not satisfactory?
2.	Were any loans made through the Regina office from the first of January to the date of Mr. Anderson's dismissal?
3.	If so, were they not confirmed by head office?


Mr. DUNNING:: 1.	The board has nothing further to add to the information previously furnished on this matter.
2.	Yes.
3.	A number of the loans so made were approved by head office on the recommendation of the Regina office.


VILLEMONTEL, QTJE., POSTMASTERSHIP
Mr. WERMENLINGER:: 1.	Has the postmaster at Villemontel, Chapleau county, been discharged?
2.	If so, for what reasons, and on whose recommendation ?


Mr. ELLIOTT (Middlesex):: 1.	Removal authorized but not yet effected.
2.	Unsatisfactory management; decision based on findings of district director of postal service.


FIRE WOOD EXPORTS
Mr. LALONDE:: 1.	How many cords of fire wood (cord wood) Were exported from Canada to the United States during the months of January, February, March and April. 1935, and for the corresponding months in 1936?
2.	What was the average price per cord paid by the purchasers?


Mr. EULER:: 1. and 2. Canada's domestic exports of fire wood, by countries, -from January 1 to April 30, 1935, with the average export value, were as	under:-		Average
	Jan. 1-April		Export
Countries	30, 1935	ValueCords	$	$United States...	18,274	84,081	4.60Alaska	35	279	7.97Bermuda	7	56	8.00Total	18,316	84,416	4.61Canada's domestic exports	of fire wood, by	countries, from January 1 to April	30, 1936,with the average	export	value,	were asunder:-	AverageJan. 1-April	ExportCountries	30, 1936	ValueCords	$	SUnited States...	16,914	72,241	4.27Alaska	24	192	8.00Total	16,938	72,433	4.28


HAY EXPORTS
Mr. LALONDE:: 1.	What was the total number of tons of hay exported from Canada during the months of January, February, March and April, 1936, and to what countries?
2.	What was the average price per ton paid by each importing country?


William Daum Euler: 1. and 2. Canada's domestic exports of hay by countries from January 1 to April 30, 1936, with the average export value, were as under:-
Average
Jan. 1-April	Export
Countries	30, 1936	ValueUnited Kingdom. ..	Tons 784	$ 11,670	$ 14.89United States	2,540	16,968	6.68China	14	267	19.07St. Pierre and Miquelon	76	954	12.55Panama	24	160	6.67Bermuda	443	5,045	11.39British Straits Settlements.. ..	16	432	27.00British Guiana.. .	4	78	19.50British Honduras. .	. 2	23	11.50Barbados	32	350	10.94Jamaica	. 33	311	9.42Other British West Indies	. 2	10	5.00Hong Kong	. 35	780	22.29Newfoundland	809	8,301	10.26Total Exports. ..	4514	45,349	9.42


FARM LOANS
Mr. FERLAND:: 1.	What is the total amount of the loans made to the farmers of the province of Quebec, under the provisions of the Canadian Farm Loan Act. since its coming into force to March 31, 1936?
2.	What is the total amount of the loans effected in the county of JolietteTAssomption-Montealm, under the provisions of the said act,
during the same period?


Mr. DUNNING:: 1. Loans granted	$6,105,725.00
Loans disbursed	 4,617,467.52
2. The records of the Canadian Farm Loan Board are not kept by counties, and the information asked for is not now available.


TRANS-CANADA HIGHWAY
Mr. LALONDE:: 1.	What is the location of the proposed trans-Canada highway from Lachute, county of Argenteuil, Quebec, to Ottawa?
2.	Has the location been decided by the provincial or by the federal authorities?
Questions

3.	Does the highway pass or -will it pass through the villages of Fassett, Montebello, Papineauville, Plaisance and Thurso, in the county of Labelle, Quebec?


Mr. ROGERS:: The route of the trans-Canada highway in the province of Quebec is covered by a report of the honourable the executive council of Quebec dated October 1st, 1931, approved by the lieutenant governor on October 2, 1931; subsequently amended by a report of the honourable the executive council of Quebec dated March 24, 1933, and approved by the lieutenant governor on March 25, 1933, and further amended by a report of the honourable the executive council of Quebec dated June 7, 1933, approved by the lieutenant governor on June 8, 1933, copies of which executive orders are as follows:
(Translation)
Copy of the Report of a Committee of the Honourable the Executive Council, dated the 1st of October, 1931, approved by the Lieutenant-Governor on the 2nd of October, 1931.
Respecting the Trans-Canada Highway
The Honourable the Minister of Roads, in a memorandum dated the 1st October (1931), recommends:
That a highway running across the province of Quebec be created and designated under the name of the Trans-Canada Highway.
That such highway be constituted as follows: Highway No. 2, from the New Brunswick limit between Saint-Jacques, New Brunswick, and Sainte-Rose-du-Ddgele, province of Quebec, as far as the city of Levis, passing through the town of Riviere du Loup, and following the riverside road between the village of Andre-ville and Sainte-Anne de la Pocatiere.
Highway No. 3, starting from the city of Levis as far as the intersection of Highway No. 1.
Highway No. 1, passing by the Quebec bridge, from the intersection of Highway No. 3, as far as Quebec.
Highway No. 2, starting from Quebec as far as Montreal, following the riverside road between Saint-Sulpice and Charlemagne.
Highway No. 8, from Montreal to Hull.
Certified.
(Signed) A. Morisset,
Clerk Executive Council.
Copy of the Report of a Committee of the Honourable the Executive Council, dated March 24. 1933, approved by the Lieutenant-Governor on March 25, 1933.
Respecting the Trans-Canada Highway, in the Province of Quebec
The Honourable the Minister of Roads, in a memorandum dated March 24, (1933), recommends that order in council No. 2510, approved on October 2, 1931, respecting the location of the Trans-Canada Highway, in the province of Quebec, be amended so that the location of that transcontinental highway, between Montreal and Ottawa, follows highway No. 8, as far as Grenville, at which point it would pass over the interprovincial bridge on

the Ottawa river, and thence toward the dominion capital, on the Ontario side. Certified.
(Signed) A. Morisset,
Clerk Executive Council.
Copy of the Report of a Committee of the Honourable the Executive Council, dated June 7, 1933, approved by the Lieutenant-Governor, on June 8, 1933.
Respecting the Trans-Canada Highway
The Honourable the Minister of Roads, in a memorandum dated June 7,	(1933), recommends :
That the location of the Trans-Canada highway, as determined by order in council No. 2510, dated October 2, 1931, and amended by order in council No. 524, dated March 25, 1933, be further amended so as to follow the section of highway No. 2 now passing through the village of L'Assomption instead of the riverside road between Saint-Sulpice and Charlemagne.
Certified.
(Signed) A. Morisset,
Clerk Executive Council.
QUESTIONS PASSED AS ORDEiRS FOR RETURNS


DOW'S LAKE, OTTAWA, BOATHOUSE
Mr. WARD:: 1.	Does the federal driveway commission control the boathouse situated at Dow's lake, Ottawa?
2.	What is the name of the caretaker; his salary, and when was he appointed?
3.	What are the schedules of rates for boats and canoes?
4.	Under what authority does the Rideau Aquatic Club, Ottawa, operate the boathouse on the Rideau canal?
5.	What rent, if any, is paid?


MANITOBA PUBLIC BUILDINGS
Mr. MAYBANK:: 1.	What are the number, nature, location and address of each public building in Manitoba?
2.	By whom is electric power for each of such buildings supplied?
3.	In how many eases is such supply of electricity under contract for a period?
4.	When does such period expire and at what rate is such electricity supplied in each ease?


MOTIONS FOR PAPERS
Mr. BROOKS:: For a copy of all correspondence, letters, agreements and other documents passing between the present government of the province of New Brunswick, or any department thereof, and the government of Canada, or any department thereof, relative to the selection of site and the establishment of a national park in the province of New Brunswick.

Business oj the House-Adjournments


GARIBALDI PARK
Mr. TAYLOR (Norfolk, for Mr. McGeer):: For a copy of all correspondence, letters, telegrams and other documents passing between the government of British Columbia and others and the government of the Dominion of Canada, relating to Garibaldi park, its development and maintenance.


CANADIAN NATIONAL RAILWAYS- VANCOUVER HOTEL
James Samuel Taylor: For a copy of an agreement entered into between the city of Vancouver and the Canadian National Railway Company referring to the Canadian National Railway hotel in the city of Vancouver and dated the first day of December. 1927, together with a copy of order in council No. 2214 dated the twenty-ninth day of November, 1927, relating to the said agreement.


SASKATCHEWAN FINANCING
James Samuel Taylor: For a copy of all correspondence, letters, telegrams and other documents passing between the government of Saskatchewan, the government of the Dominion of Canada and the Bank of Canada, or any member or representative thereof, relating to the financial position of the province of Saskatchewan and the financing of the liquidation of debts of the said province of Saskatchewan, maturing on or about the first day of May, A.D. 1936.


Mr. DUNNING:: Mr. Speaker, I think I
should make a reservation in connection with the passing of this resolution, inasmuch as correspondence between the Bank of Canada and other parties is mentioned. I feel quite sure the house will desire to accept the principle that the Bank of Canada must be the judge in all cases whether it is in the public interest or proper for correspondence with the bank to be produced. In the present case I cannot see any objection whatever to producing the correspondence which passed, but I think it rather important to make reference to this as a matter of general principle.


[Stage Direction]
Motion agreed to.


Right Hon. W. L. MACKENZIE KING (Prime Minister) moved:: That when this house adjourns on Wednesday, 20th May, it stand adjourned until Friday, 22nd May, and when it adjourns on Friday, 22nd May, it stand adjourned until Tuesday, 26th May, instant.
He said:	Mr. Speaker, as far as I have
been able to ascertain there are a number of hon. members who do not wish the house
to sit on Ascension day. There are also a large number who do not wish the house to sit on Victoria day. I have been told that a good many were ready to sit on one day or the other, but practically none ready to sit on both days. Everything considered it would seem to come nearer to meeting the general views of the house if the motion were permitted to stand as it is worded, and I hope the house wiill find it possible to accept it as it is.


Right Hon. R. B. BENNETT (Leader of the Opposition):: Mr. Speaker, in view of what the right hon. gentleman said on Friday last, that "if it should appear after consultation between the whips that it is the wish of hon. members that the house should sit on either of those days, or on both, so far as the government is concerned we shall be glad to be governed accordingly." I have discussed the matter with those with whom I am associated and we think we should sit on both days rather than adjourn, because to adjourn would break two weeks, and one of them in a most unsatisfactory way. To meet on Tuesday is a very unsatisfactory method of dealing with the situation. So far as Ascension day is concerned, to some members of the house it is a day of religious obligation, but the house does not meet until three o'clock, and1 if they do not desire to attend on that day there will be no difficulty on that score. In view of the fact that to adjourn over Monday means beginning next week on Tuesday, which will be very inconvenient for a number of our members, we think perhaps the best purpose would be served if we sat on both days. Obviously, however, if the government has decided that the motion shall pass in the form in which it is, that is the end of it.


William Lyon Mackenzie King: May I say that the view I expressed is the one I ascertained from the government whip, who, I understood, had been in conference with the whips of all other parties in the house. As to sitting on Ascension day, the government took account of the view expressed by the leader of the opposition when the question was before him on May 8, 1934. I quote from Hansard of that day:
Right Hon.	R. B.	Bennett:	In	1912	thehouse was in	recess	on	Ascension	Day.	In1913 and 1914	it did	not	sit on	that	day.	In1915 and 1916	it was	in	recess.	My	information is that on Ascension Day there was no sitting in 1917, 1918, 1919, 1920, 1921, 1922, 1923, 1924, 1925 or 1926. In 1927 the house was in recess. In 1928 and 1929 there was no sitting. In 1930 the house sat on May 29. In 1931 the house sat on Ascension Day, and it will be recalled that there was some protest against its sitting. In 1932 it did not sit, and last year we sat in order that the business might be concluded so that I might attend the conference in London. Under these circum-
C.N.R.-Branch Line

stances my intention is to move to-morrow that when the house adjourns to-morrow, it stand adjourned until Friday at three o'clock.
So that as late as 1934, for the reasons mentioned, the right hon. leader of the opposition thought it- was advisable not to sit on Ascension day. In 193S also, which was last year, the house did not sit on Ascension day. Seeing that such has been the practice, and as apparently we are not immediately near the end of the session, the government has thought it advisable that we should not sit on Ascension day. As to Victoria day, the objection to sitting on that day has usually come from hon. gentlemen opposite; it was made quite vigorously on some previous occasions. The government has also had that in mind in hoping that the house would accept the resolution in the form in which it is expressed.


Richard Bedford Bennett: I am quite aware of what was said in 1934, but the reason I directed attention to the matter in the terms I did was that the Prime Minister on Friday last mentioned that the government had no views on the matter and were quite willing to sit on either or both of the days in question, and I thought probably it had been discussed before he made that statement. In view of what he has now said, it would appear that it is thought desirable by the government that we should not sit on either day, and that is the end of it.


William Lyon Mackenzie King: I just wish to say to my right hon. friend that I thought the government whip's word had probably covered his party.


Richard Bedford Bennett: The whips tell me that what I say is exactly what they say. I consulted the whip, and he tells me the statement I made is exactly the view I was asked to present.


William Lyon Mackenzie King: Unfortunately it does not cover all the other members of the house.


Richard Bedford Bennett: No.
Mr. V'OODSWORTH: I think that so far as the group in this corner is concerned we should prefer to sit right through.


[Stage Direction]
Motion agreed to.


[Stage Direction]
On the orders of the day:
Mr. RALPH MAYBANK (Winnipeg South Centre):: Is the Minister of Railways (Mr. Howe) aware of an attempt being made at the present time by the Canadian Pacific Railway to enter the mineral area of north

Quebec at present served only by the Canadian government railways, national transcontinental line, by building a line from Angliers into Noranda, and thence easterly paralleling the national transcontinental and crossing it in a northerly direction, and proceeding to lake Chibougamau, the whole of which territory is at present tributary to the Canadian National Railways transcontinental line? If so, will the minister declare that such action by the Canadian Pacific Railway is in breach of both the terms and the spirit of the Canadian National-Canadian Pacific Railway Act, which enjoins a policy of cooperation between Canada's two main railway systems; and will the minister take steps to prevent, or endeavour to prevent, such action by the Canadian Pacific Railway with a view to continuing to retain the territory for service by the Canadian National lines which have spent many millions of dollars in pioneering and opening up this highly mineralized area?


Clarence Decatur Howe: The government is aware that the Canadian Pacific Railway Company havp made application to the legislature of Quebec for a charter to build a line as described by my hon. friend. The Canadian National Railways inquired as to the views of the department, and we have instructed the railway to represent the position of the Canadian National Railways as to the granting of a charter. Whether this is a violation of the Canadian National-Canadian Pacific Railway Act is a matter of argument. It may be observed that this would bring a third railway into Noranda, which is now served by the Canadian National and Timiskaming and Northern Ontario railways.


Hon. H. H. STEVENS (Kootenay East):: Following that question, may I direct a question to the Minister of Justice? This is a matter of law, and I do not pretend to have any right of judgment in my own mind on the subject; I put it as a layman. Is it competent for a corporation whose work has been declared to be for the general advantage of Canada, and which is thus brought within the jurisdiction of parliament, to achieve its wishes by avoiding an application to parliament and seeking the incorporation of its project by means of a provincial charter, although the incorporators are members of the staff of a federal corporation? Does that proceeding violate the principles of law which govern a federal corporation?


Hon. ERNEST LAPOINTE (Minister of Justice):: Will my hon. friend allow his question to remain as notice?


Henry Herbert Stevens: Certainly.

Special War Revenue Act



RELIEF CAMPS


[Stage Direction]
On the orders of the day:
Mr. ANGUS MacINNIS (Vancouver East):: I understand that men from the relief camps have begun work on railway maintenance. I should like to know whether the agreement between the railway companies and the government has yet been placed on the table, or is ready to be placed on the table of the house?


Clarence Decatur Howe: The agreement has not been completed. As soon as it is completed and returned it will be placed on the table.


Mr. PELLETIER:: On the same subject, may I ask whether the government has entered into any agreement with the Northern Alberta Railways with the same purpose in view?


Clarence Decatur Howe: No special arrangement has been made with the railway in question, but as it is jointly owned by the Canadian Pacific and the Canadian National, there will be no difficulty about extending the arrangement to that territory if the railways wish to do so.



WAYS AND MEANS


[Stage Direction]
The house in committee of ways and means, Mr. Sanderson in the chair.
3.	That the rate of consumption or sales tax imposed by section one of section eighty-six of the said act, as enacted by section eleven of chapter fifty-four of the statutes of 1932, be increased from six per cent to eight per cent.
Charles Avery Dunning: I have a proviso dealing
with a matter which has been the cause of difficulty in the past. Paragraph 3 is to be amended by adding the following words:
Provided that if any manufacturer or producer has prior to the first day of May, one thousand nine hundred and thirty-six made a bona fide contract for the sale of goods to be delivered after the eight per cent rate comes into force, and if such contract does not permit the adding of the whole of the eight per cent tax to the amount to be paid under such contract, then so much of the tax as may not under such contract be added to the contract price shall be payable by the purchaser to the vendor and by the vendor to His Majesty, but in case the vendor refuses or neglects to collect such tax from the purchaser the vendor shall be liable to His Majesty for the payment of such tax.
I think I am correct in saying that in amending the sales tax in 1931 a similar problem arose which was dealt with in a
similar manner. It is in order to provide for bona fide contracts entered into prior to the first of May, the delivery of which was not to be consummated until after the first of May.


Henry Herbert Stevens: I tried to follow the
reading of this technical amendment, but I am not quite clear on it yet. Will it cover a case of this kind: Assume that some large distributing body, anticipating an increase in the sales tax, placed large orders in the month of April with instructions that the invoices should be made out and sent to the purchaser as part of the April sales; the purchaser paid for the goods on April account, but the goods were not delivered until some subsequent date, perhaps in August or September. Would this amendment protect the revenue against such an evasion?


Charles Avery Dunning: Yes. The commissioner
advises me that the tax is exigible at the time of delivery of the article, and of course my hon. friend will see at once that the amendment is designed to deal with cases which might be based upon foreknowledge of the kind he has indicated. It provides that those attempting to take advantage of such a situation will not be able to do so. That is the intention.


Henry Herbert Stevens: I have just one more
question on the point, or perhaps it is more in the way of a suggestion. This may be covered in the regulations or by the practice of the department at the present time, but I am not quite certain; therefore I will put it in the form of a question. Is it the practice of the department to insist that shipping receipts as well as invoices shall form part of the documents on which the tax is calculated?


Charles Avery Dunning: The auditors of the
department examine the shipping documents, which are necessary to prove delivery.


Henry Herbert Stevens: Therefore the goods must be shipped before May 1?


Charles Avery Dunning: Yes. The opinion of
the department is that this amendment places it beyond doubt.


Mr. ISNOR:: I should like to ask the
minister a question in regard to contractors who have entered into contracts-


Charles Avery Dunning: This is intended to
cover that situation also.


Gordon Benjamin Isnor: Erven subcontracts, which
have not yet gone into effect? The general contract, I assume, will cover all subcontracts that might be entered into in connection with the building?
Special War Revenue Act


Charles Avery Dunning: If the contract is a
bona fide one, entered into before the first of May, for completion or 'delivery after the first of May, the amendment covers it.


Gordon Benjamin Isnor: The general contract would
have been entered into before May first, but the subcontracts have not been let in all cases.


Charles Avery Dunning: I am not sure of that.


Charles Hazlitt Cahan: Am I right in construing
this amendment to mean that the additional two per cent must be paid in any event, either by the vendor if he is liable under his contract, or, if not, then by the vendee?


Charles Avery Dunning: Yes.


Charles Hazlitt Cahan: That is the idea?


Charles Avery Dunning: Yes.


Charles Hazlitt Cahan: It assumes that any contract of sale will be made in view at the least of the present six per cent sales tax, and the only doubt that might remain is with regard to the additional two per cent. In certain cases, under this resolution, that additional tax must be paid by the vendor, but in all other cases it must be paid by the vendee. It is to safeguard the collection of that additional two per cent, in any event?


Charles Avery Dunning: That is it. There is
just a point in connection with the question of the hon. member for Halifax (Mr. Isnor), who mentioned the case of a subcontract which was not entered into prior to the first of May. I am told that if the subcontract was entered into after the first of May, obviously the contracting parties would take cognizance of the fact that the eight per cent sales tax applied at that time. I cannot make any answer other than that.
Mr. BEiNNETT:	There is another set
of circumstances that I think must be considered, such as the class of case that was dealt with by the government of which the hon. gentleman was a member in connection with Mr. Dixon and the merchants, which my hon. friend may recall. A number of purchasers of automobiles in Calgary and other western cities made contracts for delivery as soon as possible. The automobiles were loaded on cars and were actually in transit on their way west at the time the act came into force. The contracts were made on the basis of the payment of six per cent. Are they to be liable for six per cent or eight per cent? It would seem to me that the general principle acted upon by governments heretofore has been to hold them

liable for six per cent only. Hon. members will recall that on a former occasion we voted a large sum of money, on what I conceived to be very doubtful grounds, for the purpose of reimbursing those who had been dealt with harshly by a sudden and unexpected change in the sales tax. What I have in mind is goods that had left the factories and were moving towards destination. I understand that under its terms the contract was complete; delivery was made when the goods were put on the cars; they are then at the risk of the purchaser, no longer at the risk of the vendor, and in the contract the sales tax to be paid was at the rate of six per cent. That is the whole basis of the contract. Is the rate now to be eight per cent in respect of these particular goods? It is a matter of much importance to many people who have to depend upon the movement of traffic taking eight or ten days. I know the minister has received a considerable number of communications with respect to matters of this kind; copies of them have been sent to me.


Charles Avery Dunning: I hope not all of them.


Richard Bedford Bennett: No, I should think not all of them; it would be an entire misconception of my duties if they were. At any rate I think they have a fairly sound case, in view of what was done on a previous occasion by the government of which the hon. gentleman was minister of finance, when we voted a very large amount, I forget how much, to reimburse those who had paid a sum in excess of that mentioned in the contract that they had made with their vendor.


Charles Avery Dunning: It was the luxury tax-a slightly different matter.


Richard Bedford Bennett: Well, a tax that was changed suddenly. The two have this feature in common, that they involve consideration of a contract made between a vendor and a purchaser under which a given tax was to be paid. It does appear to be rather difficult to say that because certain purchasers live at some little distance and cannot get their goods for ten days or so from time of shipment, those who live nearer to the point of shipment and got their goods the night before May 1 will be protected, whereas those who are in Vancouver, Calgary, Edmonton, Saskatoon, Regina, or west of the lakes, Winnipeg, will have to pay an additional two per cent, although the contract was executed and the liability for the purchase price complete. They are bound to accept the draft with bill of lading attached, because the goods are at their risk from the time they are put on the cars.

Special War Revenue Act


Charles Avery Dunning: My right hon. friend touches on what he knows is one of the most difficult matters in the administration of this tax. I hope he will not mind my stating that the precedent of the old luxury tax to which he refers is scarcely a parallel, for this reason; that the removal of the luxury tax immediately lowered the value of every car on every dealer's floor in Canada. Also I have rather a good precedent for the course we are following now in that it was taken previously by my right hon. friend's government. On the basis of the information which I have from the department, delivery is made in law the point of imposition of the tax, and it is the department's view that cars in transit, draft against -bill of lading, when the sales tax increase came into effect had not been "delivered to the purchaser" within the meaning of the terms of the statute. Where delivery to a common carrier was made without lien, c.o.d. or draft against -bill of lading, the department has regarded delivery as having been made. In former years when the sales tax rate was decreased the automobile companies claimed that the ownership in the cars in transit, draft against -bill of lading, had not passed to the customer, and that the lower rates applied. The department acquiesced in that view and accepted the reduced taxes on succeeding reductions, and it is not thought that when the tax rates are going up a different view should be taken of cars in transit under substantially similar conditions. Progressively as the sales tax came down the view accepted here was that taken by the automobile companies and acquiesced in by the department. Surely the rule should work both ways, and that is the principle on which we are proceeding in the proposal now before the committee.


Mr. KINLEY:: In this country those who are on the coasts are in this position, that goods take quite a time in transit from central Canada. All cars are shipped draft against bill of lading. The automobile companies sent out telegrams to the banks to refuse the documents unless the buyers paid the extra sales tax. Evidently, therefore, they had interpreted it as the minister says.


Charles Avery Dunning: That at least proves that the cars were still in the control of the vendors.


John James Kinley: The question is, what constitutes delivery. Is it delivery to the transportation company, or delivery to a retailer
in Nova Scotia?


