[Stage Direction]
Fourth report of special committee on canteen funds.

Mr. Macdonald (Brantford City).

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

[Stage Direction]
Mr. LaCROIX (Quebec-Montmorency):
Is it the intention of the Minister of Justice to take steps for the internment of Dr. T. T.

Shields who recently pronounced the following words: "The Roman Catholic church has done everything possible to discourage enlistments"?
Mr. ST. LAURENT:	This question deals
with the same matter that was mentioned in the question to me by the hon. member for St. Mary, on June 12 last, and which "appears on page 3302 of Hansard.
The matter involved has been and still is under investigation by the department.

Mr. CARDIFF:: 1.	What is the name of the postmaster at Marquis, Saskatchewan?
2.	When was he appointed?
3.	By whom was he recommended for the position?
4.	Is he a veteran of the great war?
5.	If not, did any veterans make application for the position and what are the names of such persons?


Mr. MULOCK:: 1.	Office vacant due to death on 3rd April, 1942, of J. E. Jenner. Mrs. Hazel Stewart, former assistant, is acting postmaster.
2.	April 4, 1942.
3.	Placed in temporary charge by the district director of postal services, Moose Jaw.
4.	No.
5.	Yes. E. A. Brown, the present postmaster at Prendergast, Sask., a non-resident.


SYNTHETIC RUBBER-SARNIA PLANT
Mr. HATFIELD:: 1.	Is the government constructing a plant at or near Sarnia, Ontario, for the manufacture-of synthetic rubber from petroleum products?
2.	Is this process a cheaper process than the manufacture of synthetic rubber from wheat?
3.	If not, why is this process being used?


Mr. HOWE:: 1.	Yes, in southern Ontario.
2.	As synthetic rubber has not been produced on this continent in commercial volume by either process it is impossible to answer this question.
3.	It is proposed to use both processes in the government programme for the production of synthetic rubber in Canada. Butanol produced from wheat will be shipped to the southern Ontario plant and there converted into butadiene, the principal ingredient of Buna-S rubber. The butadiene at this plant will be synthesized with styrene into Buna-S rubber.


CANADIAN FORCES
Mr. FULFORD:: 1. What are the total enlistments from the-constituency of Gaspe, (a) in the navy, (b) in. the army, (c) in the air force?

Income War Tax Act
operator. He might have to wait for a period to find out whether he could make the contribution himself. No matter how we approach the situation, there will be great difficulty. As I say, for the last three months the government has refused to place farm wages under a ceiling, as has been done with other callings.


Mr. TUSTIN:: Do I understand the minister to say that this national defence tax and the deductions for compulsory savings are payable three days after they are taken from the payroll? Is that not an innovation to the practice in connection with the national defence tax which was deducted each week but payable on the 15th of the following month? Must the employer send in a cheque every week?


Mr. GIBSON:: Three days after the pay date, but not more often than once a week.


George James Tustin: This will mean three times as much work for the employer in making up statements, issuing cheques, and sending them in to the income tax collector.


Mr. ROY:: Could the minister not make other arrangements for the collection of the income tax at the source in order to avoid trouble in making refunds at the end of the year? This practice is quite expensive for the government, and it is inconvenient for people to have to wait for their money when a refund is due. Why could the employer not start to make deductions just at the period when a man has earned, if he is single, $660? If a man is making $100 a month, deductions from his wages should not be made before he has worked for seven months. In industries such as lumbering and fishing many employees do not work all year, and certainly many of them do not work for seven months at S100 a month. The government will be obliged to refund income tax deducted at the source, and this could be avoided if the employer were allowed to check the wages of a man and permit him to work for a certain period before starting to make the deductions. If a married man is making $100 a month, it will take him a whole year to earn $1,200, and he would not be taxable.


Mr. ILSLEY:: We discussed that before this evening, and I think the tax will have to be collected on the income as earned. I do not think a measure of judgment can be allowed the employer. He may have reasons for thinking that a man working for him will not earn the minimum during the year, but the only reason the government can recognize is the rate of pay which an employee is receiving. If an employee is not receiving the minimum rate his employer need not make a deduction. That has been the case in the past, and it will continue to be the case. The hon. member for
Rosedale (Mr. Jackman) has asked that I prevent the impression from going out-is that the main question?


Mr. JACKMAN:: It is the main request. It was not a question.


James Lorimer Ilsley: I was asked what I thought was a question of law, and I gave what I thought was a correct answer. The hon. member raises a question of desirability or policy, and he would like me to say that I think it would be most undesirable for any employer to undertake to pay the national defence tax, whether he be a farmer or anybody else. I should like to give that some consideration. The hon. gentleman may be perfectly right about that; it might be undermining the structure, but it occurred to me that it would apply to only a small class of employees, those who are not under the wage ceiling, and perhaps it would not be as serious as he says. However, he may be perfectly right, and I shall try to consider what the implications will be.


Harry Rutherford Jackman: The question is, on whom is the incidence of the tax? I tried to get figures from the government; I had a question on the order paper as to how many employees of the government or employees of government-owned corporations have their income taxes paid by the government. I have not had a complete return as yet, particularly in regard to one large government-owned institution. I also asked about how long a time can lapse before a claim for national defence tax should be made. How soon do you have to send in forms? I do not suppose one per cent of the people who are entitled to rebates on national defence tax have ever put in claims. I have never seen a form. Is it a period of twelve months, or would the statute of limitations apply, as the leader of the opposition suggested?


James Lorimer Ilsley: There is no statute of limitations.


Harry Rutherford Jackman: I asked the Minister of National Revenue how he would work out the case where a person had several sources of income. A man is in the 30 per cent bracket, but any one of the three sources would require more than 15 per cent to be witheld. I am trying to find out about the administration.


[Stage Direction]
Resolution agreed to.
26. That any enactments founded on
(a) Resolutions 1 to 15 inclusive, 20 and 21 shall be applicable to the income of the 1942 taxation period and fiscal periods ending therein and to all subsequent periods;
Ob) Resolution 16 shall be applicable to the income of 1943 taxation period and fiscal periods ending therein and all subsequent periods;
[Stage Direction]
Income War Tax Act
pay the income tax deduction which normally would be paid by a hired man, instead of having the hired man pay it himself?
James Lorimer Ilsley: That would, I should think, be equivalent to a gift to the employee in the amount of the deduction, and perfectly permissible.


Mr. GRAYDON:: Is there anything wrong about it?


James Lorimer Ilsley: I do not see anything wrong.


Gordon Graydon: Then that is the whole
question.


Mr. CASTLEDEN:: Has the minister the
figures showing how many taxpayers there were in the dominion last year who received less than $660 or $1,200 as the case may be?


James Lorimer Ilsley: No, we have not those
figures.


George Hugh Castleden: Or any approximation of them?


James Lorimer Ilsley: No. On this question of
refunds I may say that in the fiscal year ended March 31, 1942, there were 46,522 refunds of national defence tax.


George James Tustin: How many applications?


James Lorimer Ilsley: I do not know.


George Hugh Castleden: These were from
people who earned less than the minimum?


James Lorimer Ilsley: I do not know, but 46,522
refunds were made.


Harry Rutherford Jackman: I believe the minister
has just given expression to a principle which is fundamentally unsound, and to a practice which should be stopped right away. That is, that any employer can pay the tax of an employee and have it considered equitable in the eyes of this statute.
.Mr. ILSLEY:	Not where there is a wage
ceiling, of course.


Harry Rutherford Jackman: I was not speaking of wage ceilings. If you allow that principle to go out from this house you will find that all kinds of employees will demand and insist that their employers, who already are burdened by their own taxes under this and previous acts, pay the national defence tax for these employees. You cannot admit that principle for one moment, because it affects not only factory employment but domestic service, farm employment and all sorts of service. If an employer pays the tax' on the wages of the employee, certainly that is an addition to the income of the employee and there must be a tax on the tax paid. Therefore you never catch up with yourself. The IMr. Graydon.]
minister should be clear on this matter and should not answer as he did without adequate contemplation, or without sufficient opportunity to give the matter thought.


James Lorimer Ilsley: The hon. gentleman is
technically correct there, about its being an addition to the income. Of course the wage ceiling applies to practically all employees in Canada, and where that ceiling applies this could not be done because it would be a violation of the order relating to the stabilization of wages. When I gave that answer I had in mind farm labour.


Harry Rutherford Jackman: Are you going to allow employers to pay that tax?


James Lorimer Ilsley: They cannot pay it without violating the wage ceiling, where there is one.


Harry Rutherford Jackman: Well, of course the wage ceiling does not apply to a great many classes of employment as yet, as the minister is aware. I do not know about seasonal employment in the canning factories and on farms, but certainly it does not obtain in domestic service and in many other branches of employment. If this principle is allowed to stand it will cause all sorts of hardship. I know there are places where the employers do pay the tax in order to keep their people in employment, as the hon. member for Qu'Appelle mentioned. We even see advertisements in the newspapers to the effect that persons will accept certain rates of pay, provided the tax is paid by the employers. It is astounding what some people will demand, when they know their employers must pay heavy taxes before they can pay wages, and therefore I hope the minister will not allow this principle to stand. I should like to ask also how much time may lapse before a person who has had the national defence tax deducted from his wages may reclaim that tax from the department, after he finds that he has not come up to the minimum.


James Lorimer Ilsley: Any time.


Mr. ROSS (Souris):: How often must the employer turn in these deductions to the government? What are the periods? I should like to know, because I want to follow this up.


Colin William George Gibson: Within three days after the close of the pay period.


James Arthur Ross: The minister has said that there is no price ceiling on farm wages. For many months we have been trying to have regulations passed in that connection, and this is going to prove rather difficult for the farm

Income War Tax Act
in this case. I have a hired man, have had him all the summer, I pay him $60 a month, he served me with notice that if I deduct from him in August he is going to quit."
True, he cannot go into industry because farm labour is frozen by order in council. "But," he says, "I am going to lose my man at a time when I need him in the worst way. He can get much higher wages from farmers nearby." I may say that I thought of telling him to pay the tax himself and say nothing about it to the government, but that would only increase the man's wages as far as the farmer was concerned. What can I say to him? I should like an answer from the minister, because I have received many similar inquiries.


The CHAIRMAN:: I do not believe it is In order to ask questions like this, and crossexamine the ministers as though they_ were witnesses. The ministers explain the provisions. They are not here to tell any hon. member how to reply to a consulting elector.


Mr. PERLEY:: I think many electors would be pleased to get a statement from the minister.


Mr. CHURCH:: Under the principle of this provision the government is just as bad^ as the government of Germany. The principle there is that might is right. I can say this to the government, that this whole budget is interfering very seriously with industrial conditions in this country. The government is now going to collect this tax at the source. So far as I know that never has been done anywhere except in British Honduras, where that principle was adopted. In my opinion the government is making a great mistake, because the people will not have the money with which to pay the tax. In the second place, the burden, as collector, is now placed upon the employer as well as the employee. Prom what I understand, the government or the state will have to bury a lot of people because of this budget. One undertaker, as a result of this budget, told me that he wanted the cash before he would bury a person in the cemetery. The hospitals also want cash. I do not know where it is going to end, because the government puts in its hand and takes the total amount of the tax first, and as a result all the others will have to wait for their money. In the end I believe the government will lose a great deal of money by this confiscatory method. We are here in Ottawa; we do not know the feeling in our constituencies. I have seen this principle adopted in other countries, and always it has brought about reduced revenues. I think the minister should pay attention to
the handwriting on the wall. The people cannot pay these taxes. It is all very well for the minister to smile; there will be less smiling after this budget has been in force for a year. The undertaker will also act for the authors of the budget.


Gordon Graydon: With great respect for your ruling, Mr. Chairman-


Thomas Vien: It is not subject to debate.


Gordon Graydon: I am not going to debate it; I am going to make a statement in order to be clear on the matter. I want to say this, that whether the Chairman realized it, or whether the minister realized it, "the question asked by the hon. member for Qu'A.ppelle is being asked all over the country.


Thomas Vien: Order, please. The hon. gentleman cannot refer to the ruling or to the question that was asked and declared out of order. The matter before the committee is not an exchange of correspondence between an elector and a member of parliament, or the answer that may be given by a member to any question asked. The matter before the committee is the budget resolutions, and I invite hon. members to limit their discussion to those resolutions.


Gordon Graydon: I bow to your ruling, Mr. Chairman, but I should like to ask the minister a question, not based on any letter I have received but in order to obtain advice on this particular point. Let us say a farmer in western Canada has a hired man and that hired man says that if the tax is deducted in August of this year he will quit. The farmer wants to know what to do. This is not by way of lettter; there is no correspondence. This is a hypothetical question which I think I have a right to ask the minister, because it involves a most important principle.


Thomas Vien: Order. The hon. gentleman cannot put a hypothetical question-


Some hon. MEMBERS:: Oh, oh.


Thomas Vien: I am very serious; and
at this lime of night, when wt; have such important matters before the committee, I hope hon. members will cooperate in order to expedite the work. I have ruled out of order any question which is not strictly relevant to the section now before the committee.


Gordon Graydon: Then I will abandon my
former method of procedure in favour of what I hope will be a better one. Let me ask the minister this. Is it in order for a farmer to
Income War Tax Act

these factories know full well before the season begins that their employees with few exceptions are not going to earn that much money. Let me give one example. A factory employing 130 employees, seasonal workers, last year had three employees who earned enough to be liable for national defence tax. In spite of that there had to be 130 entries and the tax deducted from these individuals, and I ask the minister, how many of them got a refund, or how many of them will ever get it? I protested before that it would take a great staff in the office of the minister to see that these refunds were made, provided applications were made for them. As the minister may know and as I am sure hon. members will know, there is not one application in a hundred made for such refunds; the government obtains and keeps a good deal of money that actually belongs to the employees, money which is not due the government under the statutes of this country. The minister could do a great service if he would to-night instruct his officials to go to work and set up some scheme that would be simpler and would get the same results in the end, so that the tax would be collected when it was payable and everyone in the country -would be able to understand it.


Harry Rutherford Jackman: This resolution still is
not clear in its application to all classes of taxpayers. Supposing a person receives income from three or more sources, as a good many people do. If I recall correctly, on the personal income tax return form there are seven or eight sources of income listed. If a person is not properly subject to any withholding for minimum savings requirements by reason of paying enough in insurance premiums and so forth, will he have to give [DOT]each one of these sources of income evidence to disclose that he is not subject to tax as iar as the income from that particular source is concerned?
This resolution also envisages a withholding of part of the income tax from month to month. How are you going to indicate to an employer, or to the dominion government here, that you should have a certain amount withheld from you? If your income is $4,000 you are in a certain bracket. If you are getting $1,000 from another source, that employer knows only about the $1,000. Have you to make a revelation to each of four or five companies who may pay you a $100 director's fee, for instance, what should be withheld in income tax before the payment is made to you? What has the government in mind there? As the leader of the opposition has said, it is not fair to ask people

to indicate to all sources from which they may derive some income exactly what their total is. Surely, as in the past the government will rely on the filing of income tax forms to clear up any small or even large balances that may be owing. A person cannot very well escape paying what he justly owes to the country.


Mr. FAIR:: Does the minister intend to send out instructors to make bookkeepers of farmers? He has told us that he had difficulty in understanding this income tax business himself. I am wondering as to the case of farmers who require help for a few days at harvesting or something, what kind of job they will make of calculating these deductions and what kind of return they will send in.
Could some other system not be worked out whereby this difficulty would be remedied? In many instances farmers hire their neighbours for a week or ten days at threshing time and then have to deduct national defence tax, which they are not entitled to pay because in many instances these men would not have, in the year, an income of more than $400 or $500, all told. Yet they were compelled to pay the national defence tax. Indications this year are that the tax will have to be calculated at a very high rate compared with what it will actually be, because when the harvesting or threshing season comes along, men will get perhaps $4 or $5 or $6 a day, and after that time they are lucky if they average $1 a day. The minister should take cognizance of the injustice being inflicted in those cases.


Mr. QUELCH:: Would it not be possible to adopt some simple procedure whereby an employee would have proof that the employer had sent in the amount of money he claims to have deducted, because as hon. members have suggested there will be some employees who will feel that money is being taken from them and not being sent in? Could not something in the way of a duplicate receipt be adopted so that the employee could see that the employer sent in the money?


Colin William George Gibson: Yes, that receipt could be given each pay-day, or by large employers who have regular payrolls it would be given possibly at the end of the year; but if any man left their employ he would be given a receipt showing the amount deducted from his pay while in the employ of that firm.


Ernest Edward Perley: How shall I reply to a
letter I got last week from a farmer? I have the letter in my office. He says, "Will you find out from the minister what I am to do

Income War Tax Act
that some better means should be found of returning deductions that have been made from income to those who have not received taxable income. Some better means should be devised than those that have heretofore been in effect. I am satisfied the government has hundreds of thousands of dollars-


An hon. MEMBER:: Millions.


Mr. MacINNIS:: From figures I have seen of the incomes of those up to $2,000, I would not say that. Some way should be found, and if the workers realize that every cent they pay to the government, or every cent deducted from their pay, if not properly deductible, will be returned later on, there will not be any great difficulty. The leader of the opposition suggested last year that every employee should have a card and that when he worked for a particular employer he would mark the wages received and the deductions made, and he would take that card to the next employer, so that that would give at the end of the year an account of wages received. I do not think it is impossible to do something of that sort, and I am sure it would bring great satisfaction both to the government and to the taxpayers concerned.


James Arthur Ross: As this resolution reads, it applies to all salaries and wages paid by the employer to residents or persons in Canada. Does that apply to daily wages? Take, for example, farm and seasonal help. Does it mean that this fall when a farmer hires a man for a few days in connection with the harvest in the field he will have to go through all this red tape and make deductions similar to those which would have to be made throughout the year and which would put the man in the income tax brackets? Is that right?


James Lorimer Ilsley: The same rule has to apply as in the case of the national defence tax.


James Arthur Ross: Well, you are certainly balling things up properly in this country. I do not know where we shall end. Imagine a farmer in the west who sees no possibility of getting his harvest in with the help available. He brings home some help from the town, and he is required to go into all these details that are proposed. I do not see how you can expect him to do this sort of thing; it is not possible. I do not know where it will all end.


George Hugh Castleden: I offer a suggestion in line with what the hon. member for Vancouver East (Mr. Maclnnis) has said. The Minister of National Revenue suggested that under this resolution the government
intended to draw up a schedule whereby the employer would know what he should deduct from the employee's pay envelope, and it occurred to me that there is a simple way of getting round what I maintain is a great abuse in regard to taxing these people, hundreds of thousands of them being below the taxable level. To-day they are paying taxes and in some cases getting no refund. I was wondering whether it would be possible, when the schedules are drawn up, to put in a regulation to this effect, that until a single person receives $660 he shall not be taxed, and no married person shall be taxed until he receives 11,200. After the person has received the taxable amount the deductions could be stepped up.


Colin William George Gibson: The tax has to apply on payments made at definite rates. A man might change employment once a month. The employer simply deducts the tax from any salary paid at the rate of $660 a year or higher in the case of single men or $1,200 in the case of married men.


George Hugh Castleden: I understand that, but could the employer not find out whether that man has yet received his $660, and until such time as he does receive it he would not be taxable.


James Lorimer Ilsley: It must be deducted as it is earned.


George Hugh Castleden: What is happening
now is that it is being deducted as it is earned. The man probably gets employment for six months at $100 a month, and if he does not get employment for the rest of the year he gets no further income but still has paid his tax and cannot get it back.
Mr. TUSTIN-:	I agree with the minister
that this is a hard budget. But I go farther and say that it is the most complicated piece of legislation I have ever seen in my time in this house. How the minister expects the average individual to be able to figure out this tax is more than I can understand.
I want to repeat what I have said for the last two or three years with regard to seasonal work. I have protested on behalf of the seasonal workers each year since the national defence tax was put into effect, and I protest again to-night as strenuously as I can. In my constituency I have thousands of people who work part time at seasonal work in the canning factories. It has been the policy of this government to insist that the employers deduct the national defence tax from these people if they were earning at the rate of over $660 a year. The employers in
Income War Tax Act

organizations for the operations of which I am responsible, the national war finance committee, with its fifteen or twenty thousand workers, is going to employers, employers like the hon. member for Northumberland, New Brunswick, who says he does not understand this, I do not wonder that he does not; perhaps I do not understand it too well myself, but it can all be made perfectly clear. Tables will be put in their hands; they will be told how much they shall deduct, and when they can give effect to statements of workmen about principal payments and payments to pension funds and insurance schemes. Their cooperation will be invited, and the cooperation of the workmen will be invited. It may be that we should have had them in, but there is no time to do everything in this world. The government must make some decisions itself, and it has only twenty-four hours in the day in which to act. We made that decision and we worked out this plan, which is a fair plan. It is open to the objection of the employee who does not want his employer to know that he has a mortgage on his house or that he has a life insurance policy, but though the employer will know that, it is not going to do any great harm. Is it a great sacrifice to ask the workmen of this country to make, when you consider the sacrifices which people are making in other parts of the world? We should not magnify out of all reason all these little discomforts and inconveniences and sacrifices.


Mr. HANSON (York-Sunbury):: After that scolding by the minister I have just this to say, that I have shown this government as much cooperation in its war effort and in relation to this very budget as I could be humanly asked to give. I put myself in the judgment of the membership of this house if I have not done so. When I object to certain theories which are advanced in relation to one detail the minister says I am making a dreadful speech and I am upsetting the whole ideas of the public. I resent that sort of thing; I do not have to take it from the minister. If necessary, I will fight back. Usually I am a fairly pacific kind of a man. Sometimes I may simulate rage, but, frankly, even now I cannot get very much enraged over the minister's scolding. If I were twenty years younger or if this had happened twenty years earlier, I might be flying across the floor, but I am not doing that any more. I do not want to be open to the charge that I am hindering the government's war effort; but I say this, and say it with great sincerity, great honesty of will and purpose, that a human being has a dignity to preserve, not least in

relation to his own private affairs. One of the things we are fighting for is the personal rights of the democratic citizens of this country. Government regimentation in Canada is going beyond all bounds in certain respects. I can only give the honest reaction of my own mind to a proposal of this kind. If I am wrong, well, I am sorry. I think there is a large measure of truth in the position I took and I have nothing more to say about it.


Angus MacInnis: I was not present during the first part of the discussion, but I agree with the principle of deductions at the source as far as ordinary employees are concerned. Persons of this class have said to me that they would rather have it this way than go to the trouble of making returns when they keep no records of wages or other income received during the year. Section 25 provides for regulations which will be determined by the governor in council as to the manner of collections and deductions. I have given the matter a little thought, and I believe that persons making an income of over $660 should be compelled-possibly that is the intention- to make a return at the end of the year. In that return the employee could make any disclosures that might be required which he did) not wish to make to the employer. I am not greatly concerned about the objections to the worker disclosing certain information to his employer because I am satisfied that during the last ten or twelve years, at least from 1930 to 1939, many hundreds of thousands of workers throughout the country had to bare their very souls not to the inspector of income tax, not to their employers, but to busybodies who came round to find out everything they possessed and their prospects of possessing. They had to give all that information before they could get a bite to eat. This is no worse than that, and the occasion that demands it is much more imperative than the situation that existed between 1930 and 1939. I think the situation could be met by making the deductions in this way. It will help the person drawing a small income, because such persons live close to their incomes, and at the end of the year there are no savings left from which a lump sum can be taken. It would save them the trouble and the worry about where income tax payments are to come from. If arrangements were made so that at the end of the year each would make a return disclosing anything that needed to be disclosed, it would meet the situation.
I think it may be in order under this resolution to point out to the Minister of Finance and the Minister of National Revenue

Income War Tax Act


Richard Burpee Hanson: He has to disclose some of his private affairs to his employers.


James Lorimer Ilsley: What he owes.


Richard Burpee Hanson: Well, are they entitled to know it?
Mr.	ILSLEY': Not all that he	owes,	of
course.
Mr.	HANSON	(York-Sunbury):	No,	a
part of what he owes. It is all done in an endeavour to make the tax collections easy and free of cost to the government, and to avoid any loss.
Mr.	GIBSON:	No, it is to avoid overcollections necessitating refunds to the taxpayer.Mr.	HANSON	(York-Sunbury):	And,	in
a degree, a few refunds. It is, of course, a practical matter. There is a principle there. I am not going to labour the point; it is getting late and we want to go away, but the objections have been pointed out. This government will reap a great deal of unpopularity from this proceeding. I cannot imagine anything more likely to turn up the nose of a self-respecting man than to pry into his private affairs any more than is absolutely necessary. I object to the underlying principle. I object to anybody knowing any more about my affairs than the necessary minimum. All of us have to yield to the force and authority of law; that is one of the theories upon which democracy is based; but there are certain standards of ethical conduct which we like to see observed, and this is a violation and breach of some of those standards.


James Lorimer Ilsley: Well, Mr. Chairman, we shall have to go out and do what we can to counteract the effect of that speech, if anyone reads or listens to it. This is not an authoritarian government .trying to perform a bureaucratic act; it is the outcome of the harsh necessities of the present situation. If the hon. gentleman knows of any better way to do this I would like to hear it. He certainly has not told it to the committee to-night; all he has done is to use very harsh and very-


Harry Rutherford Jackman: -true-


James Lorimer Ilsley: -bitter language, which, if taken seriously by workmen throughout this country, will make them sore. It is undoing the work which the government is trying and properly trying to do. The unauthorized announcement of the alternative scheme came out in the press. Immediately we received a deluge of protests from people all over the
country who said, "Why cannot I simply file a statement of my life insurance premiums, the payments of principal instalments on my mortgage and my payments on pension schemes, so that I shall not have this money deducted from the amounts due me for the greater part of the year and have to await a refund?" That seemed sensible. The workmen of this country have not all this excessive pride which the leader of the opposition says he has as a member of parliament.


Harry Rutherford Jackman: You would be surprised.


James Lorimer Ilsley: What hurt is it going to do to a member of parliament, even the leader of the opposition, to divulge to the comptroller of the treasury the fact that he has some life insurance, or that he has a mortgage on his property? If there is, which I do not believe there is, how much is that for him to do in a time like this? Here we are, with a terrible war raging round us, with awful reverses in foreign countries; and in this House of Commons, which goes on day after day, the leader of a great party rises in his place and says that his freedom must not be interfered with to the extent that he shall tell a government official how much life insurance he has. That is total war, is it? Certainly we have to do some of these things. I get rather tired of having the government lectured about its duty to wage total war and to regulate the people-where it is necessary. A colleague of the leader of the opposition, the hon. member for Danforth, in a dramatic peroration said, "Lead us, and tax us, and do this and that and the other to us."


Richard Burpee Hanson: "Give us leadership."


