[Stage Direction]
Hon. N. A. McLARTY (Minister of Labour) presented the first report of the special committee on Bill No. 98, respecting unemployment insurance, and moved that the report be concurred in.
Motion agreed to.


Right Hon. W. L. MACKENZIE KING (Prime Minister):: Since this House of Commons adjourned on Friday last, hon. members will have read accounts of the speech delivered by Herr Hitler to the reichstag on that day. The speech was accompanied by newspaper reports that many parts of Europe were threatened with famine. Some semi-official statements, presumably inspired, were also issued from German sources concerning the future of Canada. In the circumstances a word in Canada's parliament concerning Hitler's latest utterance may not be out of place.
Hitler's speech abounds with the historical falsehoods which have characterized his utterances since the outbreak of war. His words and his works are both known. His words have been a succession of promises made and of promises broken. His works have been cruelty, rapine, bloodshed and violence.
His speech was characterized by Hitler as an appeal to reason and common sense. It purported to be concerned with peace. In reality it was mostly, if not entirely, a threat of dire calamity to millions of innocent beings, and exhibited a reliance upon force and violence greater than that which Hitler has displayed in any of his previous utterances. There was not so much as a suggestion of conditions or terms upon which peace could be discussed. The speech contained, however, most specific references to "unending suffering and misery" for millions, and to "complete annihilation" of either the British or the German people-Hitler's own people-and the prediction that unless the dictator's will prevailed, a great empire would be destroyed. All this was from one who in the same address professed a deep disgust for the type of unscrupulous politician who wrecks entire nations and states.

The speech calls for no words in reply. It answers itself. The one comment that obviously may fittingly be made upon it is that so far as the future of the war is concerned, deception has run its course. Resolute action alone will decide how suffering and misery are to be ended, whether it is tyranny or freedom that is to be annihilated, whether civilization is to be destroyed or to survive.
As to the threatened disaster to the peoples of Europe, none will regret a calamity to the innocent victims of persecution and aggression more than the people of Canada who have built this nation upon the foundation of tolerance, good will, peace and racial generosity. But if such a calamity does occur none will identify more clearly its creators and originators. The men who will have brought famine to Europe will be the same men who have brought fire and slaughter to Poland, to Norway, to Holland, to Belgium and to France. Against all of Hitler's prophecies there stands another prophecy that throughout the ages has never failed to come to pass. Sooner or later sure retribution will overtake the tyrant who defies the law of God and man. Until that retribution comes to undo the wrong done by the guilty, the peoples of the British commonwealth will continue to face every ordeal with fearless eyes and unflinching courage.
With reference to the destiny of Canada all I wish to say is that the destiny of Canada will be determined not by Hitler, not by Mussolini nor by any combination of aggressors, but by the free will of the people of Canada in accordance with their tried and traditional loyalty.
Hitler has spoken of peace and of a new social order. He has done so, however, in accents of war. He has chosen to talk about negotiations in the language of domination. Let me say that the mind that is capable of conceiving thoughts of wholesale destruction and complete annihilation is not a mind that is capable of envisaging either concepts of justice or the blessings of peace. Least of all is it able to build "a new social order and the finest possible standard of culture", as Hitler claims has been his intention. The peace that will finally come to the world will be the peace that the free men of the world desire and understand, a peace that their sacrifices have won. It will not be a German peace. It will not be that false nazi peace where men move amid the hushed suspense of fear in the presence of the spy, the gangster and the Gestapo. Above all, it will never be a peace based on a conception of the subordination of individual personality to the control of the materialistic and warlike state. It will

Canada's War Effort
be a peace which will reestablish liberty and affirm the rights of men. It will be a peace under which men and women can speak the truth in their hearts and live their lives without fear; a peace in which labour will have dignity, religion will have freedom, and little children will have security.
The nations of the British commonwealth no doubt have had many failings, but they have loved and honoured justice and mercy. To-day they do not fight for power, they do not fight for the preservation of any form of government; they fight the battle of mankind. The battleground has moved to the very home of freedom itself. There and now the great qualities of the people of the British isles shine more brightly than ever. The invasion of those islands will be the invasion of the sanctuaries of all free men. Their invader is our invader. Canadians are prouder than ever to share with the men and women of Britain the rigours of the conflict, and to stand shoulder to shoulder with them in the defence of political freedom, social justice and human liberty.


Hon. R. B. HANSON (Leader of the Opposition):: I am glad, Mr. Speaker, that the Prime Minister (Mr. Mackenzie King) has made this declaration. We in Canada have read with horror and dismay the declaration of the intention of the dictators, and I am sure the public will welcome this declaration by the Prime Minister of Canada.



BUSINESS OF THE HOUSE


Richard Burpee Hanson: I desire to make a few brief observations at this point, with the permission of the house, with respect to certain things which I think should be discussed in this house before prorogation.
Over the week-end it was announced by the Department of National Defence that Major General Crerar has been appointed chief of the general staff, displacing General Anderson, who is to become inspector general for central Canada in place of General Ashton, retired. I make no criticism of this change, which I think was generally expected when it was announced that General Crerar was returning to Canada to become vice-chief of the general staff. The only comment I think I should make is that the announcement came more rapidly than was generally anticipated.
I rise, however, to make a request of the ministry. This house will prorogue in about two weeks, unless the government decides not
to prorogue but to adjourn for a period of time; and that is what I think should be done. In my view parliament should not prorogue but should stand adjourned until a definite date, which should be anticipated in case any great national emergency, such as an invasion, should arise. But whether the government decides to prorogue or adjourn, before the house rises opportunity should be given for a general discussion of the government's war effort. I do not think there would be full opportunity under the general estimates. Something more is required.
We have had a cabinet reorganization, such as it is. We have had a number of press releases from the government, including a number from the Minister of Munitions and Supply. A recent one dealt with the setting up of the five companies recently organized and wholly owned by the government, and their purpose. Then on Monday, July 8, in announcing the shuffle in the cabinet, the Prime Minister gave a long tabulated list of the war set-up of the government. Still later, on the 18th of this month, he announced the set-up in his own office, including a statement defining the duties of Mr. Brockington.
Notwithstanding all this machinery announced by the government, however, strangely enough the country is without any definite and concrete statement of what it is actually doing and what is its war effort. From time to time we have announcements of huge contracts being awarded, of vast financial obligations incurred; but, after all, no one has told the house and the country just what are the concrete results. We are always being told what the government proposes to do. We are never told what the performance is. On paper the proposals look impressive, but it is results that count.
During the last two or three weeks, in fact since July 8, I have refrained from making any demand upon the ministry for information; but two weeks have elapsed and nothing but the merest platitudes have been given out by the ministry through the medium of the press, while nothing has been given in the house. How many divisions are to go overseas? What is the production of war supplies and material? What progress, if any, has been made in the construction of tanks, of big guns, of motorized equipment, of munitions? I have been given in confidence by the Minister of National Defence a statement of Bren gun production. I am not at liberty to divulge it, and have not done so. All I can safely say is that it is not impressive. It may be up to the schedule of a peace time programme, but Canada is at war; and what may be satisfactory in peace time is not good enough in war time. Then there is the question of the defence of our Atlantic coast.
Canada's War Effort

These are but samples of the thoughts which are surging through my mind and through the minds of the people of the country, who after all are paying the bills. The Prime Minister and the members of his government apparently are content, having made our war effort the prerogative of their own party, to keep within their own bosoms the story of our war effort, of our performance as distinguished from promises. There may be a reason for this silence, this secrecy; I do not know. I am no longer given any information by the ministry, though I think I am entitled, as a matter of right, to know what is going on, as I made clear on a previous occasion, for my own guidance in the house. That information has been denied to me.
In view of that fact I am constrained to demand that the situation be clarified and remedied. We began ten months ago in a feeble way. The first nine months of our war effort was pitiful. Not until events began to happen in the theatre of war did the ministry apparently wake up to the seriousness of the siuation. It was not until the middle of June, just a little over a month ago, that any results were apparent. Since then, and then only, has Canada been getting into her war stride. There have been changes at national defence headquarters. I am agreed in those changes. The minister, too long delayed at the Department of Finance, has had an opportunity to review the position. The time has now arrived when the ministry should take the house and the country into their confidence and tell us just what is the position. We have been without information too long. I invite the ministry to do so this week; in any event before we depart for our homes, which will be within the next ten days.
It may well be that the ministry will decide that they cannot, with safety to the state, give publicly all their plans. But there are some things which can and should be made public, and as soon as possible.
One important thing is in my mind. We passed recently the national resources mobilization bill. Under this bill, and under another bill passed subsequently, we delegated to the new ministry of war services the duty and obligation of setting up and defining the terms under which men are to be drafted for service in the defence of Canada. This is a great power to vest in any one minister. Before this house adjourns, those regulations should be laid on the table so that we may have the opportunity of examination and discussion. I do not want this house to adjourn without this opportunity, and it should not be denied to us.

So far we have only had a brief statement of the principles to be followed. These principles may or may not be followed. Some other principles may be set up which would not be satisfactory. In any event, we should and must know what the regulations are. It will not do to withhold them until after our departure, and I demand that they be tabled. Any good draughtsman, with the legislation before him, with the provisions of the Militia Act, with the experience of the last war, with the provisions of the English act before him, could draft these regulations in two days. Has this been done? So far we do not know; but it should be done and the result placed before the house and the country.
With respect to those matters which are secret, or which it may not be in the public interest, in the interest of the safety of the state, to reveal, I suggest that if such matters cannot be openly discussed, then we should have a secret session of the house. Generally speaking I am not in favour of secret sessions. I believe everything should be open and aboveboard. Let the light of day in upon matters and they will become clear. That may not, however, be the wisest course in war-time in respect to those matters which have to do with our home defence. If the government on its responsibility will say that the information in relation to such matters as home defence and kindred subjects cannot be revealed publicly, I would not question their judgment.
But I do think they could trust the members of this house. After all, we were elected, among other things, to carry on Canada's war, albeit under a party government. We have a definite responsibility to the public which sent us here, and if we are to discharge that responsibility we should know what is proposed.
I therefore invite the ministry to make available to the house publicly the present status of our war endeavour, and with regard to those portions of that effort which are secret and confidential, then I ask the ministry to decide and make the whole known to us in a secret session of this house, in order that we may be informed and take such intelligent action, or to refrain from action and criticism, as patriotism, loyalty, good judgment and common sense shall dictate.


William Lyon Mackenzie King: Mr. Speaker, with the
suggestion of my bon. friend the leader of the opposition (Mr. Hanson), that before prorogation the house should have a statement on the part of the ministry with respect to Canada's war effort, something in the nature

Canada's War Effort
of a comprehensive review, I am in entire accord; and I am sure my colleagues are equally in accord. I believe they have a desire to see that a more or less comprehensive statement is given of what has been achieved and what is being undertaken.
However I cannot agree with my hon. friend when he says that the country is not aware of what is being done. The truth of the matter is that from week to week, if not from day to day, the country has been given information on some particular aspect of Canada's war effort, from some department of the ministry. It may be that the information being given in this manner, scattered over periods of time, the sum total of, or the complete results are not as apparent as they would be if set forth in a collective or all embracing manner. As a matter of fact the administration had intended that when the estimates for the Department of National Defence were being considered in the committee of .the whole, an opportunity for such a review would be given and availed of. I believe I may promise my hon. friend, the leader of the opposition, the government will be only too pleased to give to the house the kind of statement which I believe he has in mind.
The leader of the opposition said that the government had taken, as the prerogative of its own party, the carrying on of Canada's war effort. I do not believe that that statement is wholly accurate. In fact, as my hon. friend knows, I have gone out of my way to try to find some means whereby we could make clear to hon. gentlemen opposite that we were prepared to share with representatives of their different groups not merely the responsibility, but the power which necessarily goes with the direction and carrying on of Canada's war effort. The replies received to my overtures made it clear I think that of necessity, not as a special prerogative, the government, as the party returned to power in the recent general election, must take the responsibility to carry on the war effort, and to carry it on in accordance with our usual constitutional procedure.
Speaking at the time the leader of the Social Credit group said that his party would not wish to share any responsibility with a government carrying on Canada's war effort upon the present financial basis. He pointed out that if he were to be associated with a ministry carrying on the war effort, that ministry would have to have a wholly different financial system upon which to administer the affairs of the country. So I would assume that if we were to suggest that he enter what might be
called a union government he would find it impossible to come in, on that score.
Then, my hon. friend the leader of the Cooperative Commonwealth Federation said that he and his party had been elected to expound a certain economic system and philosophy in this house, an order of socialism-and I believe he used that word, and by nodding his head he appears to approve what I say. He pointed out that he would feel that they were bound to support those doctrines, and to have colleagues support them, if they were to become merged in a government which would be in the nature of a union government.
Then, finally the leader of the opposition stated that he had been elected to oppose the government, and that for that reason he did not feel that he or his colleagues could be expected to enter anything in the nature of a union government.
I take no exception to the points of view expressed by hon. gentlemen opposite, but what I would point out to them is this: When they speak about the administration placing party before war effort, of seeking to govern by rule or virtue of party, they are all open to this veiy criticism, in view of the positions they have respectively taken. They have each stated in their own respective ways that to them their respective parties, and the principles for which their parties stand, are the principles they are here to support; and that inasmuch as those principles differ from the principles of the government they would not be prepared to enter into a union government administration, even for the purpose of carrying on Canada's war effort.
Much was said at the time of which I speak about the embarrassing position in which members of the opposition might be placed if, as was suggested, they were to become associate members of the war committee of the cabinet. It was said that being placed in such a position would mean responsibility without power. My conception of it was quite the opposite. It was an offer to give to hon. gentlemen opposite a measure of power, without responsibility. I say that because I made it clear that with respect to whatever might be considered in the war committee of the cabinet, they would have a voice equal to that of the other members who might take part in discussions, and that in presenting their points of view they would be in a position to make suggestions, to give advice and counsel and to press their views on any matter connected with Canada's war effort. I pointed out that while all that was true, the final word or the final responsibility would have to rest with the government. I made it equally clear that that responsibility would be taken by the government, and that we would not expect any
Canada's War Effort

measure of responsibility to be assumed by the associate members, other than such as hon. members associated in any great work would feel it necessary to assume. I made it clear that notwithstanding their association with the war committee of the cabinet they would be free to criticize the administration, as they might wish.
I mention these facts only because my hon. friend has referred to an effort by this party to carry on the war effort, as its prerogative. We are carrying it on-not as our prerogative, but as our duty, just as my hon. friend has said that he desires to carry on his duties and responsibilities as the leader of the opposition, duties and responsibilities second only and in many respects quite as important as those carried by members of the government.
While I am speaking I might perhaps say a word as to the work of the remainder of the session. As the leader of the opposition has intimated, there is not only a general desire on the part of hon. members to have the work of the present session wound up within the course of the next few days, but equally there is a belief that this should be possible. I wish it distinctly understood that so far as the government is concerned we are not going to seek to apply pressure to hon. members to end discussion or endeavour to prevent discussion. What we should like is to have consultation between the whips in order that the matters which it is desired to have discussed may be brought up as soon as possible, and other matters, not so pressing or relevant, left until toward the end of the session.
The leader of the opposition has asked me to give him a statement of the additional bills likely to be introduced this session. I have in my hand what I believe is a complete list of all further proposed legislation. Hon. members will see that this is not of a character likely to occasion a prolongation of the session. First, there is the Canadian National Railways financing and guarantee bill. This is an annual bill to provide for the capital expenditures of the Canadian National Railways for the current year. There will be a bill to amend the Tariff Board Act. This is simply to provide for a reduction in the salary of the chairman of the board. There will be a bill to amend the Prairie Farm Assistance Act, 1939. There will be amendments to the Canadian Wheat Board Act, and a resolution to provide for 'the ratification of a trade treaty between Canada and the Dominican Republic. There will be what is designated as the compensation (defence) bill, 1940. This will have to do with compensation for ships, space on ships or aircraft requisitioned or taken over for defence purposes. I understand there are 
supplementary estimates, but not of any proportion. With what is on the order paper, this proposed legislation gives a complete picture of what remains to be done during the balance of the session.
As a means of hastening the date of prorogation, I had thought of placing to-day on the votes and proceedings a notice of motion to begin morning sittings on Thursday of this week. I will have the notice placed there and hon. members will have an opportunity of considering it in the meantime. May I say to those hon. members who have not been in previous parliaments that I do not think I have been in a parliament when it was not found both advisable and necessary at the end of the session to have morning, as well as afternoon and evening sittings, if the business of parliament was to be wound up within a definite time. If there is a desire to prorogue at an early date, the commencement of morning sittings during the present week should enable us to conclude the business of the present session, if not this week, at least in the early part of the following week.


Richard Burpee Hanson: Would the Prime Minister consider my request that regulations issued under the mobilization act be tabled prior to prorogation? I do not ask that he give a definite answer now, because he will probably want to consult with the department, but I think we should know to-morrow whether we are to get these before parliament prorogues.


William Lyon Mackenzie King: I shall have a word with my colleague immediately concerned, and if possible I shall give my hon. friend an answer to-morrOw.


Mr. M. J. COLDWELL (Rosetown-Biggar):: Mr. Speaker, there is nothing before the house, but perhaps I may be permitted to endorse the viewpoint of the leader of the opposition. We feel that something more than a statement of what the government is doing is needed before prorogation or adjournment occurs. While we dislike the idea of secret sessions, we are in accord with the suggestion that an opportunity be given to discuss frankly and freely certain matters which we have hesitated to bring up in connection with Canada's defence effort. May I just say to the right hon. gentleman who referred to me a few moments ago that when I spoke of our endeavour to advance a particular philosophy, that was done in reply to a suggestion which had been made in the province of Saskatchewan by members of the Liberal party. I quote from my own remarks as reported on page 1521 of Hansard of July 11:
*-one of the aims of the Liberal party was given as the annihilation of communism, nazism,

Questions
fascism and socialism. Consequently it would be manifestly impossible for those of us who hold the point of view of the socialist leaders who now constitute so large a part of the British government to associate ourselves with those who intend to destroy the very philosophy which we hold.
Again I desire to endorse the suggestion of the leader of the opposition that we be given an opportunity of discussing Canada's defence problems, in such a manner that we shall not be giving information or be charged with giving information to the enemy. And I think that we should adjourn rather than prorogue.



RAILWAYS AND SHIPPING


Hon. J. L. ILSLEY (Minister of Finance) moved:: That items numbers 445, 446, 458, 459 and 460 of the estimates for the year 1940-41 be referred to the committee of supply.
It will be recalled that on Friday last a report was presented to the house by the standing committee on railways and shipping. At that time you, Mr. Speaker, gave a ruling to the effect that that report could not be referred to the committee of supply, but that the estimates referred to therein should be so referred. Accordingly I am making this motion.


[Stage Direction]
Motion agreed to.


[Stage Direction]
Bill No. 105, for the relief of John Bernard Hughes.-Mr. Bercovitch.
Bill No. 106, for the relief of Annie Block Smilovitch.-Mr. Bercovitch.
Bill No. 107, for the relief of Charles-Auguste Armand Lionel Beaupre.-Mr. Abbott.
Bill No. 108, for the relief of Albert Lennox Brown.-Mr. Bercovitch.
Bill No. 109, for the relief of Talitha Emily Findlay.-Mr. Graydon.
Bill No. 110, for the relief of Joseph Armand Odilon Boucher.-Mr. Factor.
Bill No. Ill, for the relief of Doris Bertha Schwartz.-Mr. Cleaver.

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

Mr. HANSELL:: 1.	How many loans were made to Germany by or through the Bank of England and/or any
other bank in Great Britain from 1932 to the present time, and what is the amount of each loan?
2.	How many loans were made to Germany by or through the Bank of Canada and/or any other bank in Canada from 1932 to the present time, and what is the amount of each loan?


Mr. ILSLEY:: 1.	No information.
2.	We have no information that any such loans have been made. In so far as the Bank of Canada is concerned, no authority for such loans exists under the Bank of Canada Act.
mobilization act


Mr. ROY:: 1.	Will all men called up under the mobilization act be retained on service for the duration of the war in the territorial forces for the defence of Canada only?
2.	Will the government authorize propaganda among these men for voluntary enlistment for overseas service?
3.	If so, what measures will be taken to protect the men against excess of zeal and all kinds of intimidation?


Mr. POWER:: 1.	The Mobilization Act speaks for itself.
2.	I do not know what plans have been made to encourage propaganda, but there is no reason why there should not be any propaganda.
3.	If this question means what I think it means, it should not be on the order paper.


RAILWAY RATES TO SOLDIERS ON LEAVE
Mr. FRASER (Peterborough West):: 1.	What railway rates are granted to men and women enlisted in the defence of Canada who are returning to their homes on monthly leave to visit their families?
2.	Do the railway rates exceed one cent per mile?
3.	Would the government consider free railway rates over the government owned Canadian National Railways for men and women enlisted in the defence of Canada who are returning to their homes to visit their families and who can show monthly leave passes?


Mr. CARDIN:: 1.	National defence forces going on leave are granted round-trip tickets at one-way fare.
2.	Yes.
3.	The government has no authority to establish free or reduced railway rates. Such rates are established by the railways themselves, subject to the approval of the board of transport commissioners, which, as provided by the Railway Act, is the sole regulatory authority.
Questions



NEW GLASGOW-THORBTJRN, N.S., MAIL CONTRACT

Mr. BLACK (Cumberland):: 1.	Were tenders recently called for a contract for mail delivery between New Glasgow and Thorburn in Pictou county, Nova Scotia?
2.	If so, what persons tendered, and what was the amount of each tender?
3.	Which tender, if any, was accepted?
4.	If tenders were not called, with whom was the contract made?
5.	Was the contract let to the party who operated the said mail delivery under the contract wdiich recently expired? If not, why?
6.	What was the price paid to the said party who operated under the contract which recently expired?
7.	Did the said party make any offer to renew the contract which recently expired? If so, at what price?


Mr. MULOCK:: 1.	Yes.
2.	Sadie L. Macintosh, Thorburn, $354; A. J. Macintosh, Thorburn, $360; Frederick McKay Johnstone, Thorburn, $425.
3.	Frederick McKay Johnstone.
4.	See answer to No. 1.
5.	No. Both A. J. Macintosh, the old contractor, and his sister Sadie L. Macintosh, who acted as his courier were guilty of political activity while carrying the mails. It was, therefore, not considered to be in the public interest to award the contract to either of these tenderers.
6.	$325 per annum.
7.	He tendered at $360 per annum.



GERMAN PRISONERS OP WAR

Mr. BRUCE:: 1.	Have German prisoners of war or internees been housed in the Calydor sanatorium at Gravenhurst?
2.	If so, what rental is being paid for this building ?