Charles Avery Dunning: It is purely a legal question. I am only asking on the part of the department that the same rule apply when the sales tax goes up as applied when it was coming down.


Richard Bedford Bennett: That is not quite accurate. The question whether delivery has been made is a mixed question of fact and of law. The first thing is to ascertain the fact, and that depends on the terms of the contract. In law, delivery may be made to a common carrier and can be complete. The Sale of Goods Act in any province covers that, and it is uniform now in practically every province. There are cases where although delivery has passed to the purchaser the vendor's lien attaches until the draft has been paid. But usually in cases where delivery to a common carrier constitutes delivery to purchaser, the bill of lading and draft are sent through the bank, and the right to secure the bill of lading depends upon the payment of the draft. But there is of course [DOT] always the vendor's lien which attaches, and that vendor's lien is available for the unpaid purchase price in case of insolvency or matters of that kind. The test, however, is a test of mixed fact and law, depending in the first instance, as I say, upon the terms of the contract. The rules as to testing delivery are laid down in the sale of goods acts. They are somewhat complicated and I shall not refer to them now, because it would be a waste of time to discuss here a question of law of that kind. But all the great cases over which difficulties have arisen have been cases in which the question was raised whether or not delivery had been complete, and I say to the minister, notwithstanding what he has read, that in many cases provision has not been made for the exceptions. I think the Department of Justice or any of the legal men connected with the department will tell him that delivery may be made by the vendor to the purchaser by delivering to a common carrier if the terms of the contract contemplate that being done. That is the question of fact which is not determined; it can be determined only by the auditors. I know of cases frequently in my own experience in which draft was made with bill of lading attached; then when the car reached the particular point the purchaser went to the bank, and he was not given the right of inspection by the bank, although as a matter of law he has the right to inspect the goods for the purpose of seeing whether or not they are conformable to contract. If they are not, he has the right of rejection, despite the fact that delivery as between himself and the vendor has been made to the common carrier. But usually the draft is accepted and paid upon the bill of lading being taken up by the purchaser. That is the case I have ih mind, about which telegrams have been sent. The purchasers have incurred the liability and must pay the draft when they take the -bill of lading. Their
Special War Revenue Act

contract was for cash on delivery, with the six per cent sales tax, and that is the reason the price of automobiles in some places has increased to some extent-the sales tax has been increased from six to eight per cent, involving an additional two per cent on the purchase price of the commodity.
That is the case with which I am tryjng to deal. I was not sure how it had been covered by the late government, but I think in some cases, where the facts reported by the auditors conformed to what I have said, rebates were made. However, I am not sure about that; the commissioner of excise will oe able to tell us. The minister will see that Lf the contract is complete, and the risk is no longer that of the vendors, even if the insurable interest in the property has passed to the purchaser, then it is quite clear on that set of facts that we are putting an intolerable burden on the purchaser when we compel him to pay an additional two per cent. In a country the size of this it is extremely difficult, and I believe-I speak subject to correction- that in some instances, where the facts have been as I have indicated, adjustments have been made. Obviously there would be no necessity to make an adjustment where the facts are that the risk is that of the vendors, and that in point of law there has been no delivery. But I do say to the minister that under the Sale of Goods Act the question of delivery is complicated, depending primarily upon the set of facts which, of course, we have not before us at this time. But I desire to deal with the set of facts which must necessarily arise, where the vendor has no further interest in the property except in the payment of the bill of exchange which he has drawn upon the purchaser. That bill of exchange must be paid before the bill of lading can be taken away and the goods possessed by the purchaser.
There is a clear distinction between delivery in law and delivery as an expression indicating a change of possession. The old statement about possession being nine points of the law arises because possession is always regarded as one of the greatest possible factors in determining whether or not delivery has been completed. But there may be delivery- that is, in which there has been no change of possession-if possession has been given to a common carrier. That is dealt with in our Sale of Goods Act. If delivery is referable to a contract, and the facts are as I have indicated, then the vendor has no longer any interest in the subject matter of the contract, beyond payment of the draft, which must be paid before the bill of lading, the document of title, can be delivered to the purchaser.

When the bill of lading has been handed over to the purchaser on payment of the draft, then that factor in delivery known as possession is complete, and he has possession as well as the right to possession which he has under his contract. This constitutes delivery in point of law. That is the case I am trying to make clear to the minister.


James Lorimer Ilsley: I do not know whether I
can add much to the discussion, but my recollection of the principles applicable is somewhat different from that indicated by the leader of the opposition. My understanding of delivery is that it means a change of possession. Ordinarily a change of possession from vendor to purchaser takes place when the vendor delivers the goods to the carrier, who, in the absence of any special or extraordinary circumstances, is presumed to be the agent of the purchaser.


Richard Bedford Bennett: That is constructive
possession.


James Lorimer Ilsley: Yes, that is constructive
possession. But when the vendor sells to a purchaser and retains control over the goods by attaching to the bill of lading the draft for the purchase price, then he retains a lien upon the goods. In that instance the carrier is not the agent of the purchaser but is the agent of the vendor, and the goods are still in the vendor's possession. It would be inconsistent with a vendor's lien if the goods were out of the vendor's possession, because the vendor's lien is a possessory lien and depends upon possession before it can be exercised.	The point at which the tax
attaches is the point of delivery. In the case we have in mind, where the draft is attached to the bill, of lading, change of possession does not take place until the draft is paid and the documents are delivered to the consignee. Therefore the rate of tax applicable at that time is the proper rate of tax, and the rate we have to collect. It may be that the question as to who has the risk is somewhat different; that is to say, the goods may nevertheless be at the risk of the purchaser, even though they are in the possession of the vendor or the vendor's agent. That is a matter of agreement between the vendor and the purchaser. I must admit I have not looked at the cases, nor have I read carefully the Sale of Goods Act-


Richard Bedford Bennett: Neither have I.


James Lorimer Ilsley: But I believe that that
must have been the view accepted by the department when some years ago it was put forward, as it must have been, by car manufacturers and dealers.

Special War Revenue Act


Richard Bedford Bennett: Of course it applies to
more than automobiles.
Mr. ILSLEY':	Yes, it applies to other
commodities.
Mr. CAjHAN :	Does the minister assert
that a vendor's lien cannot be retained and asserted after the commodity has passed into the real or constructive posesssion of the vendee?


James Lorimer Ilsley: Yes; in that case it would
not be a vendor's lien; it would be a lien by agreement, because a vendor's lien is always a possessory lien.


Charles Hazlitt Cahan: I differ from the minister.
I have asserted vendors' liens where the vendor held constructive possession as agent for the vendee.


James Lorimer Ilsley: It .must have been by
agreement.


Mr. CLARK (York-Sunbury):: Does the
retailer who has to pay the additional two per cent lose that amount, or could the minister say who would lose it-the customer or the retailer? Can the customer be charged the two per cent?


Charles Avery Dunning: Of course that is a
matter of agreement, but the principle is that it is collected from the purchaser.


William George Clark: Can it be
collected from him?


Charles Avery Dunning: It would depend upon
the nature of the agreement between the vendor and the purchaser.


Richard Bedford Bennett: But it is passed on to
the customer. The hon. member is asking whether the consumer will ultimately pay the extra amount. It is ultimately paid by the consumer, because it is passed on to him by the retailer, who in law has a right to do so.


John James Kinley: Cars are sold on signed
orders to deliver at certain prices. Is it clear that notwithstanding the contract, the vendor has the privilege to collect the extra two per cent from the person who buys the automobile?	*


Mr. BETTS:: I should like to remind the
minister of a principle with which he is no doubt familiar. It is that in construing any taxing measure or a measure imposing a tax, generally speaking the construction most favourable to the person taxed should be adopted. It seems to me that the fact that when the shoe was on the other foot, namely when the tax was going down, the department
adopted a method of dealing with the situation which I must frankly say seems to me to have been a wrong one, cannot be a strong argument for the procedure they propose to adopt at this time, because it simply means that because one set of people were in the past relieved of a tax, now a new and entirely different set will have to suffer one.


Charles Avery Dunning: It is not a matter of
construction; it is a matter of the claim made at that time by the automobile industry as to what constitutes delivery within the meaning of the law. Surely that which constitutes delivery within the meaning of the law does not change as a tax goes up or down. It is a question of fact. I do not speak as a lawyer, and I must confess I cannot follow all the arguments of hon. members, but surely there can be no change in what constitutes delivery. That was the argument at the time, and my hon. friend will recognize the distinction between that and the con. struction of the law contracts. There is na question of construction at all; it is a question of what constitutes delivery.


Gordon Benjamin Isnor: Did both buyer and seller
expect that there was going to be some change in the sales tax?


Mr. MacNICOL:: Has the minister any
figures to give the committee indicating that the revenue lost as a result of lower duties under the trade agreement and under the budget will be recovered by the increase in the sales tax?


Charles Avery Dunning: I do not think my hon.
friend is serious in asking that question. If it is any comfort to him I may tell him that there has been no lessening in revenue due to the causes he indicates.


Richard Bedford Bennett: There has been a decrease in customs duties but an increase in the value of imports. The rule laid down in the Sale of Goods Act of Ontario is as follows:
17.	Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained.
18.	- (1) Where there is a contract for the sale of specific and ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.
(2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case.
19.	Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer:-
Special War Revenue Act

(a)	Rule 1.-Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made and it is immaterial whether the time of payment or the time of delivery or both be postponed.
(b)	Rule 2.-Where there is a contract for the sale of specific goods and the seller is bounds to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until such thing be done, and the buyer has notice thereof.
(c)	Rule 3.-Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing be done and the buyer has notice thereof.
(d)	Rule i.-When goods are delivered to the buyer on approval or "on sale or return" or other similar terms, the property therein passes to the buyer:
(i)	When he signifies his approval or acceptance to the seller or does any other act adopting the transaction;
(ii)	If he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact.
(e)	Rule 5.- (i) Where there is a contract for the sale of unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer, or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be expressed or implied, and may be given either before or after the appropriation is made.
(ii) Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not), for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract.
That is step number one. There is a section dealing with goods deliverable to order of seller, and then comes the section dealing with the performance of the contract. Section 26 reads:
26.	It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them in accordance with the terms of the contract of sale.
27.	Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, that is to say, the seller must be ready and -willing to give possession of the goods to the buyer in exchange for the price, and the buyer must be ready and willing to pay the price in exchange for possession of the goods.
There are then, five rules laid down as to what constitutes delivery in the absence of a contract, where no time for delivery is fixed, where the goods are in possession of a third

person, and where there is a demand for or tender of delivery. It gets down to the simple, single point, as the minister 'has said, that the contract determines the principles of law to be applied. Section 31 reads:
31. (1) Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer, the delivery of the goods to a carrier whether named by the buyer or not, for the purpose of transmission to the buyer, is prima facie deemed to be a delivery of the goods to the buyer.
(2) Unless otherwise authorized by the buyer, the seller must make such contract with the carrier on behalf of the buyer as may be reasonable, having regard to the nature of the goods and the other circumstances of the ease. If the seller omits so to do, and the goods are lost or damaged in course of transit, the buyer may decline to treat the delivery to the carrier as a delivery to himself or may hold the seller responsible in damages.
Rules are then laid down as to examination. I mentioned a moment ago that I was a little uncertain in this regard. Section 33 reads:
33. (1) Where goods are delivered to the buyer which he has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract.
(2) Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract.
Vendors' liens are covered by the statute. Section 37 reads:
37. (1) The seller of goods is deemed to be an "unpaid seller" .within the meaning of this act-
(a)	when the whole of the price has not been paid or tendered;
(b)	when a bill of exchange or negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise.
(2) In this part of this act the term "seller" includes any person who is in the position of a seller, as for instance, an agent of the seller to whom the bill of lading has been endorsed, or a consignor or agent who has himself paid or is directly responsible for the price.
I do not like to take up the time of the committee, but the next section deals with the rights of unpaid seller. It reads:
38.	(1) Subject to the provisions of this act and any statute in that behalf, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law-
(a)	A lien on the goods or right to retain them for the price while he is in possession of them;
(b)	In case of the insolvency of the buyer, a right of stopping the goods in transitu after he has parted with the possession of them;
(c)	A right of resale as limited by this act.

Special War Revenue Act
(2) Where the property in goods has not passed to the buyer the unpaid seller has, in addition to his other remedies, a right of *withholding delivery similar to and coextensive with the rights of lien and stoppage in transitu where the property has passed to the buyer.
The next section deals with unpaid seller's lien:	I speak subject to correction, but I
recall that in connection with certain types of goods this difficulty arose and adjustments vere made, which it seems to me was but .[DOT]easonable. The terms of the contract govern md there is no analogy between the scaling iown or the lifting up of the sales tax. That does not affect the terms of the contract. If a person in Calgary bought a carload of sugar at the refinery in Vancouver and it was paid for on the basis of the six per cent sales tax, that is, entered in the books and settled on that basis, a certain set of conditions would arise. The carload of sugar might leave Vancouver and reach Calgary with the bill of lading and draft, including the six per cent tax, drawn upon the purchaser. The purchaser might accept and pay the draft on May 5, and it is a little difficult to see why he should be liable for another two per cent even though his goods had not been delivered. They were in the possession of the carrier which was his agent for the purpose of delivery, delivery being complete when the refinery loaded the goods on to the car for Calgary. I have been pressed to bring this point to the attention of the minister as strongly as I could, because it is felt that this would be unfair. For instance, the same condition of affairs would not arise in connection with the delivery of a carload of sugar from Montreal to Toronto.


Charles Avery Dunning: I have complaints in regard to that class of transaction.


Richard Bedford Bennett: If a carload of sugar was ordered from Montreal by a merchant in Toronto on the 29 th day of April, and paid for, the goods would actually be in Toronto and the bill paid on the first of May, and that would be the end of it; but because of the long distance hauls in western Canada the purchaser would find himself in a different position. I am asking whether they have ever dealt with these matters in that way. I thought they had, but I may be entirely in error as to that. If they have, I think these are cases in which there would have to be an analysis of the auditors of the facts in each case, but I do recall one case in connection with sugar. The purchase had been completed and the goods appropriated to the contract and put away in a particular warehouse and paid for, including the sales tax, and I remember that the officers were clear that there was 12739-185
no further tax payable with respect to these goods that had been appropriated to that contract before the tax on sugar became effective.


John James Kinley: Mr. Chairman, I take it that the minister or the department has decided that goods in transit are liable to the tax, and that that would apply to automobiles. It takes seven to fourteen days for an automobile to be carried to Nova Scotia by rail, and for the sake of clarity I would like an answer to the question I asked a moment ago. This is the selling season for automobiles; many have been sold, and dealers have made contracts with people in Nova Scotia to deliver automobiles at a certain price. In the meantime the sales tax has been increased to eight per cent. Does the imposition of that additional tax confer, independent of anything else, upon the vendor the right to collect the extra sales tax from the purchaser, notwithstanding anything contained in the contract?


James Lorimer Ilsley: If the dealer has agreed to sell the automobile at a certain price he cannot go back later and charge the purchaser a higher price.


Richard Bedford Bennett: He takes a chance.


James Lorimer Ilsley: Yes.


John James Kinley: Then it is clear that the automobile dealer must pay this tax, and not the person who buys the automobile?


James Lorimer Ilsley: It is a matter between him and the manufacturer as to who bears the burden of the tax. The government looks to the manufacturer, not to the dealer, for the tax.


John James Kinley: He has protected himself by sending out telegrams advising the bank not to deliver the bills of lading until he gets the extra two per cent.


Mr. DUFFUS:: I am inclined to agree with the views expressed by the hon. member for York-Sunbury (Mr. Clark) and the hon. member for Queens-Lunenburg (Mr. Kinley). I have had twenty-five years' experience selling automobiles, and I know that once a dealer takes a signed order from a customer it is absolutely impossible to get any further sum of money from him, no matter whether it is sales tax or anything else. I think this is going to be a decided hardship on the dealers who had made many bona fide sales before the extra two per cent sales tax went into effect. It will mean just the difference between success and failure for some of them this year. I think some arrangement should be made whereby such dealers will be prn-

Special War Revenue Act

teeted. Perhaps the dealer might make an affidavit that these cars have been actually sold, and that as a result of the new tax he has sustained a loss, and he could be given a rebate. May I say that in all my experience, I have never known a dealer to collect an extra amount after the order had been signed.


Mr. MacLENNAN:: I know cases in Sydney, Nova Scotia, where the dealer sent in an order to the manufacturers for a certain number of cars, and at that time the sales tax was six per cent. After he signed the order he went out on the highways and byways of Nova Scotia to sell those cars, by description, of course, naming a certain price. He sold them, but before they actually arrived in Sydney there was an increase in the sales tax. It is an easy matter for -a dealer who has not sold a car to add the two per cent tax, but many cars have been sold at a fixed price and delivered after the sales tax was increased, and as it is now if the dealer does not pay that extra two per cent he cannot make a sale. I think some arrangement should be made for compensating the dealer. I know the difficulties of the minister, but at the same time it is' very hard on some of the dealers in Sydney. They have taken orders for cars and made their bargains in the spring. I was told that one dealer in Sydney would go to the wall in consequence. Possibly that is an exaggeration, but at all events it does work a hardship, and I hope the minister will see his way clear to making some arrangement to avoid it.


Mr. DONNELLY:: Nine out of ten sales of automobiles are just an exchange with an additional $100, $200 or $300 paid over. Does the department collect the sales tax on the old automobile?


Charles Avery Dunning: No.


James J. Donnelly: Then the old automobile is increased in value by the amount of-the sales tax. The man who sells his old automobile gets an increased price for it.


[Stage Direction]
Amendment agreed to.
Paragraph as amended agreed to.
Richard Bedford Bennett: Will the minister between now and the time the bill comes up in committee look into this matter? Everything that has been said by other members of the committee I should like also to have said in connection with the difficulties that are going to arise for the dealer. There must be a bill founded on this resolution, and between now and the committee stage of that bill the min-
ister will have an opportunity to look into it and see whether it is desirable, by any appropriate words, to provide against a situation which undoubtedly will work a very great hardship on a large number of people.


James Lorimer Ilsley: Yes, I will agree to look into it.


Richard Bedford Bennett: That is all one can ask at the moment.
4. That schedule I to the said act, as amended by section twenty-six of chapter fifty of the statutes of 1932-33, and by section six of chapter thirty-three of the statutes of 1935, be further amended by repealing section one thereof and substituting the following:-
1. Automobiles adapted or adaptable for passenger use:

(a)	valued at not more than six hundred and fifty dollars, free.
(b)	valued at more than six hundred and fifty dollars, on the amount in excess of six hundred and fifty dollars, 5 per cent.
Provided that the tax collected under paragraph fb) above shall in no case exceed two hundred and fifty dollars per automobile.
Provided further that the tax shall not apply to automobiles imported:-
(a)	under customs tariff items 702, 706, 707 and 708;
(b)	by a bona fide settler on a first arrival;
(c)	by a beneficiary resident in Canada, under the terms of a will of a person dying in a foreign country.


James J. Donnelly: As regards the phrase
"valued at not more than six hundred and * fifty dollars," is that the wholesale value at the factory or the wholesale value out in the country plus the freight?


Charles Avery Dunning: , The manufacturer's value.


James J. Donnelly: The manufacturer's
value where?


Charles Avery Dunning: At the factory.


James J. Donnelly: That is the wholesale
price?


Charles Avery Dunning: Yes.


Mr. NEILL:: Should not subsection (c)
read, "under the terms of a will or intestacy of a person dying in a foreign country"? If a man succeeds to an automobile by intestacy he is entitled to it the same as though he succeeded to it under a will, is he not?


Charles Avery Dunning: If there is any necessity of providing for that, we will check it up before the bill is introduced.


Mr. YOUNG:: If a car is shipped in
knocked-down condition to Winnipeg, or even to Vancouver, and completed there, is the tax computed inclusive of freight to the point at which it is finally completed?


IS, 1936
[Stage Direction]
Special War Revenue Act
Charles Avery Dunning: It depends upon the
selling point. Wherever the sale takes place, thait is the place where the tax is levied on the manufacturer.


Alexander MacGillivray Young: The point I am trying to
get at is this: if the car is actually shipped in knocked-down condition to Winnipeg, and is completed there,, is the freight from Windsor to Winnipeg added to the cost of the car in determining the amount of the tax?


Charles Avery Dunning: I should have to answer the question from the standpoint of theory, because it is not a practical transaction, but obviously the manufacturer of an automobile or of anything else does not desire to add to the amount of the tax levied on that particular article; I assume therefore that the original sale in all cases would apply; that is to say, the so-called assembly plant at Winnipeg or at any other point would be in that case in the position of being the purchaser. It is a matter of practice, and I am answering a theoretical question. I do not think it has any real parallel in fact.


Alexander MacGillivray Young: If it were theory I would
not be asking it. It is a matter of actual practice. A Ford car manufactured in Windsor is shipped to Winnipeg in knocked-down condition, and there assembled. I am told that the freight is actually added in determining this tax. I am trying to find out why in the world we should be collecting an extra duty on freight paid in this country.


Mr. STEWART:: Because you need the
money.


James J. Donnelly: If the price of a Ford
car at Windsor is $700, when it gets to Regina it is around $875. Are you collecting the sales tax on $875 or on $700? The merchant, when he goes to buy, may not pay $700, but only $550. Do you collect on the $5'50 that the agent pays for it? Do you collect it on a wholesale price or on a retail price?


Charles Avery Dunning: It is a manufacturer's
tax. The sales tax is levied, according to its terms, on the manufacturer's price at the place at which the manufacturer makes the sale.


John Ritchie MacNicol: Will this new regulation
increase employment in the motor car industry in Canada, or decrease it?


Charles Avery Dunning: How can one say that the imposition of a direct tax either increases or decreases employment? I suppose in theory it can be argued that direct taxation is an employment reducing agent. But inasmuch as this is an adjustment of existing taxation, and is part of a general scheme for the re-12739- 1854
organization of taxation in connection with the automobile industry generally, including the tariff, including in some particulars the excise tax, and also the sales tax, I believe the general effect of the whole plan as evolved by the tariff board and shown in their report will be to increase employment, not to decrease it.


Alan Webster Neill: May I ask what was the former regulation?


Alexander MacGillivray Young: I should like to know from the Minister of National Revenue whether in practice his department does put on this particular charge between the two points I mentioned, that is, whether it is figured in the price of the car.
Mr. ILSiLEY: The Minister of Finance answered the question. If I understand the question correctly it is whether the manufacturer is allowed to add freight to cost-is that it?-before an excise or sales tax is imposed.


Alexander MacGillivray Young: As I understand it, cars are shipped in a knocked-down condition to Winnipeg. At Winnipeg, the poin-t where the car is finally completed, the cost of the car is its cost at Windsor plus the additional work done in Winnipeg, plus the freight. At that particular point, then, the freight does figure, whether the car is valued at more than $650 or whether it is not; consequently freight does to an extent- govern what in actual practice is done in that regard by the Department of National Revenue.


James Lorimer Ilsley: Clearly in that case the manufacturing operation would be completed at Winnipeg, and all costs entering into the article up to that point would be considered the cost of the article.


Alexander MacGillivray Young: Even freight?


James Lorimer Ilsley: Yes. It is like any other raw material.


Henry Herbert Stevens: Is that not manifestly unfair?


James Lorimer Ilsley: Why?


Henry Herbert Stevens: There are huge manufacturing plants in Oshawa, Windsor and Toronto. There are no cars manufactured in the west. Surely in principle a sales tax is essentially a tax that is applied when the car leaves the door of the factory. For instance, the department does not include the cost of delivery of the car to Ottawa or Montreal or Owen Sound. If it goes to Winnipeg, and the manufacturer has a depot there from which he distributes to the dealers, then according to the minister the sales tax would apply on the freight between Oshawa and Winnipeg. I cannot believe that that is correct.
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James Lorimer Ilsley: There is a misunderstanding. I was not covering a case such as that just put by the hon. member. I was speaking about a case where a car is not completely manufactured at Oshawa or Windsor, as the ease may be, but is manufactured in Winnipeg.


Hugh Alexander Stewart: Assembled.


James Lorimer Ilsley: Assembled, put together, where the parts are taken to, and the manufacture of the car is completed in, Winnipeg,
the cost which has entered into the manufacture of that car at that point when it is completed is the cost on which the tax is levied.


Henry Herbert Stevens: May I point out to the minister that there is a vast difference between manufacturing and merely assembling a knockecbdown car. For instance, that car is made in Oshawa and is tested there. Then for the purposes of shipping they may take the wheels or the top off, putting the top in a case, and then it is shipped. I do not think that is done now to any great extent, but it used to be. Automobiles used to arrive at Vancouver in cases in freight cars. As soon as a car was unloaded they would put the wheels on, fasten on the top, and do a few other operations. But that is not manufacturing. That certainly could1 not be considered the point where the manufactured article is completed, and if there is any possibility that that is being done-


Alexander MacGillivray Young: It is being done.