James Lorimer Ilsley: "For heaven's sake, lead us." Now we have worked out a budget which is a hard budget, but we have gone to all kinds of pain and trouble to take into account the peculiar individual situations of the taxpayers of this country, not to bear on them with undue hardships, not to weigh them down with great burdens when they have savings commitments and situations of that kind. We have considered plan after plan to make this taxation as just and as easy as possible for them, and we finally decided that this, all things being considered, is the best plan for them-as the hon. member for Rosedale says,, by far the best plan for them and the best plan for the government. We are entitled, I think, to a little more cooperation than the kind of speech that the leader of the opposition has just made. Of course you can find something wrong with everything. But one of the-

Income War Tax Act
It was not a case of the government seeking an interview with the employers to ask what would suit them. As a matter of fact, the method then suggested was not adopted.
Mr. O'BRIEN:	The Minister of National
Revenue has spoken of the method to be followed in collecting this tax at the source. The employee must disclose to the employer his deductible commitments, so that the employer may comply with the law. I can understand that, so far as big business is concerned, but in the maritimes and in New Brunswick particularly, perhaps more especially in my constituency,, business is carried on very often through small employers, jobbing contractors, logging contractors and the like, and it will be utterly impossible for these logging contractors to know what is required. I am quite sure that the employee himself will not know. First of all he will attempt to seek guidance from his employer. If the employer cannot guide him, which I am sure he cannot, because after sitting here in this house and listening to the discussion I could not possibly advise my own office as to what is required, then who is to guide him?
Again, I think the minister is basing his idea on the employee being a factor in a large business where his employment continues from day to day, but in the maritimes, and in my constituency, there is a floating labour population. In fact it has been said that there are three crews, one working, one coming and one going. Men may drift in, work a day or two, and then if the food does not suit them or the working conditions do not suit them or they become homesick, the}- may quit after working one day or two or three days. If the employee has to make a declaration to the boss in the camp, it seems to me that we shall require the coinage of some new money in Canada, something perhaps in mills, so that the employer can deduct from the man's pay what it is proper for him to deduct after one day's work. The system is so complicated that while it may work in the big plants, the tax cannot be collected through some employers as business is conducted in the maritimes. The only possible solution I see is that on a certain day each year every human being in Canada who is seeking employment must be given a number and a book of some sort.


Richard Burpee Hanson: Regimentation.
Mr. O'BRIEN: We have reached that point in our regimentation where individuals have become almost like boxcars and have to have a number. The individual will then carry that

number with him in his book with a declaration as to his standing in the social order in this country. Then there can be no argument about the matter.
As it is now, if the employer tries to guide his employee, the employee will quite naturally think the employer is prying into his business and becoming impertinent. I do not think it is fair for the government to force that responsibility on the employer. If we are to be regimented, each person must have a number and a book in which to keep his records. It seems to me that we have reversed the idea of government. It seems now that the people are made for government, rather than government for the people. If we have reached that point, we must use sensible methods in carrying this idea into practice. It is all very well for gentlemen to sit in an office at Ottawa and decide that because they need a vast amount of money, therefore it can be easily obtained through the employers of this country by a process of arithmetic- addition, subtraction and multiplication. It is not, however, so easy as that. Unless the system is simplified, a great many employees are not going to pay this tax because they do not know what it is all about, and a good many of their employers do not know.


Richard Burpee Hanson: What is
the position with respect to members of parliament? A member of parliament paid national defence tax on his indemnity as if he were an employee. The statute, I think, justifies that. The tax was deducted by the accountant of the House of Commons, and there was no question about it. But now the rates are graduated, and what is going to be the position? Are we employees? Have we to disclose to some person-I do not know w'hat body yet-


James Lorimer Ilsley: I would say it would be
the comptroller of the treasury himself.


Richard Burpee Hanson: That is
what the minister has in mind? Well, I object to disclosing to any comptroller of the treasury my private affairs. It is bad enough to have to do it to the commissioner of income tax for whom, of course, personally I have a very profound respect. He is, however, my taxing master, and I do not know that we ever greatly love taxing masters. I object having to disclose to the comptroller of the treasury my private affairs, just as the conductor on my railway train tells me that he does not want to have to tell the Canadian Pacific Railway Company how much he has by way of investments. AVhy should he have to?


James Lorimer Ilsley: Just the insurance, and the principal-

Income War Tax Act


Richard Burpee Hanson: I continue:
5.	The employer must tell his employee what return he is making concerning that particular employee early in September, so that the employer and employee returns will conform.
I assume that is correct.


Colin William George Gibson: Yes.


Richard Burpee Hanson: The next is:
6.	An employer must make a return on each employee whose salary or wage is three-quarters of such employee's total income.
Is that correct?


Colin William George Gibson: The employer does not know anything about the employee's total income other than his salary.


Richard Burpee Hanson: It is three-quarters of his total income.


Colin William George Gibson: The employer files a return showing what is paid to the employee, but the employer has no knowledge as to whether the salary he pays to the employee is three-quarters or the total amount of the income of the employee.


Richard Burpee Hanson: I want to go a little farther. It says:
The most important feature of to-day's announcement is that deductions from pay envelopes include approximately one-third of the refundable portion of the tax, and not the full amount.
The budget provides that taxpayers may offset the refundable or compulsory savings portion of the tax by deducting payments on life insurance premiums, superannuation fund payments and payments on principal of mortgages.
That has been enlarged upon to-day. It goes on to say:
The national revenue department has decided on requiring the employers to deduct approximately one-third of the refundable portion of the tax and the balance will be adjusted between the taxpayer and the income tax office after deduction of the insurance premiums, superannuation-
And so forth. Is that a true statement of the position that has been arrived at? If not,'how is it going to be done, so that the public may know?


Colin William George Gibson: That one-third suggestion was discussed-


Richard Burpee Hanson: And
abandoned.


Colin William George Gibson: -and abandoned because it would not work out fairly to some taxpayers. It meant that those who would be entitled to a refund would be paying one-third of the refundable portion and then would have to wait for a refund later.


Richard Burpee Hanson: What is the position now?


Mr. DIEFENBAKER:: Under the scheme announced this evening every employee is subject to his employer knowing practically all his business.


Colin William George Gibson: No, no.


John George Diefenbaker: The employer will know what insurance his employee carries, what principal payments he is making on a mortgage or agreement of sale. He will know to what superannuation or pension fund the employee is contributing.


Colin William George Gibson: He knows that in most cases already.


John George Diefenbaker: He knows the latter, yes. But this whole business is a startling intrusion upon the privacy of the employee by the employer. I have no objection to it if the labour men of this country have been consulted about it, if organized labour has given its approval, but according to the press announcement on July 9 those who were consulted at the conference were representatives of the larger employees only. They met with the income tax officials. The question I now ask the minister is this: Have the representatives of labour, the great labour bodies, been consulted? If they have been consulted and are agreeable, there can be no objection because the scheme now outlined removes many of the difficulties and anomalies of the scheme that was announced previously.


Colin William George Gibson: There has been no interview with any organized body of labour, although the matter has been discussed with various individuals and we have reason to believe that the method which has been adopted is preferable to the one first suggested, of making some partial deduction. That would not work out fairly in every case.


John George Diefenbaker: This affects the private affairs of several hundred thousand employees, and surely if there was one case in which the representatives of labour should have been consulted, not unofficially but officially, this is the case, because unless you get the cooperation of labour this will be entirely unworkable and will result in the necessity of setting up a rebate board here in Ottawa, which will require many additional hundred employees being added to the ranks of the civil service.


Colin William George Gibson: The government did not
invite representatives of the employers to come to Ottawa and discuss this matter, but some of them came on their own initiative and asked how it was going to be worked out.
Income War Tax Act


Richard Burpee Hanson: He has
to pay it?


Colin William George Gibson: Unless he has filed with his employer a statement showing that his refundable disbursements are equal to or more than that amount.


Harry Rutherford Jackman: One hundred per cent of the minimum savings requirement will be deducted currently from the payroll?


Colin William George Gibson: Unless some evidence is given to the contrary.


Harry Rutherford Jackman: I wish to congratulate the minister upon that, because that is a more satisfactory method as far as the taxpayer is concerned, and the government will not have to whistle for the two-thirds remaining unpaid.


Mr. McKINNON (Kenora-Rainy River):: The minister is forcing the employee to disclose to his employer his private business. Under the existing regulations, income tax matters are considered secret, and this seems to me to be discrimination against the employee.


Colin William George Gibson: I admit that that is a regrettable feature. If the employee objects to making any disclosure to his employer, it is possible that he can file his receipts with the income tax department and have the income tax department notify the employer what the total deductions are to be. That would be a more cumbersome way of handling the matter.


Richard Burpee Hanson: There
will be some objection to this, especially among the higher paid men in the trade unions. The railway men are going to object to this; make no mistake about that. I have heard from some of them already. Let us consider a test case in connection with a member of parliament. A member of parliament has an indemnity of $4,000 a year. Will he have to disclose to the Clerk of the House of Commons or to some other officer of the house wdiat his offsets are as against this tax?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: It is not in keeping with the dignity of a member of parliament that he should have to do that. Is it in keeping with the idea of the income tax that he should have to do that? I ask these questions of the members of this committee in a searching way to try to arrive at a test as to whether this is a proper method. What about the ethics of this thing? What about having to disclose your private affairs? The hon. member for Kenora-Rainy River (Mr. McKinnon) has put his finger on the

vital objection, the disclosure of the private affairs of the employee. I object to telling anyone my private affairs. I must disclose them to the income tax authorities so far as I have taxable income, but they do not get a bit more information out of me than is necessary. If they demand further information, I am bound to give it, but they have to query me about it. There is a principle underlying this, and on behalf of the taxpayer I object to it. Just think of the whip that is over his head. If he does not yield, he must pay the whole thing and wait, God knows how long, to get his refund. Some of us will be dead before the refunds are paid. There are thousands, perhaps hundreds of thousands of refunds under the national defence tax that have not been reached yet.


Harry Rutherford Jackman: How far back do they
go?


Richard Burpee Hanson: I would
not think the crown would take advantage of the statute of limitations, but they do in other matters. I am wondering if some other method could not be devised to overcome the difficulty. From the report which appeared in the Ottawa Evening Citizen of July 9, I rather assumed that another principle has been decided upon. Here are the main points that were delineated there:
1.	Deductions from the pay envelopes of the employees at the source will start with the first pay-day in September.
Is that being adhered to, or is it to be put back to October 1 because of the amendment?


Colin William George Gibson: The first payroll after
September 1.


Richard Burpee Hanson: The first pay-day in September. The next main point is:
2.	Deductions over the year until August 31, 1943, will cover the entire portion of the income tax of the employee that is kept by the government and approximately one-third of the portiox refundable after the war.
Is that a correct statement of the government's position?


Colin William George Gibson: No.


Richard Burpee Hanson: The next is:
3.	The employee must file his tax return by September 30.
That is correct.
4.	The employer must file a statement of salaries and wages of his employees by October 15.
Is that date still being adhered to?


Colin William George Gibson: That is the date.

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and these tables will be approved by the governor in council and sent out to all employers.
The question now arises as to the refundable portion of the tax. That is what gives the greatest difficulty. It is proposed now to require the employer to deduct the full amount of the tax and the refundable portion.


Richard Burpee Hanson: The whole of it?


Colin William George Gibson: Except where the employee files a return showing his employer that he intends to'pay or expects to pay so much on life insurance, so much in capital payments on his mortgage,* so much to a pension fund. The total of those payments will be sent in to the employer, who then will be able to see at a glance how much is deductible each month from the wages of that man. This will reduce refunds to the minimum; it will take as nearly as possible only the amount of the tax payable by the employee. We realize that this places an additional burden on the employer, and every effort will be made to minimize that burden as much as possible. The employer will not be required to have the actual insurance or mortgage receipts. All he will require is a statement from the man himself, and eventually the employee will file with the income tax department the actual receipts on which he bases his claim to those exemptions.


Mr. HARRIS (Danforth):: Supposing an employee hesitates to give the information. Are you going to force him to do so?


Mr. MacNICOL:: This question may be out of order, but I am sure the minister will not mind answering it. As the owner of several buildings I occasionally have to employ plumbers, steamfitters, roofers, painters, carpenters and so on, to carry out repairs. I give out all work of that kind by contract. Do 1 have to deduct, from any cheques I may give any contractors, anything in regard to income tax?


Colin William George Gibson: No; those are payments made to a contractor. In that case the man is not an employee.


Mr. FRASER (Peterborough West):: I do not want to ask a question; I just want to offer the Minister of National Revenue a suggestion. I have in my hand one of the little slips that are put in the pay envelopes of the workmen, and on that slip there is nothing at all to say that the man may be entitled to a refund. Many employees know that if their income does not amount to $660 or $1,200, as the case may be, they are entitled to a refund
of the tax paid, but there are thousands who do not know that. I believe something should be printed on these slips indicating this fact, and I believe also something should be printed on the back showing that the employer makes an accounting of this money to the government, because some of these people feel that their employers are gypping them. There is a general feeling to that effect among certain classes of employees. I know of two men who left one employer and went to another because the first man was making the deduction from their wrages and the second employer did not, though of course he should have done so. I believe there should be something printed on these slips to show that refunds are made if the wages do not go over certain figures, and also that the deductions are forwarded to the government.


Colin William George Gibson: We will take that suggestion into consideration.


John George Diefenbaker: I have a question to ask, because the announcement made by the minister to-night is quite different from the announcement which was made by the department on July 9.


Colin William George Gibson: That was not made by the department.


John George Diefenbaker: The announcement that came out from Ottawa stated:
Methods of collecting income tax imposed in the new budget from salaried persons and wage-earners have been agreed upon at conference between income tax officials and representatives of larger employers.


Richard Burpee Hanson: It was officially stated.


Colin William George Gibson: It was not officially stated.


John George Diefenbaker: The minister says that that announcement did not come from any government source.


Colin William George Gibson: That is right.


John George Diefenbaker: Is it correct to state that an order in council will be passed to provide that no portion of the refundable tax will be deducted from the wage-earner?


Colin William George Gibson: The order in council does not cover that point. The order in council sets out the amounts which the employer is to deduct when the salaries are at certain given levels; it is really just a table that will be approved by the order in council.


Richard Burpee Hanson: Does that include the forced loan part?


Colin William George Gibson: It includes the forced loan, but it also shows the amounts that a man is entitled to deduct for the refundable portion.
Income War Tax Act

government give them any consideration at all for the extra clerical help that will have to be provided to do this work? Surely the government in collecting this money will not put the whole cost on the employers. That is not fair. They are being taxed very heavily now, and to make them pay all this extra cost of doing the government's tax collection is not fair. We have carried that principle to the limit.
I say it is not satisfactory to do this by order in council. The provisions should be in the bill. I want to make that clear. The minister had months before the budget was brought down to deal with this matter. These regulations should be ready and should be in the bill. We in this house are entitled to pass on the merits and the details of the government's proposals in relation to the administrative methods. Altogether too much is being left to be done by order in council and by regulation. The government can almost change the law by regulation.
I venture to say that the regulation relating to the "flying in" of the income tax was never justified by a proper interpretation of the statute, and I am shocked to think that a regulation was passed and a ruling made which would allow that sort of thing to be done. The statute referred to a man's normal employment in the air force, if it was flying or related to flying, but other men get round it by flying 100 hours or so as passengers. That never was the intention of parliament; yet the regulation allows it to be done. No wonder the minister said it was a scandal, and I entirely agree with him.
The regulations should^ not be made by order in council. They should be brought down here, so that we might have a chance of passing upon them. Parliament is entitled to that. This is a taxing measure, and the crown has no right to tax the subject except by clear and express language. That is a primary principle of law; and the method by which the crown taxes a subject should be the subject of discussion and decision by parliament, not by order in council or by a regulation, drafted by no matter how competent a commissioner of taxation. It is not fair to the subject that it should be done in that way. We as the representatives of the people have a right to protest against that method, and I do so to-night with all the force at my command. Bring down the regulations in the statute; let us have a look at them.


Colin William George Gibson: This section does not
authorize the government to amend the tax rate by order in council.
	,


Richard Burpee Hanson: Not the
rate..


Colin William George Gibson: It enables the government
to determine what portion of the tax should be deducted at the source. The reason for that is this. If it were decided to deduct 100 per cent of the tax payable on any given date or at any given rate of pay, the taxpayer might have more deducted than eventually he would be required to pay.
I should like now to make a statement as to how we propose to handle this collection at the source, because it is a very difficult problem and one that has given us a great deal of concern in working out. Some time ago an interview was held with various groups of employers to find out how it could be best handled from their point of view, and the suggestion was made that only a certain portion of the refundable tax should be collected at the source. Some publicity was given that suggestion, but the statement that came out in the press was not official; no arrangement had been entered into, and it was realized that one problem would be this, that possibly those with higher incomes would not have any refundable portion coming back to them, that they would have exemptions which would equal their refundable portion, so that if we should deduct at the source anything at all in their eases, they would be having taxes withheld from them which they would be entitled to claim as refunds later on, and that would be a hardship on these taxpayers.
The way it is planned to work this out is this. First of all, tables will be prepared showing the various salaries that employees may be receiving, $12 a week, $13 a week, $14 a week, $15 a week, and so on. Then the table will show what tax a single man would pay per month on that salary; what a married man without children would pay; what a married man with one child would pay, and so on. Then the employer can see exactly what tax must be deducted at the source for each employee. In making up that chart we do not wish to have it show exactly 100 per cent of the tax payable, because it is realized that in some cases the rates of pay may vaty during the year, that charitable donations will have to be deducted later on, and so on. Therefore it is proposed that perhaps 95 per cent of the tax-though this is not the definite figure- which the employer will be required to deduct, will be shown; and that is the amount that is to be determined by the governor in council. This will show what portion of the total tax is to be deducted at the source,

Income War Tax Act
is a rate of 7 per cent. That is now being raised to 10 per cent. Have we done anything else, anything we should not? I think that is all we have done.


Harry Rutherford Jackman: Last year I presume we changed it so that a man could no longer give away half of his income. If you took your gross income, and took the tax off, you could then give away half your net income. That was changed last year I think, and now it stands that no one can give away even S500 to a poor relative without its being subject to 10 per cent tax.


James Lorimer Ilsley: Surely the hon. member is wrong. Subsection 8 of section 88 is untouched. It starts with these words:
The provisions of this section shall not apply to the following:-
Subparagraph (g) still stands, which is the subparagraph to which the hon. gentleman is referring. Those are not touched. Subsection 8 is not changed at all.


Richard Burpee Hanson: What has been changed is the rate on gifts other than those included in the exemptions?


James Lorimer Ilsley: Yes, that is right.
Amendment (Mr. Gibson) agreed to.
Resolution as amended agreed to.
25. That commencing after the 31st day of August, 1942, all salaries and wages paid by any employer to residents of, or persons employed in, Canada shall be subject to a deduction at the source of such portions of the taxes authorized herein as may be determined hereafter by the governor in council.


Joseph Henry Harris: I again protest most vigorously against the dominion or any other authority interfering with an employee's pay envelope. I know this is war time and we have that interference while the war is on, but I want to put on record now that legislation which forces the employer to take from the employee's pay certain moneys not only is annoying to the employee but upsets the whole family status. The wife does not really know what the husband is earning; she is not sure what all the deductions are. We will stand it while this war is on, but we ought to be very careful and regard an employee's pay envelope as something almost sacred. In many cases employees are renting a house or living accommodation from the employer, and something is taken off for rent. Very often carloads of fuel will be brought in, perhaps a little cheaper than the individual could buy it, or at any rate it is easier to finance by having a dollar a week taken off the pay. Then you have pension and superannuation fund deductions, and many institutions have
group insurance arrangements paid in part by the employer and in part by the employee. During the last couple of years we have had the national defence tax. That is now replaced with a combination of national defence tax and income tax, and there is unemployment insurance. The average employee and his family circle are so confused that they do not know where they stand. The good wife has to be almost a chartered accountant to keep track of the husband's earnings. He might be in a better position to filch some pay before he takes it home. We are breaking down that old feeling which many of us who have earned wages and taken home a pay envelope have that this is something which should not be interfered with. I merely want to put this on record for the days to come, so that we may get back to some sound condition in regard to the employment of labour.
Another condition that obtains to-day is this. The line of demarcation where an employee must pay national defence tax is $23.04 a week. If a man is earning 62J cents an hour for an eight-hour day, or $5, you will find employees laying off on Monday. They will work just a sufficient number of hours to reach the taxation point. With labour as scarce as it is at present, there is not much you can do about the matter. You cannot dismiss them. You are short of labour.
They will go farther. This has obtained within the last fortnight. They suggest to the foreman and the foreman to the superintendent, "Why cannot the office just pay me the minimum so that I shall not have to pay tax, and then hand me a bonus afterwards?". That is due to the method we are forced to adopt in order to collect this taxation. I put that on record for the benefit of those who are charged with the administration of the income tax.


Richard Burpee Hanson: This
resolution provides for the deduction of the income tax on salaries and wages at the source. As the resolution is drafted, the deduction at the source is to be of such portions of the taxes authorized therein as are determined hereafter by the governor in council. I object absolutely to that. It should be specified in the statute, so that we may know exactly what it is, so that employers and employees may know what it is. It should not be juggled around by order in council which may be repealed at a moment's notice and new regulations made.
The hon. member for Danforth has protested about interference with the employees' pay. No employer wants this trouble imposed upon him. The big companies do not. Will the
Income War Tax Act


George James Tustin: Of course that could be done, but I remind the minister that this is July 21 and it will be difficult. I doubt very much if the legislation will be completed by the end of July.


James Lorimer Ilsley: The companies have had notice of it since the budget.


[Stage Direction]
Resolution agreed to.
Resolutions 22 and 23 agreed to.
24. That commencing after the 31st day of August, 1942, all dividends and registered interest paid by any debtor „o residents of Canada shall be subject to ?, deduction at the source at the rate of 7 per centum.
Mr. ILS'LEY:	I have an amendment:
That resolution 24 be amended by adding the following as subsection 2 thereof:
"That commencing after the 30th day of June, 1942, all interest paid or credited by any bank, trust company or other person lawfully empowered to accept money on deposit shall be subject to deduction at the source at the rate of 7 per centum if such interest is equal to the interest on $100 or more for a full year.
Colin William George Gibson: I so move.


Richard Burpee Hanson: Is that not covered by implication in the resolution as it stands?


James Lorimer Ilsley: No.


Richard Burpee Hanson: This is to make sure that deposits bearing interest with a bank or trust company, shall be treated the same as dividends and registered by the bank.


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: An additional source of revenue is being taxed. Do you not now have to include in your income tax all interest received on savings account?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: And pay
on it the regular rate you have to pay on your other money?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: This just
provides for deduction at the source within certain limitations?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: And if it does not run to $100 in the full year they do not deduct it?


James Lorimer Ilsley: Yes, that is right.


Harry Rutherford Jackman: By leave Of the committee I should like to say a word with regard to section 22. It has been represented to

me that there are a large number of people who support relatives or connections who are unable to keep themselves, chiefly old people, and these taxpayers have been in the habit of giving to such persons from $500 to $1,000 a year, all of which is subject to income tax. There is a special gift tax, and if you give away $500 or $1,000 to anyone it is subject to a tax of 10 per cent. There are a number of well-to-do people who support relatives or old connections of the family and give them $500 or $1,000 toward their upkeep. Under this gift tax there is no exemption as formerly. No matter how small the gift is, there is a 10 per cent tax. It is a hardship on a number of people who are already doing what is virtually a charitable act in keeping certain persons off the public relief rolls.


James Lorimer Ilsley: I did not know that- the
exemptions were removed.


Harry Rutherford Jackman: There used to be
exemptions.


James Lorimer Ilsley: Yes, but I did not think
they were removed.


Harry Rutherford Jackman: You cannot give away
$500 now.


James Lorimer Ilsley: The commissioner tells me
that the exemptions of $1,500 and $400 are not inappropriate because of the change in the form of the income tax. The deduction is from the tax now instead of from the income. I am not very familiar with it myself, I must admit.


Harry Rutherford Jackman: I do not know how the circumstances can be met without undue hardship to the donor. Can a well-to-do man support an invalid aunt or some other elderly relative, giving that person $500 or $1,000, without being subject to the special gift tax, besides paying income tax on his income? Can he give these old people some money without paying that gift tax as well as the ordinary tax? Formerly a person could, in any one year, give up to half his net income free of tax. Now that is done away with, Otis there an allowance for a small amount of money given away to children or other people, without its being subject to the 10 per cent tax?


James Lorimer Ilsley: Has the hon. gentleman the act before him, section 88? As I read this resolution the schedule of rates which is to be found in section 88 of the Income War Tax Act is repealed, and the schedule found in the resolution is substituted therefor. In the schedule as found in section 88 I find that on gifts up to and including $5,000 there

Income War Tax Act
in order to make a payment in 1942, if he were in a position to prove absolutely to the minister that he has no income this year?


Colin William George Gibson: At the present time the taxpayer is required to file a return and pay a tax on the estimated amount of income of the previous year. That is for the purpose of giving him a basis to work on, so that if he paid up to that amount and it is less in the first two quarters than the tax eventually amounts to, he is not penalized. In the case cited by the hon. member, since there is not going to be any income, the man would not pay any tax, because he knows definitely that there will not be a tax payable. But if he is wrong, and eventually finds that he is taxable, since he has not made payments he will be liable for interest and penalties for not having made his quarterly payments.


Harry Rutherford Jackman: Would the minister say whether or not he would allow 5 per cent on overpayments in case his estimate is higher than the actuality?


James Lorimer Ilsley: No. We cannot do that.


Harry Rutherford Jackman: I have heard of a few very remarkable cases in the past in the Department of National Revenue, where taxpayers have overpaid the tax they were entitled to pay, and the only offset which the department would give them, after admitting their contention, was that they would keep the amount as a credit against future taxes. That is not thq way to do business in this or any other country. In the United States, for instance, you used to be allowed, if you are not still allowed, 6 per cent on overpayments, and if you had underpaid you were charged 6 per cent. The rule worked both ways. Surely the government is not going to charge 5 per cent on an underestimate and refuse to allow 5 per cent on an overestimate. To be fair is not a cardinal sin. though it seems to be regarded as such by the administrations of both finance and revenue.


James Lorimer Ilsley: The answer is that that cannot be allowed.


Harry Rutherford Jackman: The answer is no?


James Lorimer Ilsley: Yes, that is the answer. With regard to the statement that the Department of National Revenue refuses to make refunds, and keeps overpayments, I am informed that that is not the case.


Harry Rutherford Jackman: It has been the case. I heard of another the other day.


James Lorimer Ilsley: It may be suggested to the taxpayer, but if the taxpayer says "no, I want my money back", he gets it.
Amendment (Mr. Gibson) agreed to.
Resolution as amended agreed tp.
21. That the tax payable by a corporation shall be paid by monthly instalments during the six months immediately prior to the close of its fiscal period and the six months immediately subsequent to the close of its fiscal period.
(a)	as to the first six months, one-twelfth of the estimated tax, having regard to the previous or anticipated current year's income, applying the current year's rates ,and
(b)	as to the second six months, one-sixth of the tax after deducting therefrom the previous six months' payments having regard to the income, and applying the rates of the taxation year.
This shall be applicable to the tax on profits of fiscal periods ending on and after 31st December, 1942.
Any additional tax found due over that estimated or declared by the taxpayer shall be paid immediately upon assessment, together with interest at 5 per centum, after four months from the close of the fiscal period.