Mr. CASGRAIN:: Mr. Speaker, I think this question should be dropped; it is not in the public interest to answer it.


Richard Burpee Hanson: Of course it is a well known fact that a good deal of this building is being used for that purpose, and all the hon. member seeks by his question is official confirmation.


Pierre-François Casgrain: It is not in the public interest either to confirm or to deny the statement.


Mr. POWER:: The question may be said to have been answered by the hon. leader of the opposition (Mr. Hanson).


Richard Burpee Hanson: The
answer is yes, but that does not answer the question as to the rental paid for the building.
[Mr. Cardin.)



WHEAT-BRITISH BIBS

Mr. PERLEY:: 1.	Did the British government or the British Cereal Corporation, represented by J. Rank, at any time since the 1st September, 1939, make a bid to the Canadian wheat board of 87 cents, Fort William, for No. I northern wheat?
2.	If so, for how many bushels was the bid made?
3.	How much did the Canadian wheat board sell on the bid?


Mr. MacKINNON (Edmonton West):: 1.	No.
2.	Answered by 1.
3.	Answered by 1.



WHEAT-SALES TO BRITISH GOVERNMENT

Mr. PERLEY:: How much wheat of all grades has the Canadian wheat board sold to the British government since September 1, 1939?


Mr. MacKINNON (Edmonton West):: The Canadian wheat board has sold no cash wheat direct to the British government since September 1st, 1939. The direct sale of futures, amounting to 50 million bushels, was previously announced in the House of Commons. The balance of the very substantial purchases made by the British government has been made through the established channels of the trade.



WHEAT-HOLDINGS IN CANADA FOR BRITISH GOVERNMENT

Ernest Edward Perley: How much wheat of all grades is held by or on account of the British government or the British Cereal Corporation in all positions in Canada, (a) interior terminals; (b) western terminals; (c) eastern terminals, as up to July 15, 1940?


James Angus MacKinnon: We have no information on the wheat holdings of the British government in this country.



WHEAT-REPORTED OFFER OF GIFT TO BRITISH GOVERNMENT

Mr. PERLEY:: 1.	Has the government, through the Canadian wheat board, made an offer of a gift of wheat to the British government?
2.	If so, how much?


Mr. MacKINNON (Edmonton West):: 1.	No.
2.	Answered by 1.

Motions jor Papers,



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. DIEFENBAKER:: What is the total number of enlistments for all services to date, (a) throughout Canada; (b) in each province?


NATIONAL DEFENCE-BUILDING OF WOODEN VESSELS
Mr. ROY:: 1.	Does the Department of National Defence or other department concerned intend to order the construction of wooden vessels from Gaspe ship builders as suggested by them?
2.	If so, when will tenders be called for?


Pierre-François Casgrain: Return tabled.


NATIONAL DEFENCE-OFFICER PERSONNEL
Mr. LACROIX (Quebec-Montmorency):: 1.	What is the number of officers, (a) French
Canadians, (b) English Canadians, in the following branches having charge of the army administration:	(1) branch G (general staff) ;	(2)
branch A (adjutant-general); (3) branch Q.M.G.
(quartermaster-general);	(4) branch M.G.O.
(major-general ordnance) ?
2.	How many promotions have been made since September 1, in the different departments already mentioned, (a) among French Canadian officers, (b) among English Canadian officers?


Charles Gavan Power: Return, tabled.


NUMBER OF CIVIL SERVANTS EMPLOYED IN
[Stage Direction]
1938, 1939 AND 1940 Mr. McGREGOR:
1.	How many civil servants, both temporary and permanent, were in the employ of the dominion government during each of the years 1938, 1939, and how many as of July 1, 1940?
2.	What amount was paid to such civil servants during each of the above years?
James Angus MacKinnon: Return tabled.



MUNITIONS AND SUPPLY-BREAD FOR TRENTON AIRPORT


Mr. HATFIELD:: For a copy of all correspondence, letters, cablegrams, memoranda and other documents exchanged between the British government and the Canadian government, or any department thereof, relative to the lifting of the embargo against Canadian potatoes entering the United Kingdom since the year 1935 to date.


GRANTS IN AID TO NEW BRUNSWICK
Heber Harold Hatfield: For a copy of all special grant-in-aid agreements between the province of New Brunswick, and any department thereof, and the federal government, and any department thereof, for the fiscal years 1936-37, 1937-38, 1938-39 and 1939-40.


FARM LOAN BOARD-S. T. SHABBITTS
Mr. NICHOLSON:: For a return showing:
1.	An itemized account of the expenses of S. T. Shabbitts, an employee of the farm loan board, for the period January 1 to May 31, 1940.
2.	The number of inspections made by S. T. Shabbitts in each month of the period January 1 to May 31, 1940.


PRIVATE BILLS
[Stage Direction]
The house in committee on Bill No. 32, to incorporate Pool Insurance, and recommending that the title be changed to "An act to incorporate Pool Insurance Company"- Mr. McNiven-Mr. Macdonald (Brantford City) in the chair.
Section 1 agreed to.
On section 2-Provisional directors.
Richard Burpee Hanson: May we ask the sponsor of the bill to make clear just what the amendments were that were made in committee? While I am on my feet may I suggest to the hon. gentleman that we should have something in the name of this company to indicate that it is a limited liability company. There is no reason in the world why the word "Limited" should not be added to the name of the company. There are two schools of thought about this matter. Under the British practice, and I think under the Canadian practice in all the provinces with the possible exception of Quebec-my learned friend who is visiting me at the moment (Mr. Power) will confirm or correct me-there is in the name some word indicating to the public that it is a limited liability corporation. In the United States
Pool Insurance Company

they use the word "incorporated", and in England and under the federal jurisdiction here they use the word "limited". In nearly all the provinces, with the single exception, I believe, of Quebec, they use the word "limited" or "incorporated". I think my hon. friend would do well to accept my suggestion and add the word "limited" to the name, for the protection of the public.
One other thought in connection with this bill. We are getting into a socialistic state in this country when we set up a company of this kind which will eventually, I suppose, take over fire insurance and all the other types of insurance set out in section 6 of the bill. It may save time if I deal briefly with this question at this time.
There are twenty^six lines of this bill designating all the different forms of insurance contract which may be effected by -this company. We must remember that this is a pool company, and that if they are allowed to go into this class of business as distinguished from the ordinary operations of a grain pool, it is just a step further to go into every class of business in the country, and that is socialism. I should like to page my hon. friend the member for Ontario (Mr. Moore) who is the chairman of the banking and commerce committee and have -him express his opinion in this chamber as to setting up companies of this kind. We have in Canada old established fire and other insurance companies doing business. They serve the country reasonably well. There is competition between them- not so much, perhaps, as one would like to see, but it is an established business, and if you are going -to authorize cooperatives to enter into all kinds of business, of course that is just socialism. Have we reached the stage in Canada where that is either necessary or desirable? I put that question to hon. members. I do not think it is desirable. I believe -that there should be some limitations on the powers of a company like -this to carry on all kinds of fire insurance. I am not going to question the bona fides of the promoters of this measure, or their ability to carry on the class of insurance contract which they contemplate carrying on, although I should feel very much safer as far as my real estate was concerned if it was covered by a policy under an old line company.
These are some of the things which I think should be mentioned on the floor of this chamber in connection with such legislation as this. I should like to know whether the government -has a policy in connection with matters of this kind. What does the superintendent of insurance think about this sort of thing? I am not in a position to say, because I have not been able to attend the

sessions of the banking committee, much as I should like to go to them. One of the most interesting parts of the whole work of parliament is to attend on important bills before the banking committee.
Of course, if the government gives its blessing to this type of legislation, to the class of corporation which is being set up under it, I do not know that I can stop it, but it savours to me of socialism. Are we about to enter into a socialistic state in Canada in regard to business? Well, not with my consent, at all events-a feeble voice, perhaps, crying in the wilderness. I am not ready for this class of thing, and I do not believe many of us are ready for it. Is there not such a thing as the encouragement of private business in this country? Is the profit motive so bad that we are going to put it out of business? I do not think that it has served us badly in the past. If this thing goes on and becomes successful a great many fine citizens in the western country will be -put out of business. The house should pause before it puts its imprimatur on this kind of thing. I invite discussion of this measure by hon. members, and certainly I invite from the Minister of Finance a statement of the attitude of the insurance branch, which he represents here, -and, in a general way, -of the policy of the government.


The ACTING CHAIRMAN (Mr. Macdonald, Brantford City):: Before there is any furthel discussion, may I draw to the attention of the committee the fact that I neglected to notice that there is a slight amendment in line 16 of section 1, the word "company" being inserted after the word "insurance". The clause thus reads

I start with line 15:
... in the company are hereby incorporated under the name of "Pool Insurance Company", hereinafter called "the Company".
Shall section 1 as amended carry?


Thomas Miller Bell: The leader of the opposition suggested that there might be some discussion of the principles involved.


Angus Lewis Macdonald: We have been discussing section 2. I wonder whether we could revert to section 1-


Richard Burpee Hanson: Yes, please.


Angus Lewis Macdonald: -and carry section 1, and then proceed to section 2, the section which the leader of the opposition was discussing. Shall section 1 as amended carry?


Mr. SLAGHT:: Mr. Chairman, in committee I opposed this bill, and I desire to oppose it in this chamber. I adopt the reasons which

Pool Insurance Company
the leader of the opposition has offered, and suggest to the committee that it is an entirely dangerous principle to incorporate the nine gentlemen enumerated in section 1, all of whom are declared to be farmers. I am sure the committee will acquit me of the suspicion of any direct or indirect reflection upon the farmers of Canada or upon these worthy gentlemen who seek to enter the insurance business. But if you will look at section 6 of the bill you will find that these nine farmers are to be incorporated to carry on some twenty-eight types of insurance, including accident, automobile, aviation, bond, burglary,-in fact, as I read it, practically every known type of insurance other than life. Now they seek power, and they declared in committee through their counsel that they desired to be empowered, to extend their business activity from the western provinces, in which these pools are situate, to cover all of Canada.
The superintendent of insurance, who was present, in answer to a question I put to him, told us that operating in the immediate field in western Canada, where this company primarily intends to operate, there are probably two hundred insurance companies now writing business. They all have shareholders, many of them Canadian shareholders, and they have set themselves up with capital to carry on insurance of the kind which has been useful to the west in years gone by, with an overhead which is very considerable having regard to the business carried on. And with the intimate membership in these various pools of the insurable people in the west it must be granted that this company, if we give it these broad powers, would probably get the bulk of the insurance business in western Canada, thereby shutting out the companies at present operating there and thereby causing them to raise their rates to those of us who do not live in western Canada.
Have these gentlemen shown any knowledge of the business they ask us to authorize them to undertake? Have they indicated-I am not aware of it-any capacity to deal with the intricate business problems, actuarial and otherwise, which are involved in the carrying on of these twenty-eight types of insurance? If they seek to invade the rest of Canada, as against the companies which, through good times and bad, have been doing that business there and which recently have come through a depression in which their investments have undoubtedly suffered, should we throw into the hands of these gentlemen what is so far as the western provinces are concerned practically a monopoly which will operate at all
events close to infringing the provisions of the criminal code relating to combines? I ask the committee whether we should lightly clothe these men with power of that kind. It seems to me we should pause and inquire whether there is any call for additional insurance companies in Canada, whether the state of finances of the companies which have been giving this insurance service in Canada over a period of years is such that we ought to empower any group or class to combine practically to eliminate them from the field of western Canada, with the results I predict.
It seems to me that the bill is wrong in principle. Those who want to invade the cooperative field, forming their association in their own combined way, should not be entrusted with such extraordinary powers as this bill, along with the insurance act, will give to them-powers of investment of their funds and that sort of thing-unless they demonstrate to parliament their capacity to operate the particular kind of business for which they seek this special charter. Why do they not incorporate themselves under the provisions of the general insurance act? Or why do they not secure one or more charters to carry on the types of business which they seek to carry on? I am subject to correction, but I know of no single insurance company in Canada that has authority to cany on the twenty-eight types of insurance covered by this bill.


Mr. McNIVEN:: In that regard I am informed, and Mr. Finlayson so informed the committee, that section 6 is a reproduction of the model section which for years has been used in the incorporation of insurance companies in the House of Commons.


Arthur Graeme Slaght: If that be so I venture to say the superintendent of insurance would also hold the view that it is a dangerous thing to give to one particular class a special privilege of this kind to invade a field which in the past has been operated in by companies with large capital. It seems to me the question is worthy of careful consideration.
Look at section 7. The amount of capital which this new company is required to place behind its obligations is divided into various amounts allotted in respect of the different types of insurance.
For example, the amount they are obliged to subscribe and pay in in order to conduct automobile insurance throughout the whole of Canada is only $20,000. Is there any real security to a policyholder who holds an automobile insurance policy in a company operating clear across Canada when the capital stock behind that policy may be no more than $20,000?
Pool Insurance Company


Donald Alexander McNiven: The hon. member creates a wrong impression when he suggests that the only asset available for the carrying on of automobile insurance is a paid-up capital of $20,000. The initial capital of the company must be $250,000 with $125,000 paid up. As they undertake each branch of business enumerated in that section, additional sums of paid-up capital are required, so that the additional sum plus the initial sum is available for each branch of business earned on by the company. May I add that Mr. Fin-layson explained to the committee that sections 6 and 7 are merely reproductions of the model bill which for many years has been in use for similar companies in the House of Commons and the Senate.


Arthur Graeme Slaght: Well, some models become obsolete very rapidly. Accepting the explanation the hon. member has been kind enough to make that in addition to $20,000 for automobile insurance there would be behind the policy a pro rata portion of the paid-up capital of $125,000-


Thomas Miller Bell: The whole of it, not pro rata.


Arthur Graeme Slaght: Then what would be done about the other twenty-seven types of insurance?


Thomas Miller Bell: More capital would be put up each time.


Arthur Graeme Slaght: Yes, there is an added
provision, but let us see how much security there is behind the paid-up capital of $125,000 which can be fairly allocated to the item of automobile insurance. Twenty-eight types of insurance, with various amounts to be subscribed in addition, only two of which are less than $20,000, divided into $125,000 paid-up capital would give you less than $5,000.


Thomas Miller Bell: But they are not doing that business; they do not propose to do all these things. This is just the usual clause.


Arthur Graeme Slaght: Then let us give the nine gentlemen skilled in agriculture the power to do only what they do propose to do. Why give them a blank cheque to venture upon the dangerous sea of all kinds of business?


Thomas Miller Bell: Would the hon. member apply that observation to Sir Herbert Holt?


Arthur Graeme Slaght: Certainly, apply it to anybody.


Thomas Miller Bell: Well, it has not been so applied.


Arthur Graeme Slaght: I have not the privilege of knowing my hon. friend's friend Holt, but I would say that to some of the criticism I have heard of him I have never heard his

answer. Perhaps he might be better equipped than these applicants to carry on an insurance business. He has had experience in banking. My hon. friend is putting it in a friendly way, but I am pointing out that the pro rata share of the $125,000 you are going to compel these gentlemen to pay, if divided equally among the types of insurance they are asking power to transact, would mean less than $5,000 for each line. If you added $4,900 to the $20,000 you would have something less than $25,000. In other words you are starting men off to run an insurance business on automobiles clear across Canada with a paid-up capital behind those policies of approximately $25,000.


Richard Burpee Hanson: One big
claim would wipe them out.


Ernest Edward Perley: Will not the same practices and customs be followed as are followed by all other companies, including the underwriting of a considerable percentage of their business? All the automobile insurance business could be underwritten.


Arthur Graeme Slaght: I am glad my hon. friend
brought that up. I recall hearing learned counsel representing the promoters tell the committee that they intended to underwrite a great deal of this business. He thought they would underwrite ninety per cent of it, which would leave them doing only ten per cent of the business. In other words the chief promotional interest behind this bill is to become middlemen or brokers or canvassers for insurance.


Richard Burpee Hanson: Or scalpers.


Arthur Graeme Slaght: I should not want to use
the word "scalper," because in some other callings it carries obnoxious inferences; but after all they are not real insurance men and cannot pretend to be.


Donald Alexander McNiven: I know the hon. gentleman would not willingly leave a wrong impression in regard to what counsel said before the banking and commerce committee. He did say that they now have a company operating in Manitoba, Saskatchewan and Alberta, the ownership of which is vested in the three western pools. He said that company at present was writing a certain volume of business out there and was reinsuring about ninety per cent of that business. He further stated that they intended to continue to reinsure their business until such time as the growth of the company and the increase of their reserves warranted their carrying a greater proportion of the business themselves.


Arthur Graeme Slaght: Perhaps my hon. friend may more accurately state the position taken by counsel, but it is on record and can be referred to if necessary.

Pool Insurance Company


Donald Alexander McNiven: Unfortunately that is not so; no record was kept of the proceedings before the banking and commerce committee.


Arthur Graeme Slaght: Then I will take it that
the hon. gentleman has stated the case exactly as it was stated by counsel for the company. They have been carrying on in a small way, underwriting ninety per cent of their business in the past; and for the immediate present they intend to carry on in that way. If their venture into the field of finance and insurance turns out well, they will perhaps some day write fifteen per cent of their insurance and reinsure eighty-five per cent of it, and so on up the scale of financial splendour. But that does not remove the objection I have to the bill, which is admittedly a class bill, concerning a class for whom I have the greatest respect; I have many farmers in my riding. Should we permit them to go into a field unknown to them, so to speak, in which they will compete with long standing companies that have had lean years? Should we permit them, thinking perhaps that we are on the up-grade in the matter of insurance and similar activities in the west, to supplant, because of their capacity for herd insurance, companies whose shareholders throughout Canada are in a sense dependent upon their revenues? And there is the second evil, that if they invade the rest of Canada and wipe out many of the insurance companies at present operating in their own field, the rates will be raised on policies held by shareholders in Ontario, Quebec and the maritimes. In my view it is a dangerous experiment, though I hold the greatest respect for the hon. member who is sponsoring the bill in this house.


Thomas Miller Bell: We have listened to an extraordinary speech from the Liberal benches. My idea of the essence of liberalism is that it stands for the preservation of free competition in a free, competitive society; yet here we have a member rising on the Liberal side and suggesting that a certain group of people are seeking to invade a preserve which is the special privilege of certain people who have been carrying on that sort of business for a considerable length of time, and that therefore we ought to keep out a group of people who wish to embark upon this enterprise. When I heard the hon. gentleman suggesting that a group of farmers could not direct a business of this description my mind went back exactly a hundred years to the story of the Rochdale cooperatives, a group of semi-literate working people in Great Britain who laid the foundations of the greatest cooperative business in the English-speaking world.
I should like to tell my hon. friend that this group of farmers in western Canada have had some experience in the operation of big business; and that even if they had not the experience they could do what other cooperative and mutual societies, and big businesses, have done; that is, hire the brains to conduct the technical operations for them. I have in mind at the moment one of the largest insurance companies operating in western Canada, the Wawanesa Mutual Insurance Company, of Wawanesa, Manitoba; and the hon. member for Portage la Prairie (Mr. Leader) reminds me of the Portage la Prairie mutual as well. These companies were organized by groups of farmers, and to-day they are giving some of the best insurance services that we have in this dominion. As I interjected when the hon. member for Parry Sound (Mr. Slaght) was speaking, after all what does Sir Herbert Holt know of the multifarious businesses which he directs? He is neither omniscient nor, I hope, omnipotent; but at least he directs textile companies, banks, power corporations and mining companies. Yet when a group of farmers come before this house asking for the same rights that we have been giving to various other individuals, we are told that they ought not to invade this field.
I hold no brief for the pools except to this extent, that I believe the time has arrived when the farmers and the common people generally of this country have to look after their own business and cooperate to mind their own business; and this group of farmers in western Canada are endeavouring to do that very thing. The law lays down the conditions under which they must operate. The superintendent of insurance must look into every operation they conduct and oversee everything they do. We have had the same sort of discussion with regard to the proposed Alberta provincial bank. We are told that the Alberta government cannot operate the bank. The people who are directors of the chartered banks to-day do not operate them either. The people who direct the textile industry and power corporations do not operate those corporations. They get the technical advice which qualifies them to do so. And the very fact that we have two hundred competing insurance companies on the prairies and elsewhere in Canada paying commissions of, we will say, 15 per cent or 20 per cent as minimum rates, for the securing of business, shows that to that extent the competition is wasteful. Our farmers, mutually and cooperatively working together, want to save them-
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selves wasteful expenditure, in view of the fact that they are important users of these services.
I contend the time has come when the principle of cooperation must be expanded into ever-widening fields of human endeavour, and that in this parliament we should be encouraging rather than discouraging that sort of thing. I am quite sure that in a few minutes we shall be faced with the suggestion that the pool directors are asking for a monopoly. Cooperation cannot lead to an objectionable monopoly. A monopoly of a service may be left safely in the hands of peoples' cooperatives; but that is a very different thing from a monopoly owned and controlled by a small group of persons whose only interest is the profit they can wring out of it.
I submit that the committee ought to give this measure its full support and thereby allow the farmers of western Canada to conduct this business in their own interests, which after all will be the interests of the majority of people in Canada. Whether we like it or not we must face the fact that the agricultural community is faced with a grave crisis. After the war that crisis may become intensified rather than minimized; we may find ourselves in the position of having to engage in violent competition for the markets of the world. That condition may not develop immediately after the war, but I should expect it in two or three years' time. Consequently anything which will enable the farmers to produce at a lower cost to themselves is in the final analysis an advantage to all of Canada. For these reasons I should like to see this bill accorded the support of this committee.


Arthur Graeme Slaght: The hon. member for Rose-town-Biggar (Mr. Coldwell) has misunderstood the real basis of my objection to the bill.


Thomas Miller Bell: I am sorry.


Arthur Graeme Slaght: He has said that Liberalism tends to throw everything wide open, thereby permitting everybody to compete in everything. Let me illustrate my view in the matter. Take as an example the occupation of teaching. Boards of education set up teaching standards, and those who wish to become teachers in the schools or universities have to educate themselves so to do. They have to pass tests and examinations, and must receive the right to teach. If a teacher were to come to the House of Commons asking for a private bill to place him in the teaching business I should be opposed to it, and I have no doubt the hon. member for Rosetown-Biggar would oppose it too.


Thomas Miller Bell: Quite; but the analogy is not sound.


Arthur Graeme Slaght: My hon. friend says the analogy is not sound. In any case I have stated the gist of my objection to the bill as I should like him to understand it.