Henry Herbert Stevens: -I think it should be challenged and1 definitely changed. The cost of delivery of a car will run about $200; roughly speaking I think that is about the freight on various weights.


Mr. ROSS (Moose Jaw):: A hundred and some dollars.


Henry Herbert Stevens: It will run, I think, as high as $200 on some of the heavier cars; it is between $100 and $200. Well, eight per cent on say $150 gives you $12 additional, merely on freight. Let me ask the minister this question: Assume that it is an imported car bought in Detroit, we will say, and shipped to Vancouver, to take an extreme case. Does the department impose the sales tax, when customs entry is made, on the price of that car in Detroit plus the freight?


Mr. MOORE:: Why speak of a car having been wholly made in Oshawa? I happen to know that the Oshawa plant buys parts and materials from two hundred factories, principally in other cities than Oshawa, and the question arises as to where a car is really manufactured.


Henry Herbert Stevens: That has been covered by the law for many years. We call these cars manufactured in Oshawa, but they are really assembled there. Certain portions of them are actually made there from raw material but a substantial percentage of each car consists of imported parts which are there attached to the locally manufactured parts. That is all covered in the law.


Charles Avery Dunning: No.


Henry Herbert Stevens: The minister shakes his head. It has been covered in the law for fifteen years. I remember that around 1920, 1921 or 1922 we went to a great deal of trouble to determine how we could declare what was made in Canada and what was not, and then there were certain rebates and all that sort of thing. I think you deal with it to a certain extent in the resolutions now before us. In any case we have dealt with that matter in parliament over and over again, but what I mean is this: to all intents and purposes when the car leaves the factory in Oshawa it is a delivery by the manufacturer of the car.


Richard Bedford Bennett: It ia completely fabricated.


Henry Herbert Stevens: Yes, whether it is assembled or manufactured. But if that car is delivered in Ontario, and the sales tax is imposed on the factory price at Oshawa, it is vastly different from a car delivered at Regina, Moose Jaw, Calgary or Vancouver with freight added, and in equity at least it would impose upon western purchasers a gross injustice, in forcing them to pay sales tax on the freight. The object of the sales tax is that it should be a manufacturer's tax. That is the basis and the whole theory of a sales tax. When the car leaves that factory it should go into the hands of any Canadian purchaser from Aklavik to Halifax and from Victoria to Montreal-


Charles Avery Dunning: The commissioner says it does.


Henry Herbert Stevens: That is the essence of the whole business.


William Henry Moore: The object of assembling cars in Winnipeg, I assume, is to reduce western costs. When I was speaking of assembling in Oshawa I was speaking of the first stage of assembling, because you have different stages. There are oars also that are completed there, but in the matter under discussion now apparently the car is not completed in Windsor. For the purpose of reducing costs in the west the car is shipped to

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Winnipeg in a certain form, and is then completely assembled. That is my understanding of the situation, and I think the hon. gentleman will find that by this argument he is arguing against having industries in western Canada and against a reduction in the cost of motor cars in the west.


Henry Herbert Stevens: The hon. gentleman has not grasped the point at all.


John James Kinley: The freight cost on automobiles depends on how many automobiles are in the shipment. If you have a full carload you get a lower freight rate. They are shipped knocked down for the purpose of saving freight, and disregarding everything else it will give the big man an advantage over the little man if you do not include the sales tax, because he has the advantage of a lower freight rate through his ability to take cars in big shipments in knocked down condition.


Mr. McGEER:: The point is this: When a manufacturer in Windsor ships a completed car to Ottawa, we will say, there is no part of the freight involved in the sales tax because your sales tax is charged on the manufacturer's price at the factory. But if the present development of industry continues and you have plants established at points like Winnipeg, Regina or possibly Vancouver, when there is a shipment of parts to those western points the freight on those parts is included in the manufacturer's costs. So when the manufacturer's costs go out with those freights included, the westerner pays a tax upon a freight rate which the man in eastern Canada does not have to pay. The result of that sort of discriminatory taxation of course would be very favourable to eastern manufacturers.


Some hon. MEMBERS:: Why?


Gerald Grattan McGeer: Let me put it this way. I can quite understand you fellows down east all being in favour of these things which concentrate-


William Henry Moore: I cannot understand the
hon. gentleman's objection to manufacturing in western Canada.


Gerald Grattan McGeer: No, we are not objecting to that, but what we do say is that when you ship parts from your main headquarters here to the west and assemble the car there, the cost of transportation to the point in the west should not be included in the calculation for the sales tax. You handicap your western manufacturer by the imposition of an extra tax on the freight which is not included in the east.


Mr. McLARTY:: How can the increase
of a sales tax or excise tax, the proceeds of which naturally go to the government, possibly help the manufacturer? He is simply a collection agent for the government.


Gerald Grattan McGeer: That is quite another thing, but what we are trying to do, of course, is have a manufacturing plant for automobiles in the west as well as in the east, and I think the general trend of manufacturing activity is to recognize a distribution of manufacturing centres throughout the consuming area. I think I catch the drift of the suggestion of my hon. friend from Kootenay East. It is that when you levy your sales tax on the freight on parts moving from the main factory to western points and do not levy the sales tax on the freight on a completed car going to other points, you discriminate against the western fabricator or the assembly man, and against the development of a plant in the west that is compelled to depend, for the time being at least, on the movement of the bulk of the parts from headquarters factories in Windsor. It is simply a question of whether or not you are going to equalize it by making your sales price at your factory the sales price plus the freight to the point of delivery. If that is done in the east there can be no complaint from the west over- having to pay freight on parts moving from the headquarters plant to the point of assembly or manufacture, but if you are not going to levy any tax on the freight charged on the automobile moving from the factory to the point of consumption the suggestion is that you should not levy sales tax on the freight on parts moving from your headquarters here to the western point of assembly.


Charles Avery Dunning: What about the movement of parts into what you describe as headquarters?


Gerald Grattan McGeer: Well, they will pay the tax in any event. For instance, there are no taxable parts coming into the factory at Windsor that have not paid that tax before they are moved to Winnipeg or Regina or Vancouver. As long as the taxes are paid at headquarters there is no question as to their being evenly distributed over all. I do not think there is any point of importation from outside of headquarters.


Charles Avery Dunning: There is no tax on raw materials.


Gerald Grattan McGeer: Well then, nobody pays any tax. The only thing that it seems to me might appeal to the minister is whether the tax should be charged on freight on a western
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movement which is not charged on the eastern movement. For instance, take the man fabricating in Vancouver, where the freight is say $150 on the total volume of material going into the car; if he has to pay that tax, the amount paid may be sufficient to bring the car in in complete form from the factory at Windsor without the sales tax on the freight. Suppose I buy in Vancouver a complete car at Windsor and it is shipped to me; it is clear I do not pay any sales tax on the freight. But if I buy one assembled in Vancouver from parts made in Windsor, I pay tax on the freight on those parts. Why should I pay sales tax on freight on the material to assemble a car, and not pay sales tax on freight on the car assembled at the point of origin of those parts and delivered at the same destination?


Richard Bedford Bennett: But you do.


Gerald Grattan McGeer: The minister says we do not pay the sales tax on the freight.


Richard Bedford Bennett: My hon. friend is seldom wrong, but I am amazed at him this time. There are perhaps two hundred communities producing materials that go into the production of a car. The car leaves Windsor for Vancouver knocked down. That means that there is a great deal to be done to make it a completed car. The minister has just said that on that car as shipped out there is no freight added to the price for the purpose of ascertaining the sales tax.


Gerald Grattan McGeer: I understood the contrary. I think it is my right hon. friend who is wrong.


Richard Bedford Bennett: No, wait a moment. In order to complete the car a number of parts must be used. The cost of those parts is their initial cost at some Ontario town plus the freight, and upon that the sales tax is paid.


Charles Avery Dunning: That is the point.


Gerald Grattan McGeer: My point is that we pay freight on those parts, and that constitutes part of the manufacturer's price.


Richard Bedford Bennett: I was just going to finish. The car is made at Oshawa and the sales tax is paid there on the completed car. Entering into the production of that car were a number of parts. One part came from Chatham, Ontario, upon which freight was' paid by General Motors at Oshawa, and upon which sales tax was paid in the completed automobile.


Charles Avery Dunning: That is right.


Richard Bedford Bennett: That is the whole story. The same thing applies in Vancouver. In answer to the question asked a moment ago,

the minister says there is no charge upon the car that goes out knocked down in the way of freight for the purpose of sales tax. That is settled. But on the parts that enter into the production of that car, their cost is the initial cost in Ontario, whether it be at Windsor, at Oshawa, or at Chatham, plus the freight, which is at a lower rate than it would be if it were incorporated in the car as shipped. The reason they are shipped knocked down is that from various factories parts are shipped out by carloads and so get a very low freight rate, as the hon. member for Queens-Lunenburg says. Also the knocked down cars can be loaded in larger numbers in a railway car and thereby they receive a low freight rate which reduces the freight on every unit, and the parts which went into another car altogether. The original price paid for them in the Ontario town, plus the freight, make the complete cost of the part that enters into the car, upon which the sales tax is paid.


Gerald Grattan McGeer: I quite agree. Where the
right hon. gentleman has missed the point is this: two cars are shipped out, one of them a completed car. The manufacturer finds that by establishing an assembly base in Vancouver or Winnipeg he can knock that car down and ship it at a lower cost and put it together at destination and make money by the saving on freight. If he ships the completed car he does not pay any sales tax on the freight, but if he knocks his car down and reassembles it in Winnipeg he has to pay the sales tax on the freight.


Richard Bedford Bennett: No, not unless he adds
parts to it upon which freight is paid.


James Lorimer Ilsley: Not if it is a mere assembly. The question is whether it is a manufacturing operation that takes place at destination.


Gerald Grattan McGeer: I understood it was stated that whatever the freight charges on the assembly are, they are part of the manufacturer's cost.


James Lorimer Ilsley: It depends on whether it
is a mere assembly or a manufacturing operation. If a manufacturing operation takes place at destination, then the sales tax is imposed upon the sale price at destination. It does not apply only to motor cars; it applies to everything. For instance, I am advised that wood is shipped from British Columbia to mills in Quebec which make what are called shuttles. When the shuttle is sold the sales tax is reckoned upon the sale price, which includes as a component part not only the cost of the wood in British Columbia but the freight on the wood from

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British Columbia to the Quebec factory. There would be no way of administering the Special War Revenue Act otherwise, because the tax is a tax placed upon the article when manufactured, at the factory door, as one hon. member expressed it. No sales tax is imposed upon freight as such or raw material as such; the sales tax is imposed upon the finished product when delivered, into which ihese elements go as components.


Gerald Grattan McGeer: I quite agree, but here
you have an important variation from the common or general illustration you have given, in that the main automobile manufacturing is carried on in eastern Canadian centres. It is true there are certain assembly points in the west, which are developing. The question is: when no charge is made on the freight on a completed automobile, should there be any charge made on the freight on articles which are sent out from headquarters for assembly in the west? That is a very different thing from shipping raw material in the form of lumber for manufacturing in the east.


James Lorimer Ilsley: I do not think it would be
administratively possible to make the distinction. The only rule that can be applied is the rule I have tried to state several times, that you take the sale price of the article when it is manufactured. If that price has been enhanced by reason of the fact that certain of its parts or certain raw materials have moved long distances, that is something we cannot help; we look at the sale price where the manufacturing operation is complete.


Henry Herbert Stevens: It does however leave
this fact clear, that a plant for the assembling of automobiles in western Canada would be an impossibility in competition with one in eastern Canada. If the minister is correct in his diagnosis of the case-and I am not disputing what he has said-it means this: Wheels are manufactured by a separate concern in Ontario. They are finished,, complete wheels, ready to put on the car. The manufacturer in Winnipeg or Vancouver pays a sales tax on the original cost of the wheel, plus freight over a distance of two or three thousand miles.


Charles Avery Dunning: No, he does not pay
sales tax on it at all. He buys it under a licence as a component of the car he will manufacture.


Henry Herbert Stevens: Yes.


Charles Avery Dunning: And he imports it by
.the carload at the lowest possible rate,
because he is taking advantage of the possibility of putting a great many wheels in one carload. It is a matter of what the wheel costs the manufacturer.


Henry Herbert Stevens: Yes, but it is obvious it
will cost a great deal more after it is hauled three thousand miles. He pays a sales tax on the higher cost.


Charles Avery Dunning: But how can we fix-


Henry Herbert Stevens: There can be no doubt
that the further you haul an engine, or whatever the part -may be, the taxed sales price will be that much higher.


Charles Avery Dunning: The ruhber in the tire
comes from South America. The cost of getting it here is a component part no matter where it goes.


Henry Herbert Stevens: I know this is a difficult
point, because I have been through this kind of argument before. However there is in it an element of fundamental justice which offers a challenge to the present method. At least it calls for study to see whether or not the cost of freight movement in Canada shall be included in determining the figure on which sales tax will be imposed. I admit that movement of an article from Hamilton to Toronto, Oshawa, Windsor, London, or other points in central Ontario would not cost very much. It is something that the manufacturer might foe prepared to cover.


Richard Bedford Bennett: But it is in the cost of the article.


Henry Herbert Stevens: It is in it, yes, but it is
small. But when you come to move all these articles-I think the hon. member for Ontario said there were about two hundred, did he not?


William Henry Moore: Yes.


Henry Herbert Stevens: There are two hundred
separate items which enter into the assembly. If they are moved within a radius of one hundred miles, to Toronto or to -other points, the freight would not amount to very much. But when those two hundred items are moved across the continent to Vancouver, to Winnipeg, or Regina, then the freight becomes an important part of the cost, and imposes a handicap upon the western assembly plant which, I suggest, is quite unfair. I must say this is the first time I ever heard of lumber being moved to the east to make box shooks, because I believe we could secure in the east the kind of lumber required for that class of -manufac-
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ture as easily as it could' be secured in the west. But whether it applies to lumber, or the matter now under discussion, the practice of imposing sales tax on freight within Canada might very well be discontinued. It would not be very difficult to bring that about. For instance, we may have a carburetor, a wheel or some engine part, the sales tax upon which could be figured upon factory cost at point of production, and upon a price plus freight to Oshawa or Vancouver.


Charles Avery Dunning: Of the part?


Henry Herbert Stevens: Yes, of the part.


Charles Avery Dunning: The hon. member must see immediately that he would upset the whole structure of manufacturing parts of a completed whole under licence, the principle being that the tax is levied on the finished manufactured article. Operations of various kinds are carried on under licence in order to give the department an opportunity to be sure that the tax is collected when the article is finally manufactured.


Richard Bedford Bennett: At the completed manufactured price.


Charles Avery Dunning: Yes, at the completed stage of manufacture. It took years of development of the tax, as the hon. member must know, to arrive at the comparatively simple formula which now exists. May I point out that his suggestion would change the whole principle in that a carburetor manufacturer- and I do not know whether there are any in Canada-


Richard Bedford Bennett: Yes.


Charles Avery Dunning: Yes. A carburetor manufacturer, for instance, would be a licensed manufacturer of parts in relation to, let us say, a plant at Oshawa. But he would be a manufacturer of the finished article in relation to a plant at Vancouver. The hon. member's imagination will indicate to him immediately the difficulty of trying to administer a situation like that. Either a manufacturer must be a manufacturer of parts which ultimately go into a completed whole, which is taxed, or he must be a manufacturer of a finished article which is taxed at his factory gate. I see no escape from one or other of the positions.


Alan Webster Neill: When the manufacturer of a carburetor sells the article, is the tax payable on that article?


Charles Avery Dunning: No; that carburetor
could be shipped to a manufacturer in Vancouver, Oshawa or any other point, and there, wherever it was, enter into the taxable value of the completed article. That is the principle of the law.


John Gordon Ross: The question I am asking is this: We make Eord cars in this part of the country, and a certain sales tax is paid to the government. Then, in the city of Winnipeg Ford cars are assembled. Does the Ford car sold in the city of Winnipeg pay a greater tax to the government than the Ford car made at Ford, Ontario?


William Daum Euler: Yes, of course, because it sells for more.


James Lorimer Ilsley: In Winnipeg it is an assembling operation.


John Gordon Ross: In Winnipeg it is an assembling operation?


Charles Avery Dunning: That is a question of fact about which I cannot speak.


John Gordon Ross: The tax is on the car, in both places. There is a certain tax paid on a certain type of Ford car; what is it?


Charles Avery Dunning: I shall get that information, but I do not have it just now.


Richard Bedford Bennett: It is eight per cent on the sales price.


John Gordon Ross: Yes, but the sales price at. Oshawa is lower than the sales price at Winnipeg.


Henry Herbert Stevens: To the extent of the freight.


John Gordon Ross: Yes; so that there must be a higher tax paid by the consumer in Winnipeg than by the consumer at Ford, Ontario.


Charles Avery Dunning: May I point out that under this amendment the Ford car, in either case, will not pay it.


John Gordon Ross: Possibly so, but I am getting at a principle. In one part of Canada we have a consumer paying a higher tax on an article on which a lower tax is paid in another part of the country. Is that right?


William Daum Euler: It seems to me that the
principle is a simple one. Although I do not wish to prolong the discussion, may I explain what I mean? The sales tax is imposed on the manufacturer's sales price. If the manufacturer is located in Winnipeg the tax applies on the selling price of the product as delivered from the factory at Winnipeg. I take it that an assembly plant is a manufacturing plant. The car is not completed until it is ready for delivery to the customer. I take it that the Ford Company at Windsor sends its cars in what has been described as a

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knocked-down condition to its assembly plant at Winnipeg, and I would say that the manufacturing operation is completed at Winnipeg. When the car is sold out of the manufacturing or assembling plant, whichever you choose to call it, all costs would be included, among which would be freight. On that price the tax must be paid, and there can be no escape from it. The law is definite that the sales tax shall be charged on the selling price, and if the article is finally sold in Winnipeg that selling price will finally include freight.


Gerald Grattan McGeer: There is one point to remember, namely that in the whole fabric of freight rates there has been a definite and a partly successful endeavour to balance up charges of freight so that those carrying long haul costs are not penalized on an exact mileage basis. If in the imposition of the sales tax, freight rates are included in the manufacturer's cost, he must of necessity impose a discriminatory or a heavier charge on western plants than on eastern or central plants where, because of shorter distances, freight rates are less. I cannot see any reason why in the levy of the sales tax there might not be an attempt on the part of the department to balance the sales tax so that a person buying the same article in western Canada shall pay approximately the same sales tax as is charged to a person buying that article in central Canada. The mere fact that there is some difficulty in working out such a problem is no good reason why the work should not be undertaken. It is being done by private industry and it seems to me that it could be done in this instance. One effective way of balancing the incidence of the sales tax would be to eliminate the item of freight in the total manufactured cost. This should not be a difficult thing to do.


Charles Avery Dunning: What freight?


Gerald Grattan McGeer: Whatever freight enters into the cost. Supposing there is freight on an article coming from Oshawa.


Charles Avery Dunning: From South America, from South Africa, wherever the materials come from to make up the goods.


Gerald Grattan McGeer: There should be no difficulty in that regard, because if those freights enter into the cost, they must be shown in detail in the statement of what makes up the cost. Certainly the internal freights from the manufacturing centres should not be difficult to segregate. As a matter of fact, in a great many instances you will find the manufacturers doing just what the hon. member for Kootenay East (Mr. Stevens) says should be
done, namely, absorbing the freight. Under its present administration, this sales tax is going to add another discrimination against the west and the maritime provinces and give a further preference to the centralization of manufacturing in central Canada. That is the way in which the present method of administering the sales tax will work out and it is one of the matters that we shall have to face sooner or later.


Charles Avery Dunning: I do not want to obstruct the passing of one of my own items, but I should like to direct the attention of the committee to the fact that we are discussing a special tax on automobiles. As I said a little while ago, this tax will not apply to any car valued at less than $650 ex manufacturer. Therefore, whatever my hon. friend has said has no application to the particular matter now before the committee. It seems to me to be improper that we should assume that manufacturers of automobiles are conspiring to collect as much as possible in the way of sales tax for the government. I think that is a ridiculous assumption. I am inclined to believe that they are trying to put their cars together and get them sold under conditions which will involve the levying of as little as possible in the way of sales tax. Obviously they can make no money out of the sales tax as such; they are merely collectors for the government. To adopt the assumption put forward from several quarters, one would have to believe that discrimination is created because the manufacturers have conspired together to add to the sales tax. I cannot believe that there is any other reason why a manufacturer should ship parts to western assembly plants than that' of economy. If that method is cheaper, of course the quantum of sales tax would be one of the factors reduced by that process. This matter requires close examination such as was made by the tariff board of the whole structure of the tariff, the sales tax and the excise tax as they related to the automobile and other industries. It was partly upon this report that we acted in connection with this particular matter of a five per cent tax, which, I say again, does not affect any automobile valued at less than $650.


John Gordon Ross: These cars are made here and assembled in other places. The minister seems to think it would be a difficult matter to set a sales tax on these cars. There are only so many different types of automobiles made by each company and the department must have a list of these models and must know the amount of sales tax charged at the factory. I can see no reason why an identical amount cannot be charged in other places
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in Canada for the same model of car. This centralized industrial area in this part of Canada has been charging other parts of the country excess prices for everything and surely the government should not act with them in placing higher taxation on these people. This is not necessary and the same rates could be charged in every part of Canada.


Charles Hazlitt Cahan: I think, as the minister says, we are getting far away from the issue raised in this resolution. For some months, two or three summers ago, I had something to do with the administration of the Department of National Revenue. My memory is clear that the sales tax was then levied in accordance with the statute. Section 86 of the statute states that there shall be imposed, levied and collected a consumption or sales tax of six per cent upon the sale price of all goods. The amount of this tax is now being increased to eight per cent. Paragraph (a) of the section reads:
(a) produced or manufactured in Canada, payable by the producer or manufacturer at the time of the delivery of such goods to the Jiurehaser thereof.
Therefore, if commodities are sold at Oshawa or Toronto the sales tax of eight per cent will be computed upon the invoice prices.


Alexander MacGillivray Young: What invoice prices?


Charles Hazlitt Cahan: The invoice price charged
by the manufacturer or the producer for that commodity delivered at Oshawa. If any person wishes to obtain the commodity at the lowest possible price, all he has to do, if he is a resident of Vancouver, Victoria or Halifax, is to buy it at the price for delivery at the station where the commodity is manufactured.


John Gordon Ross: You would have to buy three cars.


Charles Hazlitt Cahan: Buy three cars?


John Gordon Ross: Surely.


Charles Hazlitt Cahan: No, not at all. You can
buy any commodity for delivery and pay the sales tax on the minimum price for the sale of that commodity at the factory.


Gerald Grattan McGeer: How can you do that when you are assembling?


Charles Hazlitt Cahan: Just a moment, please. You can do better than that. Many commodities can be purchased for delivery at the place where the purchaser resides. In such cases the cost of transport from the place of manufacture to the place where the purchaser resides 
is paid for by the purchaser, as he must pay it, but in the case of a motor car he would pay very much less for transportation if he took his delivery near the place of his residence. In that case the manufacturer will sell to him and receive the price of sale, but the transportation charges will be cut down by reason of the fact that the manufacturer giving delivery to him at the place of his residence in any distant part of Canada will be able to transport in large quantities to that place of residence at a less cost for carriage than if it were one single package sent by freight or express, because in the transfer of large quantities from one part of Canada to another the transportation charges on goods in bulk are proportionately less than the transportation charges on single articles. The sales tax is levied and computed upon the purchase price, and is payable by the manufacturer or producer at the time of delivery of the goods to the purchaser. Therefore it is true that a purchaser residing near the factory may purchase at a price for delivery less than if he bought for delivery at a point 3,000 miles away. But if he buys for delivery at a point 3,000 miles away the sales price of the manufacturer will not cover all costs of delivery and insurance, and the cost to the purchaser will in such case include cost of transportation and cost of insurance. But it is a great advantage to the purchaser of many commodities to buy for delivery in his own town because in such case the manufacturers may arrange for transportation in large quantities, with the result that the individual unit is transported for very much less cost.