George James Tustin: Will the minister state how this tax on corporations can be figured out or carried out under the present wording of the resolution? It states that the first six monthly payments shall be paid in the six months before the close of the fiscal year of the company. A great many companies end their fiscal year not later than December 31. We are now near the end of July, and I was wondering how the tax can be figured out.


James Lorimer Ilsley: I did not get the point of the criticism. Will the hon. gentleman state it again?	*


George James Tustin: I was not criticizing; I was merely asking a question. Section 21 provides that the tax shall be paid by monthly instalments during the six months immediately prior to the close of the fiscal period, and the six months immediately subsequent to the close of that period. It is now near the end of July, and a great many companies close their fiscal year on December 31 or sooner. How can the tax be worked according to this resolution?


James Lorimer Ilsley: The answer will be found in the second last paragraph:
This shall be applicable to the tax on profits of fiscal periods ending on and after 31st December, 1912.


George James Tustin: But how are you to begin now to make payments, or do payments not start until after December 31?


James Lorimer Ilsley: What would be the difficulty about estimating the tax for the year and paying one-twelfth of it at the end of this month?


George James Tustin: I do not have that clear yet. Am I to understand that the last payment of the six would be made on December 31?


James Lorimer Ilsley: Yes.
Income War Tax Act

from the Minister of Finance, the hon. member for Souris and the hon. member for *Qu'Appelle will have to fight their own battles.	.
To change the subject for a moment, may I have an answer to the query I put to the minister with reference to sole proprietorships? On what basis are they to be taxed this fiscal year?


James Lorimer Ilsley: I will give the answer tomorrow.


Colin William George Gibson: In answer to the question previously put by the hon. member for Peterborough West (Mr. Fraser), arrangements will be made whereby the taxpayer who shows that he has made payments of insurance premiums and principal payments on a mortgage will be able to reduce his quarterly payments accordingly. That will be worked out by the department.


Gordon Knapman Fraser: That is starting with the first payment, is it?


Mr GIBSON:: Starting with the first payment, so that if he estimated that he was entitled to a reduction of the full amount of the refundable tax he would not have to pay any of the refundable portion of his tax with his quarterly payments.


Gordon Knapman Fraser: That is all right, and I think the public will be quite satisfied with that. I asked another question, with regard to the insurance receipts. The reason why I mention that is that many income tax payers who at the present time are paying premiums to insurance companies might not get their insurance receipts, or they might not ask for a duplicate. I therefore believe that the sooner instructions are issued in connection with that, the better it will be not only for the government but for the income tax payer.


Robert Fair: I was amused a little while ago to hear the Minister of Finance making fun of the hon. member for Souris, but perhaps if that very small percentage of farmers who will pay the tax could hire lawyers to make up their returns there would not be any of them paying income tax for the past year. I subscribe to the arguments made by the hon. member for Souris and others along the same line. I know it is impossible in almost all cases for the farmer to make payment before, at the earliest, October 15, because experience has taught us that a large proportion of his purchases is made on credit. People go to machine-shops and get repairs and twine, and to the grocery store and run up grocery bills, and naturally those bills have to be met first. Because the

farmers have not been given the cost of production, I think the government, who after all are responsible, should not be as hard as the Minister of Finance tells us he is going to be.


Ernest Edward Perley: In reply to the Minister of Finance, and having in mind the nice spanking he gave the leader of the opposition and one or two other hon. members on this side, I want it distinctly understood, and I think my reported remarks will bear me out, that I was making a plea, not only for the farmers who happen to be in the income tax list, but generally for business in western Canada. I included all the business men and named various organizations. The minister's statement was not deserved by us. Furthermore, I do not agree, even if only a hundred farmers paid last year, that we should not put forward their case as well as that of any hundred men in any other part of Canada. I wish, however, to make it quite clear that I was making a plea for business in general in western Canada.


James Arthur Ross: Did I understand the Minister of Finance to say that there were not more than between one and two hundred farmers who paid income tax in 1941 in Manitoba?


James Lorimer Ilsley: No; I said I did not have the figures for 1941. The figures I had were for 1939 or 1940.


James Arthur Ross: Even if that were correct, I do not think it conveys a true picture. While the minister flatters me in suggesting that probably I got my leader excited, I think he overdid the picture a little, and I should like to follow it through. I represent the business people of my riding and that part of the province as well as the agriculturists, and these business people are called upon to arrange credit for the harvesting of the crops. Many of them will probably have paid income tax also in 1941, and you ask them to file a return and commence paying on October 15. They have to provide some method of financing our farmers to take this crop off, and you are placing an impossible burden upon them. The difficulty applies, not merely to the farmers, but also to business men located in the prairie provinces who supply twine, tractor fuel and other materials necesary for harvesting the crop. I think the matter deserves a little more consideration than the minister has given it.


Victor Quelch: I have in mind the position of a grain farmer who may have his total crop destroyed by hail. In western Canada that is quite a common occurrence. Supposing the farmer had paid a small income tax in 1941; would he then have to borrow money

Income War Tax Act
would have to make a twelve-months adjustment, and a very big adjustment, within a period of six months. I said that it was not fair to the taxpayers of this country, after their personal budget had been completed and half a year had gone by and half their expenditures had been made, and half their income had been earned, for the minister then to turn round and impose as onerous a tax as this and expect the taxpayers to step up to the line, go through the whole formula on the dot, and pay taxes very much higher than were thought of the year before. It is only fair that the minister should give consideration to the man who has to dig down and get this money, and the western farmer is in that category. It does not affect the farmers in my part of the country. I only wish they were receiving enough income to pay income tax, because then they would, be that much better off and would be making a profit out of their operations. I am pleading for the western farmer who is in a different position and is entitled to consideration, and one of the basic reasons why is the fact that this government delayed bringing down the budget for six full months. The}' have not yet .brought down certain information which we asked for and ought to have in connection with income tax payments. I should like to know just what defaults there are in income tax payments. There will be more if you crowd the taxpayers of this country too hard.
If hon. members will look at this resolution they will see that when the assessment is made it is payable right on the dot. We used to have thirty days after the assessment was made in which to pay our tax, but now it begins to bear interest of five per cent before the assessment actually reaches the taxpayer. He is assessed on one day and the notice is sent out on that day. The interest begins from that day before he actually receives his assessment. That thirty-day provision should be restored. Anybody is entitled to thirty days' credit without interest. This is crowding the willing horse too far, and I protest against it in the name of the taxpayers of this country, and especially in the name of the western farmer. I see hon. members on all sides of the house nodding assent to what I have been saying. The minister should have a heart.


James Lorimer Ilsley: When my bon. friend gets
violent like this, I have to reply. To begin with, I am very happy to hear that there is such a large number of farmers in the west who had taxable incomes in the year 1941. When I heard the hon. member for Souris talking about his neighbours who are going to be so terribly embarrassed this fall, I
remembered that they can be embarrassed only if last year, in 1941, they had taxable incomes.
I have been trying to find out the number of farmers in Manitoba who submitted income-tax returns for the year 1941 and have not been able to get it, but a year or two previously the number was from one to two-hundred for the whole province, and I would very much doubt, having in mind the speeches I have heard in this house from the hon. gentleman and his hon. friends if there is any considerable number of farmers in Manitoba who had taxable incomes in 1941.
The hon. member for Souris has painted a very pathetic picture and has the leader of the opposition all excited about these wealthy neighbours of his who are going to be embarrassed this fall because it is going to be hard for them to get help, and who are going to-have a big crop and a lot of bills to pay, so-that they will not be able to get out and pay these big income tax instalments-based on 1941 income, it must be remembered-by October 15. Surely, if the speeches we have heard from all over that side of the house, including the groups in the comer, have presented the facts, this problem is one of infinitesimal dimensions, and I would advise my hon. friends on this side of the house,, and others, not to allow this inflammatory-appeal of the leader of the opposition to get them too excited, because, after all, it does not amount to much this year. If this year there are a lot of taxable incomes among the farmers of western Canada, and perhaps of eastern Canada; if they are coming into the income tax-paying groups in a big way, and1 if we find that there is some inconvenience,, then next year we may have to make a. change. But I do not want to make ana exception in favour of the farmers of western Canada. If I do I shall soon hear from the-farmers of eastern Canada, and then there will be others with equal claims for exceptions-to be made in their case. Other occupational groups as well as the farmers, have friends in this house, and they will be coming, along, too, once this date is pushed back. We need the money. We want to count on its ooming in. We want it paid on the 15th day of October.


Richard Burpee Hanson: You want it on the 15th day of October, but the laws of the Medes and Persians are not immutable. A little while ago you changed the date back, one month, and as far as I am concerned, I am very thankful for that change. I am afraid after the spanking I have just received:
Income War Tax Act

be able to get anything by that time, and neither can the farmers. I do not see how it would make much difference to the department or the government if these dates were moved on a month, and it would prove of great assistance to the west.


James Lorimer Ilsley: These payments are distributed evenly over the tax year, and it is important from the government's point of view to have these coming in regularly.


Ernest Edward Perley: You could extend April and July another month, and conditions would not be any worse than they are now.


John Ritchie MacNicol: If a person is paying a quarter of his tax on October 15 and the next date is January 15, he could pay all the remainder on that date if he wished?


James Lorimer Ilsley: Yes.


Gordon Knapman Fraser: The minister said that under this item he would let us know what kind of insurance or mortgage receipts the government will require, whether they will have to be in duplicate or triplicate.


Colin William George Gibson: The regulations are to be based upon the resolutions, and the resolutions have not been passed yet.


Mr. SENN:: Is there any good reason why the first payment could not be made in January and then the other payments at three month intervals for the rest of the year? If private individuals could put in their income tax returns then, it would save a lot of bookkeeping.


James Lorimer Ilsley: The hon. gentleman would understand the reason if he knew how hard it is to keep in funds. We need money, and we need it all the time. We need it regularly, and we need it early rather than late.


Richard Burpee Hanson: The point is you want to be able to count on having so many millions on a certain date. No doubt many people are going to be embarrassed in this connection. I think in justice to their 'Constituents the western members who know the situation much better than I do, should support the hon. member for Qu'Appelle (Mr. Perley) and the hon. member for Souris (Mr. Ross). The farmer will be facing a real hardship if he cannot change his crop into money.


James Arthur Ross: Not only is this going to create an individual hardship, but it will be an impossibility. Any one conversant with the methods of financing the harvesting of crops in the prairie provinces will realize the difficulties. It is very difficult for many 
farmers to finance at the banks, and it will be still more difficult this fall on account of the fact that we shall be able to deliver only a small quota at threshing time. In most sections all available space for the storage of grain will be filled.
There is another difficulty created by the fact that the budget was brought down, as late as June, in. the middle of the year. I know neighbours of mine who have overobligated themselves already for this year's obligations. They have bought equipment and assumed other obligations which it would be very difficult for them to fulfil under normal conditions this year, and now you impose a tax upon them which it will be utterly impossible for many of them to pay on, the 15th of October. All the expenses of a grain farmer come in the harvest months-his binder twine, tractor fuel, everything-and our credit is not very good with the dealers in these times. It is a real hardship to arrange finances to take off the crop under normal conditions, and here you impose this tax which the farmers must pay by October 15, by which date most of them will not have completed their harvesting operations and cannot estimate their income. That is not only a hardship, but in the majority of cases it will be utterly impossible for them to pay, and I plead with the minister an<l his staff to give consideration, to them.
I am inclined to agree with the hon. member for Haldimand that the first payment should not be asked for until January 15, when a man can make some estimate of his year's operations. I would go farther than the member for Qu'Appelle and say that the first payment should not be made until January 15.
Did I understand the Minister of National Revenue to say that there were two distinct sets of forms to be filled out, one by the salaried man in September, and one by the business man in March?


Colin William George Gibson: Yes.


James Arthur Ross: Then there should be a distinct division made in the matter of payments too, because I repeat it will be an utter impossibility for many of the farmers to make payment on October 15, and I plead with the minister to give consideration to the agriculturists of this country who will be placed in an impossible situation if this resolution goes through as it stands.


Richard Burpee Hanson: The minister brought down his budget on June 23. On June 30, I replied, and pointed out that he had delayed bringing down the budget for a period of six months; that half the calendar year and half the fiscal year of most people had expired, and that in consequence people

Income War Tax Act
here. I believe the Department of National Revenue will have to give the matter some consideration.


Gordon Knapman Fraser: I think practically every hon. member has received from one to twenty letters dealing with this point. Something should be done about it at once, because the people are worried. This is a very drastic tax. The people are willing to pay it, but they want to pay it in the easiest possible way, so that they may not be affected any more than is necessary.


Colin William George Gibson: The hon. member has mentioned the case of a man in receipt of an income of $2,000. Apparently this would be a married man without dependents, whose tax would amount to $231 with the refundable portion amounting to $200, making a total tax of $431. The hon. member asked if a man turning in insurance premium receipts totalling $200 would then pay only on the balance of the non-refundable tax, which would be $231. When the man makes his first payment on October 15 he cannot say definitely that his income is going to be $2,000, or we cannot expect definitely that that will be his income for the year. Consequently we do not know what the refundable portion of his tax will amount to. If we made an estimate in October we might overassess what the refundable portion of the tax would be.


Richard Burpee Hanson: The minister said, "having regard to the previous year's income".


Colin William George Gibson: That is the basis for working out what he *will pay in the first two periods, but we would hardly be justified in accepting that sum for rebate purposes until we knew what his income for the year will be. A great many incomes vary considerably from year to year.


Mark Cecil Senn: I think there is a good deal of merit in the contention raised by the hon. member for Peterborough West (Mr. Fraser). I have a suggestion to make that might obviate all the difficulty, although it would mean a delay of three months in making the first payment. I see no reason why the income tax return should not be made out on January 15 for the year previous and then there would be no difficulty about estimating the whole thing. Here we have four payments made before the income tax return is submitted. If you were to delay the first payment for three months you would be able to have the income tax return properly made out, and there would be no difficulty about making adjustments.


Colin William George Gibson: While the income tax return does not need to be in until March 31, probably in a great many cases it will he filed with the January payment. I think a great many taxpayers will know their previous year's income at that time.


Richard Burpee Hanson: Is there a provision that it must be in by March 31?
Mr. ILSLEY': In the case of those making four payments. In the case of those who have deductions made monthly or weekly, the return may be put off until September 30.


Richard Burpee Hanson: It does not say that.


Mr. BERTRAND (Prescott):: The final return will be made on March 31, just as it was last year?	*


Colin William George Gibson: In respect of the cases where 75 per cent of the income comes from salary or wages and deduction is made at the source, the returns are made later in the year. Those who are not getting 75 per cent of their income from salaries or wages will fill out their forms as heretofore, on March 31.


Elie-Oscar Bertrand: Is the refundable portion of the tax to be payable only at the end of the year?


Colin William George Gibson: No.


Mr. WRIGHT:: I find myself in agreement with the hon. member for Peterborough West (Mr. Fraser) with regard to what he has said about the refundable portion. What will happen will be that the taxpayer will not be able to meet his insurance premiums until the government makes the refund, probably at the end of the year. He will have to let his policy lapse until that time and pay interest to the insurance or mortgage company. If you cannot allow full exemption, I think you should allow a percentage of the exemption. I know in some cases there is going to be a real hardship in meeting insurance and mortgage payments and the income tax in the first few months.


Ernest Edward Perley: I want to make another appeal to the minister to change the dates to November 15 and February 15. Merchants, lawyers, doctors, in fact the whole business community in western Canada are affected, because they are waiting for the returns from agriculture. They cannot possibly make a return until the farmer has paid for his new machinery and other expenses. This year it is practically all on a cash basis; at least 50 per cent cash has to be paid and then the remainder later in the fall. This affects not only the farmer but the whole business community. The merchants will not
44561-284 J
Income. War Tax Act

has to pay $50 in addition. Then he has to wait until such time as the government refunds that extra $50. In other words, the governments holds up that money until it is ready to return it.


Richard Burpee Hanson: Let me understand this. Supposing the refundable portion of the tax I must pay the government amounts to $1,000. Do I understand that it may be the case that I shall have to pay that amount to the government in four quarterly instalments of $250 each, along with my other taxes, and wait until September, until I file my final return, for that refund, if I am able to show a bona fide payment of $1,000 in insurance premiums?


James Lorimer Ilsley: I think it will be either one of the plans I have mentioned.


Richard Burpee Hanson: The plan I have suggested would be the hardest, would it not?


James Lorimer Ilsley: Yes, that would be the hardest.


Richard Burpee Hanson: If I can satisfy the department that I paid life insurance premiums amounting to $1,000 in the calendar year 1942, which will be my taxable period, and can submit official receipts showing payment of $250, say on October 15, $250 the following quarter, $250 for the third quarter and $250 for the fourth quarter, or more, why should the department not accept that indisputable evidence, so that I shall not have to put up any money, instead of forcing me to pay the money to the government? Why should the taxpayer not get a little break in this matter? That would not be attempting to take anything away from the government; it is just what the statute will call for. I would have no difficulty, as many others would have no difficulty, in furnishing insurance premium receipts to cover each quarterly payment of my deductible portion. It seems to me that would be eminently fair. Of course, if the department would not accept that evidence, I would have to bolster it up with proper evidence from the company.
Then there is another point. I believe the minister's reply to me was based on the use of the words "having regard to the previous year's income and applying the current year's rates." I assume that was the basis of his statement, that you would pay these two instalments on the basis of the 1941 tax, applying the current year's rates. But let me point out this anomalous position. If my memory serves me aright, in 1940 members of parliament received $5,100, whereas in 1941 they received only $2,900, less the national defence
(Mr. G. K. Fraser.]
tax. This year we shall have to pay on an additional $1,100, on $4,000 in addition to our other income. Unless we make some allowance for that $1,100, we shall not be paying 25 per cent in the first instalment of this year's taxes, based on last year's income. I do not know how you are going to work that out. I am just directing the point to the attention of the minister and his officials, though no doubt they are more thoroughly aware of the problem than I am.
Then there is one other thing, and I am not going to labour this any farther. I should like the minister to explain the position in which sole proprietorships will find themselves under this'resolution. For example, if the fiscal period of a sole proprietorship ended on the 31st day of January, 1942, under what taxation rates will he be taxable, the 1941 rates or the 1942 rates, or will there be an apportionment of eleven months at the
1941	rates and one month at the 1942 rates? My understanding is that the normal rule is that sole proprietorships are taxable under the rates for the taxable year in which their fiscal period ends. I think that is right. If that is the case, it would mean, under the example I have given, that the sole proprietorship would be taxed in respect of eleven months of 1941 at the very steeply increased
1942 rates. If such is the case, it would appear to me rather an intolerable position for a sole proprietor, and I believe some formula must be worked out under which justice would be done him in the premises. I am going to place that on the record, so if an answer cannot be given immediately the matter can be considered. I have no doubt there are innumerable problems of a like nature which will arise under these resolutions, and which will have to be studied.


Gordon Knapman Fraser: I think we should have this matter straight, that we should find out just what is the position. If a man has to pay the tax plus the refundable portion on October 15, and in addition look after his other payments, and then wait until the end of the following year before getting any refund, in the case I mentioned he will pay the government $431, the whole tax, plus the $200 he will have to pay the insurance company, or a total of $631, and he cannot afford to do that. I have sent a note to the minister outlining my suggestion, and I do . not see why the government could not follow it, because it would not cost one cent. The government will get part of the tax anyway.


James Lorimer Ilsley: I do not think any administrative decision on the point could be made

Income War Tax Act
off the crop. I shall be surprised if many of us are not trying to harvest our crop this fall when the snow is on the ground. When the crop is harvested we shall be able to market only a small percentage. The latest maps issued for the three prairie provinces show a prospect of a very large crop at every marketing centre in the three provinces, which is most unusual. Probably not since 1915 have we had such prospects for a big crop. This is going to create an impossible situation on the prairies. I trust the minister will be able to do something about the first payment at least.


Richard Burpee Hanson: How does the minister think it possible for any taxpayer, and especially a farmer, to reckon his 1942 income as early as October 15? How can I reckon what my income will be for the full year as early in the fall as that? It is not fair.


Colin William George Gibson: The tax is reckoned on the income of the previous year at the new rate. The two payments are made on that basis. Then in January-


Richard Burpee Hanson: It is the same formula as last year, with the difference in date?


Colin William George Gibson: It is figured on the same income as last year, with the new rates applied. Then, in the new year the correct income for the previous year is definitely ascertained, and the final two payments made of one-half the remaining tax payable.


Gordon Knapman Fraser: Suppose a man has an income of $2,000, and the refundable part of the tax is S200. He is a married man with no children. When the first payment is due he has paid premiums and has receipts for them to the amount of $200. Can he turn them in at that time, or does he have to extend them throughout the year? Can he discharge the whole refundable part of his tax by putting in those receipts at that time? He would, of course, have to pay the rest of the tax, which is $231. Most of the year would be up at that time, and he might have receipts not only for his insurance but perhaps for any payments on mortgages, medical expenses, et cetera. If he could turn them in at that time, it would be a great help, whereas if he could set off only a proportion and had to pay part of the compulsory saving, it would mean a double payment.


Colin William George Gibson: That would mean that the taxpayer would not be paying one-quarter of, the tax in the first quarter or one-half in the first half-year. The department would not have the proper proportion of the tax in those first two periods.


Gordon Knapman Fraser: Not if the man handed in receipts for $200 and, in addition, paid the proportion of the normal and graduated tax which would be $231?


Colin William George Gibson: It is difficult to follow the case the hon. member puts. I gather his suggestion is that the amount that can be deducted should be deducted from the earlier payments.


Gordon Knapman Fraser: Yes.


Colin William George Gibson: That would mean a much smaller tax payable in the first periods if he took his total deduction in the first periods and left none for the last two periods.


Gordon Knapman Fraser: The man -would have no payment to make on his compulsory savings in the last periods anyhow, because his insurance receipts would cover it. The government would get nothing but the receipts plus the proportion of the normal and graduated tax.


James Lorimer Ilsley: Let me state what I think the hon. member said, and let him correct me if I am wrong. He is thinking of a taxpayer who pays in four quarterly instalments beginning October 15. By that time the taxpayer has in his possession receipts evidencing payment of life insurance premiums or instalments of principal on a mortgage or something of the kind which make up in amount the total instalment. The question is whether the department will accept those receipts instead of the money in payment of that instalment. Is that it?


Gordon Knapman Fraser: That is what I mean.


James Lorimer Ilsley: That is a matter for the Department of National Revenue, but I should think their practice would be something like this, that they would refuse to take anything but cash in that year, that October; that when the year ends, in January, they could adopt either one of two courses of action. Either they spread the receipts evenly over the three remaining instalments, because then they would know exactly what offsets the taxpayer was entitled to, or they could take the alternative course of compelling payment in cash until the non-refundable part of the tax was paid in full, and after that take receipts. Which course they would take I do not know, but I should think it would be one or the other.


Gordon Knapman Fraser: If the government does not take the receipts on the first payment on October 15, it means that the taxpayer not only has to pay his insurance premium during the present year, but


Special War Revenue Act
ion of Canada 2 per cent, and that every mutual company shall pay to the minister a tax of 4 per cent? What is the reason for the apparent difference in the rates?


James Lorimer Ilsley: Probably the best reason, although there may be others, is that in effect the business of Lloyd's is consolidated for the purpose of determining whether they make profits in Canada or not. There is no other way of doing it. Lloyd's organization is a unique organization.


Richard Burpee Hanson: It is just an association.


James Lorimer Ilsley: It is an association, and yet there is no joint liability. When one is insured by Lloyd's he is not insured by a group of insurers operating or acting jointly; he has a large number of contracts, each with a large number of individuals.


Harry Rutherford Jackman: Syndicates.


James Lorimer Ilsley: Some of these individuals are operating at a loss and some at a profit. In determining whether the whole of them are operating at a loss or at a profit in the country, naturally the operations of all must be consolidated. That is a great advantage for taxation purposes.


Harry Rutherford Jackman: The government do not share in losses. Do Lloyd's consolidate all their profits and losses on Canadian business, or is it the total of these syndicates in England who operate also in Canada?


James Lorimer Ilsley: The question is whether they consolidated their business.


Harry Rutherford Jackman: This is a tax imposed on Lloyd's at a slightly higher rate than on Canadian companies, because their business is considered as a whole, not the individual syndicates which may operate in Canada, some of which may show a profit, some a loss. Is it possible to take a consolidated picture of the business of Lloyd's in Canada?


James Lorimer Ilsley: That is right for income tax purposes, but here we are talking about a tax on premiums. The advantage to the company, to the insurers as a whole, lies in the fact that for income tax purposes you consolidate their business. There is no way to come at them one by one. You have to consolidate their Canadian business and determine income tax in accordance with the net result, which is a great advantage to the company that justifies a disadvantage on the premium tax.


John George Diefenbaker: How does the consolidation justify the charging of a higher
rate? If these were individual companies, how would the position of the government be improved?


James Lorimer Ilsley: The consolidation very
materially minimizes their income tax liability. If the premium tax were the same as that of other companies, and their income tax were minimized by this peculiar arrangement of theirs, they would have an advantage over competitors.


John George Diefenbaker: In England are they charged a higher tax than others?


James Lorimer Ilsley: I do not know.


John George Diefenbaker: Does this not look like discrimination against Lloyd's?


James Lorimer Ilsley: It may to them. It is open to argument, no doubt.


John George Diefenbaker: This is all very well from the point of view of the minister, but from the point of view of equality before the law, where is there any justification for picking them out for different treatment?


James Lorimer Ilsley: That is what I have been explaining.


John George Diefenbaker: Does the minister admit that it is not a good principle that one organization should receive one treatment and another a different treatment?


James Lorimer Ilsley: I do not know what principle the hon. member is trying to get me to subscribe to.


Richard Burpee Hanson: He is
stating the general principle of equality of treatment.


James Lorimer Ilsley: Equality of treatment is a right principle, but there would be no equality of treatment between Lloyd's and their competitors in Canada if their competitors cannot consolidate and Lloyd's can, because the consolidation of the business of a hundred insurers so that the losses of one offset the profits of another minimizes very materially the income tax liability of those insurers. Therefore you have the competitors of Lloyd's paying income tax on a less advantageous basis than Lloyd's. We contend that it is fair that Lloyd's should pay premium tax on a less advantageous basis than others.


John George Diefenbaker: The attitude taken by the government, then, is that for the advantage of Lloyd's competitors, and in order to secure equality of competition, this tax is being imposed?


James Lorimer Ilsley: To secure equality of competition, yes.
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John George Diefenbaker: Surely there is no justification for this government undertaking to assure equality of competition between private organizations by means of a tax-


James Lorimer Ilsley: What does the hon. gentleman mean by "equality of competition?" I agreed to that before I understood what he meant.