Mr. CRERAR:: It was not my intention to say anything respecting this bill, but really I must take exception to the observation of the leader of the opposition that this is a socialist measure.


Richard Burpee Hanson: "Social"- hardly that. I said it savoured of socialism.


Thomas Alexander Crerar: In the discussion which has taken place in the last half hour or so some interesting points have been revealed. It would seem the leader of the opposition regards this as a socialist measure, and suggests therefore that we should be very careful in adopting it. I fail to see where there is any reason for the suggestion that it is a socialist measure.
Here are a group of farmers doing a large business in grain-the most natural thing in the world. They want to provide means whereby they can carry their own insurance. As a matter of fact several years ago the grain dealers in Winnipeg and some elevator operators obtained a charter to create a company to carry the insurance on grain in various places in which it might be found. That effort was never regarded as socialistic. This is the development of a praiseworthy attitude which is entirely opposed to the ordinary conception of socialism. For that reason I believe it should be encouraged.
This is a cooperative effort. These people are not coming to the government asking that it carry their fire insurance. No, they propose to do it themselves, subject to the laws of the country. They come under the insurance laws of Canada, just the same as would any other insurance business in the dominion.
I must confess I was surprised to hear the hon. member for Rosetown-Biggar (Mr. Coldwell) say, in support of the bill, that farmers and others should be encouraged to look after their own business. I fully agree, but that is not the socialist doctrine we have heard from members of the Cooperative Commonwealth Federation.


Thomas Miller Bell: My conception of
socialism is a cooperative society.


Thomas Alexander Crerar: It is not the conception we have -heard from the hon. member for Rosetown-Biggar. For instance, it is not the argument we have heard in regard to wheat.


Thomas Miller Bell: Yes, it is.

Pool Insurance Company


Thomas Alexander Crerar: It is not what we have heard in connection with several other matters. Under this measure the Pool Insurance company are not coming to the government for favours. They are asking power to do business, power similar to that given by the state to others. They are willing to subject themselves to the rules and regulations of the insurance branch. I see no reason on earth why they should not have their charter.
I hope hon. members of the Cooperative Commonwealth Federation will keep in mind what I have said. I will march with them all the way in the creation and development of cooperative effort, but I cannot march with them all the way when they want to thrust upon governments duties which, under our theory of government, it is not the function of government to perform.
I must take exception to the observations of the hon. member for Parry Sound (Mr. Slaght). I do not believe his argument is a sound one. He suggests that if a group of farmers were to create an insurance company to look after their own business they might bring about a form of competition which would be bad for similar business in other parts of Canada. I suggest this is not a valid argument. They can extend their business and see it grow only under competitive conditions. They are not asking for anything which would remove those competitive conditions. If under competitive conditions the business set up by these gentlemen increases. surely that will not be detrimental to the country. I suggest it would be a good thing; consequently in that respect I agree with the hon. member for Rosetown-Biggar.
I commend to the thoughtful consideration of hon. members of the Cooperative Commonwealth Federation, not only in the house but throughout Canada, the statement of the hon. member for Rosetown-Biggar that farmers and others should be encouraged to look after their own business-


Thomas Miller Bell: Yes.


Thomas Alexander Crerar: -and not come asking that the government-


Thomas Miller Bell: Oh, we did not say that.


Thomas Alexander Crerar: -go into every kind of business.


Thomas Miller Bell: I did not say that.


Ernest Edward Perley: May I say a few words in support of the measure? On this occasion to some extent I must agree to disagree with my leader, something which I am glad to say I do not have to do often.
I believe I attended most of the sittings of the committee, where the bill was thoroughly discussed. In fact I was going to say it was thoroughly threshed out. In referring to the bill the hon. member for Parry Sound referred to this type of insurance as "herd" insurance, and I believe he used other agricultural terms. We threshed it out pretty thoroughly. The superintendent of insurance was there. The bill was opposed; I think the hon. member for Parry Sound offered some objections to it, as did the hon. member for Queens-Lunen-burg (Mr. Kinley). But it was also supported, and when a vote was taken it was approved in its present form by an almost three to one vote.
I am not afraid of this legislation should it come into force. I do not think it will result in creating more socialism in Canada or that it will act in a way detrimental to the people of Canada. As the hon. member for Rosetown-Biggar (Mr. Coldwell) has said, it is purely a cooperative measure, and I am glad the Minister of Mines and Resources (Mr. Crerar) has agreed with him to that extent. The counsel who was piloting the bill through the committee stated that for a time they would have to adopt the principle of underwriting a great deal of the insurance, and the hon. member for Regina City (Mr. Mc-Niven), who is sponsoring the bill, has made that quite clear. The bill was discussed in detail in committee and the general practice has been to allow such bills to pass once they have been approved in committee after thorough discussion.


James Lorimer Ilsley: Mr. Chairman, the leader of the opposition invited me to give some indication as to the attitude of the government toward the bill, and particularly the attitude of the department of insurance. The department of insurance has no objection to the bill, in fact it is in favour of it. The government has no objection to the bill. The situation seems to be this: Nearly twenty years ago there grew up a form of insurance company in western Canada which has proved very prosperous. The pools now wish to start a similar company. The main thing from the point of view of the public interest is whether the policyholders are adequately protected. I do not think that we can deny to those engaged in this particular form of the grain business a right which has been granted to private interests generally.
In one of his reports to me on this bill, the superintendent refers to the tendency of persons engaged in business to form themselves into mutual associations for the protection of their own interests. He goes on to say:
Pool Insurance Company

This is not the only case that may be cited of capitalistic groups favouring the organization of mutual insurance organizations for the purpose of reducing their insurance costs. There are the so-called "trade mutuals," such as the hardware mutuals, the mill owners' mutuals, the lumber mutuals, the druggist mutuals and others. Many of the patrons of these mutual insurance companies are quite intolerant of the introduction of the mutual principle into the business in which they are themselves primarily engaged, while viewing with a benignant eye the principle of mutuality when applied to the items raw material and operating costs; as producers they are rightists, as consumers leftists.
He then goes on to report in favour of the bill, based on the decision that the policyholders will be adequately protected. Perhaps I may be permitted to read a few passages from the report of the superintendent of insurance. He states:
That the financial basis of the insurance company is wheat and the company will therefore be financially jeopardized by collapse of the export market for that commodity.
With the first point I dealt in my memoranda of the 17th.
On the second point I have no fears that the hazards of the wheat market will endanger the interests of the policyholders of this company. The premiums paid by policyholders to this company will not be paid in wheat, or in any kind of money other than real money. That money will be invested within the restrictions of the general act, and it will be this department's duty to see that the funds are used only for the legitimate purposes of the company. The claims for losses will be paid in real money and, if at any time the wheat market should collapse, the volume of new business obtainable may thereafter very greatly decrease, but the claims of policyholders in the company will continue to be paid from the reserves maintained, or the business as a whole will be reinsured, using the securities representing those reserves as the reinsurance premium necessary to procure that reinsurance.
The only item in the company's assets which might suffer from a wheat disaster is the uncalled capital of the shareholders. The act provides for an authorized capital of $300,000, with provision for increase to $1,000,000. Before any kind of business can be commenced at least $230,000 of the capital must be subscribed and at least $123,000 paid in cash thereon. (Section 7. subsection (1)). Before any business, other than fire and allied minor classes of insurance, can be undertaken, the subscribed capital must be increased to at least $350,000 and additions made to the paid capital, depending on the class of insurance added. (Section 7, subsection (2)). The present subscribed capital of the provincial company is $200,000 with something less than $100,000 paid thereon.
It is probable therefore that for some time the subscribed capital may be only partially paid and the unpaid balance subject to call. The department, however, has always treated subscribed and unpaid capital as a non-admitted asset so that no account is taken of that item in arriving at the financial standing of the company. It is a useful asset in the event of a temporary emergency but, in the event of
[Mr. Ilsley.l
liquidation, is likely to be of little value. Our experience is that it costs more to collect uncalled capital in liquidation than the amount yielded by the effort.
To illustrate the margin of security available in the event of the reinsurance of the company as a whole becoming necessary, it may be pointed out that the act requires such a company at all times to maintain admitted assets at least equal to 115 per cent of its liabilities to policyholders, including the full reserve of unearned premiums. If the 15 per cent margin is depleted to any extent, it is the duty of the department to see that it is at once made good, failing which, reinsurance may be compulsory. Ordinarily in reinsurance a commission is obtainable from the reinsurer for the value of the business thus acquired and for the goodwill of the agency organization. That reinsurance commission is usually stated as a percentage of the full reserve of unearned premiums mentioned above, and ordinarily that percentage is not less than 25 per cent nor more than 50 per cent of that reserve; a common percentage is 40 per cent. Assuming the lowest rate, it means that while the company maintains assets equal to 115 per cent of its liabilities, it can dispose of the same for not more than 75 per cent of those liabilities. There is therefore a margin of safety in the ordinary case of at least 40 per cent of the liabilities.
The basis of the stability of our insurance companies is that departmental action must be taken before it is too late and while there is a reasonable margin of safety to provide for any reasonable adverse contingency.
I do not know that I need to read any further from the report. So far as the department of insurance and the government are concerned, there is no objection to the bill because it is felt that the interests of the policyholders are adequately protected.


Richard Burpee Hanson: If the
superintendent, in whom I have the greatest confidence, has given this bill his blessing, and the government have no objection to it, I suppose it will go through. I should like to point out that the incorporators are asking authority to transact any and every kind of insurance contract of which I have heard.


Donald Alexander McNiven: Except life.


Richard Burpee Hanson: Cooperative associations are promoting this bill. I am in accord with the principle of cooperation qua the business of the cooperator. I know something about the lumber mutuals and they certainly have been the proper thing in connection with the insurance of mills, especially large mills. They have saved a great deal of money to the policyholders, principally because of the service they have given and the recommendations they have made with respect to sprinklers and the improving of conditions both in and outside the property. When these recommendations are

Pool Insurance Company
made there is an automatic reduction in the premium. All these things are to the good, but they are within the particular industry.
That is the principle upon which the lumber and mill mutuals are carried on, but it is not the case here. I have no objection to these cooperatives carrying on business within their own industry, but what are we to think of a company which asks permission to write earthquake insurance, burglary insurance, falling aircraft insurance, guarantee insurance, inland transportation insurance, inland marine insurance, marine insurance, plate glass insurance, sickness insurance, and so on? It will readily be seen how that request takes this company outside the principle of the cooperatives. I shall not take up any more time except to ask the sponsor of this bill to consider the first suggestion I made, that the word "limited" be added to the name of this company where it appears in line 16 of section 1. There cannot be the slightest objection to that.
My recollection is that when this bill was first introduced the company was to be known as Pool Insurance, and in some place-I assume in the banking and commerce committee-the word "company" was added. I want to go the whole way and to conform to the British practice and the established Canadian practice and let the public who will be dealing with this company know that it is a limited liability company. Certainly that ought to be done so that the unwary insurer will know that he is dealing with a corporation whose ability to pay is limited, and very seriously limited, if they enter into all the different forms of insurance business which are anticipated and which they are capable of carrying on under this bill. I throw out that suggestion and leave it to the sponsor. I am not-going to move an amendment.


Mr. THORSON:: There can perhaps be
no objection to the suggested amendment, but I submit that it is not necessary.


Donald Alexander McNiven: As the sponsor of the
bill, and answering directly the suggestion made by the leader of the opposition (Mr. Hanson), may I say that this bill was first introduced in the senate and was referred to the senate banking and commerce committee, where it was discussed. After the bill had passed through the other place it was introduced here, given a first and second reading, and referred to the banking and commerce committee of this house. This committee during several sessions had the benefit of the opinions and advice of Mr. Finlayson, the superintendent of insurance, and as I understood it, when the particular suggestion of my hon. friend was made, Mr. Finlayson was of the opinion that as this company was subject to the provisions of the Canadian and British Insurance Companies Act, 1932, the word "limited" was not necessary. I find on reference to a number of similar acts passed in previous years by this house that the word "limited" is not specified in any of them. They were all joint stock companies and by the provisions of the general act the word "limited" becomes part of their capital structure.


Richard Burpee Hanson: I do not
understand that.


Donald Alexander McNiven: Possibly for the benefit
of those who are not on the banking and commerce committee it might be advisable to give something of the history of the applicants for this bill.
Reference has been made to the ^ nine gentlemen who are applicants for this incorporation as farmers. These gentlemen are nine of the directors of the three western pools. For a good many years they have been engaged not only in the business of farming but in the marketing of grain through the western pools. The western pools own a lot of property, some 1,800 elevators in western Canada, terminals at Port Arthur, Fort William and Buffalo; and they have other terminals under lease at various strategic points. They also own cottages which have been built beside these country elevators for their employees. They have in the city^ of Regina, for example, a large office building, and another large office building, I believe, in the city of Winnipeg. They have a large number of employees, and for the purpose of looking after the insurance of their property the three western pools set up a subsidiary company, which for years has handled all the insurance on this wide variety of property owned by the western pools, as weli as insurance on their employees, sickness and accident insurance, burglary insurance and employers' liability. So that when these gentlemen come before the house and ask for incorporation as an insurance company they do not come as novices in the insurance business, as the hon. member for Parry Sound would have the committee believe. One year ago they incorporated a company in Manitoba which as a provincial company has been doing business in Manitoba. Alberta and Saskatchewan. That company is managed by the same individuals who for years have looked after the insurance on pool properties.
The pools handle a great deal of grain through the 1,800 elevators which they own. These 1.800 elevators are subject to the Canada Grain Act and must be licensed by the board of grain commissioners. As a con-
Pool Insurance Company

dition of granting the licence the board of grain commissioners insist that the grain stored in these elevators be insured in a company approved by the board. When the western pools proposed the Manitoba-incorporated company as a company for the insurance of the grain in their elevators the board of grain commissioners demurred. The board stated that while they had no objection to the company itself, they would like any company carrying insurance on grain in elevators licensed toy the board to be subject to the supervision and inspection of Mr. Finlayson of the department of insurance of this government. Because of that expression of opinion by the board of grain commissioners, the group which incorporated Pool Insurance in Manitoba has come to this parliament for the incorporation of Pool Insurance Company, intending that this company, when incorporated, shall take over the business now being carried on in Manitoba, Saskatchewan and Alberta by the provincial company.
The hon. member for Parry Sound has referred to the incorporators as if they were mere novices. I think I have established that these men have a background in big business and in the insurance business. As every lawyer in the house knows, lawyers frequently use the names of their office staff as the incorporators of companies. This house has frequently been called upon to incorporate a group of individuals who were merely dummy directors, a screen for the real interests behind the company. But in this respect this particular company differs. The men who are applying for this incorporation are directors of the institutions which intend to invest their money in the company and whose property will be insured in the company once it is incorporated.
The hon. member for Parry Sound also questioned the advisability of incorporating this company on the ground of inexperienced management, an objection similar to that taken by the leader of the opposition. He forgot for a moment the statement of the hon. member for Victoria, Ontario, that 80 per cent of the farm properties in Ontario are insured in mutuals, and the mutuals are largely owned, controlled and managed by the farmers. Yet, when that is true in his own province he would deny the western farmer through the medium of his own organization the right to insure his own property.
In another statement the hon. member was fair neither to himself nor to the people he represents, when he said that there are now two hundred companies carrying on insurance business in Canada and that if this particular

company managed to get a large part of the insurance in the west it would reduce the volume which the two hundred companies would get and thus increase the rates of insurance to people who reside and desire insurance in eastern Canada. Surely he does not intend that these two hundred companies should enjoy a monopoly, that they should perpetuate their rates and their business at the expense of western Canada; and surely he does not express the opinion of the people of eastern Canada when he says that business placed with a western company in volume will result in increased rates by companies insuring properties in eastern Canada, and therefore this incorporation should not be permitted.
Something has been said about a monopoly. The applicants for this incorporation do not desire a monopoly. They are opposed to monopolies. The three western pools own approximately twenty per cent of all the elevators in western Canada, and in 1928 and 1929, in the heyday of their existence, never handled more than half the grain of western Canada. It will be remembered by those who are interested in the organization of western pools that it was once thought an organization could be set up which would influence the price; that is, obtain a higher price for wheat. Since then, world conditions have changed the picture and have demonstrated the impossibility of any western or other organization influencing upwards the price of wheat. Some of those in the western pool have come to the conclusion that, since the price of wheat is fixed by world conditions, organized effort in the future should be centred upon a reduction of the cost of everything which enters into the production of wheat. They are now asking for this measure as a means of reducing the cost of insurance.
The hon. member for Parry Sound expressed regret that the sponsors have asked power to deal with some twenty-eight different branches of insurance. I have examined several insurance acts passed by parliament, and I find that the kinds of insurance which these companies are permitted to write vary in number from twenty-four to twenty-eight. Section 6 conforms with the principle followed in respect of companies incorporated by this parliament for a number of years, at least as far back as 1928.
It is not the intention of this company to branch out at the present time into all these types of insurance. The pools will insure their own properties. Later on, individual members of the various western pools may desire to insure their property in this company. If so, the company has the authority and the power so to do. The provincial company is a member of the Western Canada Underwriters'

Pool Insurance Company
Association, and abides by the rules, principles and practices of that board. It also has with a number of companies reinsurance arrangements which it intends to continue until such time as its reserves are built up to a place where it is safe for it in the interests of its policyholders to carry a greater share of that insurance in the company itself.


Mr. KINLEY:: Mr. Chairman, I opposed this bill in committee, not because I have any quarrel with cooperatives-as a matter of fact I am in favour of cooperatives; I think they should be stimulated and encouraged- but because when cooperatives become monopolies, it seems to me they are entering upon a field which deserves attention from the whole of Canada.
I opposed this bill first because section 10 sets aside the Canadian and British Insurance Companies Act, 1932. In so doing, it affects the independence of directors and creates an opportunity for the interlocking of companies which I believe in this instance, will become an invasion of the Combines Investigation Act. That act defines "combines" as a combination, having relation to any commodity which may be the subject of trade or commerce, of two or more persons by way of actual or tacit contract, agreement or arrangement having or designed to have the effect of-
_ (1) (v) preventing or lessening competition in, or substantially controlling within any particular area or district or generally, production, manufacture, purchase, barter, sale, storage, transportation, insurance or supply.
This bill sets aside in section 10 the general act. It appeal's to me that if people want to come here for legislation they should accept the general act and not ask for privileges.
The set-up of the institutions which are applying for this bill consists of, as I understand it, a wheat pool in Manitoba, a wheat pool in Saskatchewan and a wheat pool in Alberta. These three pools, which were formed for the cooperative marketing of primary products in the west, are combining together to go into the insurance business and to invade secondary business. I believe you will agree, Mr. Chairman, that the foundation-stone of these three cooperatives is wheat. I wonder whether the wheat situation at the present time, as regards the amount we have on hand, our prospects for marketing, and all the conditions surrounding it, is stable enough to base the whole economy of western Canada on wheat, because this is not a small business, it is a big business. I understand that these companies have done
as much as six hundred million dollars worth of business in one year. They have reserves running into millions, and we were told by the solicitor who appeared before the committee that they could not have independent directors of this company because there was no one in that part of the country who had $2,500, which is required under the general Insurance Act to qualify a man as director.


Donald Alexander McNiven: I do not think the hon.
member would like to leave a wrong impression. Mr. Milliken who appeared as counsel in support of the bill did not say that there was no one in western Canada who had $2,500. What he said was that the supporters of the bill, the directors of the pool themselves, were not in a position to put up $2,500 as a condition to becoming directors of the company.


John James Kinley: I thought it was a strange thing for the solicitor to say, but he said they could not find anyone with $2,500.


Donald Alexander McNiven: No, I disagree.


John James Kinley: the proper control of corporation law contained in both federal and provincial statutes. I refer to limited liability, because there can be corporations with unlimited liability, and others with what is known as double liability. Then again there is the individual who takes the responsibilities of his business in his own name. Limited liability was considered a masterpiece of legislation when it was first enacted in England, and no doubt it was the background of Britain's industrial development, but it has grown and developed to such a degree that it has become to-day the vehicle upon which most of the iniquities of big business ride. When we create a company we create another person in law, who can be clothed with great powers and privileges. With the aid of a few friends and some money, those who control that company can create another company or person, and with favourable circumstances continue the operation until they have a number of companies, all doing the will of the creator who controls them. It gives a man the privilege of making a contract with himself. He interlocks the directorates and makes one serve the other and all serve the master mind behind them. Hon. members have all heard of the South Sea Bubble, which was the collapse of big business, causing a scandal such that public opinion was aroused. We are told that the directors were punished by having everything taken from them but their clothes.
Now the pools asking for this incorporation evidently are a combination of those operating in Manitoba, Saskatchewan and Alberta, a large organization doing an immense business, an organization that has been indirectly subsidized by the government of Canada to the extent of millions. This money came from the taxpayers. We are told these companies make no profit; it is incidental to their operation. But in the past I believe that they gambled in wheat futures, with the result that they made losses and gains of great magnitude. Furthermore, when a previous government was holding the wheat of this country these pools were paid rather stiff amounts for the storage of grain. They certainly were making profits and losses. The question is, do the primary people interested get the profits.


Donald Alexander McNiven: The hon. member has made a statement that the western Canada pools gambled in wheat futures and thereby sustained substantial losses. That is quite a serious charge, reflecting upon organizations representative of a large number of people. It is not borne out by the facts, neither is it consistent-


Richard Burpee Hanson: One speech at a time.


Angus Lewis Macdonald: Only with the consent of the hon. member for Queens-Lunenburg has the hon. member for Regina City the right to speak now.


Donald Alexander McNiven: Nor is it consistent with, the story told of the operation of the western pools by Mr. Milliken before the banking and commerce committee. What Mr. Milliken said there was that on three or four occasions the western pools had gone into the market and bought wheat. But they have never sold wheat short. My only reason for interrupting -and I apologize to the hon. gentleman for doing so-is that I did not want that statement to go out-


An hon. MEMBER:: What is the statement?


Donald Alexander McNiven: -that the western pools have been gambling in wheat futures and caused their organizations losses of millions, without a reply and a contradiction being made at the time.


Mr. McGEER:: They are not going to sell insurance short, are they? What has that to do with the insurance business?