Gerald Grattan McGeer: The illustration just given by my hon. friend from St. Lawrence-St. George indicates something quite apart from the sale of automobiles. This sales tax is levied at the manufacturer's place. Cars go out to dealers in carload lots; they do not go out to individuals, and the question here is: can some way not be found whereby the tax on an automobile shall be somewhat the same in the maritime provinces and in the western provinces as it is here in central Canada? But quite apart from this whole question of assembling and complete manufacturing, one objectionable feature to any taxation is unequal taxation, and as this particular tax is being imposed there will be two effects: First, it will be a discrimination against the maritimes and the west and a preference in favour of central Canada; in addition, it will carry with- it a burden of taxation on the user of the same commodity in the maritimes and in the western provinces that is not imposed on the user living in the central sections.

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I quite agree that this question of unequal distances cannot be ignored entirely, but this house went very far in support of the principle I am now suggesting when the Maritime Freight Rates Act was passed under which a huge subsidy was paid out of the consolidated revenue fund to permit the haulage of freight from Halifax and Saint John in order to eliminate a geographical disadvantage. I quite agree that some problems of administration are involved in such an adjustment, but this is something which the minister should not dismiss just because of the difficulty. I think it is worthy of consideration.


Mr. McLEAN (Melfort):: I would like to ask the Minister of National Revenue where the line is drawn between assembling and reassembling. I have listened to so many opinions from so many hon. members that I believe there is some confusion over what they are discussing. It seems clear to me that some are talking about assembling and others are talking about manufacturing.


William Daum Euler: The same thing.


Malcolm McLean: No. It is impossible for a manufacturer who is establishing himself in Winnipeg or Vancouver to avoid paying sales tax and excise tax on parts that enter into his product if he brings them in from all over Canada, but I do not think there is any such manufacturer in western Canada. It would be possible to do what the hon. member for Moose Jaw (Mr. Ross) suggests, namely, collect the same sales tax md excise tax on a car assembled in Winnipeg as are now collected on a car assembled in Windsor, if only the same manufacturers were making such cars and sending them out from Windsor. But if the manufacturer establishes himself in Winnipeg or Vancouver he does so simply to get lower costs than he would get in his own city. It becomes very important where the line is drawn between assembling and reassembling. The minister said that if a car was reassembled in Winnipeg there would be no additional charge added and there would be no tax, I understood him to say, on the freight from Windsor to Winnipeg.


Alexander MacGillivray Young: Did the minister say that?


Malcolm McLean: Yes, he did. This is of a great deal more importance than appears on the surface because not only do we pay the thirteen per cent additional on automobiles, as was pointed out by some of my hon. friends, but this would apply also to other machinery that is shipped in a condition where it has to be reassembled before it goes to the ultimate consumer. It would
apply to farm implements, for example, which are sent out in a condition where they have to be reassembled. I wish the minister would inform the committee

and if he has not the information before him now he can get it quite readily-just where the line is drawn between assembling and reassembling, say at Winnipeg, Regina or Vancouver, and where and how the sales tax and the excise tax making up the thirteen per cent are added, and whether they are added on stuff that is reassembled. I think if we had that information it would clarify the question.


William Daum Euler: It depends upon where the sale is made and upon the price.


James Lorimer Ilsley: I have stated the principle that applies, and I cannot state it any more clearly. What I had better do, I think, is to find out just what is happening in reference to Ford cars and whether we regard what is happening in Winnipeg as assembling or as a manufacturing operation.


Henry Herbert Stevens: Will the item stand until we get that information? Otherwise-


Richard Bedford Bennett: May I point out that
the question raised has no bearing upon the item now before us, although it has an important bearing upon an item just passed. I want to be able to give the information-


Henry Herbert Stevens: I was asking the Minister of National Revenue if the item stood.


Charles Avery Dunning: Inasmuch as it is really my item I was trying to answer my hon. friend. The question which has been raised certainly does not apply to the resolution now before us; it would apply, I assume, to the one which we have passed. Be that as it may, I am anxious that the fullest information should be afforded; I should like to see if there is not some other item upon which we could give absolutely detailed information perhaps by eight o'clock this evening, and we can take up another item as the question is not properly applicable to this one.


Henry Herbert Stevens: We are on paragraph 4, Mr. Chairman, with reference to automobiles?


Charles Avery Dunning: The special tax on automobiles.


Henry Herbert Stevens: That applies exactly the same.


Charles Avery Dunning: 
Henry Herbert Stevens: Most cars are more than S650, so the five per cent applies just the same as the sales tax; the same principle of discrimination is there.


Gerald Grattan McGeer: The situation is worse, because as a matter of fact the price of the manufacturer in the east is going to be under $650, whereas in the west the price will be over that amount, and carry the extra tax.


Charles Avery Dunning: May I tell my hon. friend that that simply is not the case. I can answer that with great positiveness.


Gerald Grattan McGeer: Well, we pay the bills out there, and we happen to know some of these cases.


Henry Herbert Stevens: I frankly admit that the whole situation this afternoon perturbs me. I listened to the hon. member for St. Law-rence-St. George (Mr. Cahan), and I have no dispute with his review of the situation, but what we are seeking to evade or to avoid is this: Take a plant in Ontario; we have information from the hon. member for Ontario (Mr. Moore), in whose constituency is Oshawa, and who is extremely well informed, that that plant will draw from two hundred plants, and out of what it draws from those two hundred other plants it makes an automobile. Let us consider the case of a plant established at Vancouver, Regina, or Winnipeg, in the west, or in Halifax in the east, a considerable distance away from these two hundred plants, most of which are in Ontario. The western or the Halifax plant buys these parts exactly as the Ontario plants do, from the two hundred plants I have referred to; they haul all the parts to the west or to the east, and they pay a sales tax the same as Ontario, plus the difference in freight, plus a tax on the difference in freight.


Malcolm McLean: Surely it has always been that way.


Henry Herbert Stevens: That is so. If that is true-and it cannot be gainsaid-then, not by the handicap of geographical position, judged from the manufacturer's standpoint, but by act of parliament, by the imposition of a federal tax, the government is placing a handicap upon the western manufacturer. That, I submit, is not sound. What I wished a little while ago to draw to the minister's attention was that a sales tax or an excise tax such as this five per cent excise tax, wherever imposed in Canada, is supposed to bear with absolute equality upon all citizens no matter where they are. That is fundamental, and we are talking about fundamentals. If difficulties of administration
[Mr. Dunning.l
offer obstacles, it is the duty of parliament to overcome those obstacles. If what the Minister of Finance (Mr. Dunning) and others have described as being the case is what exists in fact, it is almost impossible for a manufacturing plant to develop in the west. I have not forgotten the argument raised by the hon. member for St. Lawrence-St. George about the manufacturers shipping parts in bulk. That is merely a minimising of the manufacturing cost. It is all right as far as it goes. But why should parliament because of transportation handicaps, impose a larger sales tax rate or valuation in the west than they do in the east? As the hon. member for Moose Jaw (Mr. Ross) has well pointed out, take the case of a V-8 in Windsor and a V-8 in Vancouver. The western purchaser will pay, under those circumstances, substantially more in sales tax, even though the fullest advantage is taken of bulk carload shipments. I do not care what the method of handling is, whether it is a case of assembling or of shipping a car complete.


Charles Avery Dunning: The hon. member says
that the sales tax will be greater?


Henry Herbert Stevens: Yes, and the five per cent excise tax as well. .


Charles Avery Dunning: Well, we will find out.
I can say positively, with respect to the excise tax mentioned in the item, that in connection with the Ford V-8 car it would not be so, because the sales tax would be non-existent at both points.


Henry Herbert Stevens: All right; the Ford V-8
may come under the $650 figure.


An hon. MEMBER:: Take the Dodge.


Henry Herbert Stevens: Take the Buick, which i3 a very common car, and, as I have driven one for a great many years, I think it is a good car. I do not suppose there are any cars of that make which come under $650. Or we can take the Dodge, or the Chrysler, or a good many other cars; they would all come under the five per cent tax and the eight per cent tax. After all, we in this parliament dare not disregard the question of equity in taxation. I know the difficulties the department is up against, because I remember the way in which it struggled with this matter some years ago. But essentially I do not think this matter is very difficult, because all that would be necessary would be to say to the manufacturer that the question of transportation of parts need not be considered for sales tax purposes in the computation of the sales price, and that would end the matter.



[Stage Direction]
Special War Revenue Act
Charles Avery Dunning: But that is the present
position.


Henry Herbert Stevens: No.


Charles Avery Dunning: My hon. friend will
permit me to answer him. He mentions the Buick car. The sales tax on a Buick car is the same, no matter where it is, because the sales tax is collected on the factory price, and the factory price is just at the one place.


John Gordon Ross: But if they were made at Regina-


Charles Avery Dunning: Ifs and ands and buts bring us to this point: My hon. friend has just stated that the sales tax was assumed to be an absolutely equitable tax. A number of hon. members wrho have spoken have sat in this house all the years the sales tax has been in existence, and this is the first time I ever heard anybody claim that the sales tax could possibly be equal in its bearing on all citizens across three thousand' miles of country. It is quite obvious that we have accepted, as this parliament accepted many years ago, the principle of the sales tax at the source as distinguished from the retail sales tax. The bearing of that tax could not possibly be equal on all citizens. The point at issue, as to whether it constitutes discrimination as between the east and the west, depends upon the source of raw material supplied. To the extent that a plant in western Canada would have access to raw materials of supply at a lower	cost than	a	plant	in	the east, theadvantage would	be	with	the	west. To theextent that the plant in the east had advantages in raw material or price costs over the plant in the west, obviously the advantage would be with the east. I would admit that at present I think-and I do not speak with the absolute knowledge that some members speak	with-the	balance	of	advantage isprobably with the Oshawa or Windsor plant, because of the development of routes and the places	from which	raw	material supplies
come. But the things which enter into the car-the rubber in the tires, the asbestos linings, a thousand and one commodities- come from many parts of the world, and there are accumulated costs, as far as transportation goes, through the parts factories. The transportation costs from the parts factory to the automobile plant, as we use the term, also enter into the cost which becomes the basis of the final tax paid at the factory door when the car is going out. So far as the Canadian consumer of cars is concerned, the equity of the bearing of this tax, whether it be sales tax or this special extra tax, will be decided by the information which the Minister of National Revenue will have for us, I hope, by eight
o'clock. That is to say, is there a lower tax payable on a car ex the factory door in Ontario than is payable on the same car which reaches, through one or more methods, the user of that car in any other part of Canada? That is a simple matter of fact. But I submit that when we go further, and try to demonstrate that this sales tax should be a tax bearing equally on all consumers, wherever they may be,, we run absolutely counter to the fundamental of the tax itself, which is that it is a tax at the source, and that consequently its bearing must increase by distributing methods and distances and so forth throughout the country. I do not see how there is any escape from that.


Henry Herbert Stevens: The tax would not increase with distance. Surely if the tax is a tax at the source the tax would not increase by distribution. That is exactly our quarrel with this method of taxation.


Charles Avery Dunning: But in its ultimate bearing on the consumer, of course, it would.


Gerald Grattan McGeer: How could it?


Henry Herbert Stevens: If the tax on a finished car was $100 in Oshawa it would not be any more at Vancouver, because the minister has already said that they do not tax on the freight on the finished product. But if the car is made in the west they do charge on the freight and on the materials which go into that car, which is a vastly different proposition.


James Lorimer Ilsley: I have before me now the tariff board report on the cost of ears in all the important cities of Canada, and in every case the sales tax on a Ford tudor car is shown as $34.70. The cities enumerated are Halifax, Fredericton, Quebec, Montreal, Ottawa, Toronto, Hamilton, Windsor, Winnipeg, Regina, Calgary and Vancouver. The sales tax is shown as $34.70 on the same car.


Henry Herbert Stevens: But the minister will admit that those figures apply to cars which are finished here and shipped out as the. finished product. Will the Minister of Finance, who knows something about this, tell us that the sales tax on a car produced in Regina is the same as the tax on the same car produced in Oshaw'a? General Motors have a plant at Regina, though it has not worked very much.


Charles Avery Dunning: It has not worked for years.


Henry Herbert Stevens: Why? Because of handicaps, and this is one of them.
Special War Revenue Act


Charles Avery Dunning: My hon. friend knows better than that. The answer is that the westen farmers have not had enough money to buy cars.


Gerald Grattan McGeer: They have bought plenty of cars.


Henry Herbert Stevens: The long and the short of it is that the plant was established in Regina to manufacture General Motors cars, but the sales tax on a car produced in Regina will be found to have been substantially higher, when that plant was running, than on a car produced in Ontario.


Charles Avery Dunning: The tariff board made an exhaustive inquiry. The document from which the Minister of National Revenue quoted is a comparison of selling prices in 1935 of a Ford de luxe tudor in various cities of Canada and the United States. The various factors making up that selling price are given and in every case, as the Minister of National Revenue says, the sales tax factor is identical no matter for what city in Canada the price is quoted. I prefer to take the evidence of what I believe was a thorough inquiry, but again I will check it, or the Minister of National Revenue will check it, between now and eight o'clock, to find out what really is the situation. I have before me the information in regard to another make of car analyzed in exactly the same way, and with the same result all across the board. I used the Ford because that was the car about which the allegation was made.


John Gordon Ross: It is assembled in Winnipeg.


Alexander MacGillivray Young: A long time ago I asked a simple question, but a great many other matters have intervened. I was not asking anything with regard to the manufacture of parts in the two hundred plants that have been mentioned; I asked this specific question: If a car is made in Windsor and is sent in a knocked down condition to Winnipeg, where it is finally assembled, would the price on which this special excise tax as well as the sales tax would be based include the freight from Windsor to Winnipeg? I am not just sure on that point. I understood the Minister of National Revenue to say no, but I understood the Minister of Trade and Commerce to say that it was included. As a matter of fact I think it actually is included. What has been said by the Minister of National Revenue and the Minister of Finance is, I think, quite true. I understand that the practice is not what the hon. member for Vancouver-Burrard thinks, but that the manufacturers redistribute that additional cost over all the consumers

in Canada. I do not think we in western Canada actually do pay that extra cost, except our share of it, but that is the practice of the automobile people themselves and not of the Department of National Revenue. I believe the minister will find that to be the fact.


Charles Hazlitt Cahan: I suggest that on many of these commodities there is no additional cost. The difference in freight rates over short distances and long hauls must be. taken into consideration.


Charles Avery Dunning: Not by the department, in levying the sales tax.


Charles Hazlitt Cahan: No; but the manufacturer sets the price, and he sets the same price in all these cities, so apparently the eight per cent sales tax is paid on the same price whether you live in Winnipeg or Toronto. But the manufacturer can often do that without loss. I was interested in an undertaking in the west, and in purchasing machinery in England I found that the cost of freight from Liverpool to Montreal was exactly the same as the freight from Liverpool to Vancouver plus the railway freight over the mountain. I have seen freight bills showing the cost of transportation of certain commodities from Halifax to Truro. I do not know whether or not that condition exists at the present time, because it was some years ago that I was interested in such matters, but at that time it was cheaper to send the freight from Halifax to Montreal and back to Truro for delivery than to send it by ordinary local freight from Halifax to Truro. I remember the former member for Pictou, who is now in the senate, making similar calculations as between the long haul and the short haul. The fact is that the advantage given by the long haul to those who make use of it is of such tremendous importance that it must be taken into consideration if you are to consider the bearing of the cost of transportation.


Charles Avery Dunning: In reply to my hon.
friend from Saskatoon I would say that I have gone through each of these schedules, and they are all based upon the full delivered price not including taxes, freight or licence, and that figure is the same right across the board. The sales tax is also the same right across the board. Then there is a special municipal tax in Montreal; that is the only place where that cost enters. Freight, of course, varies right across the board depending upon the point of delivery and the licence factor also varies, though not markedly. It is $30 in Vancouver and as low as $15 in Windsor. The main factor of price differential

Special War Revenue Act
shown, that is from the factory on, is the factor of freight. There is no difference in the application of sales tax no matter where the Ford car is delivered, and inasmuch as it was in connection with the Ford car that the question arose-because it is the only car that is assembled, or whatever is done, at Winnipeg-it is quite apparent that whatever may or may not be the ease with respect to freight rates, at least it does not enter into the matter we are now discussing because the sales tax applies on the factory price which is identical no matter where the tax is levied. I have the same information with respect to every automobile. I have gone through it, and I have found that while, of course, the amount of the sales tax varies in relation to the factory price of the car, in every case it is uniform right across the board throughout Canada, and the item which creates the difference is freight on the car, not sales tax on the freight.


Alan Webster Neill: If the minister will add one remark to his statement he will satisfy me at any rate. He said that the sales tax was the same no matter where the car was sold; will he add "or no matter where it is assembled?" He told us early in the debate that the tax was levied upon the price at which the manufactured article is first sold. If it suits Ford to assemble at Winnipeg then the price he sells at there is different from the price he quotes delivered in Windsor plus freight. It might be held, and I think the minister indicated, that that is the price on which he assesses the eight per cent. In Winnipeg it would be higher on a car out of an assembling plant.


Charles Avery Dunning: This is a comparison of
selling prices in 1935 of a Ford de luxe Tudor at various cities in Canada and the United States-


Alan Webster Neill: No matter where sold or
assembled ?


Charles Avery Dunning: Each city is named
separately, with the various items making up the price.


Alan Webster Neill: Is it not all based upon the
factory in Windsor?


Charles Avery Dunning: No; it is the actual
selling price.


Alan Webster Neill: I am speaking of the case
where the car is assembled at Winnipeg; it must take a bigger price.


Charles Avery Dunning: My hon. friend forgets
that I gave the various items, which showed
that the freight is the variable item, with some slight variation for the licence. Perhaps someone can tell me what a Ford Tudor car costs in Regina?


John Gordon Ross: It costs $900
and something.


Charles Avery Dunning: As I have indicated,
$950. What is it in Vancouver-$993.70?


Mr. REID:: No; it is over $1,000. I am
quoting January prices.


Charles Avery Dunning: This is $3.30 below
$1,000. At any rate these are public documents; they were tabled in the house; it is easy by perusing them to find where the differences arise. I am not criticizing or commending the freight differentials, but I tell the committee that there is where the difference comes in, not in the sales tax.


Henry Herbert Stevens: That is not the point
we have been debating at all.


James J. Donnelly: Is that the price on
which the sales tax is collected? That is the retail price the minister is speaking of, not the price at which the company sells to the dealer.


Charles Avery Dunning: The first item I read
was $793 at the factory; the second was $34.70, both of them being identical across the board. The second item appearing in each case has a definite percentage relationship to the first, being the amount of sales tax actually payable with respect to that car in the whole of Canada.


James J. Donnelly: In each case that is
the retail price to the consumer.


Charles Avery Dunning: My hon. friend has not
yet grasped the point. I will try again. The first item is the full delivered price not including freight, taxes or licence, $793 wherever you take the car. The sales tax is $34.70 wherever you take it. The freight varies all the way from $21 to Toronto and Hamilton, $47 to Halifax. $27 to Montreal, $103 to Winnipeg and so on.


Charles Hazlitt Cahan: That means the sales tax is never computed on the freight?


Charles Avery Dunning: No; the sales tax is
computed on the one item, the $793.


James J. Donnelly: You collect on the
retail price, not the wholesale?


Charles Avery Dunning: I am sorry my hon.
friend does not yet grasp the point. It is the full delivered price not including taxes, freight or licence, $793 wherever you take the car, and the sales tax is $34.70 wherever you take it.
Special War Revenue Act


Henry Herbert Stevens: That is not six per cent on $793.


Charles Avery Dunning: In 1935 the commissioner tells me that a five per cent discount from the manufacturer's price was allowed in calculating the sales tax.


Henry Herbert Stevens: That does not cover the point.


Joseph James Duffus: I am almost sure that I
am correct when I say that the sales tax is based upon the factory price less the dealer's discount, and that it is the same all over Canada no matter whether the car is sold retail or wholesale.


The CHAIRMAN:: Shall resolution 4
carry?


Henry Herbert Stevens: No; the minister promised to look up certain matters.


Charles Avery Dunning: In connection with another item, but I think the committee might extend me the courtesy of passing this one, in view of the fact that discussion has been tolerated on another all afternoon.


Henry Herbert Stevens: Surely the time has not
arrived that the minister says he is tolerating a discussion.


Charles Avery Dunning: No, I said that discussion has been tolerated.


Henry Herbert Stevens: Well, members of this house have rights, whether they sit on one side of Mr. Speaker or the other. The trouble with the minister-I am sorry to say this-is that he has persistently refused to see the point some of us have been trying to make. I admit that some of my friends in the east think we in the west are a little touchy on this theme, but the long and the short of it is that we have been trying for the last forty years to build up industries in western Canada and we are under a severe handicap right along the line, the chief one of course being the freight. But as long as the principle disclosed here to-day applies in the application of the sales tax, a handicap is imposed upon anyone who attempts manufacturing in western Canada as compared with those in the east, a handicap -that is not incidental to either cost of machinery or transportation except in so far as the tax is applied on the cost of transportation in Canada.
I would like for a moment to get away from automobiles as an illustration. Let us take, for instance, farm implements; it has been amazing to me that the farm implement industry has not developed in western Canada.

Now we have some idea of the additional cost imposed by taxation, and often a very few cents will either make or destroy an industry-


Mr. GOLDING:: Is there a sales tax on
agricultural implements?


Henry Herbert Stevens: I think there is; I am
not sure of that. In any case-


Frederick George Sanderson: With all due respect
to the hon. member I think he is out of order in discussing farm implements.


Henry Herbert Stevens: Well, I think perhaps
technically you are correct, -Mr. Chairman. I said that I took them as an illustration, which is not entirely ruled out in discussion in this house. I was trying to get away from automobiles, about which the minister is a little worried and says that the committee has tolerated the discussion too long.


Charles Avery Dunning: I did not say any such
thing. I said that discussion has been tolerated this afternoon.


Henry Herbert Stevens: Well, I resent the suggestion that we should be described as being tolerated because we presume to discuss this item.


Charles Avery Dunning: I did not describe the
hon. member as being tolerated. My hon. friend is trying to put words into my mouth.


Henry Herbert Stevens: Well, let it pass. At the same time we are not entirely subject to the minister as far as our feelings go.


Charles Avery Dunning: Allow me to have feelings too.


Henry Herbert Stevens: I am coming to this point; there is a thirteen per cent tax disclosed in this resolution, eight per cent sales tax and five per cent excise tax. There is no question that on cars assembled or in process of manufacture in western Canada there are imposed by the parliament sales and excise taxes upon the freight rate that goes into the movement of Canadian parts to the plant in the west. I submit that that is unfair. The finished product from the east may move to the west without any such imposition. We are not suggesting that there should be, but we are suggesting that the principle which applies to the finished product of an eastern factory should apply to the parts that go to a western factory, and that the incidence of sales tax in this instance should be equitable throughout the whole of Canada. Otherwise we impose a perpetual handicap on the development of industry in the western part of the country.

Special War Revenue Act
The minister quoted from a document to which I have not access. He says that it has been laid on the table of the house, but one copy among 245 members does not afford a very great opportunity to any member. May I ask the minister if it would be possible for hon. members to have copies of the report-


Charles Avery Dunning: Would the hon. member be gracious enough to permit me to answer him?


Henry Herbert Stevens: Most certainly.


Charles Avery Dunning: If my memory serves me correctly, the report comprises twenty-one volumes.


Henry Herbert Stevens: If one had access to those volumes he would perhaps be able to interpret them. The minister's interpretation of the document refers only to a car built in eastern Canada and could have no connection with plants that may be in existence in western Canada. It certainly does not apply to the Regina plant, which has had an unhappy record. There are two reasons why the plant in Regina should not have been successful; ha-rd times was one of them and handicaps in assembling and manufacturing was another. There is a distinct handicap for any factory in western Canada, and the question regarding the Ford plant at Winnipeg has not been answered. That was the matter which brought me to my feet. A while ago we were assured that we would have an answer on the point, but we have not yet received it.


Charles Avery Dunning: You will get it.


Henry Herbert Stevens: I protest against the application of the sales tax in an unequitable way throughout Canada.


Some hon. MEMBERS:: Carried.


Charles Avery Dunning: I do not intend to say "carried," because evidently some hon. members of the committee do not take my word when I say that the information will be produced fully, before the item is passed. It is only five minutes to six, and I suggest that we continue the discussion until six o'clock. I believe I indicated to the committee that my natural desire to pass the resolution had nothing to do with my willingness to bring down any further information, if there is any more, than is here contained. In asking that the item be passed I trust the committee did not deem me guilty of any discourtesy towards it. If I have shown a little impatience, I regret it. But I trust hon. members who are somewhat vigorous in their own speech will accord me the same privilege as they claim 12739-186
for themselves. After all, a minister of the crown has no less rights in discussion than any other hon. member. I claim no more, but I desire to take advantage of all the liberties enjoyed by my colleagues on the committee.
Paragraph 4 agreed to.
At six o'clock the committee took recess.
After Recess
The committee resumed at eight o'clock.