John George Diefenbaker: It was exactly the purport of what the minister said. He said Lloyd's had an unfair advantage over other companies in the matter of competition.


James Lorimer Ilsley: In the matter of income tax.


John George Diefenbaker: No, "competition" was the word used by the minister.


James Lorimer Ilsley: No; my whole argument is that income tax is imposed on Lloyd's on a more favourable basis than on their competitors in Canada, and conversely the premium tax is higher on Lloyd's than on their competitors.


Harry Rutherford Jackman: I might agree with the minister if he can answer in the affirmative the question I am about to put. The effect of this consolidation which Lloyd's are allowed is that some syndicates may lose money and others may make money, but the government shares only in the profits, not the losses? And just as a company pays a 2 per cent higher rate on a consolidated return, so the government is trying to make the same difference here. But if it is a fact that there are few if any losses by insurance companies in Canada, it would seem that the imposition of a higher rate on Lloyd's merely because they consolidate may be very unfair, and not lead to equality of competition. Do any insurance companies in Canada operate at a loss?


James Lorimer Ilsley: Is the hon. member asking whether Lloyd's do?


Harry Rutherford Jackman: No. The minister is assessing Lloyd's a higher tax than other companies by reason of their consolidating their returns. If there are no losing companies in the consolidated picture, then there is no advantage gained by the consolidation.


James Lorimer Ilsley: The hon. member means the consolidated insurers, not companies?


Harry Rutherford Jackman: Syndicates.


James Lorimer Ilsley: Well, syndicates, yes. They are individuals, as I understand. A Lloyd's policy is a document signed by a large number of persons, each of whom obligates himself to assume a certain part of the loss. If there are one hundred insurers there are really one hundred contracts. The hon. member asks, do any of those-


Harry Rutherford Jackman: There is no advantage in a consolidated return unless some subsidiaries or individuals in the consolidation lose money-losses, of course, are not taxable -and certain others have profits against which the losses of the others would be an offset. In a consolidated company return the advantage is that there may be a subsidiary which is losing money, and to make a consolidated return they must pay 2 per cent higher corporate income tax. If there are no Canadian companies, or if the number is not substantial, that lose money, I think Lloyd's are discriminated against.


James Lorimer Ilsley: I think the hon. gentleman's argument is fallacious. I do not think the determining factor is whether the Canadian companies, any of them, lose money or not. I do not know whether they do or not, I suspect they do. I think I know of one that has lost money, but I am not sure. But that is not the determining factor. The determining factor is whether if Lloyd's were taxed on the same basis as the others, that is, each insurer taxed individually, that would mean that Lloyd's as a group were paying considerably more tax than otherwise. By the system we have adopted they are paying less taxes than they otherwise would, or no taxes. We are just treating them differently from the other companies.


John George Diefenbaker: What is the justification for putting a tax of 4 per cent on mutual companies as provided in subsection 3? This looks very much as though the advantage that came to the insured through insuring in mutual companies and Lloyd's is now to be denied, or prevented as much as possible, by the imposition of heavier taxation.


James Lorimer Ilsley: We have not gone into it exhaustively, although there has been considerable discussion as to the justice of the pre-existing difference in rates. The factory mutual and reciprocal exchanges have had their premiums taxed at 2 per cent as compared with 1 per cent for the stock companies and mutual companies generally in Canada. This does not apply to mutual companies generally; which is a very limited class of companies, taking in the reciprocal exchanges and the New England factory mutuals. For a long time there has been a difference in the rate imposed on their premiums as compared with the rate imposed on the premiums paid the ordinary Canadian mutuals and stock companies.


John George Diefenbaker: What has been the difference up to the present?


James Lorimer Ilsley: It has been 2 per cent for the reciprocals and factory mutuals and

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1	per cent for the others. Now we are adding
2	per cent in the one case and 1 per cent in the other.


John George Diefenbaker: You have simply doubled it. Is there justification for penalizing companies who pass on to their insured the advantage of the savings they make, companies such as the mutuals and the Lloyd's syndicate, by placing upon them heavier taxation than is placed upon ordinary joint stock companies? The advantages of the savings generally are passed on to the insured. What justification is there for a government taxing agency penalizing institutions of that kind? -because they are penalized when they are required to pay heavier taxation than is paid by joint stock companies. On the one hand the company that operates purely on a joint stock basis has to pay a certain tax, but as soon as a mutual company is formed for the advantage of its policyholders, then it has to pay a tax which is immeasurably heavier. There must be some justification other than that given by the minister.


James Lorimer Ilsley: That is not correct. The hon. gentleman is speaking as though mutuals, the sort of mutuals we think of here-


John George Diefenbaker: I am thinking of the mutual companies which charge a certain premium and then, at the end of the year, when it is ascertained what the losses are, a benefit is given to all insured. That is the type of company covered here, is it not?


James Lorimer Ilsley: The ordinary mutuals are not covered.


John George Diefenbaker: But what about this company that is taxed 4 per cent?


James Lorimer Ilsley: Those are limited, I feel sure, to the factory mutuals and the reciprocal exchanges, and that is a very limited class of companies. They have a peculiar set-up. I have heard and participated in arguments by the hour, not with them but about them, as to whether there is a difference and whether the difference does justify this difference in rate. It has been there since early in the thirties, I believe, or at any rate for a number of years.


John George Diefenbaker: Were the companies represented in the arguments?


James Lorimer Ilsley: No, they were not.


John George Diefenbaker: Of course not.


James Lorimer Ilsley: Whatever I say, my hon. friend is going to have it that the mutuals are taxed at a higher rate than the stock companies. That is what he is going to say, and apparently I cannot stop him from doing
so. But that is not so with regard to any but a very small proportion of the mutual company business, the New England factory mutuals and the reciprocal exchanges, who have an entirely different way of operating from the ordinary mutuals in Canada, who are taxed on the same basis as the stock companies.


Mr. NICHOLSON:: In spite of what the minister says, the hon. member for Lake Centre has made a point which this committee should consider. Regardless of how few companies are operating on this particular premium deposit plan, they are carrying on under the mutual idea, and I think taxation of this sort is discriminatory. I do not see any reason why a government department should take sides as between various types of companies competing for various kinds of insurance. I think the hon. member for Lake Centre has made a case which should be considered by this committee.


James Lorimer Ilsley: If the superintendent of
insurance were here to argue the case he would point out that the item subject to the tax is a different item in the balance sheets of the factory mutuals and the reciprocal exchanges from that of the joint stock companies. I have heard the validity of that distinction disputed-certainly it is disputed by the reciprocal exchanges and the factory mutuals-but I have also heard it stoutly upheld. After hearing considerable argument on the matter I decided to leave it exactly as. it has been in the past and- not to precipitate myself into a dispute of that kind in an effort to correct a situation which has existed for a good many years.


Richard Burpee Hanson: I had
occasion, almost twenty years ago, to look into the case of these New England mutuals. In our part of the country they carry a good deal of the insurance on our factories and mills, or -they did; I have not been familiar with the matter during the last few years. I came to the conclusion that they provided the cheapest and most effective form of insurance that any industrial concern could operate under, and I have no doubt that is true. The old line companies will combat that idea, but the advent of these mutuals into the field, in New Brunswick at all events, had the effect of bringing down rates to an astonishing degree. It was simply surprising what the old line companies offered to continue the business for, but even then the factory mutuals could and did underbid them and obtained a good deal of the business. This seems to be just an opportunity to impose a tax upon people who are providing a service at a very

Special War Revenue Act

low rate. Is this wholly in. the interests of revenue, or is this another balancing feat, as was the case in connection with Lloyd's?


James Lorimer Ilsley: This is an adherence to the status quo; this is a Conservative act.


Richard Burpee Hanson: That sounds very good, an adherence to the status quo; that is very high sounding, but it does not mean much to the ordinary layman who does not know a great deal about the insurance law. I wonder if, because these companies provide very low cost insurance, the minister or some genius in the Department of Finance has not seized the opportunity to say, "Well, here is a place where we can jack them up." And it is suggested to me that possibly this might be inspired by rival interests, in the hope of putting these people out of business in Canada, but of course they cannot do that.


James Lorimer Ilsley: The inspiration came a good many years ago, then.


Richard Burpee Hanson: That may be true.


Mr. LOCKHART:: Could it not be corrected now?


John George Diefenbaker: The inspiration
could not have come so very long ago, because Lloyd's have not been operating in Canada for very long.


James Lorimer Ilsley: Since 1932 or 1933, I believe. But I am not talking about Lloyd's at all, and neither was the leader of the opposition.


John George Diefenbaker: I should like to know whether this is an equalization of tariff in order to equalize competition between these companies, or whether it is for revenue. If it is for revenue, it means that those in this country who are insured in these mutual companies, operating under the system outlined in subsection 4 of section 14, will have to pay more for their insurance than they have paid heretofore. In other words there is a discrimination against people who choose to insure with mutual companies.


James Lorimer Ilsley: That is not correct. There is no increase in the tax imposed.


John George Diefenbaker: Well, the old rate was 2 per cent and the new rate is-


James Lorimer Ilsley: Four per cent.


John George Diefenbaker: The old rate applying to companies under subsection 14 was 1 per cent and is now 2 per cent. In other words, in one case you are increasing the tax by 1 per cent and in the other you are increasing it by 2 per cent.


James Lorimer Ilsley: Yes, and there is an answer to that. The increase from 1 per cent to 2 per cent is on the stock companies, is it not? That is the argument, that we favoured stock companies being increased one, as against two?


John George Diefenbaker: That is not the
same increase.


James Lorimer Ilsley: It just shows how cocksure a person can be who does not know all the facts.


John George Diefenbaker: The minister can
speak with authority on that, so far as this section is concerned.


James Lorimer Ilsley: I wish to say what happened there. With regard to the stock companies there was a provision before that the premium tax should be subtracted from the income tax. Now it cannot be. So that the 1 per cent is paid in increased income tax for every company that makes a profit. In that way the position is equalized. It is an increase of 2 per cent, only the other 1 per cent comes in increased income tax.


John Ritchie MacNicol: How much extra revenue will accrue from the additional 2 per cent?


Colin William George Gibson: The increase in the full year would be S250,000, and for the remainder of the year $190,000.


[Stage Direction]
Section agreed to.
Sections 6 to 9 inclusive agreed to.
On section 10-Returns.
Gordon Knapman Fraser: Should the expression "every telegraph operator" be worded in that way?


James Lorimer Ilsley: Yes.


Gordon Knapman Fraser: That means that in an office where there might be half a dozen operators, each one would have to make a return.


Colin William George Gibson: It does not mean every'
telegrapher. It means the operator of an office.


Richard Burpee Hanson: There are only two operating companies. The minister is going to adhere to this telephone tax, is he?


James Lorimer Ilsley: I am afraid I shall have to.


Harry Rutherford Jackman: It is too bad. This tax on telephone extensions is so small it is not worth bothering about. It is one of those things which annoy people, and it falls on people in brackets which are surely caught adequately enough by the ordinary tax. It yields very little revenue, and perhaps does not cost the individual very much. Surely the

Special War Revenue Act
minister is catching sufficiently that class in the higher personal income tax brackets without making this small imposition.1 It is so trivial it is not worth bothering about, but it just keeps people from giving their whole hearted support to the budget and doing everything they possibly can to help the minister, rather than find ways and means of getting around certain provisions and perhaps defeating the main purpose the minister has in mind. I do think it would be better if he would not throw out these little barbs which draw blood, which do not amount to anything, but which make people feel inclined not to help the minister.


Richard Burpee Hanson: A tax like this has a psychological effect which will operate against the government's budget. People who are called upon to pay 25 cents a month oh telephone extensions are the people who are not only caught but are soaked in the drag-nets. This is going to have the effect of increasing their wrath, and it will be reflected in their lack of cooperation and their disposition not to buy war bonds and war savings certificates. They will say: The government is taking it out of me right and left, fore and aft; why should I buy any more war savings certificates? I have heard that time and again, and no doubt 1 will hear it again when I go home. The minister will hear it too, and his war savings committee are going to hear about it. If the minister would give in on this one minor point it would show a little flexibility, and it would be appreciated by the people. No doubt they would say, "Well, he is not so hard-hearted after all."


Alexander Malcolm Nicholson: I take exception to
the observations of the leader of the opposition and the hon. member for Rosedale. It seems to me that the minister should not give way, because those who are going to be taxed are people who can still make a great many adjustments in their way of living, without any serious change in their standard of living.


[Stage Direction]
Section agreed to.
On section 11-Record of telephone extension, dispatches or calls.
Gordon Knapman Fraser: I
would ask the same question about the expression "Such telegraph and telephone operator." Then, section 12 sets a penalty not exceeding $1,000. Going back to section 9 we find reference to "such telegraph operator" and so on. I suggest the section is not very clear, and that the word "company" should be used.


Colin William George Gibson: If the hon. member will
read the definitions in the act of "telegraph
44561-293J
operator" and "telephone operator," I believe the point will be clear in his mind.


[Stage Direction]
Section agreed to.
On section 13-Tax on railway, vessel, bus and aircraft tickets or right of transportation.
John Ritchie MacNicol: I notice the rates have
been materially increased on aircraft travel in the northwest. Until recently there were a number of private lines up there, but I understand that now one of the big transportation companies is in control. The placing of a tax on air travel in the northwest, in addition to the increase of rates, will interfere with air traffic from Edmonton to the northwest territories. I have been in that district, and I am going up there again this summer, and I can understand1 what a difference I shall have to pay this year as compared with last year.


James Lorimer Ilsley: Just 5 per cent.


John Ritchie MacNicol: But that is applied to
the new and higher rates. Aircraft companies have greatly increased their rates.


Alexander Malcolm Nicholson: 1 notice that the tax
on pullman or parlour car seats is to be 15 cents. Surely this must be regarded as a luxury tax. Pullman or parlour cars operate only on trains which carry air-conditioned cars and equipment of the kind. I believe pullman travel must be considered a luxury.


John Ritchie MacNicol: It is not a luxury; it is
a necessity.


Alexander Malcolm Nicholson: It may be a necessity for those who can afford to pay it, but my submission is that pullman travel is in the luxury class. The tremendous strain on railway facilities in connection with war industries should give all hon. members cause for careful consideration. A pullman or parlour car seat costing $2 will carry a tax at the rate of 7J per cent. If the pullman seat costs S5 the 15 cent tax brings it down to a very low rate. Would the minister tell the committee why the pullman or parlour car seat tax was not placed on a percentage basis, the same as the tax on sleepers and tickets?


James Lorimer Ilsley: I think the answer is that
no one ever pays S5 for a chair ear seat, to go anywhere.


Richard Burpee Hanson: The hon. member is confusing pullman seats and sleeping car accommodation. You cannot pay as much as $5 for a seat; they will not sell it to you. You would have to take a berth.


Alexander Malcolm Nicholson: You can pay SI. It should be on the percentage basis.
Special War Revenue Act


James Lorimer Ilsley: We would lose a tremendous revenue-perhaps I should not say "tremendous", because the total is not that great-if we did that.


Alexander Malcolm Nicholson: This is a discriminatory taxation. The minister is allowing those who are using this luxury form of travel to get away on a percentage less than the people who buy tickets.


James Lorimer Ilsley: It is more in practically every case.


Alexander Malcolm Nicholson: It should be on a percentage basis, with a minimum of 15 cents. A chair car ticket from Toronto to Ottawa would give you this percentage. A chair from Melville to Winnipeg costs $1.60, so that this would give you less than 10 per cent.


James Lorimer Ilsley: I am not critical of the hon. member for his suggestion, because his approach to many of these matters is very much like my own. I do not think the revenue or any advantage which would be derived from the change would be worth the inconvenience. Chairs are bought for short distances, and a tax of 15 cents is easy, to administer. It will not mean that conductors will have to go round with their pockets full of coppers. Theoretically we would get more money from the tax the hon. gentleman suggests, but this would then be a case where the observation of the hon. member for Rosedale (Mr. Jackman) would apply; it would be an inconvenient and irritating tax that would not yield much of anything. People would have to be making odd change for that particular purpose.


Richard Burpee Hanson: There is one part of this section which demonstrates that while the minister is not willing very often to listen to arguments from this side of the house, apparently he has been convinced that he was wrong last year on one matter. There is now an overriding proviso which reads:
Provided that the tax imposed by this section shall not apply on the charge for a ticket or right of transportation, if the regillar one-way charge for such ticket or right to any place in or outside of Canada is 75 cents or less.
This matter was argued quite strongly last year, but the proviso was kept at 50 cents on the theory that there never was a commuter who had to pay 75 cents. The minister has raised the limit, which is one way of admitting that he was wrong, which he does not often do.


Harry Rutherford Jackman: I am glad to see this raised from 50 to 75 cents. Both the minister and the Minister of National Revenue replied to my argument last year that no commuter who lived just outside the city and came to
[Mr. Nicholson.l
work every day paid 75 cents-it was not possible. I gave them examples, and apparently they find that it is possible. If a commuter buys a book of tickets, the 75 cent exemption is determined by the price of the individual fare. This creates a hardship, because you get a substantial discount when you buy a book of tickets. It brings up the general principle which I find in many places in this budget. There is too little acquaintance with the problems of the people of Canada. There is too much thinking in what is sometimes referred to as the ivory tower.


Richard Burpee Hanson: The
bureaucratic mind.


Harry Rutherford Jackman: They do not seem to be acquainted with the real problems of the people. There are several other changes which the minister has made to which I may have a chance to refer, changes which were strenuously argued for last year and refused by the minister. As the minister knows, there is very little of a critical nature in suggestions made in regard to budget proposals. The suggestions we made are for the most part based on experience, and I do wish the minister would give a little kinder reception to those that are advanced.


[Stage Direction]
Section agreed to.
Sections 14 to 17 inclusive agreed to.
On section 18-Cigarettes and manufactured tobacco to be in packages.
Richard Burpee Hanson: This is new, is it not?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: How much is it expected will be received in revenue under this new tax?


Colin William George Gibson: It is estimated the revenue for the full year will be $17,600,000; for the
remainder of the year, $13,200,000.


Richard Burpee Hanson: This section is all new?


Colin William George Gibson: It is new.


Richard Burpee Hanson: It reads:
All cigarettes or manufactured tobacco, whether imported or manufactured in Canada, shall, before they are offered for sale or are removed from the custody of the proper customs officer for sale or consumption, be put up and prepared in such packages as may be prescribed by regulations made under this act, unless they are imported in such packages.
Do we not have another provision with respect to the putting up of cigarettes in packages?

Special War Revenue Act


Colin William George Gibson: Under the Excise Act.


Richard Burpee Hanson: Subsection 2 imposes an excise tax on cigarettes of the same type as are referred to in subsection 1. Is this a double tax?


Colin William George Gibson: The present tax under the Excise Act is $6 per thousand, and the tax under the Special War Revenue Act amounts to an additional $2 per thousand.


Richard Burpee Hanson: You are giving them two jolts, so to speak.


Harry Rutherford Jackman: Why was there a change in the method of taxation? Why did you not raise the excise tax $2?


James Lorimer Ilsley: That was dealt with in the resolution.


Harry Rutherford Jackman: Stock in hand?


James Lorimer Ilsley: No, it applies only to manufacturer's stock at the time the resolution was passed. The old tax goes into the price for price ceiling purposes, and the new tax does not.


[Stage Direction]
Section agreed to.
On section 19-Proviso.
Harry Rutherford Jackman: I think this is the section the leader of the opposition referred to a moment ago. I have heard of several cases where people are purchasing articles on the instalment plan which will be taxable under this new provision. In one case a young woman was buying a set of silver for her hope chest, and she had only one more payment to make. When she went to pay it she found she was being assessed 25 per cent more because of this new tax. I presume it is a case of administrative difficulty, but is there no way in which such cases could be dealt with?


James Lorimer Ilsley: Could this not be discussed under schedule VI?


[Stage Direction]
Section agreed to.
On section 20-Collection of tax upon sugar content of goods imported.
Richard Burpee Hanson: What is the change here?


Colin William George Gibson: We are removing the superfluous words which gave the rates of the tax on sugar. The rates are set out in schedule
II	and need not be repeated in the body of the act because the act itself would then have to be amended every time a change was made in the schedule.


[Stage Direction]
Section agreed to.
Sections 21 to 25 inclusive agreed to.
On section 26-Repeal of sales tax on furs.
Alexander Malcolm Nicholson: Why is the sales tax being repealed?


James Lorimer Ilsley: Its place is taken by the new tax.


[Stage Direction]
Section agreed to.
Sections 27 to 30 inclusive agreed to.
On section 31-Certificate of default to be registered as judgment.
Richard Burpee Hanson: This is a type of clause that has crept into legislation in the provinces. Under a workman's compensation act, we will say, an assessment is made and if the man does not pay it, his whole property may be tied up by registering some kind of wickhagen-


George Hugh Castleden: Wickhagen?


Richard Burpee Hanson: Yes. It is a homely term in New Brunswick applying to a legal process. This section imposes a lien by statute on property. I notice that in the succession duty act it is called a caution- caveat is the word we usually use. Is this a new principle in taxing statutes?


Colin William George Gibson: This is just adding one section to the other sections already subject to the same provisions.


Richard Burpee Hanson: That is as clear as mud. I asked if this was a new principle in our legislation, or have we been doing it for years?


Colin William George Gibson: There is no change in the principle at all. This is just adding one other section to the other sections already dealt with in the same way.


[Stage Direction]
Section agreed to.
Sections 32 to 34 inclusive agreed to.
On section 35-Control of amusement tax.
John Ritchie MacNicol: Does the federal government obtain a revenue now from the amusement tax on picture show tickets?


Richard Burpee Hanson: What was the defect in the previous control that made this necessary?


Colin William George Gibson: The change of method in regulating this tax was brought about because there were different regulations in the various provinces. The Royal Canadian Mounted Police were checking theatres in some of the provinces by counting the patrons entering, but found that that was not a satisfactory check because some of the patrons were entering free, on passes. This provision is intended purely to assist in checking evasion of the tax in places of amusement.
Special War Revenue Act


Richard Burpee Hanson: What has been the history? Has there been much evasion? What about abuses? Talk about abuse of the pass system on the railways- the abuse of the pass system in motion picture houses is tremendous, I have heard. How much is the country losing by means of this free pass system in connection with picture shows?


Colin William George Gibson: There is no check on that.


John Ritchie MacNicol: Subsection 3 provides:
A patron to whom a portion of a ticket is delivered under subsection two of this section upon being admitted to a place of amusement, shall keep the same in his possession until he leaves such place of amusement.
Is not that a common nuisance regulation? When a man goes into a picture show, after sitting down, he usually rolls up the stub and throws it on the floor. Now he will have to throw it outside when he comes out.


Colin William George Gibson: This provision is already in provincial legislation, and we have included it for uniformity.


Richard Burpee Hanson: I am surprised that a Scotsman would throw on the floor his right to a seat, because if the usher brought somebody else along and the man did not have his stub with him, he would have no right to his seat. I recommend to my hon. friend that he keep his.


Alexander Malcolm Nicholson: Are horse races considered amusements?


Colin William George Gibson: There is a tax on admissions, and taxes on betting.


[Stage Direction]
Section agreed to.
On section 36-New parts XVI and XVII:
Richard Burpee Hanson: Has anybody read these sections? I have tried to. They were never before the committee. These are new provisions relating to the operation of the tax in certain places of entertainment. Does anybody in the committee know just what he is doing? Does the chairman know?


Thomas Vien: I do not.


Richard Burpee Hanson: Take the penalty clause, for instance. That is a new enactment, is it not?


Colin William George Gibson: Yes.


Richard Burpee Hanson: All these sections from 133 to 143 are new and were never discussed on the resolution stage. Power is given to the minister, for example, to exempt any person from payment of the tax if the entertainment is for a charitable purpose.
fMr. Gibson.]
I am going to read the penalty clause, 137, so that at least some people will know what we are doing:
Every person who fails to present a bill or invoice or to affix or cancel an excise stamp or stamps as required by section one hundred and thirty-five of this act is guilty of an offence and liable, on summary conviction, for the first offence, to a penalty of not less than twenty-five dollars and not exceeding two hundred dollars and in default of payment to imprisonment for a term of not less than three months and not more than twelve months, and for each subsequent offence to a penalty of not less than two hundred dollars and not exceeding five thousand dollars and in default of payment to imprisonment for a term of not less than six months and not exceeding two years.
The object, of course, is to penalize those who systematically or who may as a matter of practice try to defraud the treasury by not affixing these stamps. I agree that some provision has to be made for punishment of those who are out to defraud the public revenues. -


John Ritchie MacNicol: How are people to be notified?


Richard Burpee Hanson: I suppose the department will see to it that the whole trade affected by this bill is circularized and that they know about these new provisions and these new stamp taxes. These are new stamp taxes and the stamps must be affixed and cancelled. I suggest to the minister that the penalties, at least for minor infractions, are pretty high. On wholesale infractions of the tax he ought to be pretty severe, but is there very much latitude or discretion given to a convicting magistrate? I should like him to think that over. Suppose by inadvertence I put on a stamp and do not cancel it-to take the most minor thing I can think of-I have to pay a fine of $25. It seems to me that that is excessive.
At one o'clock the committee took recess.
The committee resumed at three o'clock.


James Lorimer Ilsley: With reference to the point raised by the leader of the opposition, I am told that this is in keeping with the penalties for infractions of other revenue laws. Whether the offence is of the same magnitude or not is, I suppose, arguable, but it is a very easy thing for anyone to evade this if he wishes, and the penalty must be fairly strict.


Harry Rutherford Jackman: Would the minister consider putting in "knowingly or wittingly"?


James Lorimer Ilsley: No. They will get out by saying that they forgot to put the stamp on.
There is a section here which the leader of the opposition wanted called to his attention

Special War Revenue Act
when we reached it. It is on page 14, section 140 of the act, being part of section 36 of the bill:	Tax on retail sales. The question was
about delivery.


Richard Burpee Hanson: Instalment sales.


Harry Rutherford Jackman: Suppose a person has undertaken to purchase various articles which are taxable under this section and has almost completed the payments, or has been making deposits against a specific article. No delivery has been taken. It may be that a young woman is saving for a hope chest, has specified flatware or something of the sort, and has almost completed her payments; and now she must pay, in order to get delivery, 25 per cent extra. I understand that is the way this section is administrated at the present time. It does not seem equitable.


James Lorimer Ilsley: It works both ways, I think. The delivery is the overt provable act and fixes the time when the tax is due, but the moment of sale is sometimes difficult to ascertain. The question then arises whether "sale" means agreement to sell or not. It might be that in many cases an article could be bought and laid away, and if the tax were on the sale, the tax would become due after the conversation took place or after the article was set aside. I assume that if that were the rule, at the time of the beginning of the tax, many transactions might come to light in connection with which it was alleged that the article had been set aside and laid away before the coming into effect of the tax. For these reasons delivery seems to be by all odds the best date to take. I believe that in the administration of the sales tax, experience of years resulted in the adoption of the delivery date as the important date, the determining date.