John James Kinley: The point I am making is that we are basing secondary business on a wheat economy. On account of world conditions to-day that economy is not in a stable condition, also it is dependent on such factors as rain; unless rain falls in the west, the wheat structure goes down and a condition will follow that will involve all the business of western Canada. This company depends on the wheat pool. The pyramid is only as strong as its foundation.
I bring this to the attention of the committee not so much to oppose this bill as to show that the people of western Canada are about the same as people in other parts of this country. It is interesting to see how the iniquities of big business, complained of in the east, have invaded the cooperatives so-called in the west. The Combines Investigation Act was passed to guard the situation, and I regard this as a combine which will infringe the Combines Investigation Act. No doubt the wheat pools of western Canada have a great deal of influence, with which they can demand business. They have an unfair advantage in competition because probably they will command business without the expense of going after it. Human nature is essentially the same everywhere. Greed and selfishness uncontrolled will grow and become powerful. We blame our troubles on

Pool Insurance Company
the capitalist system. That system is not perfect, but it is the best system that has been devised for orderly progress and to ser re the people. Usually it is not the capitalist system that is at fault; rather it is the abuse of the capitalist system.
In my opinion this legislation is an attempt to monopolize and control the lives and destinies of others. No doubt the next attempt, if the pools survive, will be the creation of banks; again they will want to invade the general law and secure privilege. This privilege is demanded because a number of people want it, and they claim special virtues, which in the end will turn out to be just as greedy and selfish as the iniquities of big business, which during this century has been attacked both in the United States and in Canada. Always the best legal minds have been used to explore the possibilities of corporation law, and the keenest business brains have used it to become unduly powerful and wealthy. Then, if and when disaster comes, with limited liability they crawl out from under with perfect safety, and as usual *the public suffers.
I have no objection to cooperatives; in fact, I believe in them. The community in which I live was built up on this system, but it was not built up as a class movement. People made profits; and business without profits is something that hardly goes with a democracy. I do not think I need say more, Mr. Chairman, except that in future, when people begin talking about big business or of business which controls the affairs of people, I hope those in some parts of Canada will look to themselves, and not preach a philosophy of socialism because of iniquities that may exist in other parts of the country.


Mr. FAIR:: I am sorry that a talk such as that given by the hon. member who has just taken his seat should be heard here to-day. I believe we all realize that the wheat growers of the west and the wheat pools are having a hard time to get along, and I believe the reason for that is recognized by every sane, thinking man in this country. Certainly I was surprised to hear the remarks of the previous speaker, coming as they did from an hon. member whom I had credited with more intelligence than I can credit him with in future.
The hon. gentleman said the business of the secondary industries would be monopolized by this pool insurance. I should like to ask him who are better entitled to any profits or savings that may be made in connection with the insurance in which the company intends to deal than those who are paying the costs. This bill has been brought in for this very simple reason, that
the pools want to decrease the cost of their insurance, and I believe it is a perfectly legitimate business.


John James Kinley: If the hon. gentleman will pardon me, counsel for the company told us they were members of the underwriters' association.


Robert Fair: I was not able to hear everything the hon. gentleman said during the course of his remarks, nor was I able to catch his interjection, but he made one statement I should like to contradict. The hon. member said the wheat pools had cost this country a great deal of money. I want flatly to contradict that statement. I happen to know quite a bit about the wheat pools, and I know that if they -had been permitted to operate freely that statement could not have been made. I do not think it can be made anyway. I do say to the hon. gentleman that after the man-made crash of 1929-for which perhaps the hon. gentleman has been speaking the government took over several millions of bushels of wheat which were being held by the pools, and the way that wheat was handled finally cost the members of the wheat pools several millions of dollars. I do not think the hon. gentleman will try to contradict that Statement; before attempting to do so, he had better get all the facts.
If I had been able to follow his remarks more fully I have no doubt I could contradict other statements he made, but I do not think his remarks reflect any credit upon him or upon those for whom he was speaking.


Joseph Thorarinn Thorson: All the arguments that have been advanced to-day were presented to the banking and commerce committee. We have had two attacks on this bill, the first on the ground that it is a socialist measure. That statement has been answered effectively by the Minister of Mines and Resources (Mr. Crerar), who points out that the only shareholders of this proposed company are the pool organizations of western Canada. These are set out in section 3 of the bill as the following:
Manitoba Pool Elevators Limited; Saskatchewan Cooperative Wheat Producers Limited; Saskatchewan Pool Elevators Limited; Alberta Wheat Pool; Alberta Pool Elevators Limited.
The only others who may become shareholders are wholly owned subsidiaries of any of these companies, or any other cooperative company incorporated as such under the laws of the Dominion of Canada or under the law of any province of the dominion. So the only persons who can be shareholders of this company are cooperative organizations.
Pool Insurance Company

Now we have another attack on the bill on the ground that this proposed company is a combine. If that is so, then it is a most peculiar kind of combine. The purpose of most combines is to enhance the price of the products which the combines have to sell. The purpose of this organization is to enable cooperators to insure their own grain or to go into other forms of insurance, with the object of reducing the cost of insurance to those who become policyholders of the company. If that is a combine, then it is a beneficial one. Certainly it is not the sort of combine of which we are accustomed to think.
If it is the desire of persons in western Canada, or indeed in any other part of Canada, to cooperate for the purpose of improving their own conditions, as in this case for the purpose of reducing insurance rates, why should we in this parliament place any obstacles in their way? All the arguments put forward to-day were thoroughly discussed in the banking and commerce committee.


Richard Burpee Hanson: If this
company is in the underwriters' association, are not the rates exactly the same as those of the old line companies?


Joseph Thorarinn Thorson: Yes, they would be; but they have taken power under this bill to pay patronage dividends to policyholders, so that if any profits result from the operation of the insurance business, the benefit of such profits will go to the holders of insurance policies in the company, after adequate provision is made for those who have contributed the capital.
One other argument advanced by the hon. member for Queens-Lunenburg was that this company stands on the basis of wheat. It will stand on the premiums of insurance paid in, and will not necessarily depend upon the success or failure of the wheat industry. That was an error into which the hon. member fell. It was exploded in the banking and commerce committee, and I was surprised that he should advance this exploded theory again in committee of the whole. I for one am in favour of the measure as a cooperative measure, neither socialistic nor in the nature of a combine, but rather an effort on the part of farmers in western Canada who are members of these pool organizations to cooperate still further in the matter of insurance.


[Stage Direction]
Section agreed to.
Section 2 agreed to.
On section 3-capital stock.
Angus Lewis Macdonald: Section 3 was
amended in committee by adding thereto subsection 2, as follows:

(2) With the exception of the qualifying shares of the directors as provided by section ten hereof, no shares shall be allotted or transferred to any person other than Manitoba Pool Elevators Limited, Saskatchewan Cooperative Wheat Producers Limited, Saskatchewan Pool Elevators Limited, Alberta Wheat Pool, Alberta Pool Elevators Limited, or a wholly owned subsidiary of any one or more of the aforesaid companies or any other cooperative company incorporated as such under the laws of the Dominion of Canada or under the law of any province of the Dominion of Canada.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
Sections 4 to 7 inclusive agreed to.
On section 8-Distribution of profits.
Angus Lewis Macdonald: This section has been amended by adding after the word "company" in the third line the words "available for the payment of dividends and after allowing for a non-cumulative dividend to the shareholders of the company of not more than five per centum per annum on the amount paid on the shares held by them."


Richard Burpee Hanson: That is an
improvement.


[Stage Direction]
Amendment agreed to.
Angus Lewis Macdonald: Then there is the further amendment of adding the word "participating" before the word "policies", towards the end of the section.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
Section 9 agreed to.
On section 10-Qualifications of directors.
Richard Burpee Hanson: In my
judgment this section should not become law. Directors either are or are not directors. Either they have capital interest in the company, or they have not. This section relieves the directors entirely from any personal responsibility. That is not good policy, and it is worse law. I protest, although the committee may do as it likes. I cannot stop this sort of thing, but I suggest that the government should stop it.


John James Kinley: And it invades the Insurance Act.


Richard Burpee Hanson: It invades every principle of sound insurance law in Canada, and I call the Prime Minister's attention to it. This section should not become law, although I shall not detain the committee by discussing the matter further

Pool Insurance Company
1S09


Joseph Thorarinn Thorson: There might be a good deal in what the hon. leader of the opposition has said were it not for the fact that the bill was amended in committee by adding subsection 2 to section 3, which provided that the only persons who could be shareholders in the proposed company were the cooperative organizations I mentioned a moment ago, or wholly-owned subsidiaries of any of them, or any other cooperative company.
In other words, the only persons who can be shareholders in this pool company, other than directors through their qualifying shares, are companies. Now, if these companies are the only shareholders in another company, they must be represented in that other company of which they are shareholders, by persons, and it is quite proper that the persons who should represent the shareholder companies should be the directors of the shareholder companies. That is the reason for the provision contained in section 10 of the bill. The shares will be owned by the shareholder companies who must be represented on the board of directors of the proposed company by persons, since they cannot be on the board of directors themselves in their corporate capacity. I believe that is the justification for a section which might otherwise be objectionable.


Richard Burpee Hanson: That is not a justification. That is just a palliation of a violation of a principle. If section 10 is wrong in principle and in law, then of course it should not pass; and section 3 should be changed to meet the situation. What was the good of passing paragraph (b) of subsection 2 of section 6 of the Canadian and British Insurance Companies Act, 1932, if it were not additional protection? This is a vexed problem. Insurance legislation has run the gamut of the law courts, and has been before the privy council two or three times. Now, by virtue of our jurisdiction, we are doing away with some of the safeguards with which under the general act parliament has surrounded this business. This is done at the behest of a group of strong cooperative organizations-strong in number. Supposing wheat fails and these pools go under, what will be the position? One of the gentlemen connected with the wheat pool told me he did not see any future for wheat in the Canadian west. He did not see anything for it in the immediate future, or perhaps for some years. If these pools fail to function and if there is no market for our wheat, what is going to become of them? What is going to become of companies operating under the pools? It is not beyond the realm of possibility that the pools might go into liquidation.
What is the good of the reserves they have set up-to the extent of millions, someone has said-if those reserves are invested in country elevators?


Joseph Thorarinn Thorson: The insurance company will stand on its own feet, and will not depend necessarily on wheat.


John James Kinley: How will you pay the premiums?


Richard Burpee Hanson: My hon. friend's vision is not long. If the proprietary shareholders of this insurance company fail, what will be the effect on the company? If my hon. friend has had any experience in business, I need only ask the question to get the answer. He must know that, especially with a provision such as that contained in section 3, sooner or later this company will seek liquidation. The whole principle is wrong.
I	might argue it further, but if parliament wishes to go ahead with this sort of thing, then let it go ahead. I have done my duty by calling attention to the situation.


[Stage Direction]
Section agreed to.
On section 11-Notice of coming into force of this act.
Richard Burpee Hanson: We might as well fold up, if we cannot follow proper principles.


[Stage Direction]
Section agreed to.
Section 12 agreed to.
Preamble agreed to.
On the title:
Donald Alexander McNiven: I move that the title
be amended to read, "An act to incorporate Pool Insurance Company."


[Stage Direction]
Amendment agreed to.
Title as amended agreed to.
Bill reported, read the third time and passed.

[Stage Direction]
On the orders of the day:
Richard Burpee Hanson: On Friday evening last, the Prime Minister (Mr. Mackenzie King) announced that four by-elections would be held on Monday, August 19 next. These by-elections are being held under section 108 of the elections act, and because of the provisions of this section which refers to by-elections held within

Elections-Soldier Vote

six months of a general election, no new enumeration of the voters is required to be made, only a revision before the oounty judge in urban constituencies being necessary.
The particular point, however, to which I desire to direct the attention of the Prime Minister is with respect to the absence of any provisions, either in the act itself, or in the regulations, or in any order in council issued under the act, for taking the soldier vote, either in Canada or overseas, in any byelection. Unquestionably there must now be in the army a large number of enlisted men who come from the four constituencies in question. Some of these men must be overseas or located at different points throughout Canada. Is it not the intention of the government to give these men an opportunity to vote? To deprive these loyal soldiers of an opportunity to vote is to deny to these freeborn citizens the highest right in the gift of the country-the right to exercise their franchise. Is this right to be denied to them?


William Lyon Mackenzie King: I am sure there has been no intention to deny anyone, least of all the men who are serving in our defence forces, the right to exercise his franchise. In the preparation of the elections act it probably was assumed that in connection with byelections held in war time there would not be the same reason for having the lists in all particulars made up in the usual way. My hon. friend will realize that to take the soldier vote at any time during a war requires a great deal in the way of machinery and the outlay of considerable expense. This becomes an even more difficult and relatively more expensive business when a by-election is to be held. If my hon. friend is agreeable I should like the question to stand until to-morrow when a complete answer will be given by the Minister of National Defence for Air (Mr. Power). I feel sure my colleague will be in position to explain just how difficult it would be to have the soldier vote recorded in connection with by-elections.
I believe it would meet with the general approval of the citizens of Canada if we had during this period of war the same understanding with respect to by-elections as has been arrived at in the United Kingdom, and avoid contests in many constituencies. I believe the public would approve a truce to party strife so far as by-elections are concerned, if it could be arranged in a manner which would do no injustice to any existing party or political group in the country. Of course I understand that every constituency

must have the full right to decide matters of this kind for itself, but I do believe that I am expressing a feeling which prevails generally throughout Canada when I say that one of the means of assisting Canada's war effort at the present time would be the avoidance of political contests in by-elections.


Richard Burpee Hanson: I have no objection to the question standing, as the Prime Minister suggests, until the minister is present.
With regard to the other kite he has flown, let me tell him that to adopt that suggestion would simply mean that there would be no opportunity for public opinion to express itself with regard to the war activities of this government. With that suggestion I am not in accord.


OIL CONTROL
[Stage Direction]
On the orders of the day:
Thomas Miller Bell: I should like to direct the attention of the Minister of Munitions and Supply (Mr. Howe) to a matter which is rather pressing in western Canada. Will he give the house an assurance, either to-day or to-morrow, that arrangements will be made to secure an adequate supply of crude oil to the Cooperative Refinery Limited of Regina, Saskatchewan, whose supply is threatened by a recent decision of the federal oil controller?


Hon. C. D. HOWE (Minister of Munitions and Supply):: I am familiar with the general situation, but not with the position of the Cooperative Refinery Limited. For a long time, more particularly since the outbreak of the war, great pressure has been brought to bear on the government to find an adequate market for Alberta oil. I was assured personally by the highest authority of the Alberta government that we could definitely count at all times upon a production in the Turner valley of 35,000 barrels a day. With that in view arrangements were made to enlarge the area to be served from Turner valley. At the proper time, in order to meet that situation, the oil controller called upon the Alberta government for a production, not of 35,000 barrels a day but of 30,000 barrels a day. It was then discovered that the wells could produce only 27,500 barrels a day. The minister in charge in the provincial government simply told us that he was very sorry but he had been misinformed. The result has been that having built up the demand to the higher figure, it is not now possible to

Closing oj Burma Road
supply all customers 100 per cent, and this situation affects those companies which have no oil storage. When the demand is greater than the production we cannot guarantee that every customer will receive his full requirements, especially if he has no storage capacity to tide himself over periods of maximum and minimum demands. I shall be glad to inquire of the oil controller just what is the position of the company referred to and what steps can be taken to meet their demands.


Thomas Miller Bell: The difficulty is that the other companies share only in the surplus, the two major companies being in control of the bulk of the oil. Perhaps the oil could be rationed so that these companies could get a percentage of their requirements.


Clarence Decatur Howe: I shall be glad to inquire into that as well.



PRINTING OF PARLIAMENT


[Stage Direction]
On the orders of the day:
Ernest Edward Perley: On Friday evening the leader of the opposition (Mr. Hanson) directed the attention of the Prime Minister (Mr. Mackenzie King) to a report of the committee on the printing of parliament which had been presented the day before by the hon. member for Chambly-Rouville (Mr. Dupuis), and referred to the fact that the committee had recommended that many documents should not be printed. The Prime Minister said he would look into the matter and reply to the leader of the opposition. Can he do that to-day?


William Lyon Mackenzie King: I may say to my hon. friend that I have not had a chance since the other day to have a word with the leader of the opposition (Mr. Hanson) with respect to this particular matter. I did just mention it when I came into the house to-day, having in mind the promise that was made at that time. Members of the following of my hon. friend are members of the committee and no doubt have had before them, as other members of the committee had, the reasons why the committee made the recommendation it did, and if there is a feeling on the part of other members that some documents should be printed which the committee recommended should not be printed, I can see no reason why the committee might not reconsider the printing of certain documents in the light of further representations that might be made to them. I would be quite agreeable to
95826-114J
asking the chairman to have the committee consider further any representations which the leader of the opposition may wish to make regarding the printing of documents that have not been printed, if that is agreeable.



CLOSING OF BURMA ROAD


[Stage Direction]
On the orders of the day:
Mr. T. C. DOUGLAS (Weybum):: Mr. Speaker, may I direct a question to the Prime Minister (Mr. Mackenzie King)? In view of the fact that the closing of the Burma road for the next three months will shut off all supplies to the Chinese government headed by General Chiang Kai-Shek, will the government give consideration to stopping the shipment of all war material to Japan for the same period of time?


William Lyon Mackenzie King: My hon. friend was kind enough to give me notice of his question. I am sure he will appreciate, as other hon. members of the house must, that in answering any such question in the House of Commons of Canada I have to consider what effect the answer may have in the United Kingdom, what effect it may have in Japan and what effect it may have in China. At this particular time when the relations between the different countries are what they happen to be, I rather hesitate to make any formal reply to my hon. friend. I would be glad to have a word with him privately about the situation as I understand it. In the meantime I would answer him as follows:
The question is so phrased as to convey the implication that the Canadian government has taken steps to stop shipments to China. This is not the case.
As to the question itself, the hon. member is aware that it is not the practice in answering questions to make forecasts of future policy.



PROPOSED AMENDMENT OF CANADIAN WHEAT BOARD ACT

[Stage Direction]
On the orders of the day:
Ernest Edward Perley: May
I direct a question to the Minister of Trade and Commerce (Mr. MacKinnon), and I had one also to direct to the Minister of Agriculture (Mr. Gardiner) had he been in his seat. In view of the statement made by the Prime Minister (Mr. Mackenzie King) at the opening of the sitting, that we were to have amendments to the Wheat Board Act, would
1812	COMMONS
Munitions and Supply-Labour Disputes
the minister indicate now, since the house expects to prorogue within the next ten days or so and this is an important matter, whether the legislation will be brought down within the next day or two? There are some important suggestions to be made to the minister with regard to the legislation, and I think it should be brought down at the earliest possible moment.


James Angus MacKinnon: I hope that the legislation
will be ready within the next two or three days.


Richard Burpee Hanson: What
date? Can the minister say?


James Angus MacKinnon: Within the next day or two.



MUNITIONS AND SUPPLY


[Stage Direction]
On the orders of the day:
Mr. CLARENCE GILLIS (Cape Breton South):: Mr. Speaker, may I direct a question to the Minister of Munitions and Supply (Mr. Howe) relative to two telegrams I have received, copies of which I have sent to the minister, pointing out the serious situation that exists in the town of Inverness and in Trenton, Nova Scotia. Is the department acquainted with the situation as pointed out in these telegrams and is any action contemplated by the department?


Clarence Decatur Howe: Mr. Speaker, the situation in
Trenton is that the car works there have been engaged in the production of a considerable order for the Department of Munitions and Supply. Completion was delayed by labour troubles, as my hon. friend is aware, but I understand that the order is coming to an end, if indeed it has not come to an end. A proposal from the company in question is being received within the next day or two, I understand, in relation to a considerable munitions order, and if the proposal is in order, possibly that situation will be taken care of in the very near future.
So far as the Port Hood collieries are concerned, they are collieries that have been opened and closed four or five times. The coal is very low grade and the collieries themselves are at a distance from consuming markets. The government does not intend to take any steps to open these collieries, and in the interests of the industry itself it would,
IMr. Perky.]
I believe, be unfortunate if anyone else took such a step. I should think the coal mining industry of Nova Scotia can be better employed in localities which have higher grade and more accessible coal.


Richard Burpee Hanson: Is that
the company which is owned by the government of Nova Scotia? It is either the Port Hood or the Inverness company.


Clarence Decatur Howe: I am sure it is the Inverness company.


Mr. BLACK (Cumberland):: Inverness is
government-owned.


Richard Burpee Hanson: Then I
suggest that the government of Nova Scotia should assume the responsibility.


EXCISE ACT, 1934, AMENDMENT
[Stage Direction]
Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of Bill No. 100, to amend the Excise Act, 1934.
Motion agreed to, bill read the second time, considered in committee, reported, read the third time and passed.

[Stage Direction]
Hon. T. A. CRERAR (Minister of Mines and Resources-for Mr. Gardiner) moved the third reading of Bill No. 89, to amend the Cheese and Cheese Factory Improvement Act.
Mr. STIRLING:: That was not the understanding we had. There is a misunderstanding. is there not? The minister suggested to me that after what had passed between him and the leader of the opposition he would go on with the Farmers' Creditors Arrangement Act.


Thomas Alexander Crerar: That is true. But is there any objection to the third reading of this bill?


Grote Stirling: I personally have not, but-


Thomas Alexander Crerar: That was mentioned on Friday. If my hon. friend has any objection we shall let it stand.


Grote Stirling: I myself have not any objection, but I have not had any conversation with respect to this bill.


Thomas Alexander Crerar: Well, let it stand.
Motion stands.

Farmers! Creditors


FARMERS' CREDITORS
James Lorimer Ilsley: That a message be sent to the senate to acquaint their honours that this house disagrees with their amendment to Bill No. 25, an act to amend the Farmers' Creditors Arrangement Act, 1934, for the following reasons:
(1)	Because the findings of a board of review are based mainly on questions of fact determined after consideration of the farmer's circumstances and the present and prospective capability of the farmer to perform the obligations prescribed by the board, and the productive value of the farm.
(2)	Because the boards of review in the provinces of Alberta, Saskatchewan and Manitoba as now constituted, comprising a judge of the supreme court of the province, as chief commissioner, a commissioner representing the debtor, and a commissioner representing the creditor, are considered to be in a better position, after listening to all evidence, to render a final decision than an appeal court with nothing but the record of a case before them.
(3)	Because the courts now have jurisdiction to hear appeals in cases where errors of law are alleged to have been made by a board of review.
(4)	Because it is inadvisable at this late stage of the operation of this act to provide for appeals from proposals which may have been or may be confirmed by boards of review.
(5)	Because the provision for appeals would increase the costs of the administration of the act and delay the final disposition of a farmer's application.
He said: Mr. Speaker, with regard to this bill I want to explain the position to the house. This bill went to another place and was amended there, and the amendment is a somewhat important one. It proposes that all decisions of the boards of review should be appealable, and provision is made for a court of appeal. I am not just sure whether it is confined to the provinces of Saskatchewan, Alberta and Manitoba, but substantially that is the proposal. I regret to say that the government is not prepared to accept the amendment that has been proposed to this bill, and I do not know that I could state the reasons for the governments inability to accept it better than by reading the written reasons which the rules require the minister having charge of the bill to give to the house in the event of non-acceptance.
So far as I can learn, those who are best acquainted with the administration of the Farmers' Creditors Arrangement Act-and by that I mean the chief commissioners in the various provinces and those associated with them-are of opinion that it would not be advisable to provide for appeals, substantially for the reasons that I have just mentioned. That is the position the government will have to take in regard to this amendment proposed by the senate.