Charles Avery Dunning: If the chairman will call paragraph number 5, the Minister of National Revenue (Mr. Ilsley) will be permitted to give the information which he undertook to give before six o'clock.


Frederick George Sanderson: We will call paragraph 5, Special War Revenue Act:
5. That schedule II to the said act, aa enacted by section seventeen of chapter forty-two of the statutes of 1934, be amended by adding to paragraph (iii) thereof the following:-
Provided, also, that tax imposed under paragraph (iii) shall not apply to the goods mentioned therein, when sold to or immported by manufacturers of automobiles or chassis under the following conditions:

(a)	If less than ten thousand automobiles or chassis are manufactured or produced per annum and at least fifty per centum of the factory cost of manufacturing or producing them, exclusive of duties and other taxes, is incurred in the British empire;
(b)	If ten thousand automobiles or chassis or more are manufactured or produced per annum and at least sixty per centum of the factory cost of manufacturing or producing them, exclusive of duties and other taxes, is incurred in the British empire;
Provided, however, that effective April 1, 1938, the words "sixty-five" shall be substituted for the word "sixty" in this paragraph.


James Lorimer Ilsley: This afternoon certain questions were directed to the Minister of Finance (Mr. Dunning) and myself with regard to the payment of additional sales tax by reason of the fact that certain automobiles were assembled in Winnipeg instead of at Windsor. The particular automobile under discussion was the [Ford. Information was given to the committee from a report of the tariff board to the effect that the sales tax on automobiles was uniform throughout the country, the model in question being the Ford de luxe Tudor, upon which the tax was $34.70 That information is correct. Some hon. members raised the question as to how such tax was reckoned, and one took six per cent on $793 which gave him a figure larger than $34.70. In order that there may be no doubt

Special War Revenue Act

as to how this figure is arrived at, I would inform the committee that $793 is the published or list price of the automobile. In order to arrive at the price at the factory door certain discounts must be considered. There is a dealer's discount of 211 per cent as well as a further discount of five per cent which is of long standing and which, I believe, was originally a distributor's discount. Recently this discount has been discontinued as it has not been thought to be justified by the conditions of distribution in the automobile business. If 26i per cent is taken off $793 and the tax of six per cent reckoned on what is arrived at, the tax will be shown as $34.70. I desire to make it plain that that is the sales tax which is passed on to the consumer in every part of Canada, whether he resides in Halifax, Montreal, Windsor, Winnipeg or Vancouver. There is no discrimination against any section of Canada or any city of Canada. There is no additional sales tax passed on to the consumer by reason of the fact that Fords are assembled in Winnipeg rather than being manufactured only in Windsor, Ontario.
There is one other point I should like to make clear. I tried to explain this afternoon that the sales price upon which the sales tax is computed is the price of a manufactured article at the factory door when the manufacturing operation is completed. I think I stated also that we have to decide whether an operation is merely an assembling one which the manufacturer carries on for certain profit or convenience, or whether it is a further manufacturing operation. I stated to the committee that I would ascertain whether we regarded the operation carried on by Ford at Winnipeg as an assembling or manufacturing operation. I now state to the committee that such operation is regarded as an assembling operation, and not as a manufacturing one. I think that answers the question.


Richard Bedford Bennett: The minister said six per cent; did he mean six or eight per cent?


James Lorimer Ilsley: I was referring to what had happened up to the present. Of course, from now on the sales tax will be eight per cent and there will be the other taxes provided for in this resolution.


Joseph James Duffus: What applies to Ford cars, obviously applies to all others. The opinion which I have obtained since the recess is substantially the same as that given by the minister. There is what is known as the factory list cost and then there is what is known as the dealer's list, which is also known

as the billing cost. Upon that sum the sales tax is based. While I am on my feet I should like to point out that the argument made by the hon. member for Wood Mountain (Mr. Donnelly) is not correct. He stated that a dealer is not penalized for taking in a used car. The fact is that a dealer may have sold a new car in December for delivery in May and in the meantime he may have sold the car taken in, in exchange. It is not now possible for him to increase the sales tax on that used car. I claim that we as a parliament should reimburse the dealer for the two per cent sales tax where a sale has actually been made to the ultimate consumer, because it is not possible for him to increase the price accordingly.


Mr. MacKENZIE (Neepawa):: Following up the discussion of this afternoon I have in my hand a letter received from a man in Manitoba in which he states that when he went out to buy a car he found the price increased by $28 because of the difference in sales tax. Would it be possible for this increase to amount to as much as that?


Richard Bedford Bennett: What was the price of the car?


Frederick Donald MacKenzie: No information was given. I know this man was driving a Pontiac last year.


Richard Bedford Bennett: That increase would be correct on a $1,400 car.


James Lorimer Ilsley: It would depend upon the price of the car. If the hon. gentleman would like to communicate with me further and give me the name of the car and the price asked, I can go into the matter and tell him whether or not the statements made by the dealer are correct.


Gerald Grattan McGeer: I understand the sales tax is the same all over, but the reason it is the same is because the assembling plants in Winnipeg or Regina absorb it. This extra cost imposed upon these assembling plants because of the sales tax may be the reason for closing down the assembling plant in Vancouver. It is not so much the actual difference in the price of a car in the west; it is a question whether the imposition of a sales tax on a freight rate on parts going out to be assembled at these western points may in itself be sufficient to prevent the development of assembly plants there. All I would say to the minister is that there seems to me to be an opportunity to investigate possibly some field of administration to see whether an adjustment could be made so that there

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would be no discrimination against manufacturing or assembling at western points. It may not be a matter that can be worked out, but I suggest that it may be worthy of consideration in the administrative program.


James J. Donnelly: We have just heard
how the price of a car has been increased by $28, due to the sales tax, it is said. Such an increase on the wholesale price of a car would mean that the retail price to the consumer would be around $1,800 or $1,900 by the time the car got to Manitoba, paid freight out there, and the agent's commission. If that increase is due to the sales tax alone, it is collected on the retail price which the consumer pays.


James Lorimer Ilsley: I have no knowledge that
that increase is due to the sales tax alone.


Mr. RYAN:: This afternoon the hon. member for Vancouver-Burrard (Mr. McGeer) made a statement that was not quite correct. He stated that the Maritime Freight Rates Act was passed to compensate for geographical difficulties. I cannot discuss that question on this resolution, but I will give a report of the Duncan commission to my hon. friend, and after he has read it I am sure that with his usual fairness he will be glad to withdraw that statement.


Gerald Grattan McGeer: I have read the Duncan
commission's report through, and-


Frederick George Sanderson: Order.


[Stage Direction]
Paragraph agreed to.
On paragraph 5:
5. That schedule II to the said act, as enacted by section seventeen of chapter forty-two of the statutes of 1934, be amended by adding to paragraph (iii) thereof the following:-
Provided, also, that the tax imposed under paragraph (iii) shall not apply to the goods mentioned therein, when sold to or imported by manufacturers of automobiles or chassis under the following conditions:-
(a)	If less than ten thousand automobiles or chassis are manufactured or produced per annum and at least fifty per centum of the factory cost of manufacturing or producing them, exclusive of duties and other taxes, is incurred in the British empire;
(b)	If ten thousand automobiles or chassis or more are manufactured or produced per annum and at least sixty per centum of the factory cost of manufacturing or producing them, exclusive of duties and other taxes, is incurred in the British empire;
Provided, however, that effective April 1, 1938. the words "sixty-five" shall be substituted for the word "sixty" in this paragraph.
12739-186J
Charles Avery Dunning: A word of explanation.
The tariff board in reporting on the whole automobile industry stated in its report bearing upon this matter:
The board is of the opinion that the incentive for content supplied by the provisions of tariff item 438(c) could reasonably be supplemented by exempting from the tire tax such tires and tubes as are used for original equipment of automobiles produced by manufacturers, and having a British empire content as stipulated in the schedule.
That opinion the government concurs in, hence the paragraph now before the committee.


Richard Bedford Bennett: What I find a little difficult to understand-doubtless the minister will make it clear to me-is that first of all we are imposing a tax under .paragraph (iii), section 17 of chapter 42 of the statutes of 1934, and then we say that the tax shall not be levied provided that the manufacturer makes less than 10,000 automobiles. If he makes more, then there is a different consideration.


Charles Avery Dunning: There is a proviso.


Richard Bedford Bennett: Yes.
Provided, also, that the tax imposed under paragraph (iii) shall not apply to the goods mentioned therein, when sold to or imported by manufacturers of automobiles or chassis-under the following conditions.
If he makes less than 10,000, and at least 59 per cent of the factory cost of manufacturing, exclusive of duties and other taxes, is incurred in the British empire, he does not pay any tax. If he manufactures more than 10,000 he has to have a sixty per cent content to escape the tax. If he makes 100 automobiles or chassis, then under paragraph (a) he escapes the tax.


Charles Avery Dunning: Provided he has a fifty per cent British empire content.


Richard Bedford Bennett: Is not that exactly the opposite of what you want to do? You want to encourage the production of automobiles in this country, and the utilization of our own parts, giving employment to our parts-producing companies, but you say that they are exempt if they make less than 10,000 automobiles.


Charles Avery Dunning: Provided-


Richard Bedford Bennett: Provided that fifty per cent of the content comes from the British empire. Well, that has been so for a long time.


Charles Avery Dunning: This is giving the small automobile manufacturers, provided they come
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up to the fifty per cent British empire content requirement, the same chance as the larger manufacturer would have. That is the idea of the board in making this recommendation. While the verbiage appears at first glance to be a little peculiar, I think when my right hon. friend examines it more closely he will find it carries out this idea.


Mr. COLDWELL:: Have the 10,000 automobiles or chassis to be of one particular type or make or can they consist of all types made by one company?


Charles Avery Dunning: All types made by a single manufacturer provided the content requirement is lived up to.


Major James William Coldwell: If the government is giving a rebate of duty on account of tires of British content, should1 not that decrease the price of the automobile, if the tire on the original equipment is worth less on account of the reduction in duty? We hear so many complaints of the increased price of automobiles, and my observation has been that the price of tires is considerably less in the United States than in Canada.


Charles Avery Dunning: We are not dealing at present with the tariff item. The tax which is referred to in this paragraph is a tax of two *cents per pound by weight which tax now *exists on tires, and three cents per pound on Inner tubes. This is a cost reducing factor, taking it off under the conditions set out in the resolution. But as has been pointed out, there are other cost increasing factors. While it is perhaps premature to mention it, and while I do not desire to precipitate a debate on the tariff relating to automobiles, which we shall reach later, I should point out that the examination of the tariff board indicated that it would take some little time for the cost reducing factors to be really fully operative, but I will come to that later.


Richard Bedford Bennett: Is there any tax other than the tire tax covered by (iii) of schedule II?


Charles Avery Dunning: No. Paragraph (iii) of schedule II relates entirely to the tire tax.


Mr BENNETT:: The tire tax applied only in case of imported tires, did it not?


Charles Avery Dunning: All tires.


Richard Bedford Bennett: I was not quite sure about that.
Paragraph 5 agreed to.

On paragraph 6:
6. That schedule III to the said act, being the list of articles exempted from the consumption or sales tax as enacted by section eighteen of chapter forty-two of the statutes of 1934 and amended by section seven of chapter thirty-three of the statutes of 1935, be further amended by adding to the said schedule the following:

Materials, not to include lubricating or fuel oils or plant equipment, consumed in the process of the manufacture or production of taxable goods;
Crushed stone or crushed gravel to be used exclusively in the building or maintenance of provincial, county or township roads;
Printing paper and printing ink for use exclusively in producing quarterly, bi-monthly, monthly and semi-monthly magazines and weekly literary papers unbound;
Liver extract for use exclusively in the treatment of anaemia;
Goods enumerated in customs tariff items 695b and 696a.


John Ritchie MacNicol: Take them up one at
a time, Mr. Chairman.


Charles Avery Dunning: I suggest, Mr. Chairman, that each one be taken separately to facilitate discussion.
6. That schedule III to the said act, being the list of articles exempted from the consumption or sales tax, as enacted by section eighteen of chapter forty-two of the statutes of 1934 and amended by section seven of chapter thirty-three of the statutes of 1935, be further amended by adding to the said schedule the following:-
Materials, not to include lubricating or fuel oils or plant equipment, consumed in the process of the manufacture or production of taxable goods.


Charles Avery Dunning: This relates to an old
bone of contention which, I know, will be remembered by many members of the committee. The consumable materials include driers, solvents and similar items which are used up completely in the process of manufacture of certain articles, but which, because they do not appear physically in the finished product, in the past have been taxable. By the granting of this exemption the administration of the sales tax will be simplified, and some double taxation will also be eliminated.


Richard Bedford Bennett: Yes, but this covers all
materials. It reads, excepting lubricating or fuel oils.


Charles Avery Dunning: "Consumed in the process of the manufacture or production of taxable goods." The department has considered this very carefully from the administrative standpoint, and is of opinion that consumable goods as defined here are now well enough understood, so that the clause can be administered in the spirit of the explanation I have just given.

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John Ritchie MacNicol: Take the case of castiron boilers made in a number of cities and towns in Canada. The boiler itself when complete will be subject to the sales tax?


Charles Avery Dunning: That is right.


John Ritchie MacNicol: Do I understand from
this that all individual materials like cast-iron, crushed stone, sand, and everything else that enters into the manufacture, are exempt?
Mr, DUNNING:	Cast-iron would be, of
course, as a raw material. As to what would be considered consumable goods in that case it is pretty hard for me to say. There are thousands of items involved. Whether the sand, for instance, used in the foundry would be a consumable material might be a question.
I assume it would not. It is only materials that are completely consumed in the process of manufacture.


John Ritchie MacNicol: But the sand would be
consumed in due course in the process of manufacture. After it has been used frequently it is no longer of any value.


Richard Bedford Bennett: It is not consumed,
though.	.


Charles Avery Dunning: There is a great deal of
difficulty in distinguishing between this item of consumable materials and another item which is administered, called non-permanent equipment. I am advised that the sand would fall into the class of non-permanent equipment. It is still there when you get through.


John Ritchie MacNicol: And the limestone that
is used in the melting of the iron; it would be consumed.


Charles Avery Dunning: The iron in question,
being a raw material, entering into the finished article, would be manufactured under licence for that purpose, and would not be taxable.


[Stage Direction]
Item agreed to.
Crushed stone or crushed gravel to be used exclusively in the building or maintenance of provincial, county or township roads.
Mr. GREEN:: May I ask the minister why cities and municipalities are not given the benefit of this exemption? I take it that the idea is to promote the building and maintenance of roads, and surely cities and towns are entitled to just as much consideration as are the townships and counties of a province. This is particularly important in British Columbia, because we have no county or township roads there.


Charles Avery Dunning: In connection with this item, my hon. friend from Vancouver-Bur-rard (Mr. McGeer) took it up with me, and
I inquired into the situation. As regards the class of municipalities mentioned by my hon. friend for Vancouver South (Mr. Green), such municipalities already have exemption with respect to their own plants; that is to say, where they are in the business of manufacturing crushed gravel they are not subject to sales tax.


Howard Charles Green: Suppose they have no plant?


Charles Avery Dunning: Supposing they have no plant, they are, and under this amendment as it now stands, would continue to be. There is some administrative difficulty in connection with the application of the sales tax to this class of commodity when used by public bodies. For instance, in the past provincial governments have not been taxed; there is a reason for that, of course. But on the other hand, if a contractor is working for a provincial government, and purchases gravel, it is necessary to apply the tax, and the same is true with respect to the other smaller as well as the larger municipal bodies. It is now thought that the tax can be administered with an exemption to the municipality and the county and the provincial government, even though contractors are doing the work. It sometimes happens that a purchase is made by the contractor for gravel from a pit owned, for instance, by the municipality. That, again, creates an administrative difficulty, and the Department of National Revenue believes that, having regard to all the factors, if the big city municipalities are exempt, and the smaller municipalities, counties and so forth are exempted under this new provision, it will be administrable and will bring a certain amount of needed relief in communities such as those referred to by my hon. friend. To go further: I understand the hon. member for Vancouver-Burrard will be asking now, what he has asked me privately, and what I think will be supported by the hon. member for Vancouver South, namely, to provide for municipalities other than those described in the amendment, the amendment being:
Crushed stone or crushed gravel to be used exclusively in the building or maintenance of provincial, county or township roads.
The other municipalities having their own crushing plants are already covered. The desire will be, doubtless, to have the exemption extended to include all gravel or crushed stone used by a municipality for the purpose of its roads or streets, regardless of whether the municipality has its owm plant or whether it is operating through a contractor. The only objection to that is the difficulty of administrative dealing with contractors of a
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municipality in relation to such matters. I have prepared an amendment, but really I have no very strong views on it; the administrative department is much more concerned than I am from the standpoint of revenue. The amendment is to substitute "crushed stone or crushed gravel purchased, produced or manufactured by any municipality exclusively for use in building and maintaining its roads or sidewalks, and not for sale." I should like an expression of view from the committee on that. The revenue involved is not considerable, but there is the fairly difficult problem of administration if the provision is widened to this extent.


Howard Charles Green: In British Columbia a large
majority of the people live in municipalities or in cities, and it would be rank discrimination if they were not given that exemption. Is it the idea of the amendment that all gravel and stone used on municipal roads shall be exempt from sales tax?


Charles Avery Dunning: The word "purchased"
involves just that.


Gerald Grattan McGeer: I am trying to draw attention to the fact that an exemption has been extended on gravel used on provincial, county and township highways. I do not think there can be very much more difficulty in administering that tax if it is applied to a municipality than there will be in connection with a township. I notice that a number of townships in the east include places that normally would be municipalities. In the part of Ontario from which we have just returned there is a town called Kirkland Lake with a population of 18,000 which is within a township. If you are going to exempt what are obviously cities located within townships you [DOT]can hardly be confronted with any administrative difficulties in a simple municipality, and you will straighten out this discrimination. I do not think it makes a great deal of difference to the municipalities, but as a matter of discrimination I think this amendment should be accepted.


James Lorimer Ilsley: I would move the amendment to which the Minister of Finance referred.


Charles Avery Dunning: This is not an amendment to the section before the committee but to the other provision already in the law with relation to municipalities.


Frederick George Sanderson: The amendment reads:
Resolved, that it is expedient to amend the resolution proposing amendments to the Special War Revenue Act introduced on the first day of May, one thousand nine hundred and thirtytMr. Dunning.]
six, to provide that schedule three to the said act shall be amended by striking out the item reading as follows:
Crushed stone produced or manufactured by any municipality exclusively for use in building or maintaining its roads or sidewalks, and not for sale,
And substituting therefor the following:
Crushed stone or crushed gravel purchased, produced or manufactured by any municipality exclusively for use in building or maintaining its roads or side-walks, and not for sale.


Richard Bedford Bennett: Cannot the minister
accomplish his purpose by merely taking the item that is before the committee and adding a single word to make it read:
Crushed stone or crushed gravel to be used exclusively in the building or maintenance of provincial, municipal, county or township roads;


Charles Avery Dunning: No, because there is
already an item which requires to be repealed.


Richard Bedford Bennett: Then just rescind that
provision. This amendment, as it stands, involves the consideration of many factors which I do not think should enter into this discussion. If you just add the word "municipal" after the word "provincial" and repeal the provision concerning their own plants you have the matter settled.


Gerald Grattan McGeer: All that would be involved now would be this: If a municipality made a contract which involved the use of crushed stone, under this item the municipality would have to buy that stone as a separate item in the contract, in order to avoid payment of the sales tax. If a contractor bought it and used it on a municipal road it would not be exempt under the proposed amendment, but if a contractor buys gravel to carry out a contract made with a township, a county or a province he is not required to pay the sales tax. I think the suggestion of the right hon. leader of the opposition is the happier one, because it would completely eliminate all suggestion of discrimination.


Charles Avery Dunning: Of course the distinction is the one to which the hon. member for Vancouver-Burrard draws attention. Under the amendment as proposed the municipality would have to be the purchaser of the gravel. From an administrative point of view this would be much easier to administer if we had an exemption from sales tax on gravel purchased or produced by the municipality, instead of trying to dig out the actual gravel factor involved in a contract with a city. We admit at once that with respect to these smaller towns it is very difficult to apply the provision in the same way, and that is why we are asking for two separate sections. Surely it will not be a hardship on the larger muni-

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cipality to buy its own gravel as a separate item in order that there may be the greatest ease in the administration of the sales tax rather than to have in each contract a separate item which will show the price of the gravel. Really that is the object of handling the matter in this way.


Gerald Grattan McGeer: There is the danger that a contractor supplying gravel to a city and at the same time supplying gravel for the construction of a building, which latter gravel would not be exempt, may not keep his accounts so accurately as to be able to separate the gravel, and may chisel on one or the other contract, so that he would not get the benefit of this exemption in his public business. Speaking with some knowledge of general administration in cities, I do not think there will be very much difficulty in meeting the situation where the amount of gravel to be used in the contract is sufficient to make the sales tax a factor, and I do not see any difficulty in meeting that situation.


Henry Herbert Stevens: May I point out to the minister that the only difficulty arises in this way, that in some provinces, notably British Columbia, they have no counties or townships; they use the term "municipalities." We have dozens of districts there which are termed "municipalities," but which are exactly the same as counties in Ontario or other eastern provinces.


Charles Avery Dunning: They are called "municipalities," and the new amendment will cover them.


Henry Herbert Stevens: But why should they not be on exactly the same basis as a county? Perhaps we ought to call them "counties," but we do not. They are exactly the same as the county of Frontenac, the county of Carleton or any other county; they have just the same organization, but they are called "municipalities." The minister will please bear in mind that this does not affect only the large cities. Take the numerous small municipalities, as we call them, or what would be called towns in Ontario-


Charles Avery Dunning: They would be exempt all the same; all they would have to do would be to purchase the gravel themselves, and they would be exempt.


Henry Herbert Stevens: Why should they have to purchase the gravel themselves while the county does not have to do so? Why could you not simply say "provincial, municipal, county or township roads," and this would cover the whole business.


Charles Avery Dunning: But you do not get away from the administrative difficulty of which I spoke.


Richard Bedford Bennett: If the minister will look at his amendment I am sure he will realize that it does not accomplish the purpose he has in mind. He brings into this committee a resolution which exempts from all sales tax crushed stone or gravel to be used exclusively in the building or maintenance of provincial, county or township roads, wholly irrespective of by whom it may be purchased. That is the position. Now, what is suggested is that we add the word "municipality," and if there is difficulty about administration-


Charles Avery Dunning: With but one qualification.


Richard Bedford Bennett: No; there cannot be even that. The government proposes to exempt from taxation any crushed stone or gravel used exclusively in the building or maintenance of provincial, county or township roads. Now we add a fourth class: municipal. As far as administration is concerned the proposed amendment complicates the matter. It means that unless they are in the business themselves they do not get the exemption.


Charles Avery Dunning: No; in that case they merely require to purchase their gravel.


Richard Bedford Bennett: But they must sell it to the contractor. Suppose, as the hon. member for Vaneouver-Burrard (Mr. McGeer) says, they call for someone to repair half a mile of street. He puts in his tender. Of course he adds the sales tax.


Charles Avery Dunning: No; they call for tenders less the gravel, which they supply themselves.


Richard Bedford Bennett: Then, why say with respect to township, county and provincial roads that there is not going to be any trouble, and that there is because you add municipal? If it is good for three it must be all right for the fourth.


Gerald Grattan McGeer: Where could there be any difficulty in administering that tax where you exempt the provincial authority? I shall give a concrete example. We have about three large crushed stone and gravel companies in British Columbia. They supply gravel to one province, to the unorganized territories and to the cities, and in addition the same companies supply the bulk of the gravel used in all buildings. There could not be anything more comprehensive than the activity of the General Gravel Company. They are in every line of business. If the
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same concern presents an administrative difficulty in the lesser activity of supplying gravel to a municipal road it cannot possibly be an administrative problem as great as that involved in its activity on the general provincial account. So there can be no justification for continuing the discrimination on the ground of administrative difficulty. It is something that is not of great importance, and if the suggestion of the leader of the opposition were accepted and the word."municipal" added and the other provision exempted, that would bring everything on the same basis.


Charles Avery Dunning: All right; I at any rate am convinced, and as I am not the administrative department I can the more easily accede to the proposal. That would involve an amendment to the printed resolution inserting the word "municipal" after the word "county."


Richard Bedford Bennett: The amendment as it stands would be all right down to the substituted part.


Charles Avery Dunning: The printed copy would then read:
Crushed stone or crushed gravel to be used exclusively in the building or maintenance of provincial, county, municipal or township roads.
If that is agreeable, the proposed amendment being withdrawn I will ask my colleague now to move:
That the item reading as follows in the existing law be now struck out:
Crushed stone produced or manufactured by any municipality exclusively for use in building or maintaining its roads or sidewalks and not for sale.
That would be entirely unnecessary after the insertion of the word "municipal."