Richard Burpee Hanson: There
might be a case of complete payment with the taking of delivery deferred. The transaction would surely be completed if payment had been completed.


James Lorimer Ilsley: Delivery is the date.


Richard Burpee Hanson: Even if payment has been completed?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: That is unfair and inequitable. I can understand the minister's point of view where payment has not been completed, but in the case of a complete payment where the purchaser says "Hold that, and I will call for it next week," I do not think the tax should apply. Does it apply in such a case?


James Lorimer Ilsley: If delivery has not been made the tax does not apply.


Richard Burpee Hanson: Would
there not be constructive delivery in the case of which I speak?


James Lorimer Ilsley: There would be constructive delivery; that is, the article would be held by the vendor as agent for the purchaser, and lawyers might raise an argument as to whether delivery had not actually taken place. But I think that for purposes of administration the officials of the excise division take physical delivery as the one determining factor.


Richard Burpee Hanson: Well, it is the easiest way.


James Lorimer Ilsley: Yes.


Harry Rutherford Jackman: It is another example of administrative ease being sought, notwithstanding the hardship on the individual. I do not know how general these instalment cases are, but it does seem to me that the administration might take a more lenient attitude in regard to them, because it is only during the next few months that any evasion or subterfuge could be perpetrated if this section were made more equitable. It seems most unfair that persons who have already undertaken to buy things on a limited income should now be subject to the very steep tax of 25 per cent because they had not actually taken physical delivery. The administrative difficulties would be over in a few months if the minister would relax the method of handling the tax.


Joseph Henry Harris: In the case just cited, if the entry has gone through the books of the vendor the transaction would be definitely closed so far as the vendor was concerned, even though the goods had not actually been delivered. Another point is that in auditing the vendor's books the department's auditor would go in accordance with those books, and that would be the alpha and omega so far as transactions of this kind are concerned. Up to a certain point the tax does not apply, and from there on it would apply. It would not be within the province of the departmental auditors to go back and check stocks, I imagine. The simplest and most satisfactory way would be for the departmental auditor to take the audited books of the company as the transaction on which the new demand would be based.


James Lorimer Ilsley: Many of them do not keep
books, or adequate books.


Joseph Henry Harris: But the point
taken by the hon. member for Rosedale is
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well taken, because, as we all know, many young couples getting married to-day, with the husband in the armed forces, are not able to take up residence yet but want to feel some sense of security with regard to certain articles they had taken a fancy to, perhaps feeling that they will not be able to get them later as the shortage of materials extends. In many cases the article is fully paid for and the transaction closed, but it is left in the custody of the company. There is also the consideration of spoilage, wastage, and the necessity of storing elsewhere in case the husband is obliged to move and the bride goes to live somewhere nearby. Perhaps they hope eventually to settle in their home town, but in the meantime they are wandering around and are unable to gather together these goods, which they have not only had charged but have paid for and feel that they own. I cannot see that it is possible for the department to apply this tax on undelivered1 goods, in, the face of the bookkeeping entries of the vending companies on the one hand and the parties moving around on the other.
It obtains not only in regard to such persons as those referred to by the hon. member for Rosedale, but in many other cases. Take a simple example-the Rolls razor. I do not know whether razor blades come under this tax, but scores of people have set aside purchases because these goods cannot be supplied from overseas. They have set aside stocks, and paid for them; the entries have gone through the books of the vending companies. Thinking of the great number where physical delivery is not taken, it seems to me it is going to be a great task for the department to determine the matter on the basis of physical delivery.


James Lorimer Ilsley: I cannot help thinking that
the cases discussed are highly exceptional. In the great majority of cases where the sale does not synchronize with the delivery, the delivery comes first. The goods are taken possession of, and the property in the goods passes when the instalments are paid. The hon. member for Rosedale is putting a very exceptional case where money is p'aid with a view to getting the goods later.


Norman James Macdonald Lockhart: There are scores of
them.


James Lorimer Ilsley: But there would be many
more of the other variety.


Harry Rutherford Jackman: How many dishonest
jewellers are there who would try to rob the department? The minister is not treating this matter fairly.


James Lorimer Ilsley: I am not talking altogether about dishonest jewellers; I was talking about

the date we should' take. We could have a fancy formula that would be against the crown no matter what happened; I suppose we could take the date of the transfer of property or the date of delivery, whichever was earlier, and carve some of the transactions out of the act. But why do it? Where is the great hardship here?


Harry Rutherford Jackman: The inequity of it.


James Lorimer Ilsley: Future buyers are to be
taxed; why should not the buyers on the borderline?


Harry Rutherford Jackman: Surely the minister does
not say that is sound reasoning. Why not make everything retroactive?


James Lorimer Ilsley: I did not say anything
about making things retroactive. Where is the hardship in putting a tax on goods that pass into the possession of the purchasers in the future, following the passing of the act?


Harry Rutherford Jackman: If the minister were saving for fifty or a hundred weeks a dollar a week to pay for some article a young woman wanted for her hope chest, he would soon find where the hardship is, if when he came to his last payment he had to start saving for another twenty-five weeks.


James Lorimer Ilsley: A hundred weeks would be two years during which she has been saving. That is quite a wait. Then the hon. gentleman puts another twenty-five on that. Surely he is taking a highly exceptional case now, whatever he was doing before.


Mr. McNIVEN:: Before lunch the leader of the opposition, in commenting on the speed with which we are going through this bill, asked whether we as members knew what was in the sections., In glancing over the sections I was surprised and shocked to find in section 31 that a judgment could he registered against a delinquent taxpayer after fifteen days from the receipt of a registered notice; that that judgment, no matter whether the man lived in Ottawa or the Yukon, would be registered in the Exchequer Court of Canada and would appear in the records of this country as a judgment against him. Following the issue of the judgment there is the right to issue an execution against his goods and lands, and the appropriate officer may go into possession of his goods and chattels. It may be argued that in the case of the sales tax he has already received the moneys represented by the tax. He has collected it from someone else; therefore there should be no arrears. But there are many cases in which business concerns have absorbed the tax. The tax is payable out of their profits. They find

Special War Revenue Act
themselves in debt to the department. They receive a registered notice, and fifteen days afterwards a judgment is recorded and the sheriff may step into their place of business. For many of them it means bankruptcy. I really wonder whether we understand that we are placing such drastic powers in the hands of officers of the department.


Colin William George Gibson: There is nothing new in this provision. It now applies the law to two more sections, that is all. It has been the law that has been carried out in the past, I think very fairly.


Norman James Macdonald Lockhart: Just to clarify 142 of section 36, subsection 1, where a watch is purchased many months before and almost paid for when it is delivered or ready to send overseas, is the whole tax of 25 per cent added to the cost?


Colin William George Gibson: If the goods are exported the tax would not apply at all. Otherwise it would apply.


Norman James Macdonald Lockhart: I know of five men who are now at Debert, and who no doubt will soon be going overseas. The wives of these men are buying watches for them, and have just about finished paying for them.


Colin William George Gibson: Those goods are not being exported; they are being delivered to purchasers residing in Canada.


Norman James Macdonald Lockhart: And they will have to pay the full 25 per cent tax on those watches?


Colin William George Gibson: That is right.


Norman James Macdonald Lockhart: Could it not be on the unpaid balance? I have in mind a watch costing $32. The tax would amount to only $8, but that means quite a lot to a young wife who is working and saving her money to send a watch to her husband, who expects shortly to go overseas. Could not the tax be applied to any balance still owing, or something of the kind?


James Lorimer Ilsley: I do not think so.


[Stage Direction]
Section agreed to.
On section 37-Schedule I.
Mark Cecil Senn: Paragraph 7 imposes a tax of 25 per cent on electric or gas light fixtures and lamps and shades, globes and reflectors. Why should globes be placed in that list? They are essential; everyone uses them, and for that reason they are not a luxury but a necessity. They might better have been left out.


Gordon Knapman Fraser: If I might refer for a moment to section 143, in part XVII, this section refers to the matter
about which the hon. member for Regina spoke a short time ago. This deals with penalties. Under it, either the salesman or the purchaser must cancel the stamp, and if that is not done a penalty of from $25 to $2,000 may be imposed. That is about all we see in this act-penalties all the way through. Then the minister does not give the taxpayer very long in which to pay his tax. When we go back to the section imposing the tax on furs, we find that the tax must be paid the first business day following the delivery of the furs, though in many cases the dealer will not get his money for several days. I do not believe the people are getting a fair deal under this measure. The penalties should be reduced, and the dealer should have a reasonable time within which to pay these taxes.


James Lorimer Ilsley: The hon. member for
Haldimand asked with regard to globes. There is no change in this item; it is not a new provision at all.


Mark Cecil Senn: I wanted to know if that meant electric light bulbs, that was all.


James Lorimer Ilsley: I am told that it does not.


Mr. STIRLING:: What is a globe?


James Lorimer Ilsley: I have seen them, but I do not know how to describe them. They are lighting fixtures.


Grote Stirling: But not electric light bulbs?


James Lorimer Ilsley: No.


Gordon Knapman Fraser: Under paragraph 8 of section 37 a 25 per cent tax is imposed upon coin, disc or token operated slot machines and vending machines; coin, disc or token operated games or amusement devices of all kinds. Does this mean the government is sanctioning the use of these machines?


James Lorimer Ilsley: This provision is not new.


Gordon Knapman Fraser: I
know, but there have been a great many objections to machines of this kind.


Colin William George Gibson: This is not a new section. It refers to such machines, for instance, as those which distribute candy, gum, and cigarettes; coin-operated devices that are used for merchandising goods in that manner.


Mr. ROSS (St. Paul's):: I should like to ask the minister when a man is a professional photographer and when he is not?


James Lorimer Ilsley: I do not know; I suppose when he earns his living at photography.

Special War Revenue Act


Douglas Gooderham Ross: That is very important. Is there any definition of a professional photographer?


James Lorimer Ilsley: No, but there are different types of equipment.


Douglas Gooderham Ross: I think there should be some definition. Otherwise all you would have to do would be to go and rent a film for a few dollars, or something of the kind.


James Lorimer Ilsley: The hon. gentleman has missed the point. There is an attempt here to distinguish betwmen two types of equipment- equipment designed for professional and industrial use, and equipment designed for amateur use. Equipment of the first type is exempt; it is the second type that is taxable. There is no need for an amendment to the interpretation section to define what is industrial or professional use. I am told that this concerns equipment of two types.


Douglas Gooderham Ross: The point is that many professional photographers are taking moving pictures with 8 millimetre film, in order to cut down on expense. I think you should have some definition.


James Lorimer Ilsley: If they use amateur equipment it is taxable.


Mr. BLACK (Yukon):: This item reads, in paragraph 5:
Cameras, photographic films and plates, projectors for slides, films or pictures, except those designed exclusively for industrial or professional photographers' use-
What is the design? I should like to understand it. There are hundreds of thousands of amateur photographers in Canada. The cameras they buy, the films they buy, the projectors they buy were so expensive even before this extra 25 per cent was imposed, that very few people could afford to use them. By this additional tax you are shutting out the amateur almost entirely. As one hon. member has just said, photographic films and slide projectors used by professionals are also largely used by amateurs; there is very little difference. Take thirty-five millimetre film. Many amateurs use it, but it is used also by professionals, and is shown in theatres on the screen. How can you tell whether that film is designed for use by a professional or by an amateur? It all depends on who buys it. It is not a question of design in the film, because the film used by the amateur and the film used by the professional are of the same design, and the same thing applies in many other cases.
Mr. ILSLEY': That may be so in many instances, but I am quite sure that you would

not find amateurs using to any extent the sort of cameras or equipment used by Karsh, for example, or any photographer of that type. If equipment is designed exclusively for the use of professional photographers, or for industrial use, it is exempt from the tax. Other equipment is taxable, even though some professional or industrial use be made of it. There would have to be a ruling by the Department of National Revenue drawing a line in classifying equipment. On one side of the line the equipment would be regarded as designed exclusively for professional or industrial use, while on the other side of the line that would not be so. Articles of one class would be exempt, while others would be taxable. The goods that are exempted here must come within the words of the exemption. We start with the basis of them all being taxable. But in order not to impose a business tax to any greater extent than can be helped, because of the business taxes that are on now, we try to carve out part of this range of goods, and those are not taxable. The kinds that are carved out are those designed exclusively for industrial or professional use. It may be that some of them will be taxed.


George Black: With all due respect to the minister, his explanation makes it no clearer than it was before. If the tax is imposed for revenue, why exempt the professional photographer? He is the man who makes money out of it. The amateur does not.


James Lorimer Ilsley: We get him under the excess profits tax.
Section stands.
Progress reported.


HONG KONG COMMISSION
Richard Burpee Hanson: With the consent of the house may I intervene to ask the Prime Minister (Mr. Mackenzie King) what has been decided with respect to the Hong Kong debate?


Right Hon. W. L. MACKENZIE KING (Prime Minister):: As my hon. friend is aware, the intention on the part of the government has been to proceed with the Hong Kong debate immediately after the conclusion of the discussion on these bills standing in the name of the Minister of Finance (Mr. Ilsley). Do I understand it is the wish of my hon. friend that any other order of procedure should be adopted?

Special War Revenue Act


Richard Burpee Hanson: I suggest
that we proceed on Monday, and make it a definite fixture for that day at the opening of business.


Some hon. MEMBERS:: No.


William Lyon Mackenzie King: I know it is the desire of the Minister of National Defence (Mr. Ralston) to proceed as rapidly as possible with the discussion, largely because, among other reasons, the necessity for so proceeding has been impressed upon the government from time to time. However, if my hon. friend and other hon. members wish to have the matter stand as the first order of business on Monday, I will ask my colleague if that would be agreeable to him.


Richard Burpee Hanson: I do not see how it is possible to take it up to-day, when there are two or three more bills to be discussed. Only two have been passed, and the third is now under way. The bill having to do with the Dominion Succession Duty Act is to follow, and then we are to discuss the Excess Profits Tax Act.


James Lorimer Ilsley: I can take up the Excess Profits Tax Act to-day.


Richard Burpee Hanson: All right,
that is satisfactory; then supply.


George Black: While procedure is being discussed could the minister give any information as to when Bill No. 115 will be taken up?


William Lyon Mackenzie King: My hon. friend's wish is that we should definitely proceed on Monday?


Richard Burpee Hanson: Yes.


William Lyon Mackenzie King: Very well.


James Lorimer Ilsley: Bill No. 115 will have to come after the Hong Kong debate.



SPECIAL WAR REVENUE ACT

[Stage Direction]
The house resumed consideration in committee of Bill No. 114, to amend the Special War Revenue Act-Mr. Ilsley-Mr. Vien in the chair.
Section 37 agreed to.
Sections 38 to 41 inclusive agreed to. [DOT]
On section 42-Coming into force of certain
sections.
James Lorimer Ilsley: There is an amendment to section 42.


Colin William George Gibson: I move:
That section 42 of Bill No. 114 be amended by deleting the words "sections one to twelve
44561-294 J
inclusive" in line one thereof and substituting therefor the following:	"sections one, nine to
twelve inclusive".


[Stage Direction]
Amendment agreed to.
Richard Burpee Hanson: What happens to sections two to eight?


James Lorimer Ilsley: They are to be provided for in another section to be added. I shall move that later.
Section as amended agreed to.
Sections 43, 44 and 45 agreed to.
On section 46-Coming into force of certain sections-sugar.


Gordon Knapman Fraser: Why is there mention of the sixteenth day of February?


James Lorimer Ilsley: That is the date I made the announcement about the change in the tax.


[Stage Direction]
Section agreed to.
Sections 47, 48 and 49 agreed to.
Thomas Vien: Shall the title carry?


James Lorimer Ilsley: As I explained, another section is to be added. My colleague will so move.


Colin William George Gibson: I move:
That the following section be added to Bill No. 114:
"50. Sections two to eight inclusive of this act shall be deemed to have applied to premiums received by insurance companies in Canada during the calendar year 1941, and each calendar year thereafter."


James Lorimer Ilsley: These taxes on the insurance companies are to take the place of provincial taxes repealed. When I presented the budget . of 1941 on April 29 of that year I stated that in respect of certain classes of companies it might be necessary to impose the special taxes to take the place of the provincial taxes, and that, they would be retroactive to October, 1941. That was missed when the bill was drafted.
Section 50 agreed to.
Bill reported.
Mr. ILSLEY moved the third reading of the bill.


George Black: Mr. Speaker, I should like to direct the attention of the Minister of Finance (Mr. Ilsley) to the effect the taxation imposed under this budget is having in the constituency I have the honour to represent, the Yukon. It is causing an actual exodus of people from that territory. They cannot stay there and earn sufficient to pay their living expenses as well
Special War Revenue Act

as the new taxes, and there is nothing left for them but to get out. That is a sad state of affairs.
On June 3 I drew the attention of the Minister of Labour (Mr. Mitchell) to the inequality between the wages paid by foreign employers in that territory and those paid by Canadian employers. I should like to read a short extract from a British Columbia paper, as follows:
Writing from White Horse, Yukon territory, a former resident of the lower mainland unfolds an odd angle of the doings in the north country since Americans went in to build the Alaska highway and other defence works.
"There are a lot of American outfits up here doing construction and defence work with American money. They brought lots of help up with them but not enough to go ahead the way they figured on unless they could get some Canadians. They did get some Canadians and paid them at the same rate as Americans, $1.05 an hour for ordinary labour with time and a half for overtime; American dollars.
That didn't suit the White Pass and Yukon who have a contract to supply help to build an airport here."
They are referring there to the transportation company.
"They only pay 75 cents an hour for their help. What they get from the Canadian government is another question. So a politician pulls the strings at Ottawa and the next thing is, all Canadians at White Horse working for Americans are brought down to 75 cents an hour straight, and the next move is, all Americans at White Horse are ordered to get rid of all Canadians and hire no more.
Now what kind of a game are they playing at Ottawa? They are supposed to be trying to keep all the money they can in Canada and still they prohibit Americans doing defence work with American money from hiring Canadians which would bring American money into Canada. It looks like a big racket to me.
P.S. Koom rent the cheapest at White Horse is $10 a week; meals 75 cents to $1.50; so you will see labour is better oil working outside."
That is why labouring men are obliged to leave that part of the country. I may say that the company referred to asked me to apply to the national war labour board for authority to raise by 50 per cent the wages paid to common labour. They were then paying 50 cents an hour, and the board raised the rate to 75 cents an hour, plus cost of living bonus. The employees and the employers were quite satisfied with that rate until the United States contractors came in and paid larger wages in United States money. Naturally the Canadian labourer went where he could make the most. Why not? He should not be prevented from doing that. He could get only 75 cents per hour working for a Canadian employer, whereas he could get what amounted to $1.15 per hour in Canadian money working for a foreign contractor.

On June 3 I brought this matter to the attention of the government, when I said, as
reported on page 3017 of Hansard:
The consequence is that employees of Canadian employers are leaving them and going to work for these alien contractors, who are paying no attention to our Canadian law, while Canadian employers are bound to observe it. Certainly Canadian employers of labour would not be allowed to do such a thing, and I submit that it is the duty of the government and of the Minister of Labour to see that these alien contractors obey our Canadian law.
I repeat that. If you are not going to do that, then you should let the Canadian labourer work for the man who will pay him the biggest wages.
There is a further inequality in the ruling of the national war labour board. They have provided one scale of wages that may be paid for the different categories of labour south of the sixtieth parallel, which is British Columbia, and another slightly higher scale which can be paid north of the sixtieth parallel, which is the Yukon territory. They provide:
Because of the emergent nature of this work employees may be required to work ten hours per day but not more than sixty hours per week. In such case all work in excess of the customary hours shall be paid for at the usual overtime rates prevailing in the district for the respective trades or as established by agreement or provincial regulations.
That is the ruling for the district south of the sixtieth parallel, but no provision for overtime is made for the territory lying north of the sixtieth parallel. The usual practice for employers there is to pay time and a half for overtime, but apparently this government board does not recognize that. I have it on good authority that these United States contractors are nowT employing tractor and truck drivers in western Ontario on the basis of $20 to $25 per day, with transportation provided to the scene of construction on the Alaska highway. I do not understand how Canadian labourers can go up there and accept that money, with the present ruling of the national war labour board. I should like to see them get it. Here is what has happened. The government, through the Department of Finance, is taxing these people at such an excessively high rate that they cannot stay in the . country, and on the other hand the government, through the Department of Labour, is preventing them from earning wages which would permit them to stay in the country. This is a cruel imposition on the Canadian labourer, and I am asking that it be removed.


Hon. HUMPHREY MITCHELL (Minister of Labour):: Mr. Speaker, I think there is an answer to what my hon. friend has said. If

Special War Revenue Act
I remember aright, he was the first one to direct my attention to the situation in the Yukon. We must remember that in the United States they have not travelled as far as we have in the stabilization of their wages policy, but I believe that in the not too distant future they will 'follow our lead. My hon. friend will readily understand that we cannot have our own wages structure destroyed because of the building of the Alaska highway.
Then there is the question of labour supply. We all know that there is a very tight situation, particularly in western Canada and more particularly west of the rockies. Conversations were held through an arrangement made by. officials of the Department of External Affairs with representatives of the United States government, and a plan was worked out under which Canadian contractors who assumed contracts for the building of the Alaska highway would engage only Canadians and pay them the rate of wages set by the national war labour board. Labour coming from the United States and engaged by United States contractors would be paid the United States rates of wages. My hon. friend will understand the complexities of the situation. The United States workman gets not only the rate prevailing where he is hired, but an additional 25 per cent for working abroad. He also has the benefit of the rate of exchange, which is about 11 per cent. Most of the men engaged on the building of the Alaska highway will be United States workmen who will be employed by United States contractors. We faced a somewhat similar situation in the building of a pipeline into Alaska from north of Edmonton, but I am glad to say that this has been straightened out, according to the information I have received from the employment service of Canada.
My hon. friend referred to the recruiting of men in western Ontario. I want to say that as far as United States contractors are concerned there will be no recruiting of men in this part of the country. In the operation of an enormous undertaking like that, there are bound to be exceptions to the rule and difficulties in the application of the policy.
We have to take a national view of this question. What the hon. member says about giving it with the one hand and taking it away with the other is true, but when the budget resolutions go into effect they will affect everybody, members of the House of Commons and the general public. When this thing gets into full swing I say frankly that I think the arrangements which have been made between the two governments will work to the eventual benefit of the people of British Columbia. What we tried to avoid was the very difficult
situation that exists in Newfoundland. It is not an easy policy we have to administer, but there was no alternative to the one we took, and taking the long range view I think it will work out satisfactorily.


George Black: The Minister of Labour says that when the budget resolutions go through everybody will be assessed. I do not think that includes United States labourers working on this project. They will not pay income tax in Canada.


Humphrey Mitchell: They will pay it in their
own country.


George Black: Canadian labour ought to be free to work for the United States contractors at the United States rate.


Richard Burpee Hanson: Mr. Speaker, I do not think the minister has made an adequate reply to the hon. member for Yukon (Mr. Black). Here we have a situation which is upsetting everything in relation to the labour supply in the Yukon. After all, it is under Canadian sovereignty; the United States government ought to conform to the wage-ceiling structure that we have put into effect in this country. I do not think there would be any violation of the good feeling between the two countries if they were asked to do that.
I do not appreciate the significance of the minister's reference to Newfoundland, but I do know that wTage ceilings down there have been sky high, beyond the dreams of avarice of the average man in Newfoundland. They told me when I was there last autumn that men were working for two or three weeks and then going home to visit their wives for two or three weeks, coming back to work when their money was spent. The situation in the Yukon makes it impossible for a Canadian contractor to retain Canadian labour. The situation should be grappled with immediately.
I do not put any stock in the minister's suggestion that when these budget resolutions go through and we have a new normal tax under the income tax schedules applicable to everybody in Canada, * we can make these fellows pay the tax. I have grave doubts about that. How will you enforce it when all they have to do is to cross the line to some other part of the work? The fact of the matter is that the minister has not yet got a solution to the problem. He should give an undertaking to the house that the problem will be solved along lines that will protect the Canadian position.


Humphrey Mitchell: I should like to answer
my hon. friend if the house would consent.
Motion agreed to and bill read the third time and passed.
465S
Excess Profits Tax Act



EXCESS PROFITS TAX ACT, 1940

[Stage Direction]
Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of Bill No. 113, to amend the Excess Profits Tax Act, 1940.
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Fournier (Hull) in the chair.
On section 1-"Standard Profits."
Richard Burpee Hanson: Mr. Chairman, on the resolution stage, on July 21, Tuesday last, at page 4461 of Hansard, I asked a question which was not then answered. The question was:
What progress has been made in fixing standard profits for depressed industries?
Then I went on to say:
I have been told that the board of review has not adjudicated upon even one-third of the cases before it. If that be so, should not some additional agency be created to speed up the work? Predicated on that statement the situation is very disturbing to those concerned. If there are several hundred such eases and they do not _ know what to do until their standard profits are determined, it is unfair to them.
I went on to say:
The question may be based on an entirely erroneous impression, but I should like to have some statement as to the position at a later stage.


James Lorimer Ilsley: The board of referees has
had referred to it by the income tax division 737 cases to date. The board has handed down the following decisions: (a) under the heading of depressed business, 303; (b) under the heading of new business, 50; a total of 353.


Richard Burpee Hanson: A little
less than half the total number?


James Lorimer Ilsley: Yes. In addition, approximately 50 decisions have been made and only await official promulgation. That was the position on June 21, 1942.


Richard Burpee Hanson: Is it
thought that all the cases have been referred, or how many cases are there which have still to be referred to the board in due course?


James Lorimer Ilsley: The new companies will
be coming continually to the board.


Richard Burpee Hanson: I assume
so.


James Lorimer Ilsley: The commissioner informs
me that quite a number of old companies which have not yet made application will be doing so.


Richard Burpee Hanson: Am I to
understand that the 737 cases of old com-

panies which were referred to by the minister covers the total number of old cases in which application has been made to be dealt with under the depressed industiy clauses, and that of these some 400 have already been dealt with? That covers a period of about two years does it not? How many more old companies is it anticipated will apply?


James Lorimer Ilsley: These are the cases that
have been referred to the board, but a large number of applications to the minister have not been referred to the board. I have not the figures here.


Richard Burpee Hanson: Are they of such a character that they can be dealt with by the administrative officers on the basis of principles established by the board? I understand that this board-which I may say in passing I thought, and still think, is a very fine board-spent a substantial amount of time in the early stages of its tenure of office in studying the position and in trying to arrive at statements of general principles applicable to certain classes of cases. The chairman of the board told me that was so, and I thought it was a very good course of procedure.
While I am on my feet may I say that he paid a very high compliment to the type of assistance which the board had received. It seems to be fashionable in some quarters to slam the civil servants. I never have done that. I have not even slammed "brass hats". But it may be some little satisfaction to the civil servants to know that a man of the calibre of Mr. Justice Harrison thinks that the type of civil servant assigned to assist him is of a very high character, and I want to put that on the record. I do' not know whether Mr. Justice Harrison would himself say that publicly, but it was not a private or confidential conversation, and I think that I should say that.
What I want to know is this. There must have been many hundreds of depressed industry companies and partnerships and what-not, who were advised, either by their accounting staff or by their auditors, to take advantage of these provisions of the act. Was it the fact that the board established these principles and then the department itself went on to administer the principles thus laid down without referring each case to the board? Or-perhaps this is the better question to ask-was it the practice to refer each case to the board so that the applicants could have [DOT]the opportunity-and I think it was afforded in every case in which they so asked-of making their representations to the board?