Grote Stirling: There will therefore now be a meeting?


James Lorimer Ilsley: Unless the senate agrees
to our position.
At six o'clock the house took recess.
After Recess
The house resumed at eight o'clock.


Thomas Clement (Tommy) Douglas: I wish to say a few words about this amendment, and to make a suggestion to the minister. The kernel of the amendment suggested is found in what ivould be subsection 2 of section 12A:
The farmer or any creditor may appeal to the appeal court from a proposal which has been confirmed by the board and the appeal court may pronounce such judgment or make such order or formulate such proposal as in its opinion the board ought to have pronounced, made or formulated, and the decision of the appeal court shall be final and conclusive.
I am in hearty accord with the minister in rejecting this amendment. In the first place the board of review was set up under the original act to be itself a court of appeal. That is, when a farmer comes to the official receiver and asks to come under the benefit of this act, the creditors come-I have sat in at a number of these conferences-and a good many cases are settled then and there. It is only when the parties have been unable to arrive at a satisfactory proposal that the matter is taken to the board of review. So the board of review is itself a court of appeal, and therefore it seems folly to carry the matter a step further.
But what I am most afraid of is that this amendment would give to the creditors a club to hold over the head of the farmer. For instance, the amendment says "any creditor." It may be the least of his creditors. Furthermore, it does not specify whether, after one creditor has made an appeal and the matter been settled, another creditor might not decide to appeal. The average farmer is not keen about going to law; he has a natural reluctance to engage in any type of litigation. It would be very easy, when making a proposal, to hold over the farmer's head a threat that if the board of review did not give a decision satisfactory to a certain creditor that creditor would appeal from the board of review to the court of appeal.
Farmers,' Creditors

Another objection is that this amendment would destroy the whole purpose of the act. The purpose of the act as passed in 1934 was specific: to keep the farmer on the land as an efficient producer. The act was put on the statute books not as a means of collecting money for the creditors, but to help the farmer. It was put there to enable the farmer to go through to some extent a form of bankruptcy, to enable him to stay on the land and meet such obligations as the productivity of his land warranted. Now, if those who are stressing this amendment were willing to take out the words "or any creditor," and leave to the farmer the right to go to the court of appeal, it would not destroy the purpose of the act, because once a proposal has been formulated and the farmer settles down to meet this new proposal he is either keeping the terms or he is not. If he is, there can be no point in appealing the case. If he is not keeping the terms there are other steps that can be taken. We ought to recognize that the reasons which caused a former government to bring down this kind of legislation in 1934 are still present, only in a more acute form. Since this act applies now only in the prairie provinces, all the factors that made it necessary for the farmers in those provinces to get some relief from the burden of debt are still there in a more intensified form. If there is going to be any revision of these cases, the revision will have to be downward and not upward, because the farmer's capacity to pay is less now than it was then. And the only people who will be asking for downward revision will be the farmers.
The only amendment I would be prepared to support allowing an appeal to an appeal court would be if the farmer and the farmer alone were to be given that right.
My main reason in rising was not to speak on the amendment so much as to ask the minister to give consideration to a suggestion which comes within the principle of the amendment. I refer now to a decision just handed down in Saskatchewan. I quote it as given in The Saskatchewan Farmer of June 15-I believe it appeared in several other papers. It is of great interest and may be of dire significance to the hundreds of farmers who have come under this legislation in the past five years. The heading is:
Court decision limits board on farm debts.
And the article goes on to say:
A decision handed down by the Saskatchewan court of appeal affects every farmer who has had his debts adjudicated by the board of review acting under the terms of the Farmers' Creditors Arrangement Act.

In this judgment the court of appeal holds that the sheriffs under the jurisdiction of the Farmers' Creditors Arrangement Act have no power to decide what is or is not a crop failure: that the board of review having once fixed the conditions of the adjusted debt is powerless to alter the terms of the conditions by granting further extensions of time.
The case involved a farmer, an insurance company, an implement concern and some others. The farmer's mortgage had been written down by the board of review in June, 1937. Last year the farmer defaulted under the terms of the mortgage and foreclosure proceedings were instituted.
The farmer sought to have the "crop failure" clause applied under which the sheriff may declare a crop failure, which would have the effect of postponing automatically all payments for one year and put the interest payment over to the time when the final instalment came due.
When the farmer pleaded protection under the crop failure clause the district court judge dismissed the farmer's claim, holding that the Farmers' Creditors Arrangement Act board had no power to arrange for any such procedure as outlined in the crop failure clause.
In kings bench court the judge decided that the board of review did have such power and the farmer was right in his contention. In the- court of appeal-the highest in the province-it wras found that the district court judge was right in his finding that the farmer could not claim protection under the crop failure clause because the board of review had no right to make the clause any part of its proposals between the parties.
The court of appeal was of opinion that if parliament had decided to allow the board of review to provide for extensions of time for payment of debt upon which it adjudicated, the legislation would have made this plain in "unmistakable terms".
That is, I take it, a reference to subsection 3 of section 2 of the act which reads:
(3) In any case where the affairs of a farmer have been arranged by a proposal approved by the court or confirmed by the board as hereinafter provided, part one of the Bankruptcy Act shall notwithstanding section 7 thereof thereafter apply to such farmer but only failure on the part of such farmer to carry out any of the terms of the proposal shall be deemed to be an act of bankruptcy. Provided that such failure shall not be deemed an act of bankruptcy if, in the opinion of the court, such act was due to causes beyond the control of such farmer.
I do not need to elaborate the point to the minister, who is a noted member of the bar. If this decision handed down by the court of appeal of Saskatchewan is to be a precedent we may have a serious situation in Saskatchewan and Alberta this fall. Crop reports are that the crop is spotty. In a large part of my own constituency the crop is already less than fair. A good many of these farmers are not going to be able to meet the terms of the proposals that were formulated under the board of review. If the power to declare that the failure to meet the terms

Farmers! Creditors
is due to causes beyond the farmer's control is taken away and foreclosure proceedings are to be permitted, then we shall be faced this fall with an extraordinary situation.
I rose merely for the purpose of asking that when this matter is discussed with the other chamber and consideration is given all amendment which may be brought in before parliament prorogues, consideration might also be given to the possibility of providing what the appeal court said in "unmistakable terms" should be provided, namely, the right to declare that in a particular case the failure to meet the terms of the proposal was due to causes beyond the farmer's control. If that were done it would obviate the serious situation that is likely to arise. I cannot help feeling, after having seen these proposals made for the last few years, that the fact that this act is in existence and that there is a debt adjustment act in Saskatchewan has only postponed the reckoning which some day we shall have to face in connection with this debt question. We have these debts piling up, in some instances without even the interest being met. As a result, many of the debts are now as high as they were before the first readjustment. So all we have done has been to postpone the day of reckoning. Sooner or later we shall have to face this debt situation frankly and honestly for both the creditor and the debtor, and write down these debts to the point where prices and the productivity of the western farms will enable these obligations to be met. Perhaps it is too late this session to deal with the whole debt question, but I hope in the near future the government will give consideration to the question of reviewing all these cases with the view of helping these hard pressed people who continue to be burdened with a load of debt which they cannot possibly hope to meet under present economic conditions.


Mr. PAUL MARTIN (Essex East):: As a member from eastern Canada I suppose I have not altogether the same right to speak on this bill as may attach to the hon. member who has just spoken, but I propose to make a few observations.
In the first place I rise not to oppose the bill, but to support the amendment. Undoubtedly this matter was conceived at a time when there was an extremely important occasion for its enactment; and that applied to eastern as well as western Canada. But I believe that we should not be slow to recognize the gradual withdrawal of some of the fundamentals of our system of government. We make great profession of our desire to preserve democracy and those institutions that will safeguard democracy, but we
should not lightly let slip some of the fundamentals involved in the preservation of this very thing. We are governed on the basis that the various units of government shall operate with a measure of autonomy, these units being the legislature, the executive and the judiciary. We do not allow the legislature to deal with judicial matters so far as their interpretation is concerned, nor do we allow the judiciary to make laws. On the other hand, have we not gone too far already in allowing all sorts of bodies to usurp true judicial functions? The stock arguments of Lord Hewart, Mr. Beck and others are well known to hon. members. No parliamentarian, regardless of his experience, is unaware of the great dangers that may exist in the tremendous power which lies in the hands of so many boards in this country. One could refer to certain departments of government where departmental officials make all sorts of decisions affecting property and even affecting freedom without going through the judicial process at all.
I do not rise to oppose in any way the interests of creditors or debtors. The hon. gentleman has said there have been instances in which the decisions of the board were not in favour of the debtors, and he would allow such debtors the opportunity of going to a higher body which would deal with such adverse decisions. Then surely the same principle should apply in reverse as well. A number of the creditors are not companies; certainly this was true in eastern Canada. The hon. member for Weyburn (Mr. Douglas), together with other hon. members, must be aware of many instances of harassed, hard pressed farmers w'ho appeared before the boards as creditors.


Thomas Clement (Tommy) Douglas: Very few in western Canada, where the act now applies.


Paul Joseph James Martin: I accept my hon. friend's statement, but my purpose in rising is chiefly to complain about a further endowment of power on administrative tribunals, giving them authority to deal with property in a way that was not dreamed of by many of those who fought and died to frame the bulwarks of our constitution. Look at the words of Hallam, with which I am sure no hon. member would quarrel. He said:
Civil liberty in this kingdom has two direct guarantees: the open administration of justice according to known laws truly interpreted and fair construction of evidence, and the right of parliament, without let or interruption, to inquire into and obtain redress of public grievances. Of these, the first is by far the most indispensable; nor can the subjects of any state be reckoned to enjoy a real freedom where this condition is not found both in its judicial institutions and in their constant exercise.
Farmers! Creditors

No hoii. gentleman brought up under that sort of doctrine would quarrel with a statement of that kind. When our neighbours to the south speak of due process of law and we speak of the rule of law, even though particular circumstances might serve as a provocation we should not lightly permit a gradual diminution that will ultimately and fundamentally affect our whole system of government. And when I say "system of government", it must be remembered that the judicial function is every bit as important as is the work done in this house or the work done by the executive.
The hon. gentleman who preceded me placed one difficulty in the way of what I have mentioned; that is the matter of costs. Of course the costs in connection with litigation in this country are scandalous. We have not developed a legal technique consistent ivith our sociological and social needs. Certainly I would be prepared to see machinery devised whereby an unsuccessful creditor or debtor, having appeared before the board, would be allowed to go to a judicial tribunal by way of appeal without being worried about costs. That is a matter of detail which could be arranged quite easily.
My main reason for rising, as I have said, is to complain about the tremendous powers that are being extended to various administrative tribunals, -which regulate and dispose of property and civil rights in very important measure without allowing resort to a purely judicial tribunal to determine the wisdom of the course taken. One could recite instances of these various boards being at odds with one another; and if they are at variance justice cannot have been meted out in both instances. A court of appeal, with judicial functions, serving as a reviewing body in regard to what has been done by the board, at least would provide some unanimity in decisions which would affect the whole problem from top to bottom.
In view of what the minister has said I have no hope that my words shall have any effect. But I could not sit in my place to-night and witness the refusal of this amendment without expressing myself as I have done.


Richard Burpee Hanson: Mr. Speaker, before the motion
carries I should like to make a few brief observations, and in passing may I refer to what was said by the hon. member for Essex East (Mr. Martin). If I heard the hon. member correctly, he said, "We do not allow the judges to make the laws." May I suggest to him that in our law books there is more judge-made law than any other kind. Xf the hon. member does not believe me, let
Wr. Ma^n.]
him read a portion of a book written by the present chief justice of the United States with reference -to the interpretation of the constitution of that country.


Paul Joseph James Martin: I quite agree.


Richard Burpee Hanson: He said, in effect, that the constitution of the United States is what the judges say it is. I believe that never was the intention of the founding fathers, and his statement has caused a great deal of discussion.
I regret I felt impelled to leave the chamber before six o'clock, and for that reason I had no idea that this matter was to be discussed. I do not say there was any arrangement that it should not be discussed, but when ten minutes before six o'clock we reached the excise bill I spoke to the Minister of Finance (Mr. Usley) across the floor of the house and suggested to him that that would fill in the time. To that he rather agreed. However, there was no arrangement made, and therefore there has been no violation of any arrangement.
I understand the government has stated it cannot accept the amendment from the senate, and that the minister has given four reasons.


James Lorimer Ilsley: Five reasons.


Richard Burpee Hanson: I have not been able to find out what they are, and I am not going to ask the minister to repeat them. But without having read the discussion in the other house in favour of the amendment I am at a loss to understand why the government cannot accept it. That amendment provides for an appeal by either the farmer or the creditor, and without expense to the farmer.
In subsection 5 it is stated that an official receiver may act on behalf of the farmer on any appeal or on a stated case. And in subsection 6 it is pointed out that no costs shall be imposed upon or charged against the farmer on any appeal or stated case.
In that connection the hon. member for Weyburn (Mr. Douglas) said that he would be in favour of the amendment only if there were an appeal on the part of the farmer. I suggest to him that an appeal which is not mutual is not an appeal at all. That would be class legislation, pure and simple.


Thomas Clement (Tommy) Douglas: The act itself is class legislation.


Richard Burpee Hanson: The act may be class legislation. I had something to do with its enactment. I know it was intended only as a temporary measure, and

Income War Tax Act
1S17
it was never dreamed that it would have continued in force as long as this. However, circumstances have arisen in t'he western provinces, and I accept the statements of hon. members from the west that it is necessary to keep the act in force for a longer period of time. I am willing that this should happen.
But if a certain element of the population of western Canada, be they creditor or be they debtor, feel aggrieved at the course of the decisions which have been rendered in that part of the country, there ought to be a right of appeal. That must be the reason why the senate inserted this amendment. We all know there have been half a dozen different decisions on similar sets of facts, and if we want to have any uniformity of administration in connection with this law we shall have to have it by way of appeal which would set up a real precedent for other courts to follow. I cannot see anything wrong with the principle of appeal here. The creditor takes an appeal at his own risk or his own expense, and the farmer does so at no risk, and no expense. Surely that is as easy as it could be. The appeal would give him that much more time and, in any event, could not hurt him. He would have a longer time in which to make a turn-over, or to turn another corner, so as to get back to where he would like to be. In principle I do not see any reason why the amendment should not be accepted.
If I dared to take the time of the house I would invite the minister to state his reasons. I know this legislation is sought by Manitoba. I had hoped they would be able to get rid of the legislation, because I know it is doing one thing for the farmer, namely ruining his credit. The farmer will never have any credit as long as this legislation is on the statute books. Whether he can see it or not, for his own interests this legislation should expire in all the provinces. It has outrun its lifetime; and has outrun its course and it should not be perpetuated. However, if the government has already come to a conclusion in the matter, it would be hopeless to ask them to reconsider.


[Stage Direction]
Motion agreed to.

[Stage Direction]
Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of Bill No. 101, to amend the Customs Tariff.
Motion agreed to, bill read the second time, considered in committee, reported, read the third time and passed.

[Stage Direction]
Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of Bill No. 102, to amend the Income War Tax Act.
Mr. T. L. CHURCH (Broadview):: Mr. Speaker, I should like to ask the Minister of Finance (Mr. Ilsley) if he has any reply to make to the request of some municipal treasurers all over the country that the five per cent tax upon Canadian residents in connection with three-market bonds, adopted in committee here on July 9, be not imposed? The finance commissioner of Toronto has taken this matter up with the government and strongly objects to it. I do not want to delay the second reading of this bill, but I believe this tax imposes a great injustice upon the municipalities of this country which have done so much for this parliament. We have taken away many of their revenues and given little but taxes of all kinds in return. An additional taxation of from three to four million dollars was imposed upon one of the great utilities in the province of Ontario, the provincial hydro, in 1917, in excise duties on equipment bought for generators and other plant to build the Chippawa plant to give power to munition plants in the last war. According to Mr. Carnegie's book, during the last war Ontario at one stage produced fifty per cent of the shells used by Britain owing to the adequate supply of power to these great plants, yet Ottawa taxed the hydro.
The resolution preceding this amendment was agreed to on July 9. Over twenty years ago the city of Toronto issued three-market bonds which were payable at the option of the holder in New York, London or Toronto. The final interpretation of paragraph six of the resolution apparently annuls the right of the holders of such three-market bonds to present their bonds or coupons for payment in New York, London or Toronto as they may elect. Instead, Canadian holders are forced in future to cash their coupons, and probably their bonds when they mature, at their local banks and obtain United States exchange therefor. They are then charged five per cent upon the amount of the coupons plus the premium received upon the New York exchange. This amendment to the Income War Tax Act cancels the city of Toronto's three-market privileges granted upon its bonds and coupons issued twenty or twenty-five years ago, and also necessitates purchase by the city of United States exchange which, under present foreign exchange control board regulations, costs 11 per cent. The foreign exchange control board makes a profit of seven-eighths of one per cent on these transactions, inasmuch as its buying rate for United

Income War Tax Act

States exchange is 10 per cent, plus one-eighth of one per cent commission allowed chartered barks for supervising exchange transactions.
Since the outbreak of war a large number of Canadian holders of city of Toronto three-market coupons have, as a patriotic gesture, accepted payment thereof in Canadian funds. If the amendment to the Income War Tax Act is enacted, these patriotic gestures are eliminated at additional cost to the city. This amendment to the Income War Tax Act is a most unjust and costly imposition upon all Canadian municipalities which have three' market bonds and coupons outstanding. The government have made this retroactive; it will go back twenty-five years and open up this financial situation. This tax imposes an injustice upon the municipalities of this country. I doubt, if a case were submitted to the Supreme Court of Canada under the Supreme Court Act, it would be held that this parliament has the right to pass this amendment, because contracts for bonds are twenty years old and cannot be changed. The privy council gave a decision in what was known as the Alberta waterway case, referred to in the book published by the deputy minister of justice reviewing cases heard by that tribunal since confederation. The municipalities take care of relief and hospitalization; many other purely federal burdens have been shifted off on them, and this additional cost of exchange will have to be paid by them and levied on real estate. This is an infringement of property and civil rights of the provinces, vested rights and the law of contracts, and I doubt whether this parliament has the power to enact this legislation. I think it is a miscarriage of justice, and in addition it interferes with vested rights. Apart from British Honduras, no country in the world has done it.


James Lorimer Ilsley: Mr. Speaker, perhaps I should say a word on the second reading before you leave the chair. I think it would be more appropriate if I dealt with any observations, such as the hon. gentleman has just made, in, committee and I shall be prepared to do so when the proper section is reached. There were two or three matters which hon. members had asked me to consider before the bill went into committee, and I should like to make a brief statement in regard to those when the proper sections are reached.


Thomas Langton Church: Soak the municipalities is the minister's policy.


[Stage Direction]
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Vien in the chair.

On section 1-Rates applicable to all individuals.
Richard Burpee Hanson: I should like to get some information from the minister with respect to the application of this tax to judges' salaries. As I understand it, when this bill becomes law all judges will be subject to income tax, as well as to the two per cent national defence tax which is really part of our income tax law. As I recollect-I have not looked it up in recent years-the Judges Act originally contained a provision that the judges of Canada would be free from taxation. When the income tax was first enacted the question soon arose as to whether the general income tax law overrode the particular judicial exemption granted by the Judges Act. That is, the question was whether a general statute overrode a special statute. There was substantial doubt about the matter and to remove that doubt the Judges Act was twice amended, once in 1919 and again in 1920. For technical reasons the amendment of 1919 was thought to be inadequate to silence the question of income tax liability. The amendment of 1920 stated quite plainly that any judge who accepted the increase provided by the Judges Act of that year waived all rights to exemption from future taxation under the then existing or any future taxation law. That pretty well settled the question. I understand that all but three judges accepted the increase and automatically came under the law.
A question has arisen with respect to judges who live in communities or municipalities which have local income taxes in addition to the federal tax. In the city of Saint John there is quite a severe municipal income tax, and the same applies to other places I could mention. The same question arises somewhat in relation to the national defence tax. If they have to pay on the full amount, the effect will be that they will have to pay the municipal income tax on the full amount of their salaries. In other words, they will have to pay a tax upon a tax. I do not want to labour the point; I think the mere statement of the principle will indicate to the minister what I have in mind. It is always an objectionable principle that one should be taxed upon a tax. I realize that this matter is outside the purview of the national legislature, but this condition exists and I was wondering if the department had given it any consideration. The fact is that there will be double taxation.


James Lorimer Ilsley: I have not given any special consideration to the case mentioned by the hon. member, that is, where there is a

Income War Tax Act
municipal as well as a federal tax. But I am sure that if I were to give consideration to it I could not recommend any change in the provision that judges are to be subject to the Income War Tax Act. In one way it may be a tax upon a tax, but it would be at least as accurate to say that there are two taxes on the same income. I think that is a more accurate way to put it.


Richard Burpee Hanson: There are two taxes; that is accepted. But in the one case there is a tax upon a tax. The minister says that he could not make any change. What he means is that he would not. There is quite a distinction.
The new income tax rates and the national defence tax of 2 per cent, or 3 per cent as the case may be, bring the salaries of judges under the income tax law which is imposed on all salaries. This is the view which the department takes, and I know because I have had the point up with them. They say that the general new rates are equally applicable to all salaries over the stated amounts. And this is their explanation: Judges residing in lesser taxation jurisdictions in Canada than the dominion would like their income reduced by a salary deduction rather than by taxation because the reduced salary would save local burdens which dominion direct taxation does not. A salary deduction was made on judges' salaries, I think in 1931. At that time a salary deduction rather than a salary tax was imposed. A $10,000 salary of, say the chief justice of one of the provinces taxed at 2 per cent leaves $9,800 as income to put in the pocket, but the local jurisdiction taxes $10,000 of salary. Contrariwise a salary reduction from $10,000 to $9,800 would mean relief from local taxation to the extent of $200. A tax of 3 per cent leaves $9,700 as income to put in the pocket, but the local jurisdiction will still tax him on the full $10,000. But a salary reduction from $10,000 to $9,700 would mean relief from local taxation to the extent of $300.
There is something in this contention which has been brought to my attention, but of course if the minister does not want to make any change in the provision I shall say nothing more. I have done my duty in bringing the matter to his attention. But I suggest that the fairer way would have been to follow the course adopted in 1931 when the salary deduction was put through. That is the correct principle upon which this should be handled; then they would escape a tax upon a tax.