John Ritchie MacNicol: Would this item include stone and gravel used in the construction of street railways? For instance, in Toronto the Toronto Transportation Commission, I understand, builds the roadways and lays the tracks but does so at the expense of the city. Would this include gravel and stone used in that kind of work?


Charles Avery Dunning: If it is used in the building or maintenance of a provincial, county, municipal or township road it would be exempt. The item does not mention railways but I do not anticipate that there would be any difficulty. It would be difficult for the department to claim that that

part of the gravel which was under the street car tracks was taxable while the rest was not. As a practical matter I have no doubt about it.


Richard Bedford Bennett: What in practice is the
fact now? Do they collect sales tax on that?


Charles Avery Dunning: In practice such municipalities come under the other section.


Richard Bedford Bennett: I understood as an
administrative matter that where contractors are working on some of our roads it was ruled by the department that they were not called upon to pay this tax, and in other cases they were. I want to know what the practice of the department is.


James Lorimer Ilsley: Up to the present, if a
contractor purchased the stone it was taxable, as in such cases it would not be sold to the province.


Richard Bedford Bennett: Suppose he used it on
a provincial road, does he pay tax?


James Lorimer Ilsley: Legally he was taxable.


Richard Bedford Bennett: Some, I think, escaped.


James Lorimer Ilsley: There are some border line cases with which I am familiar.


Charles Avery Dunning: There will not be any
under the amendment.


James Lorimer Ilsley: I see this difficulty under
the amendment. The hon. member for Davenport (Mr. MacNieol) has raised the point whether stone and gravel purchased by a street railway company for use in its railway on a city street is taxable. I should say it was. If there is any administrative trouble about the matter we may have to reconsider it, because it is certainly the intention of the department to collect the tax in such a case. With the amendment first proposed that difficulty could not have arisen because the crushed stone would have to be sold to the municipality or be produced by the municipality before it was exempt.


Frederick George Sanderson: The proposed amendment is:
Resolved, that it is expedient to amend the proposed amendment to the Special War Revenue Act, introduced May 1. 1936, to provide that schedule III of the said act shall be amended by striking out the item reading as follows:-*
Crushed stone produced or manufactured by any municipality exclusively for use in build-in^ or maintaining its roads or sidewalks and not for sale.

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Charles Avery Dunning: That comes out, and the other in the printed resolution goes in.


Richard Bedford Bennett: Quite so.


John Ritchie MacNicol: Would the Minister of
National Revenue give me an explanation of what I am now about to say. As I understand it the Toronto Transportation Commission operates a street railway in the city of Toronto. It built the street railway, and has built the [DOT] roadway.


James Lorimer Ilsley: The city builds the roadway.


John Ritchie MacNicol: No; the street, railway
built the roadway under and adjacent to its tracks, but did it for the city. As the transportation commission is a body operating under the control of the city, I would understand that gravel or sand required in their construction work would be exempt under this amendment. If not, why not?
Mr. ILSLEY': They would not be entitled to exemption, because they are purchasing material for the construction of a railway, not a roadway. The works the hon. member has mentioned do not constitute a highway belonging to the municipality. It is a railway, belonging to the commission.


John Ritchie MacNicol: The railway is owned
by the city, and the lines are on and form part of the highways.


[Stage Direction]
Amendment agreed to.
Item as amended agreed to.
Frederick George Sanderson: We now come to the
item dealing with:
Printing paper and printing ink for use exclusively in producing quarterly, bi-monthly, monthly and semi-monthly magazines and weekly literary papers unbound.


Alan Webster Neill: Reverting to the last item
may I ask if the minister has put in the word "municipal"?


Charles Avery Dunning: Yes.


John Ritchie MacNicol: When I read the item
the chairman has just read I think of the saying about locking the barn door after the horse has been stolen. That does not exactly fit this item; perhaps it would be proper to speak about putting the feed into the barn after the horse has died. In the trade agreement between Canada and the United States the government did crucify the printing industry, so far as the printing of United States magazines in this country is concerned. Some twenty-one American magazines that were printed in the city of Toronto are not now printed in Canada. I went to see two plants only recently, one in my own riding and one
just outside it. One plant had been printing twelve American magazines, six of which have already been discontinued and the remaining six are being carried for a period of six months. The other plant which was printing a number of American magazines had a staff of seventy-three, but is now operating on a staff of forty. In the amendment the government seeks to help, but the help comes too late. To a certain extent the industry has already been killed.


Charles Avery Dunning: No, no.


John Ritchie MacNicol: Well, at least to the
extent I have indicated, and I have mentioned only two plants. I know there are plenty of others. Now those plants are to receive concessions on printing paper and printing ink, but nothing under this item on the machinery required to do the printing. The two plants about which I have spoken had already purchased their machinery, while a third plant about which I know had recently purchased machines from New York, but hoping that the duties would be lowered in the budget they issued instructions not to ship the machines until after the budget was brought down. To their surprise, while the tariff did not go down the sales tax went up, and one machine cost them $160 extra. If the government had taken this action prior to or at the time they entered into an agreement with the United States perhaps the industry would not have been so seriously afflicted. While this may help some new business of the future, it does not help the industries which have already lost the printing of American magazines.


Mr. DEACHMAN:: Does the item include farm magazines? It reads:
... producing quarterly, bi-monthly, monthly and semi-monthly magazines and weekly literary papers unbound.
Does that include farm magazines appearing weekly?


Charles Avery Dunning: Yres, it does.


Robert John Deachman: Would they come under "weekly literary papers unbound"?


Charles Avery Dunning: I do not know whether the hon. member has in mind something beyond that which is in the minds of those of us who have the matter in hand, but certainly the intent of the item is to cover all farm magazines, so far as we know anything about them.


Robert John Deachman: I am satisfied about that. On a strict reading I could not see that the item included the publications I have
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mentioned, but I am satisfied with the minister's explanation. I am not trying to go beyond the terms of the item, but I wished to know if those magazines were included within its scope.


Charles Avery Dunning: Yes.


Richard Bedford Bennett: Of course to me this is most iniquitous. In all the resolutions I cannot conceive of anything quite as bad. Confronted with a situation that admits into this country hundreds of thousands of American magazines of all types and kinds we are now stating that we are going to help the domestic magazines by giving them freedom from excise tax and freedom from a sales tax on ink. Then we turn to the tariff and say that we are going to make the Canadian people pay half the rebate of duties. In other words all Canadian taxpayers have to reward one set of publishers by paying half the amount of money they pay in, because there is a rebate of fifty per cent of the tax paid.
It is well known that before 1930 one publisher was buying his magazine paper from the United States. He paid a duty on that paper, and received a fifty per cent rebate, which we abolished.


Charles Avery Dunning: Eighty per cent, was it not?


Richard Bedford Bennett: Eighty per cent, was it? I thought it was reduced to fifty per cent. Now, in view of what has transpired under the Canada-United States trade agreement we have all these magazines coming into Canada and making a desperate effort to get circulation in this country. Despite what has been said, we get nothing by way of revenue on advertising. An advertising charge in the way of taxation is nothing new; it is a customary procedure in many countries. Some of them make a flat advertising tax. We are losing half a million dollars, to begin with, which is a substantial sum of money.
We are now going further, and we say that we are going to relieve a certain type of publication, not the daily newspaper on its printing paper, and not the daily newspaper on its printing ink. We are going invidiously to pick out certain classes, and they are those who use the paper thus bought exclusively in the production of quarterly, bi-monthly, monthly and semi-monthly magazines, and weeekly literary papers unbound. How printing ink would be used on a literary paper bound would be difficult to understand. They might use it at first; I thought the hon. member for Huron North was coming to that

point. I did not hear clearly what he said It strikes me that the item as it reads is not very clear. Does it carry the full rate of eight per cent, or half the rate?


Charles Avery Dunning: The full rate.


Richard Bedford Bennett: We have raised the sales tax by two per cent on all other people who have to do with the production of magazines or papers. But within a selected group we have said that not only have we not raised it but we have taken if off altogether. The weekly newspaper in Canada has a harder row to hoe than has the magazine. I read of a magazine with a circulation of one-quarter of a million and we are now saying to them that if they will import their paper, we will saddle on the Canadian taxpayer fifty per cent of all the money they pay for duty. We say to them that on the ink as well as the printing paper they buy, we will free them from sales tax. A small weekly newspaper in some remote village with a circulation of 1,000 or 1,200 is forced to pay the regular sales tax. I think this is the most unfair discrimination in favour of one select group. Of course it is done because of the propaganda which was carried on throughout the country and with which we are all familiar. After what was done in 1930 I do not think a week passed when I was not attacked in some of these papers, and I suppose I shall continue to be attacked. However that is not a matter of importance. I suppose there will be a corresponding laudation of the government for all that it has done.


Charles Avery Dunning: I shall feel hopeful for that.


Richard Bedford Bennett: The hon. gentleman has taken every means to secure it.


Charles Avery Dunning: I think I am entitled to it.


Richard Bedford Bennett: If they are so ungrateful as to pass the hon. gentleman by, I will be amazed. Is the action the government is taking quite fair? Immediately this budget was announced certain ink producers in the United States began to try to sell their inks in Canada. These inks will be free of sales tax. Item 1060 shows a drawback of fifty per cent on paper of all kinds, when used by the publisher or printer in Canada in the production of periodical publications enjoying second-class mailing privileges. There are also other provisions with regard to ink, but for the moment I cannot turn them up. I protest against this as being most unfair discrimination in favour of a particular publisher.

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Two Canadian paper manufacturers have endeavoured to produce the type of paper required for magazines. One company is the Howard Smith company and the other the Provincial company. Both companies have large mills and they have devoted themselves to the production of this type of paper. As their market in Canada is small, obviously there must be a slight difference between American and Canadian prices, but this is what one would expect. I do not know what this provision may mean to the Provincial mills, but I know they made extensive preparations to supply this paper. When we were considering the matter in 1930 Mr. Howard Smith came here and told the MacLean Company that he would supply their requirements in magazine paper, and I believe he did. This is a better class of paper than that used in newspapers. It is calendered to some extent and has a glossy surface. It has to pass through further manufacturing than the cheaper grades. I am leaving out the question of duty. Instead of reducing the duty by one-half, we are going to allow a rebate of fifty per cent. The Canadian companies were supplying the major part of the MacLean Company's requirements.
It strikes one as being a little odd that these people should not be willing to make some contribution to Canadian development. I am not unconscious of the attacks which will be made upon me in consequence of my saying this, but that will not deter me from doing what I consider to be my plain duty and pointing out exactly what this means. This concession has been obtained by the carrying on of a type of propaganda which, because of its character and extent, has been noteworthy in every part of Canada. It will be recalled that part of this propaganda was the indication of what this publisher had been able to accomplish in twenty-five years. It showed the small lean-to in which he had started twenty-five 3'ears ago and his present magnificent and very valuable plant. If this great accomplishment could be brought about in twenty-five years, surely he cannot complain that the country has treated him so badly. There is only one obvious answer. In my judgment this item will require much explanation to convince the average man that ;t is not clear discrimination against others, especially when it is coupled with the other item which places upon the taxpayers of Canada the sole responsibility of paying half the tax imposed upon importations of paper for the purposes of printing certain types of periodicals.


Frederick George Sanderson: unall the item carry?


Richard Bedford Bennett: I simply say, no.


Mr. CLARKE (Rosedale):: Did I understand the minister aright when he said that the crushed stone and gravel used between the ear tracks on the roadway-


Frederick George Sanderson: I must tell the hon. member that that item has been passed.


Harry Gladstone Clarke: I did not understand that we had passed to the next resolution. We are on paragraph 6 which covers crushed stone and gravel.


Frederick George Sanderson: The crushed stone item has been carried.


Harry Gladstone Clarke: But the whole paragraph has not. I am asking only for information.


Charles Avery Dunning: At the commencement of the discussion we decided to carry each item separately, so I think the ruling of the chair is correct. However, if my hon. friend does not desire to reopen the discussion but wants only information, I think that can be given.


Harry Gladstone Clarke: The portion between the two tracks of a street railway is used by the public and therefore I contend that the crushed stone or gravel used thereon should be exempt from the tax.


James Lorimer Ilsley: I have given my opinion on that point. I am free to confess that the matter presents some difficulty and we may have to give it further consideration. My opinion, however, is as already stated to the colleague of the hon. gentleman.


[Stage Direction]
Item agreed to.
Liver extract for use exclusively in the treatment of anaemia.
Richard Bedford Bennett: Other goods of the same type or class receive the same treatment, I believe?


Charles Avery Dunning: This is in addition to the list.


Mr. McNIVEN (Regina):: Would the
minister give favourable consideration to including in this item the medicine known as glycine? This medicine is imported from the United States, the only place in the world where it is manufactured. It is used for the treatment of muscular dystrophy, a disease which afflicts young children. A number of children throughout Canada are suffering from this disease. There is one in the city of Regina; there are four in the province of Saskatchewan; there is one I know of in the province of Manitoba, and I have just received a newspaper clipping which indicates that there are twenty-four in the city of Toronto. The disease is incurable and it
Special War Revenue Act

attacks the muscles of young children. They are quickly converted into wheel-chair patients; they soon become bed patients and finally pass away.
This treatment or medicine, glycine, was originally controlled by one concern in the United States and the price was $50 per pound, but the Mayo clinic got control of it and reduced the price to $4.50 per pound. The treatment requires one pound per month, costing $4.50, and it is subject to a duty of thirty-five per cent and sales tax of eight per cent. In view of the fact that recovery is not possible, and that when a child is afflicted it requires treatment over a long period of years, which means a steady drain upon the financial resources of the parents,
I think we might well include this medicine in the same category as liver extract, and the minister might agree to an amendment for its free admission and its exemption from sales tax when imported for the treatment of muscular dystrophy. I have already given much of this information to the minister, but I had not communicated to him the subject matter of the newspaper item which I received this morning. It is a statement from Doctor Barraclough, of the Hospital for Sick Children, Toronto, that the disease is incurable. The man in Regina whose child was afflicted wrote to Doctor Barraclough in the hope that there might be some further relief, but Doctor Barraclough's reply was that the disease was incurable, and that this medicine, glycine, afforded some relief. I would be very glad indeed if the minister under these circumstances would include glycine, giving it as favourable consideration as liver extract.


Mr. LEADER:: In support of what the
hon. member for Regina has just said, we have in Portage la Prairie a case of a child who is afflicted with this disease and has been declared incurable. The only source from which this medicine can be procured-I forget the name of it but the minister will perhaps remember-is from Rochester, Minnesota, from the Mayo brothers. I expect it is the same medicine that my hon. friend from Regina city mentioned a moment ago. I have already taken the matter up with the minister, and while he has not given me an entirely satisfactory answer I trust he will reconsider my request coming as it does now in conjunction with that of the hon. member for Regina City, and exempt this medicine at least from the application of the sales tax, if not the duty.


Charles Avery Dunning: I think the circumstances related by the two hon. members who have just spoken are such as to arouse

the sympathy of the committee to consider placing this medicine glycine on the list of articles exempted from sales tax. I may tell my hon. friend from Regina city that I have simply had no time or opportunity to check up thoroughly on the matter since he brought it to my attention. In connection with matters involving the use of a name such as this it is desired to check up very carefully. If, as I think will probably be the case, the committee would be sympathetic to doing something of the kind suggested, perhaps it might meet the case if it were understood that between now and the time the bill covering these matters comes up, we would endeavour to get all the particulars about this medicine, and if everything my hon. friends say is confirmed, we can include it in the bill. It would not be quite regular, but we could amend the bill in that manner.


Richard Bedford Bennett: Amend the bill.


Charles Avery Dunning: That, I think, is more
desirable than making the amendment here simply by inserting a name. I should like to make very sure about the matter. I would ask my hon. friend the Minister of National Health to give me his opinion on the question, but I do not believe he has ever heard of the medicine. I should, however, appreciate any scientific assistance that he can give me in the matter if it would facilitate our doing something along the line suggested.


Mr. POWER:: To-morrow.


Donald Alexander McNiven: I thank the minister very much. There is another matter to which I should like to direct the attention of the minister. I am informed that a device which is used for the extermination of gophers is exempt from this particular tax, but that the ingredients of the gopher poison which is used are subject to the eight per cent sales tax. The ingredients are strychnine and certain other commodities, all subject to the sales tax, while the completed preparation is exempt. Now, the gopher is a real western menace, and municipalities throughout the western provinces annually spend many hundreds of thousands of dollars in the extermination of the gopher. We are very anxious indeed that when the western crop does come it shall be preserved from the ravages of the gopher, and it would facilitate matters very much and be of real assistance to the municipalities if the ingredients going into the manufacture of this gopher poison could be exempted from the provisions of Ihe sales tax.

Special War Revenue Act


James Lorimer Ilsley: There is one very serious objection to granting the hon. gentleman's request; that is that the ingredients of this gopher poison are articles which are used for a great many other purposes, and administratively it would be very difficult to follow them. It would hardly be practicable to exempt them from the sales tax when used for this particular purpose, and I assume that all my hon. friend is requesting is that these ingredients be exempted from the sales tax when used in the manufacture of gopher poison. The fact that they can be used for so many other purposes would make a provision of that kind almost impossible to administer.


[Stage Direction]
Item agreed to.
Goods enumerated in customs tariff items 695b and 696a.
John Ritchie MacNicol: What about item 695b?


Charles Avery Dunning: Item 695b covers handmade drawings, or sketches or designs, but not including patterns, viz:	drawings,
sketches or designs of wearing apparel, including boots and shoes, wall or floor coverings and table fabrics, wall or floor coverings and textile fabrics when imported in single copies of such drawing, sketch or design for use in the manufacture of wearing apparel, boots or shoes, table fabrics, wall or floor coverings or of patterns. The inclusion of this item in the list of exemptions is designed to simplify administration. The revenue is unimportant and is not worth the trouble. Item 696a covers educational moving picture films. Provision is currently being made in the customs tariff, and in the schedule of exemptions from the three per cent special tax, to have this film admitted to Canada free, incidental to an international convention in which it is expected that Canada will participate. While the convention does not specifically call for exemption from sales tax, the item is being included as appropriate in view of the fact that educational supplies such as textbooks and certain phonograph records at present enjoy exemption from sales tax.


Richard Bedford Bennett: When the bill is before the committee I should like the minister to give me an indication of the amount that is involved in this paragraph 6.


Charles Avery Dunning: I think I can give that approximately now.


Richard Bedford Bennett: I do not ask for it now. It would be satisfactory when the bill is before us.


Charles Avery Dunning: I see I have only some of the information available. I will give it when the bill is in committee.


[Stage Direction]
Item agreed to.
Charles Avery Dunning: I have a rather important amendment, Mr. Chairman; it will read:
Resolved, that it is expedient to amend paragraph 6 of the resolution, proposing amendments to the Special War Revenue Act, to provide that schedule III of the said act shall be amended by striking out the items reading as follows:	lard, when produced in
Canada; salt, when manufactured or produced in Canada; hops, when produced in Canada; and substituting therefor the following: lard, salt, hops.
At the present time, in connection with these three items, a discrimination exists in the levying of sales tax on imported salt when none is levied upon salt produced in Canada. The same is true with regard to lard and hops. The sales tax in these three cases becomes in fact really tariff protection, because it is levied upon the imported article and not upon the home produced article. It is thought desirable to eliminate a condition of that kind.


Richard Bedford Bennett: The minister has not overlooked what he has done in the tariff with respect to hops.


Charles Avery Dunning: No, I have not overlooked that at all. It does not make any difference.


Richard Bedford Bennett: Does this mean an eight per cent tax on hops, or is it four?


Charles Avery Dunning: With regard to the hops' item I might point out that the same practical result does not follow as follows in the two previous cases, because hops come in under licence, and in consequence do not pay a tax.


Richard Bedford Bennett: Does this take the tax entirely off them?


Charles Avery Dunning: Yes.


Mr. STIRLING:: It takes the sales tax off them.


Charles Avery Dunning: At present there is no tax on the home produced article. By reason of the amendment there will now be no tax on the imported article.


Mr. BARBER:: Does it mean that the tax still remains on the home produced article?


Charles Avery Dunning: No.


Charles Hazlitt Cahan: As I understand it, the items in schedule III of the Special War Revenue Act are exempt from the sales tax, and the resolution now before the committee is to strike these several commodities out of schedule III?
Special War Revenue Act


Charles Avery Dunning: No-if my hon. friend will permit me-to strike out the present language which confines the tax exemption to the home produced article and to include just the words of the commodities themselves, which will have the effect of making the articles free of tax whether they are imported or produced at home.


[Stage Direction]
Amendment agreed to.
Paragraph as amended agreed to.
7. That schedule V to the said act, as enacted by section nineteen of chapter forty-two of the statutes of 1934 and amended by section nine of chapter thirty-three of the statutes of 1935, be further amended as follows:-
i. By inserting therein after the words "not to include" in the second line thereof the words "automobiles adapted or adaptable to passenger use."
Richard Bedford Bennett: After this amendment is made, how would it read?


Charles Avery Dunning: It would then read:
Articles on which other excise taxes are imposed on importation by part XI of this act, not to include automobiles adapted or adaptable to passenger use, tires of rubber, including inner tubes-
And so forth. The reason for this change is that, as the Special War Revenue Act now stands, automobiles pay this three per cent special excise tax. No change in effect is being made on account of this wording; it merely continues to tax those items which would otherwise have been technically exempt on account of changes in the act incidental to the revision of the excise tax on automobiles.


Richard Bedford Bennett: That means that the three per cent tax will still be payable?


Charles Avery Dunning: Yes.


Richard Bedford Bennett: The hon. gentleman read, after the words "automobiles adapted or adaptable to passenger use," the word "tires."


Charles Avery Dunning: That is in the present act.


Richard Bedford Bennett: Will not some further action be necessary?


James J. Donnelly: 
Charles Avery Dunning: Just a minute; wait till I get through. There will be no change at all in the treatment of "tires of rubber, including inner tubes .... trailers and other wheeled attachments." They still remain.


James J. Donnelly: I say that the duty of 17| per cent and this special excise tax of three per cent will make the duty on automobiles 20i per cent?


Charles Avery Dunning: Yes.


Richard Bedford Bennett: Plus sales tax of eight per cent on the duty paid price.


Charles Avery Dunning: Yes.


[Stage Direction]
Item agreed to.
ii. By adding thereto the following:-
Goods enumerated in customs tariff items 695a, 695b, and 696a.
Charles Avery Dunning: These are the same items I mentioned before in connection with the other amendment, but with one addition, and that is under paintings in oil or water colours. The inclusion of this item from the exemption list is designed to remove difficulties in bringing into Canada collections of paintings for exhibition purposes. While some of these paintings may incidentally be sold, most of them are reexported, and require orders in council in order to secure refunds of the tax paid upon reexports. The revenue aspect of granting this exemption is unimportant, but administratively it is important.


Donald Alexander McNiven: May I ask the minister a question with regard to moving pictures and sound films? A large dealer in Saskatchewan, who has worked up a considerable business in the northern states, informs me that he has imported films from the United States into Canada, paid duty, then sent them back to the United States, where they were shown in schools and in community centres, and then, on bringing them back into Canada, has had again to pay duty on them. Or, on the other hand, he has had Canadian pictures and sound films made in this country and taken over to the United States, and when he was bringing them back into Canada, had to pay duty on them. Will this particular provision eliminate that difficulty?


Richard Bedford Bennett: He can get a refund by putting up a bond.


Donald Alexander McNiven: These are films that are educational and are sent to schools and community centres.


James Lorimer Ilsley: The proposed amendment has nothing to do with the matter that the hon. member for Regina (Mr. McNiven) has placed before the committee. The matters to which he has referred are matters of customs administration, and if he will give me the particulars I will look into them. At the moment I cannot say what general rules apply, but I am under the impression that the narrative of fact as related to the house is a trifle improbable.


Richard Bedford Bennett: I think not. If the films go out and come back again the dealer is, I think, allowed to put up a bond. In a case

Customs Tariff
that came under my observation, the film was imported once; then it went down to the United States to be used, and when it came back a second time, the customs authorities tried to collect double duty. This has been dealt with by an arrangement being made whereby the dealer puts up a bond. The film is just temporarily absent from the country; it comes back again, and that is all there is about the matter.


James Lorimer Ilsley: Yes; it is a matter of procedure, or taking the proper steps, that is all. If the hon. member will tell me about those cases I will tell him just what his friends will have to do in future.