Excess Profits Tax Act
I think the board gave great consideration to representations which were made. What is the practice? Are the old companies pretty well dealt with, or are there several hundred beyond what the minister has intimated. Also, what is -the fate of the newsprint companies in this respect?


Colin William George Gibson: The method by which this has been worked out is that the depressed company is now permitted to assess itself, and if the department in going over the company's figures is willing to accept those figures, there is no appeal.


Richard Burpee Hanson: There is no reference?


Colin William George Gibson: There is no reference to the board; but if the department does not accept those figures, the company is referred to the board of referees. This method has very much cut down the number of appeals.


Richard Burpee Hanson: And when it is referred on the application of the applicant to the board, and comes back to the department, what is the procedure? Does the department always reaffirm the board's decision, or does it ever overrule the board?


Colin William George Gibson: After it comes back from the board of referees, the department goes over it. I do not think that in many cases the department would disapprove the recommendation of the board of referees.


Richard Burpee Hanson: I do not want to know what the minister thinks, I want to know what he does. Does he ever reverse himself? Does he ever reverse the board? Because, after all, the minister has the final say.


Colin William George Gibson: There has never been a case in which the recommendation of the board has been upset.


Richard Burpee Hanson: I am glad to hear that.


Joseph Henry Harris: Do I understand the minister aright that in the case of depressed industries they would assess themselves; that is where they have made an application to the board of referees, when the application is pending? The depressed industry in that event could not assess itself and pay its taxes. The urgency of the question is based on a thought running through my mind, namely, that a large number of businesses close their fiscal period on March 31, and the four months period expires next week, on July 31. Meantime there are quite a number of depressed industries who have applications before the board of referees, whose applications have not been dealt with, and who are in this quandary. They are anxious to pay their tax on the due date, namely July 31, but there is no decision from the board of referees. Did I understand the minister to say that in that event they could remit to the Department of National Revenue the amount of tax compiled on their own figures and subsequently have the matter adjusted, without penalty?


Colin William George Gibson: The only cases that go before the board are those in which the taxpayer has not been able to agree with the department as to what is the profit to be allowed.


Joseph Henry Harris: The board of referees are in arrears with a lot of cases, and the tax becomes payable on July 31.


Colin William George Gibson: The taxpayer has the right at the present time to ascribe to himself what he considers to be the right amount of tax, and to make payment. Later, if there is any dispute with the department, the matter is referred to the board of referees.


Joseph Henry Harris: The tax would be on the standard profits of the four previous years, but in the case of the depressed industry where they claim to work under paragraph (b), 10 per cent of the invested capital might be the basis on which the standard profits would be calculated. Could the taxpayer in that event pay his tax as of July 31?


Colin William George Gibson: A company might pay on the basis of 10 per cent, but if the department claims that it should be 7 or 8 or 5 per cent it would then be sent to the board for their ruling.


Joseph Henry Harris: That matter of adjustment afterwards by the board of referees would be honoured by the taxpayer without penalty from the department?


Colin William George Gibson: There would be no penalty, but there would be interest on the amount of arrears.


Joseph Henry Harris: As a constructive suggestion to the department, let me say that there are a great number of industries in Canada who find that their inventories are depleted at the opening of navigation. That is to say, during the summer months, with navigation on right up to the fall of the year, they pile very heavy inventories on their docks and slips and in their warehouses, with the idea of cariying on until the opening of navigation. These industries, as the minister knows, invariably close their books on April 30. On August 31 their tax becomes due. The suggestion I have to offer is that the board of referees who are handling cases of the kind

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which are now before them-and there are many, particularly in the coal industry-might readjust their agenda or their itinerary in such a way as to try to dispose of the cases of those industries whose taxation becomes due and payable on August 31. It is too late now to do it for July 31. I think perhaps that condition might have obtained with regard to March 31. In other words, get some sequence in this matter; because it is a source of worry and concern to those who are conducting their businesses as honourably and as best they know how, to find that they are not clear as to what they ought to pay. They are anxious not to fall afoul of the department.


Colin William George Gibson: I will pass that suggestion on to the board of referees, with the recommendation that it be favourably considered by them.


Richard Burpee Hanson: Under the statute the allowance for a depressed industry group is a maximum of 10 per cent, or 5 per cent, or anything in between. On what principle are these allowances made? What company is allowed 10 per cent, what company 8 per cent, what company is held down to 5 per cent? What is the basis of final assessment?


Colin William George Gibson: That is what the board of referees spent a great deal of time originally in finding out, as to what classes of industry earn high rates and what classes earn low rates, so that they could deal with any application knowing approximately what rate should be applied to each class of industry.


Richard Burpee Hanson: The minister has not answered my question. I should like to know the result. I know the method. They investigate each class of business and apply some formula to a particular class. But why should one have 10 per cent and another 5 per cent?


Colin William George Gibson: The history of that type of industry shows what the normal profit is. I take it that an industry that has a greater degree of risk would expect to make a higher rate of profit.


Harry Rutherford Jackman: Take for instance the newsprint industry. There, instead of one company being depressed the whole industry was depressed. Are you going to allow 5 per cent or 10 per cent, or how will you establish the principle as to the amount to be allowed? We should at least know what is in the mind of the department or of the board, in order that the public and the people who administer these companies will have some knowledge of what their position is.
I should like to know also whether or not the newsprint industry has had any ruling, 
after two years or more, on excess profits tax. Has clearance been given as to income tax? I gather none of them knows what its position is, not only for last year but even for the previous year. There must be some body of principles that will enable business to know where it stands.


Richard Burpee Hanson: And there should be some finality about taxation.


Colin William George Gibson: The board of referees made an investigation of the newsprint industry as a whole. They determined that the industry was depressed. Now they are dealing with the individual companies to find out what relief should be granted to each company. They made an examination, not restricted to Canada but of the world, to ascertain what the situation was, what the profits were in various companies all over the world, and what would be a fair return for these industries.


Richard Burpee Hanson: Has there been any finality with respect to any of these companies? I have information in respect to one company only up to March, but up to March there had been no settlement. The company had a splendid year last year. It had the cash to pay. I suppose it paid what it considered was due, although I do not even know that. The company, however, had to hold a huge sum in reserve in order to take care of the highest eventuality, money which might have been used for other purposes. In the meantime the shareholders are not getting a cent. As my colleague adds, they did not then know whether the amount appropriated, some $2,000,000, was enough. I realize the magnitude of the difficulty.


Colin William George Gibson: There are so many types of businesses.


Richard Burpee Hanson: Yes, many types. But these newsprint companies went through a terrible time during the depression. Most of them had to go through the wringer,
I say with sorrow. These excess profits taxes are hitting them hard, and this provision was made so that they would not suffer as they have in the past and would not, I hope, be left in such a position that if another depression comes they would have to go through the wringer again. These companies employ great numbers of people. Some of them, at the peak, employ five thousand men. Without doubt it is the largest manufacturing industry in Canada, one that is native to this country and to which we look for a large amount of employment. Therefore notwithstanding the jibes that may be thrust at me from certain quarters in this house, I think these companies have to be kept on their feet by the avoidance

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of excessive taxation. They cannot go through another period such as that through which they went in the last decade. If they do they are out, and one of the greatest factors in our national life in respect of employment is going to be in serious difficulty. I should like to know a little more about what is being done, and when the situation will reach finality.


Colin William George Gibson: Of course we realize the seriousness of the situation with regard to the newsprint industry. They presented their case as an industry, and it was given serious study. That has now reached finality so far as the industry itself is concerned. Now the claims of the various companies are receiving consideration from the board. I cannot say, as to each individual company, what stage their appeals have reached, whether in any particular case they have been finally adjudicated upon, but I know that the general principle has been laid down for the industry as a whole.


Richard Burpee Hanson: Is there much difference between the representations of the industry itself as contained in its brief and the decisions that have been reached? How far did the government go? Did they yield to all the requests of the industry, or in what particular did they not? And is the result satisfactory to the industry?


Colin William George Gibson: I cannot make any statement on that, because the brief is filed with the board of referees, and unless there is an appeal from them after their final recommendation is made I would not have occasion to go into the brief at all.


Richard Burpee Hanson: It has not come before the minister?


Colin William George Gibson: No.


Harry Rutherford Jackman: Has the newsprint industry been definitely classified as a depressed industry, and if so what has been the rate of earnings the board has decided it shall be allowed?


Colin William George Gibson: The industry as a whole does not get the rate. The industry is depressed, and it depends on the financial set-up of each company what its rate should be.


Richard Burpee Hanson: The minister said that the industry as a whole was declared to be a depressed industry?


Colin William George Gibson: That is right.


Richard Burpee Hanson: That is one thing that has been settled. But the rate that will be applicable to any given company is not a general rate, if I understand his remarks.


Colin William George Gibson: It depends on various factors including the amount of capital employed.


Richard Burpee Hanson: It is a fixed principle, but will it vary in application as between companies? Some companies are much better situated than others, and some mills in the same company are better tlian others. Take Abitibi. Some of their mills were old and had been almost abandoned; other mills were great money makers. That, company, I suppose, would have to be treated on the basis of its whole position, not as individual mills. Will some companies be allowed one rate and other companies allowed another rate of interest?


Colin William George Gibson: Yes, that may be so.


Harry Rutherford Jackman: All subject to the ordinary taxes.


Richard Burpee Hanson: There will be a variation in the allowance made to different companies, depending on their earning power, their efficiency, and all the other factors that go to make up the difference between profit and loss balance.


Colin William George Gibson: Depending upon all the
factors.


Harry Rutherford Jackman: And then they are all to be subject to this tax?


Colin William George Gibson: Yes.


Harry Rutherford Jackman: We are still very much in the dark, and I do not suppose much light can be thrown upon the matter by the minister here. But it does strike me that we should be able to learn what rate of earnings a depressed industry will be allowed, and what rate a concern such as a great railway will be allowed. In the one case it may be 10 per cent, which, after payment of a tax of 40 per cent will leave 6 per cent. In the other case it may be 5 per cent, which after payment of the tax will leave only 3 per cent. There is no finality about these matters so far as the public is concerned. As the leader of the opposition suggests, perhaps the minister does not want us to know. But after such a lapse as we have had it is time that business knew about where it stood.
I should like to ask a question also with regard to the point I raised last year concerning the plateau of corporation profits, which was the best expression I could find. We take the period from 1936 to 1939 as our standard profit period. As applied to our economy the plateau is very low as compared with that which prevailed in England during their period, because, while it included some of those years, more alternatives were given in that case. In the old country they had a

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boom in the heavy industries, and the export industries also did very well during the years which made up their plateau. In this country we had a complete depression in the newsprint industry, for example, with the exception of one year, and the heavy industries generally did very poorly. As a matter of fact the aggregate of corporation profits was very low during the years used as a base. Let us take a case nearer home, that of the United States. How does our plateau of profits compare with the. plateau which existed in the United States? We are putting on a very heavy tax, and we should know whether we are taxing a decrepit animal or a healthy, live animal. A comparison of our plateau with those of other countries will give us some indication of that. Many people have very little interest in this question, but it is a vital matter to industry; for on it depends to some extent whether or not industry will be able to survive the high rate of taxation now imposed. It is exactly the question with which one becomes familiar in our municipalities. If your assessment is high your tax rate may be low. If your assessment is low your tax rate may be high, and you come out about even. Here, however, you have a base which is very low, which in the circumstances is equivalent to a high rate of assessment; but you also have a high tax, equal to that of Great Britain and higher than that of the United States. I should like to know from the minister whether any work has been done or any publicity is to be given to the relative plateau of profits in this country during the base years as compared with those of Great Britain and the United States? Secondly, what rate of earnings is to be allowed in connection with newsprint, and in connection with the Canadian Pacific railway, both depressed industries? What rates do they get?


Colin William George Gibson: The question of what rate is to be allowed depends upon various factors including the capital structure of the company being dealt with. One company may be operating on borrowed capital while another operates on capital that has been subscribed, and the rates allowed would be determined largely by the capital structure of the company.


Richard Burpee Hanson: I suppose that is true in a degree. But take the case of a company with a large proportion of bonded debt as compared with the equity, as against that of the company with a smaller proportion of bonded debt as compared with the equity. Which gets the higher rate of return-the one with the large bonded debt? Perhaps I might illustrate it by the use of

figures. Let us say one company has $10,000,000 of bonded debt and .$5,000,000 of proprietors' capital. The other company, with the same amount of capital invested, $15,000,000, has $5,000,000 worth of bonds and $10,000,000 worth of shareholders' capital. Is there any difference based on that? That just follows the minister's statement with regard to the capital structure. Would there be any differentiation in those cases or would you treat the shareholders' equity as capital on the same basis? One is in a much more healthy financial condition than the other; the one which owes $2 is much worse off relatively than the one which owes only $1.


Colin William George Gibson: There is of course a limit on the profit that can be allowed under the 10 per cent limit, and the amount has to be varied according to the capital employed and the nature of the business. Those factors have to be considered, and where there is a small equity capital in the business normally it would have to get a higher rate, of course up to the limit of 10 per cent, than a business where there is a higher equity capital.


Richard Burpee Hanson: You treat the company having a smaller shareholders' equity better than you treat the one with a larger shareholders' equity. I took the simple case of a $15,000,000 financial structure, in the one instance $10,000,000 of bonds and $5,000,000 of shares and in the other instance $10,000,000 of shares and $5,000,000 of bonds. The one with the greater bonded debt gets better treatment than the other?


Colin William George Gibson: They would get a higher rate; yes.


Richard Burpee Hanson: What is the justification for that? It is the same type of money.


James Lorimer Ilsley: What is the question?


Harry Rutherford Jackman: The leader of the opposition asked what was the justification for treating the company with the larger bonded indebtedness more favourably than the company with the larger equity investment. The minister said they were treated differently, and now the leader of the opposition has asked the justification for that treatment.


Richard Burpee Hanson: I think I
can give the answer myself, that in the one case the shareholders' investment is in a more hazardous position than in the other.


Colin William George Gibson: He is taking a bigger risk.
Mr. HANSON (York-Sunbury:) That is not the only factor, but is that the main factor?


Colin William George Gibson: That is one of them.

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Richard Burpee Hanson: I do not think I will pursue this any further. I do not think the minister knows anything about it. I do not say that unkindly, but I think it is a fact.


Harry Rutherford Jackman: And what about the relative plateau of profits?


James Lorimer Ilsley: I have not had a chance to read this draft as thoroughly as I would like,
and that applies also to the succession duty act. I suggest that these be left over.


Richard Burpee Hanson: Before we do that I should like to ask a question in respect to this bill. When this proposal was contemplated, was there any consultation with representatives of business in respect to this whole question of excess profits? This follows what I was about to ask with reference to the change in the set-up. So far as I am aware we are proceeding with taxation measures such as this without any consultation with those who are to be affected, without consultation with business, without the aid and support and information that those who are actively and practically engaged in business could give the department. I am assuming that that is a fact; I know nothing to the contrary.
In the United States there is sitting to-day, or will be sitting if it is not now, a committee to consider this question of personal income tax. It invites representatives of business to appear before the committee to give it the benefit of their advice, and more important still, the benefit of their experience with respect to the effect of taxation on individuals and companies, so that the committee may have first-hand information-not only theoretical-as to the effect of such taxation.
I could show the minister an interesting letter I received during the noon hour from an outstanding business man in a Canadian city. He points out that we are proceeding on the wrong basis so far as our income and excess profits taxation are concerned. He shows that we lay down certain principles and then we bend the law to suit those principles, irrespective of the effect they will have on the individual. If I were to mention this man's name the minister would recognize him at once as one of the brightest and most outstanding business men in Canada. He is of the opinion that we go about this matter in the wrong way. We set up a tax structure having for its primary purpose the securing of money. I admit the necessity for that, because we are at war and we have to get money. We are taking it from groups, individuals and companies. But we have to proceed along much more scientific lines than those on which we have been proceeding thus far.


Mr. JOHNSTON (Bow River):: Hear,
hear.


Richard Burpee Hanson: Well, I
am a little uncertain about the "hear, hear" from that quarter of the house, because I would be afraid of what it involved.


Mr. GRANT:: You know you are wrong
now.


Richard Burpee Hanson: And if
the hon. member for Prince Edward Island would hold his tongue and keep quiet, it would be better for everybody in the house, because his interferences are based on pure ignorance, and nothing else. Perhaps that will hold him for a while.


Thomas Vincent Grant: That is terrible, isn't it,
from a leader of the opposition. That is what leaves you where you are.


Richard Burpee Hanson: We cannot proceed with our budget any longer on the basis of corner store economies. We have entered into tremendous big business in this country. We have a budget which is staggering in size, proportion and implications; certainly it is staggering as regards the sacrifice entailed. I am wondering if we budget in the proper way. I am wondering if in our desire to out-Herod Herod we have not proceeded in an improper direction, and under false premises.	*
The point I make is that in the United States they have adopted a different practice, which I believe has been in effect for a number of years. The treasury recommends a plan or programme. In that country they have a very high type of man filling the position of secretary of the treasury, and he is surrounded by capable officials, as is the minister in this house. I am not going to say our officials are not efficient-not at all. I am trying to make constructive suggestions; I am not trying to destroy. My purpose is to point out that we go about this thing in the wrong way. I believe we should do what they are endeavouring to do, and perhaps with a good deal of justification, in the United States. In that country the treasury recommends certain things. It is understood of course that in the United States the treasury is apart from the legislative body. They have a different set-up, but I do not believe that alters the principle for which I am contending. Certain recommendations are presented to the house of representatives. From there they go to a budgeting committee-I have no doubt the minister is much more familiar with their technique than I am. In that committee they hold hearings and invite representations from men who
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know how the taxation will affect not only corporations and big business, but small business and little taxpayers.


James Lorimer Ilsley: And then they do not
follow them.


Richard Burpee Hanson: Not always, no. But I venture to say that they are very much impressed with what they hear; and out of the whole accumulation of knowledge surely there is a little wisdom.


John Ritchie MacNicol: The same thing in
England.


Richard Burpee Hanson: That is
the democratic procedure. I suggest that we might very well follow' it in Canada. It seems to me that it would have some advantages, although I w'ould not say it is ideal. It is very much better, however, than the hit-or-miss system we have in Canada. I do not care how clever our advisers or experts may be, after all not many of them have had any actual day-to-day contact with business. They have not had as much as a good corporation lawyer-and on that point I would page the Minister of Justice, who w'ould qualify as a corporation lawyer. Those officials have not had as much day-to-day experience as those of us who, in days gone by, were intimately connected with the problems of business, and know how it is affected by tax changes. Those officials have theoretical knowledge, it is true. They have book knowledge far beyond anything I ever hope to attain. But as to the practical application of that knowledge, I would not trade my practical experience for all the theory they have inside their craniums.
That is my suggestion to the minister. I make it in the utmost of good faith. I would ask him to ponder it between now and the next budget. Instead of having the whole country rush to Ottawa after the budget is brought down, let him have some inquiries made before it is brought down. Let people point out to the minister the inequalities of certain taxation, so that he will not have to back away from things. And, by the way, this minister does not do much backing, although he does a little.
In my lifetime I have seen a whole budget revised. I remember one occasion when Mr. Fielding, who has been heralded as a great minister of finance, presented a budget in the early twenties. \Ve were down one night in the old museum building, and word came that Mr. Fielding was delivering a second budget. We all had to pile out, and when we did get up we were presented with a second budget.


Charles Edward Johnston: That is where this budget should be-in the museum.


Richard Burpee Hanson: I would not say that, because there are many good features in it. I supported it, and I cannot take the position that the budget is all bad.
As I said in my speech on the budget, every time I have had to deal with a budget, either as a private member or in my present capacity, I have been confronted with the necessity of deciding either to support or to reject. There have been many things in every budget I have ever heard that I could support whole-heartedly, and there have been many things in those same budgets I should and could condemn. But one has to make a decision either to accept or reject as a whole. That is another fault in the system. Of course it is too late now to make any change with respect to the system of bringing in the budget, but I am asking the minister if he could not make some change in days to come. We are going to be at war next year, and we will have another budget. I am not going to repeat what I said about the maximum of taxation having been reached. But I do think we have reached the time when the law of diminishing returns will come into operation.
I am sure of that, from the reactions I get from the country. Some of these very taxes which have been imposed are going to defeat the purpose the minister has in mind. However that is a prophecy, and it is a pretty dangerous sphere to enter upon at any time.
I may be wrong, but that is what I am ' suggesting. What I am striving for is the enunciation of the principle we should follow when preparing a budget. Perhaps what I suggest could not be done with respect to tariff changes, but I think it could with respect to direct taxation. We should consult the people who are to pay the bill.


Harry Rutherford Jackman: The banking and commerce committee.


Richard Burpee Hanson: My hon. friend suggests the banking and commerce committee. I would have to think over that suggestion before I would be willing to accept it in its entirety. I have no doubt that considerable good would come out of that sort of committee. I should think that some body could be set up to examine the proposals suggested by the treasury officials before they are brought down in the budget.
This would be a radical departure from our practice in this country, but after all we should not live too much in the past. Let us have a little progress. Knowledge is never static.

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We should go forward in devising our taxation methods. I had not intended to elaborate upon this matter, but I have been thinking about it since noon. I recommend it to the minister. There may be insurmountable difficulties, but at the moment they are not apparent to me. Between now and the next budget I suggest that the minister consider having hearings held in advance, not afterwards; that he consider receiving representations before the event, rather than afterwards, from the people who may be affected.
I can understand how once having brought down a budget and committed the administration, it must be a difficult thing to reverse one's position. If one's mind is as inflexible as I believe the minister's is, it must be a humiliating thing to have to change your position. However, if I am convinced that I am in error, I have never found it humiliating to admit it. The trouble is to convince the minister that he is wrong. I am sure that this would be helpful to the people who have to pay the bills.


James Lorimer Ilsley: I have no objection to giving this some consideration and studying the methods employed in other countries. I must say that I do not know much about them. I am under the somewhat general impression that in Great Britain, whose methods we follow, the greatest secrecy is preserved in the preparation of a budget. Business is not consulted to any great extent, nor is anyone else. I think the economists probably have the same influence there that they have here and with the treasuiy of the United States. I think myself that that is all to the good. Economists are likely to approach a matter from the point of view of the general interest rather than any particular interest. It is extremely difficult for a business man to adopt this general attitude, and in saying that I do not want to say anything against them.


Richard Burpee Hanson: I appreciate that.


James Lorimer Ilsley: It is extremely difficult for a business man to make an unprejudiced and unbiased approach.


Richard Burpee Hanson: Therefore you could not accept their recommendations one hundred per cent.


James Lorimer Ilsley: The leader of the opposition is suggesting that we go United States in the preparation of our taxation. As he knows, we have been pretty faithfully going British in this connection. I have no reason to think that the United States method is the better method. For example, let us consider some
features of this budget. The changes in the excess profits tax adversely affected the prices of certain stocks.


Richard Burpee Hanson: They
resulted in a cut in dividends, and there will be more cuts.


James Lorimer Ilsley: They forced the corporations to cut dividends. The banks are cutting their dividends, and sooner or later other companies will have to do likewise. Let us say that we had a committee considering the changes in the excess profits tax. It might become fairly apparent at a certain stage that certain action was to be taken. I cannot see anything to prevent speculators in shares from gaining a profit because of the advance knowledge they might obtain from the deliberations of the committee.


Richard Burpee Hanson: Does that happen in the United States?


James Lorimer Ilsley: I do not know whether it does, but I do not see anything to prevent its happening here. One of the reasons why I delivered the budget in the evening this year instead of the afternoon was that I felt that if it were delivered in the afternoon there were clever, facile individuals who would immediately see the effect it would have upon the prices of certain stocks and profit thereby. Another reason was that there was to be a heavy retail sales tax, and there would be the possibility of a rush to buy goods the day before the tax came into effect. Of course that was not very serious, but there are times when these are serious considerations, especially in dealing with tariff matters.
Year after year we have worried about the effect of advance knowledge, and we do everything we can to discourage newspapers from publishing surmises and conjectures as to the budget, lest the public be affected thereby. This budget was prepared through the efforts of fifteen or twenty very able men, who worked on it with me for months, and who kept their counsel. There was not the slightest hint of a leakage of any kind, even in connection with decisions made weeks before the budget was brought down.


Richard Burpee Hanson: Nevertheless stocks were tumbling for a month before. Look at Bell Telephone.


James Lorimer Ilsley: There were other causes for that. I am saying that there was absolutely no leakage.


Mr. ROSS (Moose Jaw):: American Telephone was falling in the United States.
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Richard Burpee Hanson: That was a long time ago.


John Gordon Ross: It was at the same time.


James Lorimer Ilsley: I do not think a case has been made out against our method of preparing a budget. It is the English method and from what I know it is highly preferable to the United States method. Apparently the committee in the United States becomes a battleground of conflicting interests. I presume they employ counsel and send experts to fight to protect their position. Here the greatest care is taken not to introduce provisions that will be ruinous or discriminatory. If a mistake is made, it is corrected after the budget is brought down. The next day after a budget is brought down telegrams begin to pour in from those affected by the new taxes, and protests are made against the imposition of this, that or the other tax. Take the hon. member for Rosedale (Mr. Jackman) for example. He thinks it is a terrible thing for business not to have more to say in writing a budget. He is the exponent of business when he objects to every tax. I think he has objected to practically every tax; I do not remember a thing that he has favoured.


Harry Rutherford Jackman: I really object to the Minister of Finance saying'that. Every time anyone wants to iron out some inequality he should not be said to be representing the business man. I suppose when I was talking about the poor young lady who is buying a chest of silver that I was speaking for business. But the minister must admit that in his proposals there are some things which are not practical. I know that changes have been made, not because of any influence hon. members may have over the minister but because he listens to someone outside in whom he has confidence. I should like to refer to one section to illustrate my point.
Resolution 5 amending the Dominion Succession Duty Act provided that the proceeds of life insurance policies if the deceased was domiciled outside Canada (1) at the time the contract was entered into and (2) at the time of his death and (3) further that the beneficiary also was resident outside Canada, shall be exempt from duty. The merest tyro in business or insurance would know that that provision would destroy the possibility of any of our great Canadian insurance companies doing any business whatsoever in the United States or in any other country outside Canada.


James Lorimer Ilsley: No, I do not agree.
Mr.	JACKMAN:	The minister does
think so?


James Lorimer Ilsley: No, I do not think so, after hearing the insurance companies on the point. They did not go nearly as far in their own behalf as the hon. gentleman has gone in their behalf.