Gerald Grattan McGeer: Is that not equally applicable to everybody with a salary?


Richard Burpee Hanson: I am only instancing the judges.


James Lorimer Ilsley: My recollection is that when civil servants were subject to a 10 per cent deduction from their salaries, judges and those in the armed forces were excepted, and there was a debate in the house on that exception or exemption. The Prime Minister and the government of the day finally decided to impose a tax of 10 per cent on the salaries of judges and those in the armed forces, instead of making a salary deduction. If I am correct about that, the hon. gentleman's recollection is faulty.


Richard Burpee Hanson: I have not looked it up, I am bound to say.


James Lorimer Ilsley: It is possible that my own recollection is faulty, but I think not. I agree that salaries of judges should not lightly be tampered with, and I was impressed with the argument that was made by the previous Prime Minister, Mr. Bennett, in that regard. But I have not the same feeling towards making the members of the judiciary immune from the same burden of taxation that is placed upon the shoulders of other people in the country.


Richard Burpee Hanson: Do not misunderstand me. They are not asking for immunity. What they are asking is that they shall not be taxed upon a tax-taxed upon money they have not received. I can see that there is an iniquity there, if I may use that word.


James Lorimer Ilsley: We are treating the judges under this measure exactly as we are treating every other person in receipt of income, particularly those in receipt of a salary. I do not think that at this time or indeed at any time the government would be justified in treating the judges exceptionally in regard to income tax.


Richard Burpee Hanson: I have nothing more to say.


Mr. LEADER:: Mr. Chairman, I want to say that I heartily agree with the minister in the last statement which he has just made. Listening to the leader of the opposition (Mr. Hanson) as he endeavours to make out a case of special privilege for the judges of this country-at least that is the way I take it-


Richard Burpee Hanson: The hon. member took it wrong. I do not think he knew for a moment what I was talking about.


Some hon. MEMBERS:: Order.


Harry Leader: I ask the hon. member to retract that statement. His language is unparliamentary and I resent it. I did know what he was talking about, and furthermore I remember being in this house fifteen years
Income War Tax Act

ago when the hon. member and others of his like were advocating higher salaries for the judges of this country. Now perhaps I do know what I am talking about. If we are going to have justice and equity dealt out to the people of this country irrespective of their station in life, the judges should be the last, and I believe they are the last, to ask to be excepted from the common burdens that fall upon the rest of the people.
I wanted to ask the minister in regard to *the salaries of the lieutenant-governors of each of the provinces and the salary of the governor general, and I know what I am talking about here also. Will their salaries be exempt from this tax? If so, I should like to know why. Or will this tax apply to the salaries of the lieutenant-governors and of the governor general as well?


James Lorimer Ilsley: The income of the governor general is exempt, of course, but the salaries of the lieutenant-governors are subject to the provisions of the act and are taxable.


Harry Leader: I wanted to point out that during the time when the salaries of the lieutenant-governors and judges were taxed in 1931, the governor general who was the incumbent in office at that time voluntarily took his 10 per cent reduction in salary.


Mr. FRASER (Peterborough West):: I
want to ask the minister a question on a matter that was discussed on the resolutions. Is a discount going to be allowed if income tax payments are made in advance? We are charged interest if we do not pay on the dot, and I think the government ought to offer a discount in order to get the money in. Undoubtedly many people will have to pay the tax in advance if they are going to pay it at all.


James Lorimer Ilsley: No provision is made for a discount if the income tax is paid in advance. I agree with the hon. gentleman that it is important that prepayment of income tax be encouraged, and I am very anxious myself that some measure of encouraging prepayment of income tax, especially by those with heavy incomes, be worked out, but whether a discount will be the means of encouraging prepayment I do not know; I rather think not. At any rate no provision is made in the statute for discounts.


Gordon Knapman Fraser: I
was referring not only to the large taxpayers but also to those in the 16,000 or $7,000 class, whose income tax is jumped from two to three or four or five times what it was last year. They will have to budget and set aside a certain proportion of the tax each month. I know the minister agrees with me; in fact, 
he said that there should be some encouragement given to people to prepay income tax. If the minister and the department would work out some way of making it easy for people to pay the tax in advance, the government would then get the money, and in the long run would be ahead because they would not have to bother about going after the money. I would ask the minister if this could not be provided for in the bill. I am not trying to favour the large income tax payer; it is the small one I have in mind. As recently as this past week-end I have heard from young couples who are living on salaries of three or four thousand dollars, some of them on less. They say they have to budget, and it is hard enough to budget as conditions are, without this extra tax which is put on them.


The CHAIRMAN:: Shall section one carry?


Gordon Knapman Fraser: No; I want to ask another question. This was brought up when we discussed the resolutions before. Will the allowances of these dollar-a-year-men be taxed?


James Lorimer Ilsley: This is a matter about which an hon. member asked me a question when the resolutions were before the house and I said I wanted to take some pains with the answer. I have it here. The answer is that living allowances are regarded as income and subject to taxation, that is in so far as they are for or go to personal and living expenses. There may be some part of the living allowance over and above personal living expenses which is a legitimate expense pertaining to the work that the employee of the crown is doing. If an itemized account is rendered of such expenses they can be deducted from the living allowance; but the part of the living allowance-which would necessarily be the greater part, in many instances all of the living allowance-which covers personal and living expenses is, by the terms of the act, income and subject to taxation.


Gordon Knapman Fraser: If
that is allowed to the dollar-a-year men, will it be applicable also to members of parliament, because they can render their hotel bills and their rent bills while they are in attendance here.


James Lorimer Ilsley: There is a special provision of the act which makes indemnities of members of parliament subject to income tax.


Richard Burpee Hanson: Indemnities are not incomes in the true sense of the word, and therefore they have to be dealt with separately.


James Lorimer Ilsley: Yes, and they are.

Income War Tax Act
1S21


Richard Burpee Hanson: And always have been. Members of parliament, I suppose, would be afraid to deal with them otherwise for fear of criticism.
The ruling which the minister has made seems to me to be unfair, to be setting a rather bad precedent. Many of these men maintain their homes and families in their own home town. They come here and give their services; yet, if I understand the situation correctly, their expenses, which are paid by the government, or such portion of them as they cannot show are for the purposes which the minister indicated, are to be taxed to them as income.


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: Well, it seems to me that this is carrying the thing to the limit for fear of incurring criticism. I think that is the wrong principle.


James Lorimer Ilsley: It is purely a legal interpretation.


Richard Burpee Hanson: As the act stands. Well, then, I suggest to the minister and his officers that they should give some consideration to changing the act, because it is not fair.


Thomas Vien: Shall section 1 carry? I would point out to hon. members of the committee that what we have been discussing does not really fall under section 1 of the bill.


Richard Burpee Hanson: Then where would it come?


Thomas Vien: It would come under section 26 of the bill, adding section 91 to the act, which section begins on page 9, and subsection 16, on page 12, which defines an employee as a person who receives any compensation, emolument, remuneration, indemnity or the like. I would think that section 1 is only with respect to the quantum of the tax, and not to the other particulars which we have been discussing.


Richard Burpee Hanson: Perhaps you are right, Mr. Chairman. I was going to ask the minister a question about the income tax on officers' pay. What is the position now? As I understand it, provision is made to exempt members of the Canadian military, naval and air forces from the national defence tax, and under section 9 provision is made for:
(t) the service pay and allowances of-
(i)	warrant officers, non-commissioned officers and men of the Canadian naval, military and air forces while in the active service forces, and
(ii)	commissioned officers of the said forces while on active service beyond Canada, or on active service in Canada, whose duties are of such character as are required normally to be performed afloat or in aircraft.
We are building up a national defence force here in Canada, and there are many officers whose services will neither be afloat nor in the air; why are they not entitled to the same class of treatment as officers of the navy and the air force? It seems to me that there is a discrimination there.


James Lorimer Ilsley: It was difficult to know where to draw a certain line. When the national defence tax was being framed it was considered that it should not apply to those in t'he forces who were overseas in a theatre of actual war, or perhaps I should say, overseas. Then the question arose as to what the principle was which gave rise to that exception, and apparently it was considered that the principle was risk, danger, that men who were in danger of losing their lives, or men in formations where there was risk of considerable loss of life, should not be subjected to the rigorous provisions of the national defence tax sections. Then the next question which arose was this: are not men in the navy, men on the seas, within that principle? It was thought that they were. The next question was, are not men who are flying, whether on this side of the ocean or on the other, within the same principle? It was decided that they were, and it was thought that the proper place to draw the line was between the men who are flying and those on the sea, and the men who are on the land in Canada.


Richard Burpee Hanson: What about an invasion of the country?


James Lorimer Ilsley: That is not envisaged by this measure.


Richard Burpee Hanson: Well, you do not make allowance for it.


[Stage Direction]
Section agreed to.
Sections 2 to 7 inclusive agreed to.
On section 8-annuities.
Mr. ABBOTT:: This section appears to go a little farther than the resolutions would indicate. The section which it replaces, namely, paragraph (b) of section 3 of the act, in the definition of income, reads:
The income from but not the proceeds of life insurance policies paid upon the death of the person insured, or payments made or credited to the insured on life insurance endowment or annuity contracts upon the maturity of the term mentioned in the contract or upon the surrender of the contract;
The replacing section is very broad, and reads:
(b) Annuities or other annual payments received under the provisions of any contract, except as in this act otherwise provided.
Income War Tax Act

The question I have in mind is this: Most hon. members know that life insurance policies nearly all contain various options which permit the beneficiary to accept payments of the capital (proceeds of the policy over a period of years, in quarterly or annual instalments. I would ask the minister whether it is the intention of this section to tax those payments, because I think the section is broad enough to do it, and if it is, that seems to me objectionable. The payments which the beneficiary receives spread over five or ten years are in large part capital. It is true they include a portion representing interest, in decreasing amounts, but in large part they are capital. It seems to me unfair to tax payments of that kind as income.


James Lorimer Ilsley: I wholly agree with the
hon. gentleman that it would be unfair to tax payments of that kind as income. This section is designed to apply to annuities in the true sense of the term. The reason why the phrase "or other annual payments" is used is that this appears to be a term apart, shall I say; it appears in the English statutes "annuities or other annual payments." Those words are always used together and used to mean apparently the same thing. It is not intended to tax a sum of money which is payable over a number of years in instalments. That is not regarded as an annual payment within the meaning of this section. If there is any difficulty about that, we shall have to take steps to correct it, but we thought it best not to depart from the time-honoured English phrase, "annuities or other annual payments."


[Stage Direction]
Section agreed to.
On section 9-Excepted incomes.
Mr. TUSTIN:: In what category is the $2,000 car allowance of ministers? Also Mr. Speaker receives a living allowance, and so does Mr. Deputy Speaker. Are their living allowances taxable?


James Lorimer Ilsley: The $2,000 car allowance is not taxable. But in so far as it is not spent it should be regarded as income under the principle I stated a while ago.


Richard Burpee Hanson: It is income if it is not spent?


James Lorimer Ilsley: Yes, as I read the law that is the correct rule to apply. As to the living allowances referred to, I shall have to look into that matter. I have not had any notice of that, and these are delicate questions.


Richard Burpee Hanson: As far as I am concerned I may tell the hon. gentleman
iMr. Abbott.]
that $2,000 is not enough to take care of the cost of operating a car if depreciation and chauffeur's wages are included.


[Stage Direction]
Section agreed to.
On section 10-Depletion.
Richard Burpee Hanson: On the question of timber lands, would the minister give us the rate of depletion, and say whether in the department they distinguish between freehold and crown timber, and what is the rate for each?


James Lorimer Ilsley: I do not think there is any distinction between freehold and leasehold so far as depletion is concerned. It is the cost that is taken into account, and the rate of depletion varies.


Richard Burpee Hanson: I think there is some error there. Depletion is the exhaustion of standing timber. In the case of orown timber limits the timber is owned by the crown and all the lessee has is the right of entry. He pays an annual rental and a stumpage charge, and in some provinces he pays a forest fire protection tax, but he does not own the timber and when it is cut it is the crown's property that is being depleted. Therefore, unless he has paid a premium for his lease, he is not entitled to nearly as much for depletion as the owner of a freehold. In the case of crown leases the lease holder frequently gets them at the upset price, in my province $20 a mile, an annual charge of $8, a stumpage charge of $3 a thousand or whatever it may be, and the forest fire protection tax. But in the case of a freehold timber limit it may cost the holder $50 an acre. He can only take a crop off once in so many years. If he is wise he cuts it so that he can go back in some years and get another crop, but every time he takes the timber off he is depleting his estate, and is entitled to a much larger sum for depletion than a leaseholder. If he wipes out all the timber, if he "cuts it clean", as they say, he will not get another crop for, say twenty or twenty-five years. He has cut down and carried away ninety per cent or more of the value. He should be allowed a large depletion charge.
I think the minister's statement is in error as to the practice, because I had this question up with the department at least ten years ago in the case of a seigniory in the province of Quebec, in which they allowed my client double what they would have allowed a leaseholder. I thought the practice still prevailed. As a matter of fact, I just rose to make sure that they are continuing the practice, which I understood was established

Income War Tax Act
at that time. If they do not differentiate, there is a great injustice being done to holders of freehold limits.
iMr. ILSLEY: I do not think there is any injustice being done, and I do not think we can thresh out the matter satisfactorily here. To begin with, we would have to know the terms upon which the leasehold was granted. It would seem to me-without knowing much about the practice, I admit-that if a person obtained a leasehold for a substantial period and if he cut that timber year by year, he is depleting his capital exactly in the same sense as if he were cutting on land which he bought and owned. That depletion should be allowed on the same principle, and I think it is.


Richard Burpee Hanson: I think that is sound to the extent that he paid a substantial amount for it, but if he got it as they did in New Brunswick back in 1892, farmed the limits out among themselves at the upset price of $20 a mile, instead of paying a premium, of course they had very little investment in the limits. It is so little that it is only the right of a franchise. But if they paid $1,000 a square mile, as I have paid for clients, or in fact $2,000 a square mile for the franchise, the right to go in and cut, then of course there is a substantial investment in the limit and they must get it back by way of depletion. I agree, however, that perhaps we cannot thresh the matter out here or make any general rule.
Each case should be and, I think, will be treated on its merits by the department. Take the case of a small coal mine in New Brunswick. The ordinary rate of depletion is ten cents a ton, based upon the theory that the government of the province charges that amount as a royalty. That is a very small amount, but take a given area of land, perhaps fifty acres of New Brunswick coal mining land, with depths that can be ascertained easily by drilling. Those experienced men down there can tell you almost to within five hundred tons what is underlying that area, and they know exactly what they should pay for it. I have seen small areas like that where the freeholder, who also had been given the mining rights by a paternal provincial government, had both the freehold and the mining right to sell, and he sold the whole thing, but at a cost of about fifty cents a ton based upon the coal underlying. In that case the department should allow the fifty cents a ton when the depletion is taken out, and I think that is what they have done.
I mention this merely to illustrate the fact that in the long Tun each case will have to be dealt with on its own basis and merits. I
hope that is what the department will do, and I think this section allows them to do that.


James Lorimer Ilsley: Yes.


Mr. GREEN:: What facilities have the department for determining a fair allowance for the exhaustion of a mine or an oil well? Do they cooperate with the provincial governments at all?


James Lorimer Ilsley: I think I would have to admit that it is impossible to fix a rate that has a scientific basis at all. The department establishes a flat rate for various classes of mines, oil wells and so on. Just what they base it upon I do not know, but it is considered fair under all the circumstances. I know that is a very loose way of describing the principle *underlying allowances; but that is what is done, and as far as I can learn that is what is done in the United States. It is a most difficult thing to set a depletion allowance which will be exactly right. Take the gold mining industry. Theoretically the depletion allowance should be such as to provide for a return of the capital over the life of the mine. But the lives of mines differ tremendously. The average life of a mine this year is different from the average life next year, so there is practically nothing to go on. As a matter of fact, there has been a long standing debate between the gold mining industry and the department, not so acute in recent years but very much so up to two or three years ago, as between 50 per cent and 33 per cent for depletion. The government allows 33^ per cent; the industry considers that the rate should be 50 per cent. I think 33J per cent would be too much if there were only one mine and it had a long life, but of course it would be too little for a mine that had a very short life. As a result, you simply have to do the best you can to fix a depletion allowance that strikes a considerable number of intelligent people as fair.


Howard Charles Green: Is any attempt made to cooperate with provincial departments of mines?


James Lorimer Ilsley: No; this is done by the
Department of National Revenue, not in collaboration with provincial departments.


Howard Charles Green: Are there any mining experts in the department at all, who know a mine from an oil well?


James Lorimer Ilsley: As one who knows very
little about mines I have been tremendously impressed by the knowledge there is in the income tax division with regard to mines. Of course in that regard the income tax division has to consult other branches of the government where there is some knowledge of mining.
Income War Tax Act

We have a Department of Mines and Resources, of course, from which a great deal of information can be obtained.


Richard Burpee Hanson: If the
minister will permit me I can give him a rough and ready rule with respect to the depletion of timber limits. That is, it should be based on a correct statement of the capital cost of the limit to the holding. That, coupled with a knowledge of what is being taken off annually, would give the department some guide, at all events, as to what should be allowed for depletion. I venture to say that it will differ in each case.


James Lorimer Ilsley: The commissioner tells me
that is substantially the rule adopted in the department.


Thomas Langton Church: As I understand it in connection with mines, oil wells, timber limits, cuts on a stumpage basis plan and all that sort of thing, there is great duplication as between the dominion and the provinces. We now have the principle that the dominion will collect dues for the provinces. That was started in connection with the collection of income tax; now each session the principle is being extended. In my opinion that is a bad principle; in finance it is called robbing Peter to pay Paul, or having federal authority as agent to collect levies for the provinces. I think it is a dangerous principle to extend to the natural resources of this country, and I am afraid it may be extended to the direct current and cheap light and power in this country, as was mentioned a year or two ago.
I think this is all wrong. Let the provinces collect their own taxes of all kinds and their own dues and all other levies. The federal authority has no more right to collect provincial taxes than it has to collect municipal taxes as agents for another authority. As the late Mr. Robb said in 1927, when this principle was initiated, it is doubtful whether we have legal authority to do this, and it was never intended at confederation. We have many of the same classes of property assessed by the dominion, the province and, in many instances, the municipality. Surely the dominion has enough to do in looking after its own affairs without meddling with provincial taxation. I believe the provinces should pay the cost of collecting their own taxes. There is only a very small charge imposed by the dominion for acting as agent for the provinces in collecting this money, and it is leading the dominion into all sorts of complications, duplications of services and inequalities, and causing a great deal of comment and dissatisfaction. I believe the dominion should say to the provinces, "Go and collect

your own taxes yourselves." The federal power took this income tax away from the municipalities in 1917, and that sort of thing is going on all along the line. The inequalities and injustices brought about under this bill are all wrong, and the overgovernment and overtaxation in duplicate and triplicate taxes of all kinds that we nave in this country should not be tolerated much longer.
I am opposed to the extension of this collection principle; I believe it is contrary to the British North America Act.


Mr. McNEVIN:: With respect to the depletion of timber is it not true that in a great majority of cases, particularly in Ontario at least, timber cut on crown lands is cut on a stumpage dues basis, and therefore does not offer any problem in regard to depletion?


James Lorimer Ilsley: That may be the case. I am not familiar with the system in Ontario.


[Stage Direction]
Section agreed to.
Section 11 agreed to.
On section 12-Children from United Kingdom.
Mr. MACDONALD (Brantford City):: 
James Lorimer Ilsley: I agree that the explanatory note is misleading. The subsection does not provide exemption for all children evacuated from Great Britain. It applies only to those who come under a plan sponsored by the government. The hon. member suggests that no such limitation be made.
I would point out that at the resolution stage this matter was debated at considerable length, and the leader of the opposition finally left it in this position: So far as he was concerned, I was to try to work out some way whereby the most deserving cases, those of moderate means who were taking children, or those taking children from families of moderate means, might be provided for. The matter was discussed at considerable length with the officials, but we were unable to arrive at any modification of the section which would achieve that limited end. The only modification possible would be to leave the section wide open, and to allow an income tax exemption in respect of all children taken into homes in this country. That would be giving to persons taking those children a privilege they do not have now, and have never had. I do not feel that we can go that far.


Mr FRASER (Peterborough West):: Many of the children in Canada now are here because people in this country arranged for them to come over before the budget was brought down. Had they known that the income tax was going to be so heavy they would never have asked for these children, because they could not have taken care of them. If the taxation is going to be as heavy as has been indicated, they cannot take care of them now. It is going to be a great burden on these people; there is no doubt about that. I know of a family that has brought out three children, and with the income tax where it is they will find it very tough sledding indeed. These people have a small income. I believe the income is about 33,000, and they have these three children from England.


James Lorimer Ilsley: What is their total family?


Gordon Knapman Fraser: They have two other children.


Mr. JACKMAN:: How many children
who have come from the old country have come in under this cooperative plan, or have they all come as a result of direct personal arrangements between people in the old country and people in this country? Have any children come from the old country under the so-called cooperative plan?


James Lorimer Ilsley: No.


Harry Rutherford Jackman: In other words, all the children in Canada to-day who are here as guests from England and Scotland will be here at the entire expense of their hosts? No exemption will be allowed for their upkeep? It seems to me that this is most unfair. It would appear that already no allowance is given for certain classes of Canadian children who are being taken care of by foster parents or by others but who have not been legally adopted. I do not believe that two wrongs make a right, and would urge that further consideration be given the whole matter. This provision has brought about a hardship.
There is one other point in connection with it that I would bring to the attention of the committee. If a charitable organization, donations to which are allowed as a deduction, used part of its funds to keep children who might come out from the old country, the contributors to that charity, if approved by the department-and I know charities are approved-would be allowed total exemption. Yet if an indivdual takes a child he is not allowed exemption.
This policy seems so small, to reasonable-minded people-and I have discussed it with many people, including university teachers and professors who are taking the children of their colleagues in the old country-that it hardly seems that we are doing our part in connection with the whole war effort, or that we are doing fairly by those people facing stress in the old country.


Howard Charles Green: I think the minister might give us an answer to the questions asked by the hon. member for Rosedale (Mr. Jackman). Apparently there are no children in Canada at the present time in respect of whom these exemptions can be obtained?