[Stage Direction]
Item agreed to.
Materials for use in the manufacture of binder twine and fishing rope.
Charles Avery Dunning: These items are being
put on the exemption list from the three per cent special excise tax in order to exempt domestic manufacturers from a tax on raw materials which their competitors abroad are not compelled to pay.


[Stage Direction]
Item agreed to.
Paragraph agreed to.
8. That any enactment founded on paragraphs one to seven inclusive of this resolution shall be deemed to have come into force on the second day of May, one thousand nine hundred and thirty-six, and to have applied to all goods imported or taken out of warehouse for consumption on and after that day and to have applied to goods previously imported for which no entry for consumption was made before that date.
Richard Bedford Bennett: We have amended two
or three of these paragraphs, and I remember that on one occasion some difficulty arose in this connection. Perhaps "any enactment founded on paragraphs one to seven inclusive as amended" would be desirable, because that would represent the bill as it will come in founded upon the resolutions adopted by the house. The resolutions include not only those that were before the house when the hon. gentleman made his budget speech but also the amendments made in committee.


Charles Avery Dunning: I thank the right hon.
gentleman for his suggestion, and I will ask my colleague to move that the paragraph be amended to read:
That any enactment founded on this resolution as amended shall be deemed to have come into force on the second day of May-
And so on.


James Lorimer Ilsley: I so move.


John Ritchie MacNicol: As crushed stone and
gravel will not likely be taken out of a warehouse but be taken rather out of a yard, a quarry or a pit, should not those words be added after the word "warehouse"?


Charles Avery Dunning: There is no doubt about that; it is covered.
Paragraph as amended agreed to.
Resolution as amended agreed to.


Richard Bedford Bennett: Perhaps, when the bill
is before the house, the Minister of National Revenue will give us some information as to the number of rebates that have been made in connection with crushed stone and gravel.


James Lorimer Ilsley: Very well.


CUSTOMS TARIFF AMENDMENT
[Stage Direction]
5. Resolved, that schedule A to the customs tariff being chapter forty-four of the revised statutes of Canada, 1927, as amended by chapter seventeen of the acts of 1928, chapter thirty-nine of the acts of 1929, chapter thirteen of the acts of 1930 (first session), chapter three of the acts of 1930 (second session), chapter thirty of the acts of 1931, chapter forty-one of the acts of 1932, chapters six and thirty-seven of the acts of 1932-33, chapters thirty-two and forty-nine of the acts of 1934, and chapter twenty-eight of the acts of 1935, be further amended by striking thereout tariff items 16, 28, 28a, 35, 79b, 83(a), 99c, 113, 142, 147, 168, 173, 178, 180a, 183. 199b. 200a, 206. 206a. 208h, 208i, 219d. 219e. 224, 259, 267, 267a, 267b, 268, 269, 270, 271, 272, 273, 274, 275, 284, 286, 288, 312a, 323. 326a, 362, proviso to 380(b), 404b, 409b to 409k inclusive, 4091, 409m, 409n, 409q, 410d, 411b, 412. 412a, 422a, 424, 427, 427a, 428a, 428b, 429(a), 429(g). 430. 430a, 431b, 431c, 435, 438a, 438b. 438c, 438d, 438e, 438f, 438h, 438i, 445a, 445f, 445g, 445k, 445m, 446a, 455, 462, 463, 473, 476a, 494b, 505, 513, 522. 522c, 523, 523a, 523b, 529. 529a. 532, 558b, 558d, 561, 564b, 567a, 569c. 569e. 584a, 584b. 587a, 603, 607 (part 2), 657a, 663c, 672a, 695, 695b, 698, 698a, 703, 718, 783, 802, 811, 813, 818. 821, the several enumerations of goods respectively and the several rates of duties of customs, if any, set opposite each of the said items, and by inserting the following items, enumerations and rates of duty in said schedule A:-
Customs tariff-9c. Horse meat, tripe and other animal offal, unfit for human consumption, and cereal meal, when for use exclusively in the feeding of fur-bearing animals: British preferential tariff, free; intermediate tariff, free; general tariff, free.
Richard Bedford Bennett: What are the importations under this item?


Charles Avery Dunning: It is a new item.


Richard Bedford Bennett: I see it covers a combination of three items.


Charles Avery Dunning: It is extracts from three items, in order to provide a free item for fox and animal feeds. I have an amendment
Customs Tariff

to qualify it to some extent; it is difficult to define. I will read the item as it will read as amended:
Horse meat, tripe, and other animal offal, ground or unground, unfit for human consumption; feeds consisting wholly or in part of cereals but not including baked biscuits; all the foregoing when for use exclusively in the feeding of bur-bearing animals or in the manufacture of feeds for such purposes.


Henry Herbert Stevens: May I draw the attention of the minister to a matter I spoke of the other night? I have no desire to put the minister to a great deal of trouble, because I appreciate the difficulty of explaining these items, but all through this new schedule as indicated by the resolution just read by the chairman, a great many items are repealed as they are in the present tariff; in many instances they are consolidated into a new item, and I have no doubt frequently the reading is considerably changed. It is quite possible that these changes will be far more significant than appears on the face of the resolution, and while I do not desire to put the minister to a great deal of trouble I think, as we go through the schedule, it would be well if he could explain the reasons why these various items were consolidated and just what has been brought into the new item. This is going to be a matter of some difficulty, but if it is approached in that way from the commencement, perhaps it will minimize the minister's troubles.


Charles Avery Dunning: Since my hon. friend spoke of the matter the other evening I endeavoured to get a comprehensive exposition of the features to which he referred. In most cases I found that "consolidation" is not really the proper word to apply. This first case is one in point, where something which has been under a general item-


Richard Bedford Bennett: Or several items.


Charles Avery Dunning: -or several items, is extracted and made subject to a definition such as the one here, "when used for feeds for furbearing animals;" that is made into a tariff item. That is true of most of the changes. But there are some fairly important exceptions, and if my hon. friend will look through the list provided in connection with the cases, such as the automobile schedule and the oil schedule, which originally were based upon reports from the tariff board, he will see that we have given in each case the tariff item presently applying to the item under consideration as well as the rates.


Henry Herbert Stevens: Yes, I notice that applies to a good many.


Charles Avery Dunning: That applies to what might be called the major items. But in order to try to meet the situation outlined by my hon. friend I have three or four pages of these items extracted in order to provide a better definition. I am afraid handing them to my hon. friend would not be very helpful, except with the explanations which I have before me and which I shall be glad to give as we go along.


John Ritchie MacNicol: In reference to this item there is a plant on Keating street, Toronto, employing, I believe, about one hundred and fifty to perhaps two hundred men, in continuous operation. I cannot say that I know very much about it, I wish the hon. member for Danforth (Mr. Harris) were present; he would be an authority on whether this item will increase or decrease employment in this line in Canada. Can the minister tell us whether putting all these articles on the free list will injure that plant or help it; will it increase or decrease employment?


Charles Avery Dunning: I do not think it will have much effect on the Toronto plant one way or the other. Products of the kind named in the item now under consideration are, my notes say, available in Canada, but because of the transportation factor they are not available to the fur-farming industry in certain provinces.


Richard Bedford Bennett: Meaning the maritime provinces.


Charles Avery Dunning: The maritime provinces; for instance fox and mink farms in Prince Edward Island cannot pay freight on offal from Ontario and Quebec abattoirs. Even in the face of the existing duties the fur-farmers of these provinces have, of necessity, because of the transportation factor, had to rely to a great extent upon feeds imported from the United States.


Hugh Alexander Stewart: Could the minister give the particulars of the imports?


Charles Avery Dunning: Feed of this kind has come in under so many items that it has
never been separately classified.


John Ritchie MacNicol: What would be the effect in Ontario, because there are some fur farms in Ontario. Doubtless the plant on Keating street supplies the farms in Ontario that raise the animals to which these items apply. The question is what the effect will be on employment in that plant.

Customs Tariff


Charles Avery Dunning: Does my hon. friend mean to say that there is in Toronto a plant employing over one hundred men manufacturing for fur-bearing animals this feed other than biscuits?


John Ritchie MacNicol: I said that there is a plant on Keating street, Toronto, employing one hundred and fifty to two hundred men, handling carcasses of horses, grinding them up. I am not sure what they do with them, but a lot of this offal material is sold to farmers raising fur-bearing animals.


Mr. TUSTIN:: Regarding the next item, cereal meal, I understand there is a great deal of dry bread brought in from the United States. Is dry bread included under this cereal meal as it is baked or ground?


Charles Avery Dunning: In the amendment we have got away from the term "Cereal meal," because of complications of that kind. I shall read that part again:
Feeds consisting wholly or in part of cereals, but not including baked biscuits.
Practically the only thing excluded is baked biscuits, because it would be quite impossible to administer that in relation to other biscuit items, so biscuits are excluded. But any other form of feed for fur-bearing animals is included.


George James Tustin: I take it, then, that dry bread is allowed to come in free of duty for furdbearing animals?


Charles Avery Dunning: Yes.


Richard Bedford Bennett: This, it seems to me, is an item which may be of very great importance in Canada. If we get into the habit of discontinuing domestic production of feeds for any of our fur-bearing animals we are going to find ourselves in the position where, if the supply is cut off, we shall be in difficulty. There are in this eountry enough horses which are no longer useful to take care of that. But what I do object to is the provision in respect of cereals. It is always a matter of great concern to think that we are going to rely upon a preparation of food produced in a foreign country, and after we have completely exhausted our own supply by reason of competition, find that the price becomes immediately increased. I do not know that that is going to happen in this particular case, but I do know that this is of a class of items which has created a great deal of anxiety on the part of those responsible for tariffs. It would seem to be a most admirable thing to say to the fox farmers of Prince Edward
Island, and the residents of that province who were so generous as to return the minister to parliament. It would be very, very wrong if that province were without reward for its efforts in that regard.


An hon. MEMBER:: What about Nova
Scotia?


Richard Bedford Bennett: Nova Scotia took no part in that. I know of one or two cases in which we have made just such concessions, as these, and we found that the last state was worse than the first because local production was driven out by reason of competition from abroad under the free list. But if the minister states that the fox farmers now have to buy this feed from the United States, that gives the item a different significance in one province. However it does not overcome the difficulty in Ontario, for instance, which raises a substantial quantity of fur bearing animals on fur farms scattered throughout the province.


Charles Avery Dunning: The fears of my right hon. friend I believe are not well founded. After a careful examination I find that while it is true that the province which I have the honour to represent produces the finest foxes in the dominion-


Richard Bedford Bennett: And the finest oats and wheat, I suppose.


Charles Avery Dunning: *-and is the province in which the commercial development of the industry was first commenced, it is also true that Prince Edward Island foxes are now found practically from coast to coast and are used for foundation stock for an industry growing almost in all parts of Canada, and nowhere more than in the middle west where it has been found that in some areas at any rate the climate is eminently suitable for the development of the industry. I am convinced that the fear which my right hon. friend has expressed as to the effect upon manufacturers of this material located in other parts of Canada will not be realized, because the prime factor with respect to ingredients of this kind is that of the freight. It is really an offal article, with the exception of a small inclusion of cereal meal, and that sort of thing. For instance, no imported article could possibly pay the freight and compete in the northern Ontario fox farms with the article which could be produced at certain of our Ontario abattoirs. The same is true across the country, with the possible exception of parts of northern coastal British Columbia and all three maritime provinces which at the present time, despite tariffs, find it more

Customs Tariff

economical to import the offal for fox feeding than to pay the transportation costs which would be inevitable on shipments of an article of low value from central Canada to the maritime provinces.


Richard Bedford Bennett: The special excise tax applies?


Charles Avery Dunning: There are men in this
chamber who know the industry better than I do. I am trying to make myself acquainted with the important factors in the constituency which, as my right hon. friend has pointed out, has done me the honour of returning me to this house. I do not pretend to know all about fox farming, but from such study as I have made of it I am convinced that this is a concession which will be of considerable value to an industry which is growing in importance, and which will not be harmed elsewhere.


Richard Bedford Bennett: Will this feed pay special excise tax?


Charles Avery Dunning: Yes, it is subject to
special excise tax.


Henry Herbert Stevens: Has the minister considered the possible effect upon Australian and New Zealand treaties? We gave both those countries some consideration in the free importation of frozen rabbits for fox feeding purposes. While that may sound more or less trivial the fact is that one of our great difficulties in making agreements with both countries was that of finding some concessions which could reasonably be made to them. This was considered a real concession.


Charles Avery Dunning: It has not proven to
be of any importance, whatsoever.


Henry Herbert Stevens: It has not?


Charles Avery Dunning: No, it is negative.


Henry Herbert Stevens: As a matter of good
faith, have they been notified?


Charles Avery Dunning: Yes, they know about
it.


Charles Hazlitt Cahan: Is it true that the maritime provinces cannot produce at reasonable cost the food required to feed the fur-bearing animals they are raising? That seems an astounding statement to make. I should like to know what proportion of this food comes from domestic production in the three maritime provinces, and what proportion is im-

ported. I have been in almost every school section of the maritime provinces, and I cannot understand why they cannot produce this food economically so as to feed the foxes they are raising.


Charles Avery Dunning: It is not that they cannot produce it, but rather that in the nature of things the proper food is an offal byproduct of another operation. It is a product of an abattoir. This is one of the uses for particular types of offal which are created in quantities capable of commercial development only in large scale abattoir operations. I think all hon. members who are familiar with the matter will confirm what I say in that regard. As is well known, large scale abattoir operations are not a feature of the commercial or industrial life of the maritime provinces. I assure the hon. member that to-day sufficient of these commodities is not available, and for that reason it is imported into the maritime provinces.


Charles Hazlitt Cahan: Does the minister say that
all of it is imported?


Charles Avery Dunning: The great bulk of it.


[Stage Direction]
Amendment agreed to.
Item as amended agreed to.
Customs tariff-9(d).	Baby chicks, n.o.p.,
each: British preferential tariff, free; intermediate tariff, 4 cents; general tariff, 5 cents.
Richard Bedford Bennett: This is an item in which there is a raising of the tariff, I suppose.


Charles Avery Dunning: In this instance we
have a specific duty instead of an ad valorem duty. It is difficult to apply a percentage of the value of baby chicks.


Harry James Barber: What was the total protection last year?


Charles Avery Dunning: There was last year a
special valuation of thirty cents.


Richard Bedford Bennett: That was under section
43.


Charles Avery Dunning: Yes, under section 43.
In some years importations of baby chicks have reached large proportions. In 1930, 924,000 were imported, to the value of $116,000, and then they were made subject to a valuation for duty purposes amounting to thirty cents per chick. This involved payment of a heavy dumping duty and a decline in imports was noticeable. In 1931, 770,000 chicks

Customs Tariff
were imported, to the value of $90,000; in 1932, 24,000 valued at $7,000; in 1933, 5,400 valued at $1,600; in 1934, 3,200 valued at $875, and in 1935 , 2,900 valued a* $560.


Richard Bedford Bennett: They are used in the
production of what are known as broilers?


Charles Avery Dunning: Yes.


Grote Stirling: What is the effect of the change? Does it maintain the tariff at about the same rate?


James Lorimer Ilsley: Perhaps I could answer that question. In the last three or four years the special value placed on baby chicks has operated almost as an embargo, because there was a thirty cent value on an article worth five cents or ten cents. The dumping duty was so high it was impossible to import them. When the trade agreement was made with the United States the value for duty purposes was cancelled and, if I remember correctly, the duty on baby chicks became 17i per cent.


Grote Stirling: That is correct.


James Lorimer Ilsley: That is a very low rate.
The other rate was prohibitively high, but on the other hand 17J per cent is very low, and is difficult to calculate.


Richard Bedford Bennett: What is the average invoice price on those?


Thomas Reid: Ten cents.


James Lorimer Ilsley: It varies.


Richard Bedford Bennett: I believe at one time
they were down to five and six cents.


James Lorimer Ilsley: I would have said ten cents
but one of the officers says about fifteen cents.


Harry James Barber: They are selling at five
cents in California.


James Lorimer Ilsley: This duty of four cents per
chick is reasonably high or reasonably low, depending upon how you look at it.


Harry James Barber: What protection was provided last year?


James Lorimer Ilsley: I can figure that out for the hon. gentleman.


Grote Stirling: Is it 174 per cent of
thirty cents?


James Lorimer Ilsley: We will follow that through.


Charles Avery Dunning: There was a dumping
duty.


James Lorimer Ilsley: Last year, each chick would be valued at thirty cents. Then the tariff would be reckoned on the-


Richard Bedford Bennett: Five and one-quarter
cents.


James Lorimer Ilsley: The tariff rate would be
reckoned on the thirty cents, the value for duty purposes. We have that, but that would be only the start of the amount. You would subtract the invoice price from the value for duty purposes. If the invoice price was ten cents, that would be twenty cents. You could not charge the whole twenty cents because that would be more than fifty per cent of the thirty cents. You could charge only fifteen cents of that.


Richard Bedford Bennett: You could only charge
ten cents. The difference between thirty and ten is twenty, and fifty per cent of twenty would be ten.


James Lorimer Ilsley: It is fifty per cent of the
value for duty purposes, which, I think, is thirty cents. Therefore, the dumping duty would be fifteen cents plus 5-f cents, or 201 cents. That would be the effective rate on the ten cent article, which would be a little over 200 per cent. In addition, there would be the three per cent import excise tax on the duty paid value, whatever it is by this time, and the six per cent sales tax, if it is not on the exempted list, and I do not believe it is, They would all have to be added and would increase the protection to that extent. I think it would bring it up to between 200 and 300 per cent. Last year we went down to 174 per cent and now it is made four cents per chick, which is about forty per cent on a ten cent chick.


Mr. WOOD:: I think the government are to be congratulated upon the very fair attitude they have taken with regard to baby chicks. It is not altogether a matter of protection or tariff for revenue; there is the question of the health of our flocks to be considered. If chicks were allowed to come in too freely they would be brought in from sections of the United States where the health of the flocks is not guarded. We have in Canada flocks equally as good as those in the United States; in fact I think this is characteristic of all our live stock. On the average I think our live stock in Canada is better than that in the United States. A four cent duty is fair and it will permit chicks to be brought in from special flocks when extra stock is needed. It must not be forgotten that there are certain prohibitive arrangements
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between some of the provinces in connection with the shipment of chicks and it would hardly be fair to let them come in from the United States more easily than they could be brought in from another province. I believe this duty of four cents per chick meets with the approval of the chick hatcheries of Canada.


[Stage Direction]
Item agreed to.
Customs tariff-16. Eggs in the shell, per dozen: British preferential tariff, 2 cents; intermediate tariff, 5 cents; general tariff, 10 cents.
Provided that, if any foreign country imposes on such goods the produce of the Dominion of Canada duties or charges more onerous than are prescribed by this item, duties equivalent thereto shall be imposed on the like goods imported into Canada from such country.
Mr. BENNETT; There are two questions I wish to ask in connection with this item. How are you going to impose the new duty- by order in council? Will this be taken as sufficient warrant for collecting a higher duty?
Charles Avery Dunning: It is administrative, yes.


Richard Bedford Bennett: There is a rather important proviso:
Provided that, if any foreign country imposes on such goods the produce of the Dominion of Canada duties or charges more onerous than are prescribed by this item, duties equivalent thereto shall be imposed on the like goods imported into Canada from such country.


Charles Avery Dunning: Yes.


Richard Bedford Bennett: That means that some action must be taken by someone so to do. I should think that would mean by .parliament when no .provision is made as to who is to take the action. When you say that additional duties shall be imposed, normally that means by parliament, unless you say that they are to be imposed by the governor in council. That is my first observation.
Second, I still think that a countervailing duty is a very dangerous thing to apply in a country such as Canada, having regard to our proximity to the United States. My first connection with countervailing duties arose from the export of coal from Lethbridge to Oregon and Washington. It will be recalled that the Americans provided in their tariff that if any country imposed upon coal from their country a duty which was higher than the American duty, then there should be corresponding increases in the American duty. We found ourselves excluded from that market by reason of the fact that we had put a duty on American coal in excess of the American duty on our coal. This is the difficulty, as I see it, in imposing countervailing duties in
[A^r. Wood.]
connection with a country like the United States. They have a population of perhaps 130.000,000, whereas we have a population of only 11,000,000 at the most. We say that we have made up our minds as to what duty we shall place on some commodities, and we apply that duty. Then they have a duty which is not the same as ours. We say to them that if they impose upon goods from Canada charges more onerous than are prescribed by Canada, duties equivalent thereto shall be imposed upon the like goods imported into Canada from such country. Is that likely to have any effect upon them? From what we know of the conduct of their fiscal policy in years gone by can we say that it will not have some effect? I think it would have been better if the minister had taken a direct instead of an indirect course and provided a duty on eggs similar to the duty now prevailing in the United States on eggs from Canada. Otherwise we are going -to have a separate tariff with respect to every country from which we might possibly import eggs. To take a direct course and provide for a British preferential, an intermediate and a general rate, possibly with the intermediate at .ten cents, would have been the most simple way of dealing with the matter. In order to get over that, knowing that congress is not going to deal with tariffs this year, the president having so stated, we must at once impose by some method the higher duty upon eggs. This provision as it reads says, "shall be imposed." What is the length of time that you give them to think about it?


James Lorimer Ilsley: We are treating it as almost meaning collect.


Charles Hazlitt Cahan: Then say so.


Richard Bedford Bennett: That is a very, very
different thing. As it reads, it says "such goods the produce of the Dominion of Canada." Then you cannot put in "shall be collected," because that is permitting another country to make your tariff for you. In other words, when a collector has to impose his rate he has immediately to look at the tariff of the United States in order to collect his tax. There has been no imposition, and an imposition is necessary to found a tax. This is not an imposition. It says "shall be imposed." That means that some authority must impose it. I took it to mean the governor in council, which I think would- be the proper authority to deal with the matter. It would be an anomalous situation, would it not, if you put yourself into the position of

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saying to the collector of customs at a port of entry with respect to eggs coming in from the United States, "tax that at the rate fixed in the United States tariff."


James Lorimer Ilsley: You do not tell him that at all. You tell him what to collect.


Richard Bedford Bennett: Collect what?
Mr. ILSLEY': We know the United States tariff and we tell him to collect that duty. We do not leave it to him.


Charles Hazlitt Cahan: But you have no authority to do so. The tax must be imposed before it can be collected.


Richard Bedford Bennett: There can be no collection without imposition. It is not a question of law or a technical matter at all. There must always be an imposition of a tax before its collection, and the imposition can take place in one of two ways; by the direct action of this parliament, or by action, having regard to the decision of the privy council in the Apollo Candle case, that celebrated case from Australia, deciding that there may be a delegation of that power, and the proper course I suggest would be by the governor in council. I am not making this part of my submission with any political motive at all; I am simply saying that there cannot be a tax unless it is imposed. A tariff is a tax, as everybody says, and there cannot be a tariff unless it is imposed. But the imposition of it involves the collection of the amount fixed by the imposing act. That would mean that there should be some authority here. The language struck me at once when I began to read it. It says "shall be imposed on the like goods." Somebody must impose the tax.


James Lorimer Ilsley: Impose means place upon.


Richard Bedford Bennett: Yes, but it says, "shall be."


James Lorimer Ilsley: That is what we are doing; we are placing the duties upon these goods.


Charles Hazlitt Cahan: We have to delegate the
authority.


James Lorimer Ilsley: It is future imposition.


Richard Bedford Bennett: Certainly. At this
moment the government for a reason best known to itself has not seen fit to fix a higher tariff on eggs, but has said: We are going to adopt the American tariff-knowing that there will be no congressional tariff action this year. Therefore, we must collect on the basis of the higher tariff. But instead of saying that, the government say, "there shall be imposed." Now there is a period
during which the United States, if their congress were dealing with tariffs, might modify or change that tariff. The result, of course, would be that the tariff would at once go down or go up, as the case might be. But when you say a tariff "shall be imposed," that contemplates action in the future, in futuro, not presently, and the power must be somewhere granted by this parliament. The proviso as it reads would leave the power where it rests, with this House of Commons and the Senate and the crown. If some power other than parliament is to exercise authority, that must be specified in the enacting statute. But this is silent in that regard.
I suggest to the minister that if he wants to make this proviso of any value at all-I am opposed to the plan as a matter of principle, because I am satisfied that it has always worked to our detriment-he should add words so that it would read "shall be imposed by the governor in council on the like goods imported into Canada from such country." That keeps our records clear. That puts Canada into the right place. That does not put us into the position of taking the tariffs of another country, and upon that telling our collectors to try to collect on a given figure which is fixed by the congress of the United States or by the parliament of Japan or Czechoslovakia. On the other hand, when we take action by order in council, we make allowance for the variations which may exist in various countries, and then we should at least be doing what the Liberal party has always pointed out should be done, namely, allowing parliament to have a little something to say about the question of tariffs. As it stands now, parliament is absolutely without authority. Somebody imposes a tariff, and I can find no authority by which he does it unless you provide the wording in the section itself.