Harry Rutherford Jackman: Why should a person in the United States take out an insurance policy with our Canadian companies when he will have to suffer succession duties in Canada and have his own succession duties in the United States? It would be an intolerable situation. I am not suggesting that I know more about insurance than the insurance companies themselves. They have put forward their point of view, and the minister has withdrawn his proposal.


James Lorimer Ilsley: Not for that reason. The main reason for withdrawing it is a legal point, and that is that the effect of it is limited because the situs of documents under seal is the place where the document and the seal are found.


Harry Rutherford Jackman: If I were an American I would never take out a policy through a Canadian insurance company if I knew I had to pay succession duties in Canada.


James Lorimer Ilsley: You would not have to do it in ninety-nine cases out of a hundred because you would be domiciled in the United States and your beneficiary would be domiciled there, and therefore you would be all right. I wish the hon. gentleman would not use such extreme language as to say that the merest tyro in business would know he was ruining the insurance business in Canada. He goes so very much further on behalf of them than they do themselves that he spoils his case.


Harry Rutherford Jackman: I do not want to overstate my case, and perhaps the minister is right. But it would hurt their business anyway. Last year we had the withholding tax on coupons of provincial bonds, and the minister changed that. Surely that resolution does betray a lack of practical business experience on the part of the minister's advisers.


James Lorimer Ilsley: I could make a very effective reply by saying on whose advice I did that, but I won't.


Harry Rutherford Jackman: The minister and I had a heated argument last year-


Mr. GILLIS:: What is before us, Mr. Chairman.


Richard Burpee Hanson: He is quite in order.
Mr.. GILLIS:	He is discussing insurance
and how the minister puts forward his budget proposals. I want to say something on the excess profits tax before we leave this.

Excess Profits Tax Act


Richard Burpee Hanson: You will have a chance. We are still on the method of approach in the preparation of a basis qua excess profits, and I think the hon. member is quite in order.


Clarence Gillis: He was in the United States a moment ago, discussing insurance companies.


Thomas Vien: I have allowed a little latitude on section 1 because no one has raised objection, but if objection is taken, I do not think the general policies of the minister in bringing down a budget can be linked up with section 1, the only effect of which is to add the proviso in paragraph (i). That proviso reads:
Provided that standard profits shall not include for the purposes of this act property in any form received by a taxpayer deemed to be the payment of a dividend under section 19 of the Income War Tax Act.
It would take quite a stretch of the imagination to see how the general policy in bringing down a budget could be covered by that amendment.


Clarence Gillis: Mr. Chairman, as I understand the clause under discussion it deals specifically with the newsprint industry and makes certain provision whereby that industry might meet with a board of referees to determine whether or not they come under the Excess Profits Tax Act, and on this section I think the discussion should be specific.
I was very much struck with the concern of the leader of the opposition for those employed by that industry. The hon. member for Rosedale is always very much concerned over widows when discussing excess profits.
What I had in mind was this, that the act as it is at the present time, rather than guaranteeing the peace-time profits of the newsprint industry is merely for the purpose of seeing that they share in any excess profits that can be made by virtue of the fact that the country is at war. I hope that neither the leader of the opposition nor any others in his group will not later in the session, when matters that are urgent and important to other members of the house come up, rise in their places and show that they are in a hurry to go home, because the discussion that was precipitated here this afternoon has, in my opinion, very' little justification. No one in this country is guaranteed his peace-time standard of living like this particular industry is being guaranteed its peace-time profits, as I understand it.


James Lorimer Ilsley: That is not correct.


Clarence Gillis: That is what I am trying to find out.


Richard Burpee Hanson: These are companies that did not have standard profits.


Clarence Gillis: My understanding of the
excess profits tax is that the standard is taken from the average in the last three normal years of operation.


James Lorimer Ilsley: Four years.


Clarence Gillis: The average profit made during those years is considered to be the standard profits.


Richard Burpee Hanson: AVhat if they did not have any profits?


Clarence Gillis: Then they would not be in
business.


Richard Burpee Hanson: Oh, yes,
they would. That is where my hon. friend is mistaken.


Clarence Gillis: The newsprint industry' in
Canada was not on relief. It went through a boom after the outbreak of the war, although there has been a slump recently because of the power situation.


Richard Burpee Hanson: Because
of the volume of sales and transportation difficulties.


Clarence Gillis: What I have in mind is
this. We have had reports from a large number of the employees of that industry who have lost their work because of the slump in the industry, and they have not been guaranteed any peace-time standard of living. They have not been guaranteed a job. They have been "considered" on this basis, that your job is to find a job for yourself, and to a large extent they are doing that. Every one of our peace-time industries which is considered non-essential has been drastically affected because of the war. Gasoline retail dealers, for example, were legislated out of business. No regulations were brought down on their behalf; no one pressed the case for compensating them or guaranteeing them the standard over the last four years. They just went out of the picture. They are absorbed in other industries. Many of them closed up 'their businesses and took carpenter's tools or a pick and shovel. I think it is ill-advised on the part of the leader of the opposition to take up the time of the committee in fighting for a readjustment of what I consider is a more than fair arrangement when regarded in the light of what has happened to others in that industry. The workers must go and find a job for themselves. If the newspaper industry is not essential to the war effort, while power is, and the newspaper industry is closed up, I
Excess Profits Tax Act

do not think the taxpayers owe that industry anything unless the whole operation is taken under examination and considered at the same time and on the same basis. In my opinion the arrangement proposed by the minister is more than fair-the arrangement for the board.


Harry Rutherford Jackman: The hon. member does
not understand it.


Clarence Gillis: I understand it perhaps a
little too well for the hon. member. Arrangements are made for the board of referees to take any section of these operations under examination in order to determine whether they have been making profits over the last four years and to arrange that the industry be kept in operation. That has been done for no other section or stratum of society in this country that I know of,' except those in the upper crust whose friends on the right go to bat for them when they are threatened in any way, shape or form.


Richard Burpee Hanson: Of course the speech to which we have just listened is a roorback from yesterday. I am going to ask the minister, on his responsibility as minister, and with the full knowledge he has, to give the hon. member, and those for whom he pretends to speak-not those for whom he speaks, but for whom he pretends to speak- the true situation with respect to depressed industries. May I call the attention of the hon. member for Cape Breton South to a statement I made in this chamber not long ago, that labour in this country is interested in its jobs, and that labour is often misrepresented by these professional politicians, theorists and schoolteachers.


James Lorimer Ilsley: We keep drifting away from the section, but I should like to explain the theory and principle of the Excess Profits Tax Act for the benefit of the hon. member for Cape Breton South and one or two of his associates who, I have felt, have not completely understood it.
It has been said, I believe by the hon. member for Yorkton and certainly by the hon. member for Cape Breton South, that in some way or another certain profits are guaranteed industries as a result of the Excess Profits Tax Act. That is not so.


George Hugh Castleden: I do not believe I ever said that.


James Lorimer Ilsley: I have heard the hon. gentleman from time to time ask who gets their profits guaranteed except these companies? I just want to point out that all these companies are in danger of running into a loss all the

time and that there is no guarantee of the standard profits. ' That is the essential point I want to make. The standard profits are ascertained for entirely another purpose, not for the purpose of giving companies a guarantee that they will make them. They do not get that guarantee at all. They may or may not make profits. They may run into a loss, as I think certain companies will do this year who are selling automobiles.


Clarence Gillis: They do not come under the Excess Profits Tax Act?


James Lorimer Ilsley: They do, provided they make profits of more than $5,000. All except some very small companies come under the act. The whole range of business in Canada, whether the companies are incorporated or not, comes under the act, except small ones making under S5,000 a year. The government does not guarantee anybody any profits; it ascertains those profits for the purpose of determining what the normal excess will be, the excess over the average profits of the four years before the war.


George Hugh Castleden: The standard profits.


James Lorimer Ilsley: Yes. But there will be anomalous cases, cases where it would be unfair to take the average of the four years as the standard profits, because it is obvious that they are not the normal profits of the company. With relation to these depressed industries, provision is made for them to apply to the board of referees to get something other than the actual average of the profits of those four years. Once that is determined- and there have been already, as I have told the leader of the opposition this afternoon, three or four hundred determinations of those cases -and we have a competent board sitting to determine them, then the taxing authorities are in a position to know what the excess is over the standard profits, and they are in a position to tax that excess. But there is no guarantee of profits. That is the reason from our point of view-from the non-socialistic point of view, if I may put it in that way -for permitting people profits of more than a bare, fixed amount. It is because of the danger of losses; it is because they are risking their capital, and go into the red certain years and nobody does anything for them. That is just too bad, but it is just their worry. Therefore we think it is fair that there should be some leeway in the good years. One hundred per cent excess profits tax without any return takes the whole excess away, even though they may go away down in the red afterwards. From a non-socialistic point of view we think that is a little too rough, and while we take the whole 100 per cent away, we allow them

Excess Profits Tax Act
20 per cent to shoot at. We think that makes for economical and efficient management, makes them careful about not throwing their money away and demoralizing their business. That is why we do not favour a full 100 per cent excess profits tax.


Clarence Gillis: Do you declare the newsprint industry a depressed industry? You are prepared, are you not, to assist that industry now as a depressed industry?


James Lorimer Ilsley: No; it gets no assistance as a depressed industry. This simply means that, instead of first taking the average of the profits of that industry or certain units of the industry for four years-


Harry Rutherford Jackman: If it had any profits.
Mr. ILSLEY; If it had any profits-and some of the companies may not have had any profits at all, or infinitesimally small profits, I do not know-you take a higher level which is based on certain principles applied by that board. That does not mean that they get any assistance from anybody; they do not get a dollar. It only means that we do not take so big an excess.


Clarence Gillis: What is the basis? Do you take the last four years' operations, or what four years?


James Lorimer Ilsley: I do not know whether it is determined or not, but for a depressed industry the most that can be allowed any industry is 10 per cent on its capital.


Harry Rutherford Jackman: Subject to the 40 per cent tax. The hon. member does not know that.


James Lorimer Ilsley: There is a 40 per cent tax, no matter how small the profits of the industry. But the most that can be allowed any industry is 10 per cent-it may range down to 5 per cent-on the capital. It is often very hard to determine what the capital is by the way, when I hear these suggestions that we should ascertain the capital of all industry in Canada-that is one of the Cooperative Commonwealth Federation proposals; I do not want to open up a big debate on that'-and allow all industiy 4 per cent and take the rest. It would be just about impossible to do that on any fair basis. The discrimination would be terrible when you came to try to apply the principle and ascertain what the capital actually is. It is not a matter of getting the evidence; it is a matter of applying the principle.
The reason why there is a sliding scale between 5 and 10 per cent on capital in these depressed industries is that in some industries there is little risk and in others there is greater risk. That is the essential difference.
There will also be differences in capital structure, as the Minister of National Revenue has shown this afternoon, but the main difference is the nature of the industry. If a person is in one of the feast and famine industries where you have losses for years and profits for years, 10 per cent may be slim. On the other hand for a public utility 5 per cent is plenty. Therefore provision is made for allowing from 5 to 10 per cent on capital in depressed industries.
It may be asked, how determine the capital there? It is a manageable proposition there. The normal thing is to take the experience, to take what they actually did earn over the range of the business. That can be ascertained. But this ascertainment of capital, to be workable, must be kept within manageable proportions.


Richard Burpee Hanson: Did the minister make it clear that no one is guaranteed profits?


James Lorimer Ilsley: Yes, I did.


Richard Burpee Hanson: Because the hon. member's whole assertion is based on the theoiy that under this tax structure someone is being guaranteed something.
One other point in connection with the excess profits tax and the budget is its effect on shareholders. Has the minister visualized this, that as a result of the fall in capital values people may sell their shares and invest in government bonds? How is that going to affect his taxation prospects?


James Lorimer Ilsley: What is the question?


Richard Burpee Hanson: My suggestion is that the new budget has had an adverse effect on capital values of shares.


James Lorimer Ilsley: Some.


Richard Burpee Hanson: Some, yes. None of us know yet what the full effect will be. To see what the effect really is you perhaps have to go to a wider area than Canada. Look at American T. & T. and see how that has shrunk under the effect of new taxation, a huge shrinkage in capital value, I think from 160 to 112 or thereabouts. I have been told that the taxation on that company will be equivalent to S4 or $5 a share. Assuming the public get the idea that there is going to be more and more taxation on dividends and the like, which constitute personal income; is there not a tendency to say, well, I will be safe and protect my capital; I will sell out and put it into government bonds. What is the effect going to be on the revenue?
Excess Profits Tax Act


James Lorimer Ilsley: How does it affect the revenue?


Richard Burpee Hanson: It will affect the revenue from that man's holdings.


Charles Edward Johnston: Did I understand the minister to say that no company is guaranteed a profit?


James Lorimer Ilsley: That is correct-not under the Excess Profits Tax Act. What has the hon. gentleman in mind?


Charles Edward Johnston: There are industries in Canada that are guaranteed a profit. It might not come under the Excess Profits Tax Act, but the impression might be wrongly taken by some hon. members that no companies are guaranteed a profit. That would not be correct.


James Lorimer Ilsley: What is the hon. gentleman thinking about?


Charles Edward Johnston: In the aircraft industry, for instance, some companies are guaranteed a profit.


James Lorimer Ilsley: No, they are not. On certain contracts they get cost plus so much. They are not guaranteed a profit on their total operations.


Charles Edward Johnston: They are guaranteed a profit on that contract.


Clarence Gillis: Which is their total operation in most instances.


George Hugh Castleden: I understand the board of referees decide what is a standard profit. Is that their function?


James Lorimer Ilsley: In a depressed industry, yes.


George Hugh Castleden: A war industry at the present time will, I presume, be in its feast stage. Do they spread over some war industry all the profit that company has been making since 1918? How do they determine the basis in that case? These companies which in peace time were engaged in some manufacturing business have changed their whole industry. Does the board of referees take into consideration the capital invested by such a company and .the losses they were making in peace time and level that with what they are making now, or do they look forward to what that company might be doing ten years from now? How do they determine the basis of standard profits in that lase?


James Lorimer Ilsley: I am not sure about the principles they apply, but they would start with the years 1936 to 1939 inclusive. Those are the years which prima facie determine the standard profits of a company. If the

company argues that it was depressed for that period, I do not know just how it proves its case. I presume, if it had been losing money, actually in the red for the whole period, there would not be any doubt about the matter, because that would obviously be an abnormal condition for a company incorporated to make a profit. But some assessment of the proper or fair return on capital would be made for that class of company, and they would be allowed that, not less than 5 per cent or more than 10 per cent on the capital. That, I presume, would be the approach the board of referees would make. It must be borne in mind that I am not in touch with what the board of referees is doing. I knew about the act at the time it went through, and the intention in framing the act was as I have stated. When I say they cannot get more than 10 per cent under any condition, that does not apply to new companies. New companies are entitled to the rate of return normal to the business, and the board of referees fix that, although that may be difficult. What I am saying is correct in the main; that is the underlying principle. Provision is made for some exceptional cases in order to meet particular hardship cases.


George Hugh Castleden: The board of referees would have to determine the actual capital for these companies?


James Lorimer Ilsley: For the depressed companies; that is right.


George Hugh Castleden: And the minister says that might be difficult.


James Lorimer Ilsley: Yes, but the definition is a long, carefully drawn definition, with every clause worked out. Roughly speaking, the definition is based on this, that it is the cost of the assets less depreciation, and less debts owed by the company. That is the general principle for determining capital. Not the par value of the shares; that does not mean much.


George Hugh Castleden: That brings in the other point that I want to bring up. In the case of an agreement under the War Measures Act whereby some special allowance is made in consideration for some construction, say the enlarging of their plant to the extent of $34,000,000, as I believe was done with International Nickel, whereby $5,000,000 a year is allowed to that company for depreciation and depletion, will that not reduce the profits of that company to the extent of $5,000,000 a year?


James Lorimer Ilsley: Yes, for taxation purposes.

Supply-Agriculture


George Hugh Castleden: For instance, we will say the profits for the year were $12,000,000 and that the standard profits ordinarily would have been $3,000,000. Their excess profits in that case would be $9,000,000. If you make this special allowance for depreciation or depletion, that will reduce their profits for the year from $12,000,000 to $7,000,000?


James Lorimer Ilsley: That is right.


George Hugh Castleden: Your standard profit will still be $3,000,000, and therefore the portion taxable for excess profits will be only $4,000,000?


James Lorimer Ilsley: Yes, but note this, that at the end of the five-year period the profits for taxation purposes shoot right up, because their depreciation is very largely written off. This merely advances depreciation, and it is not always an advantage to a company to take all its depreciation early. They are running a chance when they do that. Sometimes it is an advantage to spread depreciation over quite a period. In the case of International Nickel, however, I should like anyone who studies that agreement to ask any questions about it at any time, because it is a highly advantageous agreement to Canada. Under it, International Nickel brought in about $34,000,000 in United States money and invested it here, and they are taking out their ore very rapidly as a result. Naturally their profits would be swollen out of all relation to normality by that abnormal operation; and it would not be fair to expect them to undertake that highly abnormal operation without a rapid write-off of the investment by depreciation. If it should turn out that they are getting some permanent benefit it might be different, but the faster the depreciation is written off, the greater will be their profits in future years.


Harry Rutherford Jackman: And the greater will be the tax on future profits.


James Lorimer Ilsley: And the greater the tax will be on the profits in future years, unless there is a reduction in the rate of taxation.


George Hugh Castleden: It is not likely that the rate of taxation will be so high in post-war
years.


James Lorimer Ilsley: It might not be.


George Hugh Castleden: And their plant will be increased in value to the extent of $34,000,000, while the depreciation of $25,000,000 will have been written off. Therefore it will cost the company actually about $9,000,000.


Clarence Gillis: As I see it, whether or not this act is going to be of any benefit to the country will be determined largely by those who sit as
referees. How are these boards of referees selected? The newsprint industry is depressed. You would not call in the heads of that industry to sit in judgment on their own case, as we have done in connection with the dollar-a-year men here?


James Lorimer Ilsley: Under the act I believe the Minister of National Revenue selects the referees.


Clarence Gillis: Will they be civil servants, responsible to the government?


James Lorimer Ilsley: There is a board which has been in existence for a year or two, of which Mr. Justice Harrison of Saint John is the chairman. The other members are Mr. Dalglish of Montreal, an eminent and able chartered accountant and former president of the dominion association of chartered aeount-ants, and Mr. Fell of Toronto, who at the time of his appointment was associated with one of the life insurance companies either as director or president. The board is highly regarded for its ability and fairness.


Clarence Gillis: I am quite satisfied with that line-up. You have a judge at the head of it, and the minister has some jurisdiction over the board. I thought the selection might be made in the way that the government has chosen a number of the people who are really managing the country to-day, the dollar-a-year men, the heads of industries who really have been called in to act as sales agents for their own companies.


[Stage Direction]
Section agreed to.
On section 2-Persons liable to tax.
James Lorimer Ilsley: There is an amendment to be moved to this section, but I should prefer to have the committee rise, report progress and ask leave to sit again rather than go ahead with this act, because I want to give some attention to it and a little more thought than I have had time to devote to it so far.
Progress reported.

The house in committee of supply, Mr. Yien in the chair.



DEPARTMENT OP AGRICULTURE

[Stage Direction]
Administration service.
2. Publicity and extension division, $108,715.
Mr. GARDINER:: For the benefit of those who have not reviewed what took place the last time we were before the committee, we passed item 1 just before the debate concluded, but we discussed quite fully the publicity and extension division and also touched slightly

Supply-Agriculture
on the advisory committee on agricultural services. The discussion of administration covered pretty well the general questions which might be asked, but I would presume that hon. members would desire to discuss the other items under the head of science service, production service, marketing service and special. Just toward the end of the discussion on the last occasion I noticed that we were inclined to get down to a discussion of acreage payments and things of that kind, which really come under "special", and if we could wait until we reach that item before having any further discussion on those matters it might help us to get through more quickly.


James Arthur Ross: I do not know that this is the proper item under which to mention it, but the Minister of Finance was asked a question concerning the advisory committee on beef.


Robert Gardiner: The proper place for that to be discussed, if it is to come up under these estimates at all, would be under "marketing".


Ernest Edward Perley: 
Robert Gardiner: The cost of living bonus is added to the salaries all the way through the list, and that is the amount which covers this particular branch of the service.


Ernest Edward Perley: Just for this one branch?


Robert Gardiner: Yes.


[Stage Direction]
Item agreed to.
Administration service.
4. Contributions to empire bureaux, $36,274.
Gordon Knapman Fraser: Would :he minister explain the item?


Robert Gardiner: These bureaux were
set up some years ago, and are lifted at page 54 of the estimates, as follows:
Farnham house laboratory	 $ 6,083 33
Imperial agricultural bureaux.. 21,917 33 Imperial bureau of entomology..	5,353 34
Imperial bureau of mycology....	2,920 00

These bureaux are established with offices in Great Britain to gather information with regard to experimental and scientific investigations in connection with agriculture in different parts of the empire, so that whatever is discovered in one place can be utilized in another.
Item agreed to.

Science service.
6. Animal and poultry pathology, $147,300.


Mr. WINKLER:: 
Robert Gardiner: The department does
not supply the serum, but it is purchased in the ordinary commercial way by anyone who wishes to have it. The department, however, supervises the importation of it when it comes from outside, and checks on the different serums put out to deal with diseases of this kind. There is no financial assistance in connection with the purchase of the serum. We have, however, investigated costs. There have been complaints as to costs, but so far we have not been able to find that there have been any excessive charges in connection with the supplying of it.


Howard Waldemar Winkler: The charge may not be
excessive, but the profit to the druggist is, I believe, 100 per cent. I have no complaint against the druggist making a legitimate profit, but I think that is a little high.


Mr. TRIPP:: There never has been and
is not now any profit of 100 per cent or anything like that in connection with the supplying of serum to farmers, or anybody else.


Gordon Knapman Fraser: There should not be any profit.


Jesse Pickard Tripp: You would not expect anyone to handle it for nothing, would you? The druggist does not charge any more than the government does for such products. Druggists handle them at the same price. They might get a 10 per cent discount for handling, but the price at the drug store is the same as the price from the government department.


Gordon Knapman Fraser: Could people not send to the department directly for the serum?


Jesse Pickard Tripp: I think they do sometimes.
I know in my own province the serum for poliomyelitis is handled by both the department and the distributors. It is not always done through the druggists; sometimes the municipalities handle it. However, it is all supplied at the same price. If the municipalities distribute it they get the same discount as do the druggists. The retail price is

Supply-Agriculture
marked on the package, and the price received by the druggist is not increased in any shape or form. I do not wish the committee to think anyone is making 100 per cent profit; that is absolutely wrong.


Mark Cecil Senn: I should like to ask about the serum sometimes used in the treatment of Bang's disease, one of the most scurrilous and damaging diseases in Canada to-day. I understand the agricultural college at Guelph has a serum it is willing to distribute, but there is something in the federal act which prohibits its doing so. Has any advance been made in connection with preparing a serum which will deal effectively with this bad disease which is causing so much trouble in our dairy herds?


Robert Gardiner: I presume the hon. member has in mind the calf vaccine, which is made in the United States. It is produced in Canada now, although it was not made here originally. During the last year permission has been given to distribute it in Canada.


Mark Cecil Senn: In addition to the vaccine for calves I understand there is a serum used in the treatment of cows in calf, and that there has been a prohibition in connection with its coming into the country. There has also been prohibition in connection with distribution from time to time. I know it has been used by veterinaries with very good results, and I trust that the prohibition will not be continued.


Robert Gardiner: The department does not recognize the use of any serum for older animals. There is a calf serum or vaccine used as a preventive. Then, the department does test cattle for Bang's disease. In other words, it checks them to find out whether they react, and if there is positive reaction their destruction is advised.


Mark Cecil Senn: I am trying to find out whether the importation of serum used in connection with the more aged cattle is prohibited, and if it is prohibited to use the serum provided by the agricultural college at Guelph. I know that serum has been used with very good effect at times, and I would hope, if there is any ban on the importation or use of serum, that at least in the hands of veterinaries it might be allowed.


Robert Gardiner: The information I have from the officials is that my hon. friend must have in mind the calf vaccine. The serum containing live cultures is not permitted to be imported.


Mark Cecil Senn: I was asking if that prohibition should be done away with.


Robert Gardiner: There is no permission for the importation of the serum containing live cultures, and the only vaccine of which we are aware, which is sometimes used, is not used on the older animals.


[Stage Direction]
Item agreed to.
Science service.
8.	Botany and plant pathology, $282,582.
Percy Ellis Wright: How far have we gone in the development of rust-resistant barley?


Robert Gardiner: I would suggest that we leave that until we are discussing the estimates for experimental farms. The officials before me are not experimental farm officials.


Mr. HATFIELD:: Will the decrease of $2,515 have any effect on the service?


Robert Gardiner: As a matter of fact we are not cutting out any services or officials; it is simply a matter of general economy.


[Stage Direction]
Item agreed to.
Science service.
9.	Agricultural chemistry, $102,881.
George Hugh Castleden: What work is being
done by this branch?


Robert Gardiner: From the experience
which the hon. member has had along certain lines he will know that chemistry is the basis of practically all studies in connection with agriculture. Soil studies are based upon chemistry, as are the constitution of plants and other matters of that kind. The chemical branch provides all information used in connection with studies of this kind.


George Hugh Castleden: In the United States they are carrying on extensive research work in connection with plastics and other byproducts of agriculture. Is any provision being made for the greater utilization of agricultural by-products?


Robert Gardiner: The Department of
Agriculture may provide information which would form the basis of certain studies, but these are carried on largely by industrial chemistry. That work would come under the Department of Trade and Commerce.


George Hugh Castleden: The Department of Agriculture is not carrying on any extensive work?


Robert Gardiner: Not along those lines.


[Stage Direction]
Item agreed to.
Science service.
10.	Entomology, $450,854.
Gordon Knapman Fraser: Some time ago the department advertised for an
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artist, but it was specified that he should be male. I have had inquiries from young ladies who have attended art * schools and colleges and who want to know why they were not given an opportunity to apply for this position.


Robert Gardiner: The artists that we
employ in the department must go out into the fields, into the forests and among animals in order to make drawings and pictures of the different types. It was thought advisable to have them male.


[Stage Direction]
Item agreed to.
Experimental farms service.
12. Central experimental farm, $585,130.
John George Diefenbaker: Last year I inquired about the farm at Rosthern, and I should like to have a statement from the minister as to what disposition has been made of this farm and the animals and equipment, whether the land has been sold to anyone and, if so, to whom and at what price. Last year the minister stated, as I remember it, that while some effort had been made to effect a sale, or that tenders had been called for, nothing had been done up to the time the estimates were before the committee.


Robert Gardiner: The farm has not been sold; it has been rented to Mr. Friesian, who made an offer for it. The live stock has been transferred to other farms, and most of this stock is still in the province. I think by far the greater part was transferred to Melfort.