James Lorimer Ilsley: Correct.


Howard Charles Green: And according to the statement made the other day by the Minister of Mines and Resources (Mr. Crerar), there are not likely to be any children in Canada under agreement between the governments for the
Income War Tax Act

rest of the year. That means that this exemption is worth nothing at all in connection with income earned in 1940.


Harry Rutherford Jackman: And never will be worth anything.


James Lorimer Ilsley: It may not be worth anything; I do not know. It depends on whether they come, or whether the government sponsors a cooperative scheme for bringing out those children. If the government does that, then it is a government measure, and the people who have those children will be given income tax consideration.


Howard Charles Green: The fact is that to date
no children have come out under the cooperative scheme?


James Lorimer Ilsley: That is correct; I said that.


Mr. DUPUIS:: May I put to the minister a case as it might occur in Quebec. In our province we have many adoptions. I do not know whether similar laws operate in the other provinces, but the fact is that in Quebec we have a law whereby we may adopt a child. In law that child has the same right as has a legitimate child. If I should adopt a child, would I be allowed $400 exemption?


James Lorimer Ilsley: An adapted child is regarded as a child for taxation purposes, and the exemption applies.


Vincent Dupuis: Even if he is a refugee or an evacuee?


James Lorimer Ilsley: If he is adopted.


Mr. CLAXTON:: I share the views of
hon. members who have spoken this evening, but I understand the minister has reached a decision. Before the section carries, I should like to ask if the department has considered wording the section somewhat as follows?
Four hundred dollars for each child maintained by the taxpayer in Canada, where the child has been brought out to Canada because of the war and is maintained by the taxpayer in Canada, provided the taxpayer is not in receipt of any income in respect of such child.
That would make it quite clear that such a child would be considered in the same light as one brought out under a government scheme. I represent a constituency in which is located McGill university, one of the great universities of Canada. The members of the staff of that university are not in receipt of large incomes, but they have come forward in a most generous way and have offered to maintain the children of professors and others in like circumstances in England. Children are being brought out to be attached to the households of these professors and lecturers, all of whom are in receipt of small
fMr. Green.]
salaries and many of whom already have large families. These and other similar people coming forward in this way to assist in the war are helping just as much as though they had offered to take children brought out under a government scheme. They made the arrangements themselves without waiting for the government, and to me there is no difference in the principle. In each case the people are performing a useful service, and if a concession is granted in the one case it should be granted in the other.


Howard Charles Green: Will the minister explain
the meaning of this proviso?


James Lorimer Ilsley: That was carefully and laboriously explained on the resolution. It simply means that if a person is in receipt of an income of $5,000, his rate of taxation in the higher part of that income is 20 per cent. If he takes a child and is granted an exemption under this section, his income tax will be reduced by $80. The government will lose in revenue in respect of that child, $80 a year. This merely means that the government will not sacrifice more than $80 a year, even though the taxpayer is in receipt of an income of $20,000.


Richard Burpee Hanson: What
would he be taxed ordinarily with a $20,000 income?


James Lorimer Ilsley: It is 41 per cent.


Thomas Miller Bell: I was hoping the minister might see his way clear to meet the requests which have been made so generally from all sides of the house, and I still hope that the suggestion made by the hon. member for St. Lawrence-St. George (Mr. Claxton) will be considered as a reasonable one. These university professors and lecturers did not wait for some government plan to be put into operation; they used their own initiative and tried to assist their fellow professors and lecturers in Great Britain. Would the minister be willing to let this section stand in order that it may be reconsidered?


James Lorimer Ilsley: I do not think it would be of much service to let the section stand any longer. The persons referred to by the hon gentlemen are in effect asking the government to make a contribution of $50, $50 or $80 a year per child. The government is prepared to do that if it sponsors a scheme, but if it does not sponsor a scheme it does not feel that it should be called upon to depart from the principle which has been in force ever since income war tax legislation has been applied.


[Stage Direction]
Section agreed to.
Sections 13, 14 and 15 agreed to.

Income War Tax Act
On section 16-Depreciation.
Richard Burpee Hanson: Is this the one which was brought in by way of amendment to the resolution?


James Lorimer Ilsley: Yes.


[Stage Direction]
Section agreed to.
On section 17-Limitation of expenses.
Douglas Charles Abbott: I and other hon. members spoke on this section when the resolutions were being considered. It gives the minister most far-reaching power, the discretion to disallow any expense which he in his discretion may determine to be in excess of what is reasonable or normal for the business carried on by the taxpayer. When we were considering the resolution upon which this amendment is based I stated that while I had no objection to the section provided an appeal were allowed from the minister's decision, I felt it was most objectionable if no appeal were allowed. As the section now stands it does not provide for an appeal, and personally I doubt that if an appeal were taken under section 66 the courts would review the exercise of the minister's discretion. Under the act the treasury board is given power to disallow certain transactions which in its opinion are for the purpose of evading taxation. I think transactions of that kind will be much less frequent than will disputes as to whether expenses are excessive. Section 32 has a subsection which specifically provides for the right of appeal from the decision of the treasury board, and I suggest that this section should have a similar provision. I thought the minister indicated when we were discussing the section before, that he had no objection to there being an appeal from his decision in connection with these questions of expenses.


James Lorimer Ilsley: I think there is an appeal now. I looked into this matter quite carefully and found that the Income War Tax Act provides in some thirty-nine places for the exercise of discretion by the minister, and in seven of those it is stated that his finding shall be final and conclusive. The words "final and conclusive" are not used in the section under discussion. I doubt if it is necessary to provide specifically in this section for an appeal from the minister's discretion, because the section does not differ greatly from many other sections which provide for a similar exercise of discretion. A general right of appeal to the exchequer court of Canada is provided by the act. I read the provisions of that the other night. I have also had a memorandum prepared as to the principles which apply to such a measure. The memorandum states that judicial interference may occur when (1) the discretion has not really been exercised; (2) when it has not been exercised honestly and fairly; (3) when the party exercising the discretion was influenced by extraneous and irrelevant facts; and (4) when the decision was based on principles incorrect in law. Those are four classes of cases which are all based on decisions of the courts.


Richard Burpee Hanson: In England?


James Lorimer Ilsley: They are nearly all English decisions, but there are two or three Canadian cases. The memorandum also states:
There is only one class of case in which the judiciary has admitted that a review of the exercise of ministerial discretion will not lie, and that is where the statute makes the decision of the minister final and conclusive.
This section does not make the decision of the minister final and conclusive, and so I suggest that perhaips the matter should be left in the position where it is now.
In regard to the treasury board section, section 32A, there is express provision for an appeal to the exchequer court of Canada, but that section is so exceptional, enabling the treasury board to exercise such sweeping powers, that I have not any objection to providing for a special appeal to the exchequer court from that section. But if we provide expressly for an appeal from the findings of the minister under this section, I do not see how we can escape doing the same thing expressly in quite a number of the other thirty-eight cases which are mentioned in the act, and I would not care to do that.
I do not think the hon. gentleman need fear that the discretion of the department will be exercised arbitrarily or unreasonably, I think it is important to have that power in the minister; I do not think the hon. gentleman would dispute that. In these cases of high taxes, and especially in time of war, the executive must have considerable power, and I do not think this is quite the time, even if a case' could be made for it in time of peace, for introducing checks upon the exercise of the discretion of the executive. We are leaving checks there which have always been there in regard to this class of cases, and while this power to disallow any disbursements by taxpayers does appear to be a little greater power than is conferred by some other sections of the act, it is not different in character but only just a little bit different in importance from the power taken under other sections of the act, and I really would not feel like introducing a special appeal from this particular section at this particular time.
Income War Tax Act


Richard Burpee Hanson: The real objection to this type of legislation is this, that the effect of it is to give power to the minister to fix the rate of taxation. What would we think if the minister asked for power to fix the rate of duties on dutiable goods? It would be an unheard of thing. The indirect effect of this type of legislation is to give the minister power to affect the rate of taxation which a taxpayer has to pay. There may be an appeal; I am trying to follow the minister's reasoning in that regard. If there are thirty-seven or thirty-nine cases like this, that is of course a grave extension of a taxing principle that ought not to be in any taxing statute. It is a principle of taxing statutes, as I have always understood them, that the right to tax must be clear. The burden is on the crown to show the right to tax, and that includes the rate of taxation. Those principles are elementary. Anybody who is interested will find them in Craies or any other authority on statute law. All these cases to which the minister has referred are exceptions from what is the general rule of a taxing statute, and therefore I should say they really cannot be defended in principle. It is a matter of expediency; that is what it is, and of making it easy to collect the tax. You say: Oh, we will give the power to the minister. But you do not do it in any other walk of life that I know of. You do not give the minister that power with respect to customs schedules. There is the power to impose penalties there, but the Minister of National Revenue is not given the right to fix the rate of duty. That is the objection in principle as I view it.


Douglas Charles Abbott: I do not dispute the
advisability of giving ministerial discretion in this section, but I think it should be made perfectly clear that there is the right of appeal from the minister's decision, and an effective right of appeal. I am not satisfied that under this section such a right of appeal would be effective. The words of the section are "which he in his discretion may determine to be in excess" and so on. I do not believe the courts would look into the merits of the case to determine whether or not that discretion had been exercised wisely or not.


Richard Burpee Hanson: They never will.


Douglas Charles Abbott: And I strongly suggest that if in section 32A the right of appeal is given, which in my opinion contemplates a case that would be far less frequent and far less important than cases under this particular section, then in this section which gives the broadest possible discretion to the minister

it should be made clear that the taxpayer has the right of appeal to the courts if he feels aggrieved by the decision of the minister, and that right of appeal should be an effective appeal to decide whether the minister's discretion had been exercised correctly or not.


James Lorimer Ilsley: I was going to say that under section 5 (a) the minister "in his discretion, may allow for depreciation". Section 5 (a) reads:
"Income" as hereinbefore defined shall for the purposes of this act be subject to the following exemptions and deductions:
(a) Such reasonable amount as the minister, in his discretion, may allow for depreciation.
I do not think the following words are relevant, although there are other words in the sentence. The minister did in the Pioneer Laundry case fix the depreciation in his discretion. The case was taken to the courts and finally to the privy council, which held that the minister based his allowance for depreciation upon principles incorrect in law, and reversed him and disallowed the depreciation that he had allowed. Undoubtedly if the minister under this section based his disallowance of expenses upon principles incorrect in law, the Exchequer Court of Canada and higher courts would have the power to overrule him.


Richard Burpee Hanson: That goes to the question of jurisdiction if the decision is based upon an improper principle, but where there is a dispute as to the quantum, the courts will not review that.


James Lorimer Ilsley: I have made the principles just as clear as I possibly could.


Douglas Charles Abbott: I am familiar with the Pioneer Laundry case and the only reason why the court overruled the minister in that case was that he made the mistake of showing exactly how he had arrived at his depreciation figure. If he had been just a little more careful and given no specific reasons, the court might not have interfered with the exercise of his discretion. In the case of expenses of this kind I think it is quite likely that a disallowance would be given for no particular reason other than that it was in excess of the reasonable requirements of business, and I am fairly certain that if an expense were disallowed on this general ground the court would not interfere with that discretion. As I have said, the mistake which was made in that case was that of showing clearly that they had proceeded on an erroneous basis.


[Stage Direction]
Section agreed to.
Sections 18 to 20 inclusive agreed to.

Income War Tax Act
On section 21-Withholding of 15 per cent on account of non-residents taxed for services rendered in Canada.
James Lorimer Ilsley: One or two verbal changes in this section are necessary. The section as it appears in the draft bill reads as follows:
Every person resident and carrying on business in Canada. . . .
It is desirable to change that to:
Every person resident or carrying on business in Canada. . . .
In line 30 the language is:
. . . shall withhold and remit to the receiver general. . . .
It is desirable to change that to:
.	. . shall withhold and remit forthwith to
the receiver general. . . .
The rest of the section is exactly the same.


Thomas Alexander Crerar: That section 21 be amended by changing the word "and" in line 29 thereof after the word "resident" and substituting in lieu thereof the word "or", and by adding in line 30 after the word "remit", the word "forthwith".


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
Section 22 agreed to.
On section 23-Repeal.
Richard Burpee Hanson: Section
29 is said to be a non-operative section. What is that?


James Lorimer Ilsley: This section is an obsolete one. I will read it.


Richard Burpee Hanson: The
explanatory note says, "a non-operative section."
Mr. ILSLEY":	Well, it is non-operative
because it is obsolete. Section 29 reads:
Any person liable to taxation under this act who is not resident in Canada and is not a British subject shall not be entitled to the exemption allowed by paragraph (e) of subsection one of section five of this act-
Those are the marital exemptions.
-and in lieu of the tax prescribed by section nine of this act, he shall pay a tax of eight per centum upon all income in excess of one thousand dollars.
2. The provisions of subsection one of this section shall come into force at a date to be named by proclamation of the governor in council, and the governor in council may, by the said proclamation specify the taxation periods to which the said subsection shall apply.
This section was never proclaimed. It was enacted-


Richard Burpee Hanson: To meet a particular case?


James Lorimer Ilsley: No

because another country was denying to our citizens something we were giving to theirs, and this section was passed with power to proclaim. However, the provisions of the bill which was before the legislature of another country were changed, so it was never necessary to proclaim this section or put it into effect.


[Stage Direction]
Section agreed to.
Sections 24 and 25 agreed to.
On section 26-To whom applicable, etc.
Thomas Langton Church: Section 26 is a sort of
omnibus clause. It deals with many definitions from sections 1 to 25. The clause to which I wish to refer in this section is the definition of the word "employee," which is set out on page 12, and the reference to the word "employee" at the foot of page 3 of the resolutions:
(2) That every employer be required to deduct the tax imposed in respect of earnings of the employee earned or accruing due during and after July, 1940.
In the resolutions there is no definition of "employee," but there are elaborate descriptions of "employee" and "employer" under section 26 of this bill, on page 12; which reads:
(16) "Employee" shall for the purposes of this section include any person who receives as income any salary, wage, remuneration, compensation, hire, emolument, stipend, perquisite, or any similar payment or any indemnity, pension or director's fee, howsoever paid for any services, functions or duties rendered or performed in Canada.
There is a shorter definition of the word " employer."
"Employer" shall for the purposes of this section include any person who makes any payment of the descriptions referred to in subsection sixteen of this section.
Hon. members will see that the result of the definitions of "employer" and "employee" is to open up many statutes, like the Judges Act, and to affect the office of lieutenant-governor, the position of soldiers, of the supreme and superior courts, of many boards and other public bodies of parliament and all commissions. No doubt there should be equality of treatment. I should like to find out from the minister if it applies to the family vault with its sepulchral walls. If anyone were to laugh over there, the galleries would collapse. Would it apply to them over there, to judges, to members of parliament, and to the cabinet, who are pretty heavily taxed at present? I should like to find out from the minister if anybody in Canada is exempt. Under the definition of employee there seems to be no escape from this clause. Is it intended under section 26 to supersede certain special acts like the Judges
Income War Tax Act

Act, or to make the tax applicable to lieutenant-governors and holders of many other offices? I am not asking that anyone be exempted. As I read the section it will apply to anybody in Canada who comes under the schedules set out in the bill, whether he is exempt under special acts or not. I agree that there should be no exemptions, and that all should be taxed alike.


James Lorimer Ilsley: We are not excepting lieutenant-governors or judges from the provisions of the national defence tax. That was explained this afternoon. We are adopting the definition of income which is contained in the Income War Tax Act. The incomes of certain persons are not liable to tax under this section, and those persons are specified on page 10 of the draft bill, subsection (4); they include incorporated companies, municipalities, municipal or public bodies which in the opinion of the minister perform a function of government. There are some other exceptions, but they are not very many. I think the exceptions that are found in the Income War Tax Act are fairly well brought under this act, but not many others.


Thomas Langton Church: It is the desire of every good citizen to pay all his taxes promptly as far as he is able. But there has been too much curtailing of the rights and powers and privileges of this parliament. Members of the House of Commons are ready and willing to pay their taxes. They are just employees; that is all they are to-day, the way this government is creating boards and commissions, and members of the house might just as well go home. In the old days six papers in Toronto used to report the proceedings of parliament; to-day they are almost ignored. We are just employees of the government.
I have no objection to this amendment; it is proper that these people should pay, but the system of taxation is wrong. Under this very section you will have the provinces come along and impose the same system of taxation. In 1917 when this parliament first took over the income tax, the province of Ontario came along and imposed one mill on the assessment of every municipality in Ontario, although not by the largest stretch of imagination could it be said that the provinces had anything to do with militia and defence, which under the British North America Act is exclusively federal. This duplicate system of taxation went so far in Ontario that in 1907 an amount of $3.75 appeared in the provincial accounts that was found in the pocket on a man's body in the morgue, and instead of being given to the municipality which built the morgue and supplied the van to take the body to the
fMr. Church.]
morgue, it was confiscated by the treasury of the province. The province should collect its own revenue, and we have no business meddling in provincial affairs as we do. It became unfortunate for hon. gentlemen opposite the way they interfered in Ontario, in view of the disruption which resulted to them in the last election, and I doubt whether it has been a financial success. The province should be its own tax collector and not ask the Minister of Finance of the dominion to be what the hon. member for Temiscouata the other night described as Pooh-Bah, the Lord High-Everything that Koko was not.


Thomas Vien: Shall section 26 carry?


Richard Burpee Hanson: The whole section at once?


Thomas Vien: If it is the desire to take each subsection separately, then the discussion we have had is altogether out of order. It was on subsection 16.


Richard Burpee Hanson: We are on section 26 and no one has suggested that we take it paragraph by paragraph. But I want to ask the minister some questions with respect to subsections 3 and 16. We are all interested in the fact that the definition of employee includes the person who receives an indemnity. I have no objection to that, but how is the minister going to allocate it for this year in respect of members of parliament? The statute came into effect on July 1, and the employer, the dominion government, will have to make the remittance to itself on September 16 and monthly thereafter. We came together here on May 16, and I hope we shall be out of here by July 31. The indemnity is $4,000, and as far as I am concerned the government is going to get it all in income tax in the end. But with regard to the national defence tax, how much is the government going to deduct from my salary cheque on July 31? I am putting it as myself rather than the hon. member for Moose Jaw. What does the minister propose to do about it for this year and succeeding years? Would it not be simpler to have it paid with the income tax? How are you going to allocate it this year when we know that most of the indemnity was earned prior to July 1 although we had not received it?


James Lorimer Ilsley: That does not make any difference.


Richard Burpee Hanson: Well, it will make a difference. How much am I going to pay on the balance of my indemnity? Surely I am going to escape on the amount received for May and June.


James Lorimer Ilsley: That is not the way we do it.

Income War Tax Act


Richard Burpee Hanson: Well, how will it be done? This does not provide at all.


James Lorimer Ilsley: It does not make any difference what part of the year it is earned in, but it is half the income earned any time in the year that is subject to the tax.


Richard Burpee Hanson: Which section is that?


James Lorimer Ilsley: The hon. member for Rosedale had that question up. He did not bring up the matter of indemnity, but he was putting the case of a bonus payable at the very last of the year, and wanted to know whether the whole of that bonus would be subject to the two per cent national defence tax by reason of its being paid at the very end of the year. I pointed out that it did not make any difference when the bonus was paid so long as it was paid in the year. It is half the total year's earnings that is subject to the tax. That is section 27, subsection 3:
... in respect of the year 1940 the tax shall he imposed on one-half only of the income if the income for the whole year exceeds the relevant amount. . . .


Grote Stirling: Is the government going to deduct it or not?


James Lorimer Ilsley: Under the provisions of this measure it is deductible, yes. I do not know that it makes much difference in the case of members of parliament; the only thing is we are laying down a principle, we have to act in such a way that the fairness of our actions will appeal to the eleven or twelve million people of Canada, and we are deducting at the source.


Richard Burpee Hanson: That is the cheapest way to collect it.


James Lorimer Ilsley: That is the cheapest way, and we are applying it to ourselves.


Richard Burpee Hanson: What will be the concrete application to the indemnity this year? Will it be on 82,000 at the end of the session?


James Lorimer Ilsley: On the indemnity of members of parliament it will be two per cent of 82,000.


Richard Burpee Hanson: And thereafter on $4,000 as long as the tax is in force?


James Lorimer Ilsley: Yes, provided the member is married and so on.


Richard Burpee Hanson: Then in subsection 3 I was intrigued by the "extra tax", because there was not anything in the resolution about this. Is this just a penalty for not collecting the tax? Under the marginal note "extra tax", it says:
Taxes imposed by this section which have not been deducted at the source-
Is that a penalty, or is it an extra tax in cases where the tax cannot be deducted a.t the source?


James Lorimer Ilsley: It is an equalization tax. Here we have wage-earners all over the country who are going to have their tax deducted week by week, in a good many instances. There will be others, perhaps belonging to the professional class, who will not pay until the end of the year; there will be no way of deducting their taxes at the source. An inequality arises there unless something is introduced into the statute to equalize it, and that is what this is designed to do.


Richard Burpee Hanson: Could the minister give us a concrete case, say that of a physician who is on his own? His tax could not be deducted at the source; the patient could not very well deduct the tax on the fee.


James Lorimer Ilsley: If the income of the physician is $10,000 he will pay a tax of $200. It will not be deducted at the source; he will not pay it until the end of the year. Then, instead of paying $200, he will have to pay $203 to equalize his position with that of somebody else who has paid the tax during the year week by week or month by month as the case may be.


Richard Burpee Hanson: You are only going to make the physician pay on what he collects, not on what he carries on his books?


James Lorimer Ilsley: That is right.


Richard Burpee Hanson: It will be on his cash return?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: Not on his book accounts?


James Lorimer Ilsley: No.


Richard Burpee Hanson: As and when those are paid they will be taken into account as cash returns for that particular year?


James Lorimer Ilsley: Yes.


Mr. MacNICOL:: Take the case of a landlord collecting rents monthly. When does he pay this two per cent? Does he pay it monthly or at the end of the year?


James Lorimer Ilsley: He pays at the end of the
year on the net income.


John Ritchie MacNicol: That is not on the same basis?


Richard Burpee Hanson: That is not. wages or salary.
Income War Tax Act

Mr. MaoNICOL: Then I notice the words "blood relationship" in paragraph (d) of subsection (10). Just what is included in those words? Does it mean cousins, nephews, nieces and so forth?


James Lorimer Ilsley: We all know what relations are, and if they are relations they are blood relations. I cannot put it any clearer than that. There is a blood relationship; they are related by consanguinity. I cannot give the hon. genteman the whole list, which is extensive. In practice, however, it is not extensive, because actually a person only supports somebody who is pretty close to him.