James Lorimer Ilsley: The whole difference between the leader of the opposition and ourselves is in the meaning of the word "impose.1" We have taken it that the word "impose" means place upon, and if we read it in that way-


Richard Bedford Bennett: That does not help you. It then would read "shall be placed upon."


James Lorimer Ilsley: Provided that, if any foreign country places upon such goods the produce of the Dominion of Canada duties or charges more onerous than are prescribed by this item, duties equivalent thereto shall be placed upon the like goods imported into Canada from such country.


Charles Hazlitt Cahan: Who is to place them?
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James Lorimer Ilsley: We levy the duties. I submit that is all the authority we require. I understand thoroughly the point of the right hon. gentleman, but really I do not think the language needs alteration.


Charles Hazlitt Cahan: Would it not be far better to make it clear? It certainly is not clear, and I do not see, when there is a clear difference of opinion and a simple change would make the meaning clear, why that change should not now be adopted. Parliament itself can delegate its authority, but it must delegate its authority to some particular person or persons, and the power so delegated can be exercised only by the person or persons to whom the power is delegated. If a collector of customs at some port undertook to collect a higher duty because of the countervailing duties, I would not hesitate for one moment to bring an action to compel a return of those duties. You could make it clear by making this imposition of duties mandatory. And it is mandatory if you designate a person or persons to carry out the mandate, but I cannot understand how the mandate can be effective unless the persons are designated who are to carry out the mandate and exercise the power.


Richard Bedford Bennett: There is another argument and it might as well be made because from another ground altogether this proviso :is valueless as it reads. It says: ''Provided that if any foreign country imposes." Then it adds the words, "shall be imposed." That means a future action. It does not contemplate what the present position is at all. If you want to be exact about it; if you want me to make an argument which I think, although one is diffident about saying this, could be enforced by a court, the position is simply this, that you have an existing condition, a present duty, and you contemplate a future duty and future action by us. We know what the duty is in the United States at this minute,- and the proviso should read: "Provided that, if any foreign country has imposed or imposes a duty in excess," because we are dealing with a future condition. I do not think there is any question about this at all.


James Lorimer Ilsley: This is hair-splitting to quite an extent.


Richard Bedford Bennett: No, not as regards tariffs. In any taxing statute the law is very severe.


James Lorimer Ilsley: It is quite clear that we are not referring to action to be taken hereafter by a foreign country in imposing a duty.
tMr. Cahan.]


Richard Bedford Bennett: I would say, quite the opposite.


James Lorimer Ilsley: Well, suppose I am right, for the sake of argument.


Richard Bedford Bennett: Yes.


James Lorimer Ilsley: The next step which follows is this, that the word "imposed" does not refer to the legislative act at all; it refers to the collection of duty. What it means is that if another country is collecting from us a duty on our goods greater than we are collecting from it, we are to collect that duty. That is what all of us take it to mean.


Charles Hazlitt Cahan: But you cannot collect unless the duty is previously imposed by legislative power.


James Lorimer Ilsley: This imposes it.


Richard Bedford Bennett: Well, it is always gratifying to find my Liberal friends making arguments like that. I never expected to live long enough to hear the Minister of National Revenue make the argument he made just now. Just listen to what he says: Duties equivalent thereto shall be imposed. I put it to this committee: Do they know of any way by which a duty can be imposed in this country except by this parliament, either directly or by delegation? It is the duties that are to be imposed, and now I am told: That is all right; we will just write a letter to the collector down there; he will collect the taxes, and that is all there is about it. All I can say is that if a man who paid those taxes came to me, I think I could demonstrate to the court that he had paid them improperly and we could get the money back.


Charles Avery Dunning: When doctors disagree of course a poor layman has great difficulty, but I remember my right hon. friend's great objection to countervailing duties, which he mentioned earlier, and I also remember that when he came into office in 1930 certain countervailing provisions were on the statute books. I know he did not like them a bit. I was quite astonished that if they were of no effect he should continue to administer them for five months, in the language here used, because the language used in 1930 was precisely the same as this. I know my right hon. friend wanted to get rid of the provisions, because he did so at the earliest opportunity at a special session of parliament. But I think the fact, that in spite of their not being popular with the government of the day, and that government desiring to get rid of them,

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they were administered successfully for five months, is surely a practical proof that the wording is reasonably satisfactory in operation.
As to the principle, my views on it are well known. I think there are certain commodities on which the two-way traffic is natural and possible. At certain seasons of the year a commodity may travel north, and at certain other seasons of the year, probably because of climate, it may travel south. In such cases I believe it desirable that we should indicate to our neighbours that we are prepared at all times to bring our tariff rates on such commodities down to the minimum level specified in our tariff, provided they will reciprocate by doing the same thing on the same commodity.


Hugh Alexander Stewart: Does the minister not
think that the interpretation might be improved to some extent by using the words "is hereby imposed," making it an action of parliament instead of leaving it in the realm of uncertainty and using the words "shall be," which contemplate some action at a future time by some authority competent to impose a duty? The only authority, I submit that is competent to impose a duty is this parliament, either directly, by specifying that duty in the statute in the regular way, which is the open, courageous, manly way to act, or by delegating to the governor in council that power which parliament might exercise. It seems to me that if it is to be contended that the duty is now imposed, it would be well to say " is hereby imposed," or provide, as my leader has said, the authority of the governor in council. What is the objection on the part of the government to putting the matter beyond question, making it absolutely certain, taking to itself the power which it says here exists, which it says is hereby granted? It see-ms to me that everything points to the desirability of clearing up any uncertainty and of making it beyond question that a duty is legally imposed.


Mr. ELLIOTT (Middlesex):: May I point
out to my right hon. friend and to my hon. friend who has just spoken that this parliament, by passing this provision, is imposing duties equivalent to the duties imposed by the fereign country.


Richard Bedford Bennett: But it says, "shall be
imposed."


John Campbell Elliott: Suppose the
clause suggested by my hon. friend who spoke last were adopted: "is hereby imposed" or "are hereby imposed." We would be imposing it before the other country acts.


Richard Bedford Bennett: But it has acted. That
is the trouble.


John Campbell Elliott: If at any
time in the future there is imposed upon "goods the produce of the Dominion of Canada duties or charges more onerous than are prescribed by this item, duties equivalent thereto shall be imposed on the like goods."


Charles Hazlitt Cahan: By whom?


John Campbell Elliott: What can it
possibly mean except that we would collect from their goods the same duty that they imposed upon ours?


Charles Hazlitt Cahan: That is what it means. But who is going to make the imposition?


John Campbell Elliott: This parliament is making it when it passes this item.


Richard Bedford Bennett: There is one thing about it. The Postmaster General inclines to the' argument that this whole matter is dealing with future proposals. He says that this refers to a country imposing new duties which are in excess of ours.


John Campbell Elliott: Not necessarily.


Richard Bedford Bennett: Well, that is the way in which it was put a moment ago by my hon. friend.


John Campbell Elliott: If the duty is already imposed, surely this speaks from the present forward. There can be no doubt about what is meant.


Richard Bedford Bennett: Well, if I were drawing up the provision, I would have said, "any foreign country has imposed or imposes."


Frederick George Sanderson: Carried?


Richard Bedford Bennett: No.


Frederick George Sanderson: Is the item carried?


Some hon. MEMBERS:: Carried.


Richard Bedford Bennett: Except that we are against it.


[Stage Direction]
Item agreed to.
Customs tariff-28. Coffee, green, imported direct from the country of growth and production, or purchased in bond in the United Kingdom, per pound:	British preferential
tariff, free; intermediate tariff, 3 cents; general tariff, 5 cents.
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[Stage Direction]
Provided, that coffee, green, shall be entitled to entry under the British preferential tariff upon evidence satisfactory to the minister that such coffee has been produced wholly in the British dominions, colonies or possessions, and not otherwise.
Richard Bedford Bennett: This merely raises the general tariff to five cents?


Charles Avery Dunning: There is no change in the wording. The only change in rates is the increase in the general tariff rate from three to five cents per pound. Empire countries now constitute by a considerable margin the chief source of supply, and by far the greater part of the remainder comes from countries enjoying either most favoured nation or intermediate tariff rates. Brazil, for instance, is under the intermediate tariff. It is deemed desirable to make a spread between the most favoured or the intermediate rate and that obtaining under the general tariff, in order that there may be some definite advantage to coffee producing countries in having the benefits of the Canadian intermediate tariff.


Richard Bedford Bennett: What countries would be affected by the general tariff on coffee? Brazil has the intermediate tariff.


Charles Avery Dunning: I prefer not to enter into a public discussion, but some countries which now enjoy the intermediate tariff are, shall I say, internally disturbed and are speaking of changing their trade arrangements with other countries, not specifically Canada but including Canada.


Richard Bedford Bennett: Do they produce coffee?


Charles Avery Dunning: Yes, and I believe that a difference between most favoured nation and intermediate tariff rates on coffee in those instances may help to maintain existing trade relations and, in fact, render possible better ones. I do not specify the situation any more closely than that, because I am not desirous of embarrassing exchanges which are now taking place.


Richard Bedford Bennett: I think a spread is always desirable.


Charles Avery Dunning: There are exceptions, but in the main it is a useful thing to have.


Charles Hazlitt Cahan: Is the proviso attached to this item contained in the tariff as it now) exists?


Charles Avery Dunning: Yes, exactly.


Robert John Deachman: There is one question I should like to ask in regard to this item. The rate is now five cents on coffee coming in under the general tariff.


Charles Avery Dunning: No; it is three cents now.


Robert John Deachman: The new tariff is five cents. Does that not tend to establish in Canada a price for coffee representing the foreign price plus the five cent duty? Therefore there will be a tendency on the part of countries trading with us under the intermediate or British preferential tariff to raise the price of their coffee to approximately the point reached under the general tariff. A tariff, I submit, arranged as this tariff is, tends to raise the price of coffee to the Canadian consumer and at the same time tends to give a definite and specific benefit to the countries exporting to us under the British preferential and intermediate rates. So then the Canadian consumer pays for coffee, a part of the price goes to the revenue of the country but a large part of it goes to help producers of coffee in countries trading with us under the British preferential or intermediate tariffs.


Richard Bedford Bennett: Having regard to the competition between Brazil and British preference countries?


Robert John Deachman: I think so.


Charles Avery Dunning: The best answer I can make to the fears expressed by my hon. friend from Huron North is to give the figures of our imports in order to show the very small quantity that will be affected by the increase. Last year our total imports amounted to
35.600.000	pounds. From British Africa we imported 10,170,000 pounds, under the British preference. From Jamaica we obtained
7.047.000	pounds, under the British preference. Brazil exported to us 6,935,000 pounds, and I mentioned that as coming under the intermediate tariff at the present time. Colombia exported 6,600,000 pounds, under the intermediate, most favoured nation tariff. From the United Kingdom we obtained 1,720,000 pounds, under the British preference.


Richard Bedford Bennett: That is in transit.


Charles Avery Dunning: Yes. From Trinidad we obtained 811,000 pounds, under the British preference, and from Mexico, 775,000 pounds under the general tariff. That is the first instance of coffee coming under the general tariff.


Robert John Deachman: Then why raise the general tariff by two cents if it is inconsequential?


Charles Avery Dunning: I explained a moment ago that coffee is a very important item in regard to some countries being willing to enter into a trade agreement with Canada involving most favoured nation and intermediate tariff treatment. To continue: From Costa Rica we obtained 452,000 pounds, under

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approximately the intermediate tariff; from Hawaii we received 377,000 pounds, and from Venezuela, 291,000 pounds, under a modus vivendi equivalent to most favoured nation treatment. So it will be seen that of our 35,000,000 pounds more than 34,000,000 pounds entered from those countries receiving either British preferential or intermediate tariff treatment. I think it is generally desirable to have some advantage in our tariff to offer countries with which we desire to make trade agreements. That is particularly the case in connection with tropical countries producing commodities such as coffee, and I am sure it will be of considerable advantage in negotiating with those countries.


[Stage Direction]
Item agreed to.
Customs tariff-28a. Tea, imported direct from the country of growth and production, or purchased in bond in the united kingdom or in any British possession .... per pound; when in packages weighing five pounds, each, or less, the weight of such packages to be included in the weight for duty: British preferential tariff, 4 cents; intermediate tariff, 8 cents; general tariff, 8 cents.
Provided, that tea shall be entitled to entry under the British preferential tariff upon evidence satisfactory to the minister that such tea has been produced wholly in the British dominions, colonies or possessions, and not otherwise.
Richard Bedford Bennett: What are the changes in this item?


Charles Avery Dunning: There is just a slight change in the wording, consisting of the insertion of the phrase "or in any British possession" after the word's "united kingdom." This has been done to permit certain empire teas, produced in various British possessions in the Malay peninsula, to enjoy the benefits of the British preferential tariff which heretofore they have been unable to do because such teas have come to Canada by way, for example, of the island of Ceylon. Some of these teas, although entirely British in origin, are transshipped in the island of Ceylon, where they are assembled and prepared for shipment to the ultimate destination. A great deal of this assembling and preparation for shipment is done at Colombo, Ceylon, and under the item as it stood heretofore teas so prepared and reshipped could not qualify for the British preferential tariff because they were neither shipped direct from the country of growth or production nor purchased in bond in the United Kingdom, which were the only two exceptions. It is now proposed to regularize the tariff by including these words.


[Stage Direction]
Item agreed to.
Customs tariff-28b. Tea dust, sweepings or waste, when imported by manufacturers of caffein, crude or refined, for use exclusively in the manufacture of caffein, crude or refined, in their own factories: British preferential tariff, free.
Provided, that tea dust, sweepings or waste shall be entitled to entry under this item upon evidence satisfactory to the minister that such tea dust, sweepings or waste has been produced wholly in the British dominions, colonies or possessions, and not otherwise.
Richard Bedford Bennett: The minister will observe that in the intermediate and general tariffs he has nothing at all. It is free under the British preferential tariff; is it free under the others also?


Charles Avery Dunning: No; it will not be admitted under the other tariffs. The proviso covers that.


Richard Bedford Bennett: The other day the minister complained bitterly that when a certain government was in office it made no provision for intermediate and general tariffs with respect to cut flowers. This is exactly the same type of item.


Charles Avery Dunning: But my hon. friend had the word "free' in the cut flowers item. This is an item which we intend shall come in only from British countries. It is an entirely new item, to provide free entry under the British preferential of tea dust or waste imported for use in the manufacture of caffein. Tea dust or waste is one of the great natural sources of the world's production of crude caffein. The latter already enters Canada free of duty for refining and further manufacturing, and under the new item it is proposed that the raw material shall be allowed similar free entry in order that crude caffein may be produced in Canada from tea dust so imported. I was going to call attention to the matter my right hon. friend has just mentioned, that the benefits under the item are restricted to the British preferential tariff, and therefore will apply only to tea dust sweepings or waste produced wholly in British countries.


Richard Bedford Bennett: If it comes from any other country, what is the duty?


Charles Avery Dunning: Tariff item 28 will cover it, tea, n.o.p.


Richard Bedford Bennett: That would be a lower rate than the existing one, eight cents.


Charles Avery Dunning: It is the heaviest tea rate.


Richard Bedford Bennett: No.


Charles Avery Dunning: It will be ten cents a pound.
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Mr, BENNETT: The n.o.p. item is not here.


Charles Avery Dunning: No; it is in the tariff generally.


[Stage Direction]
Item agreed to.
Customs tariff-35. Hops, per pound: British preferential tariff, 6 cents; intermediate tariff, 10 cents; general tariff, 16 cents.
Harry James Barber: This is an item I am particularly interested in.


Charles Avery Dunning: 
James Lorimer Ilsley: I move that.


Richard Bedford Bennett: The fact is when we were dealing with similar matters on another occasion the ground was taken that these should appear in votes and proceedings before they are here dealt with at all. It is a little difficult to follow them, and I think it is not desirable to have them dealt with now, because when the bill comes in we shall have an opportunity to do so. I am not raising the issue now. This is an item which increases duties, and while it is inconsequential it nevertheless increases the duties of the general tariff with respect to green coffee.


Charles Avery Dunning: Yes, I admit it. I followed formerly the practice indicated by my right hon. friend, which I agree at once is desirable. But as a matter of fact there are so very few changes on this occasion that I do not think it will be embarrassing to the committee.


Richard Bedford Bennett: I am not suggesting it
was.


Charles Avery Dunning: There are not many changes from the list as provided in the tariff.


[Stage Direction]
Amendment agreed to.

Customs tariff-35. Hops, per pound: British preferential tariff, 6 cents; intermediate tariff, 10 cents; general tariff, 16 cents.
Harry James Barber: As I have stated, this is an item in which the district I represent is particularly interested. It is an industry which has existed in that district for over forty years, developed from a small acreage of about forty acres to some thirteen hundred acres at the present time. We boast to-day of having on the reclaimed area of the Sumas district the largest single hop garden in the world, six hundred acres. This industry has had difficulties. The product, as hon. members are perhaps aware, is consumed by the brewing industry. Although we have not produced one hundred per cent of what is consumed we have produced up to forty per cent, varying from year to year. We are in a position to produce sixty to eighty per cent.
If the minister had investigated this industry before reducing the tariff he would perhaps have had some information in regard to it. The consumers argue that certain importations are required in order to give the particular blend to the product. But we have gone to considerable trouble to ascertain the quality of our product, and some years ago a number of samples of British Columbia hops were submitted to the Brewers' Academy of New Y'ork, with the object of finding out if it was necessary to import foreign hops in order to give a particular blend to the product of the brewery. I have a copy of the report forwarded by that academy in New York clearly stating that the product from British Columbia was of the very highest grade and could be used one hundred per cent in the production of ale, stout and porter, and in the manufacture of lager beer to the extent of sixty-five per cent. We have been very anxious to have this product sold on the Canadian market. In the early days one grower in my district sold his product on the British market, but that cannot be done now because, owing to the British marketing act, they are permitted to import only fifteen per cent cf the consumption, and so we are practically shut out of that market. We have been shut out of the American market for some time by a tariff of twenty-four cents a pound. The Canadian tariff, prior to 1930, was seven cents a pound. Hops were being imported from the United States, Czechoslovakia and other European countries at a very low price and affected the industry in our district very considerably. I want to say plainly to the minister that he could find out upon investigation that if it had not been

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for the protection of sixteen cents a pound the five large producers in our district during the last two years would have been out of business, for the simple reason that the industry to the south of the line has been in a distressed condition. Producers who have been able to sell at all-a large number are still holding their crop-have been selling hops at as low as seven and a half to nine cents a pound. What that really means is this: It costs the grower in British Columbia one and three-quarter cents a pound to pick the green hops, and it takes four pounds of green hops to make one pound of dry, so that it will be seen that the price at which the product was sold south of the line did not amount to more than the mere cost of picking. I know of one case in Washington that was drawn to my attention recently. This grower was operating forty acres and he paid out fourteen and a half cents cash for every pound of hops produced last year. This did not include his family's labour, rental, depreciation, interest, storage and other charges, and that crop of course would have been sold at half that price.


Charles Avery Dunning: That is not in Canada?


Harry James Barber: That is in the state of Washington. In Canada the cost of production is a great deal higher. I think that if this matter were investigated by the tariff board, as it should be, the minister would find that cost of production will vary up to twenty-four cents a pound. With a protection of only ten cents a pound and 7i cents a pound, under distressed conditions such as have obtained in the last two years one can imagine what would happen to the industry in Canada. I know representations have been made to the minister from perhaps one grower, because in the last three or four years the matter has come to my attention when I have brought it to the notice of parliament and the government. This particular grower insists that the tariff should be completely removed. Upon investigation the minister would find that this person is more of a dealer than a grower. He has sold every pound of foreign hops that have been sold in Canada in the last four or five years.


Charles Avery Dunning: I have no such representations as have been mentioned by the hon. member.


Harry James Barber: Those representations were made prior to 1930.


Charles Avery Dunning: I have no such representations.


Richard Bedford Bennett: This matter did not go to the tariff board.


Harry James Barber: I suggest that it was only a question of the minister running through the schedule and picking out something to add to the list of which the government is boasting. They talk about placing commodities on the free list, and so on. I suggest that the minister just ran through the list and picked out hops.


Charles Avery Dunning: I am sorry the hon. member thinks that.


Harry James Barber: A few nights ago the minister said something about reducing the burden of the tariff. In this instance what does the burden amount to? One pound of hops is used in one barrel of beer. He is reducing the burden of the tariff on the brewers, the most highly protected people in Canada. There is not much burden there, even if the rate were ten cents. If it were ten cents more it would not be too much. A reduction to ten cents a pound is not reducing the burden to a very great extent on a barrel of beer. Prior to the budget being brought down I indicated to the minister that before any action was taken with regard to hops the matter should be investigated by the tariff board. The hop growers are prepared to come before the board, and I suggest that would be the proper procedure. I will go so far as to say that if he will make some arrangements whereby the brewers would take the Canadian product, he can remove the tariff completely.
Probably he will recall that prior to 1930 this matter was brought to the attention of the government and placed before the then Minister of Agriculture (Mr. Motherwell) and other members of the government. I believe at that time some effort was made, but no agreement resulted. The only remedy was to take action through the tariff. If the minister could enter into an agreement whereby the production of Canadian hop growers would be used by brewers, the growers would not be greatly interested in the tariff.


Richard Bedford Bennett: At whose instance was this reduction made in the tariff.


Charles Avery Dunning: At the instance of the brewers who use the hops, and who presented all sorts of evidence, in many cases from growers. It is not from a single grower.


Harry James Barber: One grower.


Charles Avery Dunning: No, not from a single
grower. In connection with this item I had the curious experience of having representations against it which were afterwards specifically withdrawn by representatives of
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the growers. But so far as the consumption of hops is concerned I was convinced that in spite of the higher duty there does not appear to have been any considerable diminution in the necessity for importing hops from certain other countries. I am advised that these imports are due to a particular flavour or some other quality which they bring about by mixing. I can assure the hon. member he was quite wrong when he suggested that I just went through the tariff and grabbed items here and there for the purpose of reduction. I do not think he really believes that; it was just a passing remark.
I listened to representations from both sides. The tariff was very much higher than when I left office previously. The pgople asking for the reduction represented the brewers of Canada, and of course they stated that they were manufacturing one of the most highly taxed commodities, a commodity which was taxed both federally and provineially. One can imagine the arguments they would use. I said we were mainly concerned about the hop growers, and they assured me positively that they had kept up the price and would continue to keep it up. They brought me proof of their activities-in connection with malting barley, and certainly if there is any evidence which indicates that the Canadian hop consumers do not give a fair deal to Canadian hop producers, then the hon. member may call my attention to that fact and I can assure him my viewpoint would be changed, on production of such evidence. I am of opinion, however, that a duty of ten cents per pound under the intermediate tariff and sixteen cents under the general tariff may be considered a substantial duty, having regard to the fact that a considerable quantity of hops must be imported for purposes of correct flavouring.


Richard Bedford Bennett: There is no question
about it.


Charles Avery Dunning: Hops have been imported even under higher tariffs for that reason. Our imports amount to a million and a half pounds, even under high tariff regulations.


Richard Bedford Bennett: And that means a million and a half barrels of beer.


Charles Avery Dunning: Is it a pound to a barrel?


Richard Bedford Bennett: Substantially so.


Charles Avery Dunning: It is almost as much as the total Canadian production, which amounted to 1,765,000 pounds.


Grote Stirling: How much comes from Australia and New Zealand?


Charles Avery Dunning: Practically none, in spite of the tremendous advantage they are receiving under the treaty. Importations have been very slight, despite the advantageous rates. Australian hops have not been seen in the Canadian market since 1930, with the solitary exception of a small importation of
20,000	pounds in 1933. * From the information I have at my disposal I do not share the apprehensions of the hon. member for Fraser Valley, but I can assure him of sympathetic consideration of any evidence he may be able to produce at any time which would indicate that Canadian hop consumers have not treated Canadian hop producers fairly. The growing of hops is being developed in another part of Canada, not far distant from Ottawa, and I am advised that the industry is given considerable encouragement. Those growers, after first protesting against the change, came to me and said that they were quite convinced it would not be harmful to them.


Harry James Barber: I think the minister is very fair, but there is another angle to the matter I should like to discuss.


Charles Avery Dunning: Well, it is eleven o'clock and I do not suppose we can pass the item to-night.


Richard Bedford Bennett: No. In view of the discussions which have taken place, I think the matter should have gone before the tariff board.
Progress reported.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Tuesday, May 19, 1936