Gordon Knapman Fraser: This extra tax bears out what I tried to get across once before, that the government charges interest if we do not pay, but they will not allow us anything if we do pay. The minister has not said whether or not he will allow us anything in regard to the regular income tax. If we paid this tax in advance would we get a discount, or how is it worked out?


James Lorimer Ilsley: There is no discount in either
case.


Howard Charles Green: What increase in the staff of the department is expected to be necessary in order to administer this national defence tax?


James Lorimer Ilsley: Something over five hundred is estimated.


Howard Charles Green: Over five hundred new
civil servants?


James Lorimer Ilsley: Yes.


Howard Charles Green: Under subsection 5, as I read it, an employee who does seasonal work, who may work for two or three weeks or two or three months at a daily wage which, if he received it during the entire year would bring him over $600, must pay the tax. In such case the employer must deduct the tax just as though that man were going to work for a whole year, and send it in to the government. Then at the end of the year if it should be found that no tax was payable because the man had worked for only two or three weeks or two or three months, the government would have to go through all the red tape of refunding that tax, and the man would have to go through all the red tape of making application for the refund?


James Lorimer Ilsley: Yes.


Howard Charles Green: No wonder five hundred new civil servants will be needed to administer this tax.


James Lorimer Ilsley: That is right.


Grote Stirling: How does the taxpayer make his return in connection with this? Take the case of a member of parliament, if you will. He will have the tax deducted from his indemnity, but in the case of other income he may have will it be picked up with the income tax return of the following year, or will there be a separate return which will have to be made by April 30 following?


James Lorimer Ilsley: It will be provided for in his income tax return.


Grote Stirling: The following April?


James Lorimer Ilsley: Yes.


Howard Charles Green: Following up my question of a few moments ago, what is the estimated increase in cost to the country through the administration of this tax?


James Lorimer Ilsley: The cost of collecting the new tax is fairly certain to be below three per cent of the amount of the tax collected. Personally I think it will be considerably below that.


Howard Charles Green: Does the minister know the estimated figure?


James Lorimer Ilsley: I do not think we can give any estimate that would be of much value. The other night something was said about half a million dollars, but I should think it would be more than that, perhaps a million; I do not know.


Howard Charles Green: Would it not save a great deal of trouble and expense if the minimum were made higher than $600? After all, it seems ridiculous to go to all that expense in order to collect a few cents from the large number of people who have very small incomes. Would it not save the country money if the minimum were raised from $600 to at least $750 or perhaps $1,000?


James Lorimer Ilsley: The higher you make it, the less trouble you will have; there is no doubt about that.


Howard Charles Green: And you might save money.


Mr. ESLING:: At the risk of repetition, may I ask the minister this question:	If
one hires a carpenter to do some repair work, and pays him $50 for that work, how is one going to know what other work the man gets? Is that person to be responsible for the carpenter's earnings at some other point? In other words, I believe it is practically the same as the provincial tax of one per cent on earnings. In the province, the moment we pay a man we deduct one per cent, and the matter is closed. There is no more work to it. Does the person who hires the carpenter deduct the two per cent when the car-

Income War Tax Act
penter is paid, and remit to the government? That may be all the dealings we would have with that particular man.


James Lorimer Ilsley: There has to be a deduction. If he is not on a contract basis, or if he is an employee of the hon. member, then the hon. member must deduct the two per cent and remit it to the government.


William Kemble Esling: That is all right; but I understand he is through when he remits that two per cent for that one employee who has done a week's work, or whatever the time may be.


James Lorimer Ilsley: The employer is through,
but the government may not be through. The government may have to send it back to the man at the end of the year.


Grote Stirling: What sort of check will the government have on the individual who employs that carpenter from whose payment he deducts such and such a small sum of money? What sort of check will the government have as to whether or not that employer ever turns the money over to the government?


James Lorimer Ilsley: If the employer deducts it and does not send it to the government, then the government will have a check, because the employee at the end of the year will most likely write to get it back, if in the year he has not earned the full amount.


Grote Stirling: Only if that man in the course of the year has not earned $600.


James Lorimer Ilsley: That is true.


Grote Stirling: But I employ a local
painter from the town in which I live to do some painting. The painter requires four or five days to do his work, for which he sends me his bill. It is understood that he was not working on contract. I am supposed to deduct the two per cent from the amount I pay that painter?


James Lorimer Ilsley: Yes.


Grote Stirling: But what sort of check has the government against me if I keep that two per cent?


James Lorimer Ilsley: I cannot think of any, except the one I mentioned.


George James Tustin: The other night I brought to the attention of the minister the position occupied by seasonal workers, particularly those working in the canning factories. I asked at that time if it would be necessary for employers to take two per cent out of the salaries of those earning $600 or $1,200 a year. He said it would be necessary. I am asking the minister again to give consideration to that point, and for this reason:
There will be thousands of those employees who, as the employers know, will not begin to earn $600 a year. That ruling will cause no end of confusion and there will be no end of work in the minister's department in making refunds. I suggest that his department should be able to work out some system whereby it would not be necessary to collect the two per cent on those accounts which the employer is certain will not reach $600.
Then I have this further question: As the minister is no doubt aware, a great many of the employees in canning factories are women, and a good proportion of them are married women. It may be that their husbands are working part time, too. In what position will they be? Will they come under the 8600 wage, or the $1,200?


James Lorimer Ilsley: If married, for deduction
purposes they are given the $1,200 exemption. That is, they are not taxable unless they earn over $1,200.


George James Tustin: I do not know whether I have made myself clear. Do I understand a husband and wife would be both entitled to $1,200? [DOT]


James Lorimer Ilsley: No, that is not correct. I do not wish to let that impression go out. If the husband gets a deduction of $1,200, the wife cannot get one also.


George James Tustin: Would she be entitled to any deduction?


James Lorimer Ilsley: Mr. Chairman, I believe I shall have to take refuge in sending the hon. member to the commissioner. I do not think this is a proper place to put these technical questions to the minister, namely, on the floor of the house. An answer may be inadvertently wrong in some small particular, but might be quoted in that way. It may be said that the minister said thus and so on the floor of the house. The hon. member is asking about fine points in the administration of the measure, and there would be no trouble at all about them if he would just take them up with the commissioner. He might answer a few questions put to him by the commissioner at the same time he is putting his questions.


George James Tustin: I thank the minister, and I should be very glad to get that information from the commissioner. But as a member of the House of Commons I have a right to ask these questions, and I am standing on my personal rights as a member when I ask the minister questions from the floor of the house. Of course I want a statement from the minister; that is why I am asking him the questions. But I would be delighted to have the answers privately.
1S34
Income War Tax Act


Robert Fair: In respect of farm help, do I understand that a farmer has to deduct two per cent from three or four days' wages earned during harvest time from any man he may happen to hire?


James Lorimer Ilsley: Yes, if that man is earning at the rate of $600 a year, or over.


Robert Fair: Does the minister or the government believe that farm labourers are earning $600 a year?


James Lorimer Ilsley: If they are not, then they are not taxable.


Robert Fair: I cannot understand this. I was told a moment ago that if a farmer hired a man for three or four days during harvest he would be supposed to deduct two per cent of the amount paid. I know very well that very few farm hands earn-or at least get- $600 a year. So I think it is absolute foolishness and a waste of time to ask a farmer to collect that from the men, because in ninety-five per cent of the cases we know they are not going to do it. And if they do [DOT]collect it, the government will have the expense *of refunding it again at the end of the year.
Something sensible should be done in connection with this tax. It is pure foolishness to try to collect the tax from some of these lower paid men and women, and I suggest that a more sensible view should be taken of the matter. Those who we know are not earning S600 should be relieved entirely of the responsibility.


James Lorimer Ilsley: It is quite obvious that we cannot have an amendment in those words. It would be open to so much confusion that it would be even worse than the hon. member contends the law is at the present time.


Robert Fair: I suggest the minister is going to have difficulty anyway, because a farmer knows just about what a man earns in a year. I do not think five per cent will be collected.


Mr. ROSS (Souris):: Following what has been said by the hon. member, I would point out that farmers who hire transient help in the fall for a few days will have to make this deduction. They will be hiring chaps who are wandering through the country. I know in my own area there are many hundreds of people who are relief recipients during part of the year, but they work for some time in the fall. The [DOT]collection of this tax seems to involve an absurd amount of red tape; and if it is adopted, there will be thousands of those people who will have deductions made from their pay for only a few days' work. If they are not married men, and are moving round the country, I do
fMr. Tustin.]
not know what this tax will involve. Surely
we can find some way of getting around it.
There are thousands of people throughout the
west who will never make $600 in any one year.
It seems to me that this will create a great deal
of bookkeeping and red tape. I think we could
discover some means to eliminate all this.


Mr. McCANN:: Obviously there will be considerable difficulty in the collection of this tax. Would the minister consider making the basis of this tax the aggregate earnings of an individual for six months or a year prior to the time the tax went into effect? That is the basis used by workmen's compensation boards, particularly in Ontario, in order to arrive at an average weekly or monthly earning upon which to base compensation to be paid to an individual. I would suggest that if a man in the $600 class has a record of not having earned $600 in the year previous, he should not have to pay the tax. But if a man has made over $600, then a remittance should be made in accordance with the regulations.


James Lorimer Ilsley: That might be done if there were any wTay of knowing what the taxpayer had earned in the previous year. But we would have no return from the taxpayer and it would be almost impossible to get one. We would have no accurate information as to how much he had earned in the previous year or in the previous six months.


James Joseph McCann: You are gambling with the future, whereas you would know something about a man's past earning power.


James Lorimer Ilsley: It would be very difficult to get a statement. We have something to go on here. We are working in the present, not in the past. We know what a man is getting at the time he gets the money. We are placing the obligation upon the employer, whether he is a farmer or someone else. It seems to me that at a time like this the employers ought to be ready to go to a great deal of trouble. They will have to go to a great deal of trouble if this is to be a success. If they get the idea that this means only a great deal of red tape, that it is just nonsense, that it should have been done in another way, then they will go far to prevent this measure from being a success. I do not think they are going to take that view. The difficulties are not as great as hon. gentlemen would have us believe.


James Joseph McCann: It is a nuisance.


James Lorimer Ilsley: When we consider what
some men are doing for the empire at the present time, the contention that it will be a terrible hardship for a farmer to deduct two per cent from the wages he pays his labourer is something that should not be put forward.

Income War Tax AcL


Howard Charles Green: The complaint is not only
that the fanner has to deduct it, but also about the red tape that will have to be gone through before the man gets it back again.


James Lorimer Ilsley: In some instances.


Howard Charles Green: Take a gardener whom you hire in the summer time, probably once a week or twice a month. He is paid $4 a day, and if you hire him once a week you will have to deduct eight cents and send it in to the government. Surely that is ridiculous, especially when he will have to apply to get it back at the end of the year if he has not earned the minimum income. Then as I read the bill, you would have to deduct this tax every time you pay a doctor. Subsection 16 reads:
"Employee" shall for the purposes of this section include any person who receives as income any salary, wage, remuneration, compensation, hire, emolument, stipend, perquisite, or any similar payment or any indemnity, pension or director's fee, howsoever paid for any services, functions or duties rendered or performed in Canada.
Obviously that is intended to cover a doctor. Surely we shall not have to deduct this tax every time we pay a doctor and remit it to the government. Presumably the same thing would apply to a lawyer's fee or to a soldier's pension paid for disabilities received in the last war. Surely something should be done to make this tax more workable than it is in its present form.


James Lorimer Ilsley: I think the provisions of
the bill are perfectly workable, except in a very small number of cases. I think those are the cases hon. gentlemen are dwelling upon. We could not introduce an amendment to the effect that where an employer knows, thinks he knows or is satisfied that an employee is not going to earn S600 in the next year, he need not deduct the tax. That is the contention being put forward by a number of hon. gentlemen opposite. They say that there are a number of cases where the employer knows that the employee will not earn $600. Do they think I would be justified in sponsoring an amendment in those words? There would be thousands of employers refusing to deduct the tax because they believed their employees were not going to earn the necessary amount. That is not a suggestion which will lead to any practical result. A great deal of thought has been given to this matter. Day after day the officials of the department and the former minister went over this to see if there was any method of getting away from the necessity for these refunds. The more the matter was examined, the more it was apparent that glaring injustices and discrimination would
arise if it was not done in this way. The employers will have to get the tax from the people who ought to pay it. Those who have not earned the requisite income will get the tax back at the end of the year. There will be a great deal of trouble, but in the end we shall have accomplished what we set out to accomplish; we shall have a non-discriminatory tax.


Howard Charles Green: Will the minister answer my question with regard to medical and legal fees and soldiers' pensions?


James Lorimer Ilsley: A doctor works on a
contractual basis with his patient, and I do not think he would be covered by the words of this section; it certainly was not intended that he should be. It is not expected that a patient will deduct two per cent from a doctor's bill.


Howard Charles Green: Read the section.


James Lorimer Ilsley: Pensions are subject to
income tax and will be subject to this national defence tax. Hundreds of thousands of pensions are paid to civil servants and others, and all of these will be subject to the national defence tax. There is no doubt as to what the section means.


Heber Harold Hatfield: Will the farmer have to keep a set of books and fill in these forms when he deducts the tax from the wages of his employee and sends it to Ottawa? Will he have to pay the cost of the money order? Will the employee have to make a request for the return of the money?


James Lorimer Ilsley: He will be required to remit the tax, but not to keep a set of books.


Robert Fair: I do not believe I could point to one farm labourer in my constituency who is earning $600 a year. I cannot see any sense whatever in this tax and I am asking the minister to reconsider it. Not two per cent of the men in my constituency are employed during the whole year. They get two or three months' work in the spring, possibly a month at harvest time and a few weeks throughout the rest of the year. Apart from that they are more or less unemployed or receiving only small wages.


James Arthur Ross: That applies right across the prairies.


George James Tustin: A man is going round doing a few days' work here and a few days' work there, and earning at the rate of over $1,200 a year. If he is a married man has he to carry his marriage licence around with him to prove he is married, and has he to make out one of these forms and give it to every one of his employers?
1S36
Income War Tax Act


James Lorimer Ilsley: He has to make out one of the forms.


John Ritchie MacNicol: I should like to ask a question, and I hope the minister will not think it is too small a matter. Take the case of a janitor who attends to furnaces and cuts the lawn. Let us call him a janitor. One such janitor I know gets paid at the rate of $180 a year, on the basis of $15 a month from one householder, but how many more people he is doing this service for, I do not know. In paying that janitor his S15 a month, has the two per cent to be deducted?


James Lorimer Ilsley: Yes, if the rate of pay is $50 a month.


John Ritchie MacNicol: No, fifteen dollars a
month. He may be working for a dozen other people, cutting their lawns and attending to their furnaces; I do not know.


James Lorimer Ilsley: The measure might be
difficult to apply, but the correct answer I think is this. If the $15 that he is being paid covers a length of time such that his pay will amount to over $600 a year the tax must be deducted.


John Ritchie MacNicol: I have just said that I do not know how many other people he works for, but I do know that he gets $15 a month from one householder. He cuts the grass and looks after the furnace in the winter. He may have two or three or four or five other customers, but from one householder I know he gets $15 a month. Does that householder have to deduct two per cent monthly from the $15 a month that he gives him, and if so, has the janitor to carry round with him forms to be filled out? How is the tax to be deducted and sent to Ottawa, and how is it reckoned?


James Lorimer Ilsley: It is very difficult to know what to do in that case, but the right thing to do would be for the employer to make an estimate of how much time is covered by the payment of $15 a month, and if that works out at a rate of over $600 a year a deduction should be made for the tax. That is the correct thing for the employer to do in that case.


Mr. FURNISS:: Take the case of a farmer with a hired man receiving pay and board. Would a certain allowance be made for the board? Would the board be considered part of the man's wages, or in calculating the tax would the employer just consider what the man actually received in cash?


James Lorimer Ilsley: His board is part of his income.


Stephen Joseph Furniss: At what rate would it be calculated?


James Lorimer Ilsley: At a fair rate.


Robert Fair: I did not catch what the minister said was a fair rate for board.


James Lorimer Ilsley: The board is part of the man's income and .must be allowed at a fair rate.


Robert Fair: I was wondering just how much is allowed for board, whether it is $10 or $50 or $60 a month or $20 a day. I do not know how to figure it and I should like to know.


James Lorimer Ilsley: The Department of Labour will be asked to give as a general guide the value of board in the various provinces across Canada.


Robert Fair: I believe the department now allows the farmer in calculating his income tax to deduct $15 a month for his farm help. Will that figure also apply in calculating the hired man's wages?


James Lorimer Ilsley: Would the hon. gentleman repeat his question? My attention was diverted for a moment.


Robert Fair: I am trying to find out what the government will allow as a fair amount for a man's board. Will it be $15 a month or $20 a day or $10 a month? I suggested the figure of $15 a month because that is all the farmer is allowed when computing his own income tax, so I think the same amount should apply in calculating the national defence tax.


James Lorimer Ilsley: This is a matter for the national revenue department, but if the national revenue department will not allow more than $15 a month as a deduction for income tax purposes I should say the farmer must take the same figure in calculating the income of the employee. But it is a matter for the Department of National Revenue.


Mr. BERCOVITCH:: I have a very simple question to ask the minister. I am accustomed to giving a waiter in the Chateau Laurier a tip after my dinner. Say it is twenty-five cents. Do I have to deduct anything for the national defence tax?


James Lorimer Ilsley: The answer is no.


John Ritchie MacNicol: The waiter would be making a little more than the janitor I spoke of a few moments ago.


Howard Charles Green: A little earlier in the evening the minister said that the income tax staff would be increased by 500.


James Lorimer Ilsley: Or more.

Income War Tax Act


Howard Charles Green: How many are there on
the staff at the moment, and how many of the increased staff will be located in Ottawa?


James Lorimer Ilsley: There are about 1,250 on the staff all across Canada. I do not know how many of the 500 will be required in Ottawa, but I think it would be a small proportion.


William Kemble Esling: In calculating the tax does it not all come down to this? If you pay a man $10 or $20 or $50 for doing some temporary work you deduct the two or three per cent for the tax? Then, of course, he complains about it, and you simply leave it up to him to ask for a refund from the department if he feels he is being improperly taxed. The employer cannot be supposed to know whether a temporary employee doing a few days' work for him is earning $600 a year. In other words, therefore, the employer is simply responsible for deducting the two or three per cent as the case may be from any man or woman, to whom he pays $25 for doing some temporary work, and then it is up to the man or woman to seek a refund at the end of the year. Is that not the situation?


James Lorimer Ilsley: Not quite. There will be
cases where the employer knows very well that the man he is paying is working at a lower rate than $600 a year, and in that event he does not have to deduct the tax.


William Kemble Esling: The employer is to be the judge, and he is exempt from all responsibility if his judgment is that the employee is earning $600 a year?


Heber Harold Hatfield: What about a farmer who hires a man to pick apples at so much a barrel, or potatoes?


James Lorimer Ilsley: I am glad the hon. gentleman asked me something about apples because I am right on my own ground there. If apple pickers are employed at so much a barrel, the farmer knows at the end of the week how much it has cost him to pick those apples, and if the weekly amount earned is at the rate of more than $600 a year he has to make the deduction.


William Kemble Esling: Is it really the intention
that the employer shall assume the responsibility of determining whether that man is likely to earn $600?


James Lorimer Ilsley: No. He assumes the responsibility of determining whether, when the employee works for him, he is earning at the rate of $600 a year. He cannot assume any
responsibility beyond that. He does not know whether it is a temporary job, or whether the employee -will get work after he leaves him. It is not his responsibility to judge whether the employee will earn during the whole year $600, but he is responsible for deciding whether, while he is working for him, he is working at a rate of more than $600 a year.	.


John Ritchie MacNicol: I may be out of order on this question. On Saturday a gentleman received a cheque for $75 from a United States company. Is the five per cent to be taken off that sum? He receives a cheque for this amount four times a year. I was under the impression that anyone receiving money from the United States by way of income is required to deduct five per cent.


James Lorimer Ilsley: The company remitting from the United States deducts in that case five per cent for the revenue of that country.


John Ritchie MacNicol: Then the tax on income received from the United States has not to be paid by the recipient here until his annual income tax comes to be paid?


James Lorimer Ilsley: That is right.


William Kemble Esling: In making our returns for the year 1940, does the tax which applied prior to the bringing down of the budget apply for the first six months, and the new tax for the second six months? In other words, do we make two returns, one covering each half-year.


James Lorimer Ilsley: The two per cent applies to half the income for the year 1940.


William Kemble Esling: I was speaking of the general tax, the income tax. Under the new budget there is quite a difference between the old tax and the new tax. Does the old tax apply to the first six months and the new tax to the second six months? If so, that would involve two returns, would it not?


James Lorimer Ilsley: The new rates apply to the whole year.


Heber Harold Hatfield: Is there any age limit in respect of this tax? In my constituency there are school children who will earn for a few days at the rate of $600 a year. They may be ten years old; they are picking potatoes at so much a barrel. Should we deduct from a ten-year old boy's income two per cent or three per cent?


James Lorimer Ilsley: I do not know about that.


John Ritchie MacNicol: It is going to be a headache for the department.


James Lorimer Ilsley: Does the hon. gentleman employ children and pay them at the rate of $600 a year or more?
Income War Tax Act


Heber Harold Hatfield: Many farmers in my constituency employ school children during their holidays to pick potatoes. They earn at the rate of over $600 a year for a few days, probably for two weeks, during the harvest season.


Mr. BROOKS:: Would not the fact that they were school children indicate to the employer that they were not earning over $600 a year? Would it not be obvious from the fact that they were of school age?


James Lorimer Ilsley: I should think so, yes. 1 would not like to waive any of the provisions of the measure in advance, but there is reason in all things, and if these were children, working in the summer only, it would seem that some little latitude would be allowed. That is all I can say.
Mr, KINLEY: Would not the income belong to their father, and would it not affect his income tax?


Mr. JOHNSTON (Bow River):: When you compute your general income tax do you first deduct the defence of Canada tax?


James Lorimer Ilsley: No.


Charles Edward Johnston: Otherwise you are paying a double tax-a tax on a tax.


James Lorimer Ilsley: You are paying two taxes on the same income.


[Stage Direction]
Section agreed to.
Section 27 agreed to.
Bill reported, read the third time and passed.
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Tuesday, July 23, 1940

[Stage Direction]
Hon. N. A. McLARTY (Minister of Labour) presented the first report of the special committee on Bill No. 98, respecting unemployment insurance, and moved that the report be concurred in.
Motion agreed to.