John George Diefenbaker: In the lease to
Friesian is there any option to purchase?


Robert Gardiner: No.


James Arthur Ross: The hon. member for Melfort (Mr. Wright) asked about rust-resistant barley. Could we have a statement as to what work has been done along these lines?


Robert Gardiner: Some investigations have been carried on in connection with rust-resistant barley, but they are not by any means completed. Certain types have been developed which resist certain types of rust, but we have not yet been able to obtain a variety free from leaf rust. Further work is being carried on in this direction.


Percy Ellis Wright: Are they being distributed
commercially?


Robert Gardiner: No.


Gordon Knapman Fraser: Why should SIS,040 be paid for feed in connection with an experimental farm of 827 acres? Is it impossible to grow this feed on the farm?


Robert Gardiner: If the hon. member were to look over this farm he would see that a

considerable part is taken up with experimental work in connection with hedges and horticulture generally, while other parts are utilized for experiments in the production of grain crops. Herds of live stock of different kinds are kept for experimental purposes, and feed is required for these. The object of running an experimental farm is not to produce a certain amount of grain to feed the live stock; it is to consider the different methods of utilizing different crops and other work of like nature.


James Arthur Ross: If feed grain is shipped from a branch experimental station, would it be treated simply as a bookkeeping entry, or is all this feed purchased from outside sources?


Robert Gardiner: Very little is transferred, but when it is transferred it is treated as a book entry; it becomes a sale at one place and a purchase at the other.


Ernest Edward Perley: What is going on with respect to investigations into new rust-resistant wheats? As the minister knows, certain strains of rust-resistant wheat run out after a period of years. Is this work being kept up? Is there anything in prospect? Have any experiments been carried on at the western experimental farms in connection with the production of beets for sugar? I understand that some experimental work was carried' on last year in the Qu'Appelle valley and other places.


Robert Gardiner: From the hon. member's knowledge of the farm which is in his own constituency, I think he knows that this work is being carried on more extensively this year than at any previous time. New strains of rust-resistant wheat are being developed continually. As has been stated, after a period of years some varieties of rust-resistant wheat go back to a position where to a certain extent they are subject to rust. New varieties and new strains are being developed continually to overcome any weaknesses in the varieties that have been in use.


Victor Quelch: What is the main objection to using Regent wheat? I notice from the government reports that it is a very heavy yielder and rust resistant, and yet the farmers are discouraged from using it.


Robert Gardiner: Regent is a nicer looking wheat than Thatcher, and probably gives a better sample, but it is not as good a yielder as Thatcher. Many farmers prefer Thatcher because of the heavier yield and therefore higher return per acre. I think that is the real reason.

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Heber Harold Hatfield: Have any experiments been made with Russian dandelion which has a high rubber content?


Robert Gardiner: We are working on it this year for the first time. We have secured seed from the United States, and some of it has been sown at the experimental stations.


George Hugh Castleden: I notice that the services of the apiarist are being dispensed with, which seems strange in view of the expanding demand for honey.


Ernest Edward Perley: What about beets?


Robert Gardiner: There is selection work being done on sugar beets at the farms. I think what the hon. member has in mind is what we discussed last year with regard to certain checks being made on the growing of sugar beets in the Qu'Appelle valley. The only work being done in that direction is being done by the provincial government.


John Ritchie MacNicol: Sometimes I have criticized the minister, but I am always pleased when I can give him a pat on the back. I want to compliment him upon the splendid experimental farm at Beaverlodge, Alberta. I happened to call there last summer and spent a couple of hours looking over what was being done in horticulture for the beautification of farms all through that part of Alberta, and experiments in producing all varieties of grains and vegetables. I was so amazed with what I saw that I made up my mind when I returned to Ottawa I would pat the minister on the back for the good work he is doing there.


Robert Gardiner: Thank you.


Grote Stirling: Some time ago experiments were being carried on, the minister told us, with regard to finding a soya bean variety which would be suitable to the growing period of southern British Columbia and southern Alberta. How far has that experiment progressed?


Robert Gardiner: As a result of the experiments which are being carried on we have two varieties, Pagoda and Cabot. They are both yellow beans that are produced, and they are being more widely distributed this year than ever before because we are desirous of producing soya beans to get a further supply of vegetable oils. We found that the seed supplied had been so completely taken up last spring, largely by people who were desirous of trying it out for themselves, that when we tried to get soya bean seed for sowing in connection with irrigation districts in western Canada we found it very difficult to obtain, and we could get only small quantities.


Grote Stirling: Was any distributed in southern British Columbia?


Robert Gardiner: There was no request made for distribution in southern British Columbia. They imported their own.


Percy Ellis Wright: These branch farms fill a very great need in the agriculture industry. I would call to the minister's attention the development in northeastern Saskatchewan, in the White Fox area, with regard to alfalfa seed. From five to six million pounds of alfalfa seed were produced, and there is a real need for an experimental station here to conduct experiments with alfalfa. It is a crop about which we have much to learn. One year the seed sets; another year it does not, and we do not know whether the cause is the weather, soil condition, or what. There is a small station at White Fox, but it is not on the real alfalfa type of soil. There was some thought last year of establishing an experimental station further west on the real alfalfa soil. I would urge upon the minister that something be done along that line, because alfalfa in that section represents probably 90 per cent of the farmer's livelihood, and in years in which there has been a total crop failure it has been necessary to distribute a good deal of relief. There is a real necessity for some further study in the production of this seed.


Robert Gardiner: There are five illustration stations in that area. As my hon. friend knows, there is a certain type of soil, what is called grey soil, which is most suitable to growing alfalfa. Some of the stations are located on that soil, and some are located on the different soils in that area which, so far as we know, are not so well suited to growing alfalfa. We are experimenting with both types of soil, because it would be an advantage to be able to grow alfalfa On a different type of soil from that on which we are succeeding with it now, and it would also be a means of utilizing further land. Therefore we have stations on both types of soil. With the farm located at Melfort, which is not very far away from that district, and another at Brandon, it probably would be considered too costly to establish what might be known as an experimental farm in the White Fox area just to experiment with alfalfa alone. The work is being carried on through illustration stations largely.


Percy Ellis Wright: I realize that. I have been on several of these illustration stations, but they are small stations carried on by individual farmers. No extensive work is being done on them. While I would not advocate the establishment of a complete experimental farm in that area I think a little more technical work could be done on one of these stations, on

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one of which a full-time man could be employed to carry on this work, which is important to that section of the country.


Gordon Graydon: It would seem that in the White Fox area they are having the same difficulty in growing alfalfa that we had in our part of the country. For no special reason that any farmer can ascertain alfalfa will produce good seed for a number of years, then all at once a whole section will go completely out, and no decent seed can be obtained for a number of years. That happened on our own farm at home. Whole districts were affected in the same way. It is a problem which is general,
I presume, throughout the east and the west.


Victor Quelch: To what extent has there been development of sugar beets, and what are the main obstacles to further development in order to take care of the sugar supply?


Robert Gardiner: There has been an increase in Alberta and a decrease in Manitoba and Ontario. On balance I understand there has been a decrease for the whole of Canada.
What the hon. member for Peel states about alfalfa is perfectly true, and it is as a result of the experience we have had in the east that certain work is now being done in the White Fox country. We are experimenting with fertilization of the soil to see whether the qualities for producing alfalfa seed will be retained.


Mark Cecil Senn: Are such experiments being carried on in Ontario? In my locality alfalfa is grown quite extensively, and we have had the very same experience which the hon. member for Peel relates. For some years we can get a good crop of alfalfa seed, and perhaps for two or three years it will be a failure. We have never been able to find out what the difficulty is. Have any experiments been carried out in the alfalfa-producing areas of Ontario?


Robert Gardiner: I should have said in dealing with the west that the work has been carried on in cooperation with the agricultural college, which is a provincial institution. The work in Ontario is being carried on in exactly the same way, in cooperation with Guelph college, and the experimental work in connection with it is done in the same way, through illustration stations here and there in different parts of the province.


George Hugh Castleden: With regard to the sugar beet acreage, and the answer given, in view of the fact that Canada is on a sugar ration at this time could the minister explain why there has been a decrease in the sugar beet acreage in Ontario this year? Should we not be encouraging farmers to grow as much as they can?
IMr. Wright.]


Robert Gardiner: There are two factors which enter into the matter. The labour situation has, of course, a great deal to do with the production of sugar beets, since labour is a very large factor, but there is this in addition. I understand from inquiries I have made that it is not so much a shortage of sugar which causes us to ration it-that is when you take the whole picture into view- as it is the shortage of shipping. There is very strong objection to using shipping for moving sugar from places where it probably is in surplus to places where there may be more or less of a shortage, and it is thought wise to ration sugar rather than to use up as much shipping as would be required to supply it. In our own case here, in the first place it would be difficult, with the labour which is available, to produce enough sugar to supply all our needs.


Heber Harold Hatfield: That is all the more reason why there should be an increase in Ontario.


John Ritchie MacNicol: You could not get the
farmers to do it.


Heber Harold Hatfield: Did the wartime prices and trade board have anything to do with this decrease in the production of sugar?


Robert Gardiner: The main factor in that line is that they are alternative crops. When we guaranteed a price of $1.95 for soya beans, that had something to do with it. It is a crop, I understand, which can be grown with less labour, and probably the producers think they can make more profit. There was a transfer of acreage from sugar beets to soya beans, also a transfer of acreage from ordinary beans to soya beans, and also a transfer to corn, brought about partly by the feeding value of corn in the production of hogs and live stock.


Ernest Edward Perley: Is there any increase in the acreage seeded to beets in Manitoba this year?


Robert Gardiner: I would doubt if there is any increase this year over last year, but it should be remembered that last year a considerable part of the beet crop of Manitoba was not harvested because of the wet weather in the fall.
At six o'clock the committee took recess.
After Recess
The committee resumed at eight o'clock.


George Hugh Castleden: I was asking the minister regarding the estimates for the experi-

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mental farm. Apparently the apiarist was not provided for. Have his services been dispensed with this year?


Robert Gardiner: The chief assistant's position is vacant. He is transferred to one of the other departments. I should not have said he was transferred; he is doing work in another branch of our own department, the marketing branch.


Mr. MacKENZIE (Lambton-Kent):: Before the committee rose at six o'clock there was some discussion of sugar beets. It is true that we have been growing sugar beets in Canada and in Ontario for forty years. We have a capacity in Ontario for processing beets to the extent of about 45,000 acres. Wallace-burg had the first sugar factory in 1902, and that factory operated successfully every year until this year. This is the first year since that time that it is not going to operate. It has developed from a capacity of 600 tons a day to a total tonnage for processing now of around 2,500 tons a day. It has modern equipment. We should grow about 25,000 acres more of sugar beets this year than we are growing. Twenty-five thousand acres at about ten tons an acre, which would be only a very average crop, and about 300 pounds of sugar per ton, would give close to 750,000 hundredweight of sugar. We are rationing sugar, although there is not a definite shortage at the moment. In fact there are quite large supplies, but sugar is being rationed in order to conserve that supply. It is, however, quite possible and even probable that there will be a shortage before another year. The minister gave some of the reasons why the total acreage of beets is not being grown this year. He said they went into growing corn, soya beans and some other lines that did not take so much labour. That is tru,e to a large extent. Nevertheless, if the sugar beet contracts had been offered to the growers a month or six weeks before on the same terms they eventually took, I have no doubt the total acreage of sugar beets would have been grown.
Under normal conditions we import about 80 per cent of the sugar we use in Canada. For years we have been advocating that the sugar beet industry be developed to take care of the situation that has now arisen. Most of our supplies of raw sugar came from countries that have now been cut off, and to-day we have only one source of cane sugar, that is Cuba and the islands round Cuba. That sugar must be carried by rail or truck from points in the United States to maintain our sugar supply this year, so that millions of dollars that would have gone into the hands of workers and producers in Canada will be 44561-295
diverted into long freight hauls, much of which would not have been necessary if this situation had been handled better earlier in the year. Shipping is very hazardous from Cuba to the Atlantic ports; there have been some heavy losses. The present situation should not be permitted to exist for another year. We should at least grow all the sugar beets we can process and handle.
It is true the finance department gives a subsidy or bonus of half a cent a pound which was taken from the excise tax and diverted to the sugar beet grower. But I repeat, if the contracts had been given in time and the matter handled properly we should have had a full acreage and tonnage of sugar beets this year in Canada.


[Stage Direction]
Item agreed to.
Productive Service.
16. Compensation for animals slaughtered, $375,750.
Heber Harold Hatfield: I should like to know the production of sugar from an acre of sugar beets. ,


Robert Gardiner: Are we going back? About ten tons of beets to the acre is an average crop.


Heber Harold Hatfield: How much sugar would those ten tons produce?


Robert Gardiner: About 18 per cent of the tonnage of the beets.


Mark Cecil Senn: Is it the policy of the government this year to carry on with the cleaning up of certain areas in connection with tuberculosis? What is being done in the district round Hamilton? I understand that the county of Brant is nearly finished and that the counties of Norfolk and Welland are under way, but what about the county of Haldimand? What is going on in that vicinity?


Robert Gardiner: It will be remembered that in the first year of the war we tried to cut down our vote for this purpose. We have found it quite costly to maintain the service we were giving in areas in which a considerable number of the herds are under the accredited plan. Therefore we have attempted to bring in under this plan areas of that kind; we have been introducing municipalities in the west and counties in the east where the accredited herds are pretty well up in the total number of herds for the district. In addition, we have been attempting to keep up the checks that are made on the herds in areas already admitted, and under a supplementary estimate which will come down later on we are asking for an extra amount over and above what has been provided here to take care of some of the services for which we

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have not sufficient money at present; that is, to provide for some extra part-time service which was reduced to a minimum two years ago. I shall have the record in a moment with regard to the counties.


Mr. BLACK (Cumberland):: Before the discussion concludes with regard to sugar I should like to ask the minister if his department has looked into the possibility of using the sugar refining capacity of the maritime provinces in the refining of sugar from sugar beets. Within the last few months the large sugar refinery situated in Halifax, which has been in operation for many years, producing a large tonnage of standard sugar, has been closed down as a result of transportation difficulties. I should like to hear from the minister as to whether or not his department has investigated the possibility of raising sugar beets on the farms of the maritime provinces, so that the two refineries in that district, the one at Halifax and the other at Saint John, might be able to operate to capacity.


Robert Gardiner: I would call*attention to the fact that we are now on item 16; we have gone far beyond the item under which we discussed sugar beets, though we have gone back to it twice. However, with regard to these refineries in Nova Scotia, as my hon. friend knows they have been devoted to the refining of sugar cane, and that is not a matter which comes within the jurisdiction of the Department of Agriculture. We have not been associated with that end of the sugar business in any way. With regard to the question of whether or not we can produce sugar beets in that section of Canada in sufficient quantity to keep those plants operating at full capacity,
[DOT] of course that is a matter to which we should give and are giving consideration; that is, the extent to which sugar beet production can be encouraged there. Up to the moment, however, the sugar beet production in that part of the country has not been sufficient to keep those plants operating at capacity.


Percy Chapman Black: Then may I ask the minister if his department has completed its investigation into the possibilities of producing sugar beets and refining the sugar in the two plants in the maritime provinces? Now that sugar is rationed all over Canada, this becomes a matter of importance. We have this refining capacity, and I should like to know whether there is any possibility of a large production of sugar beets in the maritime provinces which would keep this capacity employed. This is a very important development, important in the interests of the consumer, in the interests of the labourers who have lost their employment at the Acadia

refinery at Halifax, and very important in that it may give the farmers of the maritime provinces another crop to grow.


Robert Gardiner: As I said a few
moments ago, our interest in the sugar beet industry in the maritime provinces has been purely experimental. We do work in connection with sugar beets at all our experimental farms and plots there, but so far as I know this department has had nothing to do with making any checks on the refining of sugar, and we have no data here giving any information with regard to experiments which may have been carried on in connection with such refining. Therefore I am not in a position to give any helpful information in that regard.


George Hugh Castleden: In ordinary times is it possible to grow sugar beets and produce sugar which can compete, as far as price is concerned, with sugar produced from imported
cane?


Robert Gardiner: A great many factors enter into that question. I do not pose as an authority on sugar production in Canada, and of course as far as we are concerned in the Department of Agriculture we are interested only in the product that can be grown on our own farms, namely sugar beets. But the problem which concerns those of us who live in western Canada in connection with the growing of sugar beets in peace time-which, after all, must be taken into consideration, since the present is an abnormal time-is largely that of the market we have for sugar. Our market is practically confined to the prairie section, as a result of the fact that the freight rate on sugar is fairly high. Sugar is a heavy commodity, and shipping costs are high. Therefore we cannot produce sugar to be shipped outside western Canada. There has always been some controversy as to whether we in western Canada should use nothing but beet sugar, in order to make possible the greater development of that industry. There are some who contend that you could not possibly get into the position where you would use beet sugar to the exclusion of any other kind, largely on account of people's tastes and what they think are necessities in connection with certain uses that are made of sugar. In any event a considerable part of the sugar used in western Canada is cane sugar, and probably that will continue to be so.


John Ritchie MacNicol: For table use, too?


Robert Gardiner: I am not competent to discuss all the phases of the matter, but I

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have had several memoranda prepared by officials who have gone to western Canada to investigate the situation. The general conclusion is that the amount of sugar that can be produced in western Canada is limited by the market which exists between Winnipeg and the mountains. On the other hand, as I remember the discussions that have taken place here-and I have attended many of them when delegations representing the beet sugar district in Ontario and the beet sugar district out around Raymond in Alberta have called upon us-the figures show that it costs a good deal more to produce sugar beets under irrigation in Alberta than to produce sugar beets under the conditions which exist in western Ontario. That is another factor which makes it impossible to ship sugar out of that area in Alberta to other sections of Canada.


Mr. RICKARD:: Has the government
given any consideration to compensation for Bang's disease, under item 16, and has the county of Durham had its second test for tuberculosis, as provided under section 15?


Robert Gardiner: Haldimand has been
admitted, but the tests have not been started there up to this time.


Mark Cecil Senn: Is it the intention of the
administration to begin them this year? I have been trying to find that out, because the question has been asked me a number of times.


Robert Gardiner: I am informed that
Haldimand is one of the counties in which it would be almost impossible, if not indeed impossible, to start inspection, under our present policy, because it requires all the money we have available under this vote to take care of retests in the counties to which I referred a few moments ago. Durham has not been retested.


Mark Cecil Senn: Not the second time.


Robert Gardiner: No. So far as Bang's
disease is concerned, we are not paying compensation in connection with cattle slaughtered as a result of that disease. It is not the intention under present conditions to embark upon a policy of that kind.


Percy Ellis Wright: Has there been any serious outbreak of hog cholera in the past year? Two years ago in connection with this particular item there was considerable discussion as to whether the importation of pork from the 'United States had caused an outbreak of hog cholera which was occurring at that time. Since that time the importation of pork from the United States has pretty well ceased. I was wondering if there had been any connec-
44561-295J
tion between the importations and the outbreak of the disease, or if the department had come to any conclusion in that regard.


Robert Gardiner: There is no conclusive
evidence as to whether the importation of hog meat from the United States introduced hog cholera, but the fact is we did have considerable hog cholera about that time. However, that has been cleaned up, and we have had no outbreaks of hog cholera in the last two months. It is presumed that it is fairly well under control at the present time.


Mr. MARSHALL:: There is a reduction
of $154,250 in the vote. What amounts were expended for the year ended March 31, 1942? The auditor general's report gives the figures only to the end of March, 1941. Could I have a break-down by provinces for 1942?


Robert Gardiner: They are not yet
broken down by provinces for 1942, but the total amount is $270,603.33. The reason for the reduction in amount is largely on account of the fact that we are making retests rather than opening up new districts. When we make retests, of course the number of cattle slaughtered as a result of finding tuberculosis is much smaller than when we are opening up new districts.


James Alexander Marshall: The amount of the
appropriation for last year was $530,000, of which $270,000 was spent. Therefore in reality this year we shall spend $100,000 more than was actually spent last year. Is that correct?


Robert Gardiner: There was a big compensation last year for hog cholera and for other purposes which we do not expect to have this year. We are going to spend less in any event. We are not taking on as many districts as we did last year.


James Alexander Marshall: Is this figure of $375,750 not a little exaggerated?


Robert Gardiner: I am informed that in some of the areas into which wTe are going this year we anticipate very high slaughterings, and for that reason we expect this amount will be spent. We would hope, of course, that it might not be necessary to do so, but it would not be safe to start in with less than the amount appearing in the vote.


James Alexander Marshall: Is it the intention before the end of the session to table the minister's report for the year ended March 31, 1942?


Robert Gardiner: No; the report is not published yet for that year. I believe I did table at the beginning of the session the report for the preceding year. The one to the end of the last fiscal year is not yet published.


[Stage Direction]
Item agreed to.
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[Stage Direction]
Production service.
27. Live stock and poultry, $705,572.
Mark Cecil Senn: The live stock industry as such is undoubtedly one of the most important parts of the agricultural industry in Canada. If one looks at the estimates, particularly that part under which production services are listed, he will find that the three items covering health of animals, compensation for animals, and live stock and poultry total nearly $2,700,000, and the total amount to be expended is only $3,745,947. It is undoubtedly true, therefore, that the department realizes the importance of the live stock industry. However, it is difficult to discuss that industry, and particularly the production end of it, without saying something about marketing. They seem to go together.


Robert Gardiner: The discussion could *come under the vote for marketing. There is a live stock item at that point, and I believe that would be the proper place to discuss marketing.


Mark Cecil Senn: I wish to discuss both ends of it, but if the minister wishes to have it the other way I would not object.


Robert Gardiner: It would be better if we discussed production in relation to live stock at this point, and then discuss the marketing under the marketing item, thereby avoiding any overlapping.


Mark Cecil Senn: It is difficult to keep them separated. I was going to say that there are certain factors such as the labour market and price which tend to increase production. I do not see how we can separate the two factors, and talk about one without having something to say about the other.


Robert Gardiner: If it would facilitate matters I would suggest that we might pass these items on the understanding that when we come to live stock marketing we shall not be held absolutely to the item, so that anything in relation to the subject may be discussed.


Mark Cecil Senn: So far as I am concerned I will not hold up the marketing item. If I were allowed to' make a few observations now I would have nothing to say about it later. However, I am prepared to follow the wish of the committee.
I was pointing out that labour has a very great effect upon the production of live stock in both the dairy and the beef end of the industry, as well as in connection with pork and other types of live stock produced in Canada to-day. It is undoubtedly true that even yet the farmer is unable to compete in the

labour market. The price he is paid for his particular class of goods does not enable him to pay the price he would have to pay if he were to secure the labour in the amount required to produce live stock, because, after all, the live stock industry takes more labour than any other part of agriculture, I believe, with the possible exception of fruit production.
We have not had a parity between farm prices and prices of other commodities for some length of time. In fact that is a condition which goes back for years. Little progress has been made along that line, because the natural laws which relate to the marketing of cattle and marketing of other classes of farm products are not allowed to be brought into operation.
Of late years, especially since the war commenced, a number of boards have been set up which have had to do with setting prices and supervising the production of live stock. I have criticized the membership of these boards because of a lack of producer representation. To-day I asked the Minister of Finance (Mr. Hsley) about a board which is being set up under the wartime prices and trade board in connection with the beef situation. -Again we have the same position. The price will have an effect upon production as time goes on. I have no doubt that if I had been given the names of those who have been appointed to this particular board I would have found that the producers are not represented except through the officials of the department. They are all good men and I know many of them personally, but I cannot see why they would not represent the packers just as well as the producers. Yet on these boards there are packer representatives and representatives of the transportation companies. Where the packers are not interested directly, we find representatives of the buyers and dealers. I have criticized this practice from time to time, and I am sorry the minister has not seen fit to place representatives of the producers' organizations on some of these boards. They should not be placed on the advisory boards because those boards have no authority. They can advise, but they cannot make decisions. The decisions are made by the boards themselves.
Price ceilings have been established, and just the other day the minister stated that floors had been placed under certain commodities produced on the farm. That is true up to a certain point. Those floors, however, are not stationary and permanent; they change from time to time. While there may be a floor under an article, we find that from time to time there are fluctuations in the price which the farmer obtains. He does not get the same price every week for his hogs, and the same

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applies to almost all his products. It seems to me that this is a most unfortunate position, and it is causing a good deal of anxiety and ill feeling among those who are producing cattle.
The action of the wartime prices and trade board has undoubtedly discouraged production. I think it will be found that the whole cattle trade is in a hopeless muddle. A great deal of confusion has been created in the minds of the producers. These conditions are most unsatisfactory, not only because of their effect upon the cattle producer but because of their effect upon other branches of the industry. The officials of the department know that dissatisfaction and confusion exists, and an attempt has been made to rectify the situation by granting bonuses. Bonuses have been granted on cheese, milk and butter. The wartime prices and trade board has set up a food corporation to alleviate the situation which exists in Ontario and other parts of the dominion. This corporation will purchase cattle which otherwise would go to the United States market, and the cattle will be purchased at United States prices. I understand that the modus operandi is to have a shipment which may be destined for the Buffalo or some other United States market sent into the stockyards at Toronto or some other place. Then the cattle are valued by commission men at United States prices and handed over to the packers at Canadian prices. If I am rightly informed there is a difference of from $20 to $25 in the price.
The difficulty is to know whether the farmer reaps the benefit. It is quite easy for a drover to go into the country and tell the farmer that the Toronto or Canadian price is so much. Cattle are sold to the drover on that basis. He then applies for a permit to export the cattle, and an order comes from the food corporation that they are to remain in the country. He obtains the United States price, but as near as I can learn there is no way by which that extra price received is sent back to the farmer. That is a condition which should be carefully guarded against. In any event the packers are protected from loss.
This action on the part of the board has turned a sellers' market into a buyers' market. Up to the time the board placed a ceiling on beef carcases, producers of cattle were enjoying a sellers' market. They could sell with every assurance that they were getting the top price. But as soon as the order came down that the price was to be reduced one cent a pound on a certain date in June, another cent a pound on a certain day in July, it had the effect of bringing down the price of cattle some two weeks before those particular dates. I do not know whether that could be avoided.
The packers have to slaughter and hang the beef for a certain length of time, and they paid a lower price on purchases made a week or two before the time when the price would be reduced to the butcher or the person cutting up the meat.
This provided a lever for the packers to beat down prices. If you go through the country you vrill find that there is no equilibrium so far as prices are concerned. One drover is paying a certain price; another drover is paying another price. They are buying cattle as cheaply as they can. They tell the farmers that the price of beef has been reduced by the board one cent or two cents and is going to be reduced still more. The result is that the farmer does not know where he stands.
There is another phase of the situation which is perhaps the worst of all. This spring quite a number of farmers who were short of help and who saw a good crop of hay in the offing went out and bought cattle at high prices before the wartime prices and trade board had issued any regulations. They bought these cattle in order to put them on the grass instead of harvesting the hay. When the cattle are about ready for sale the farmers are faced with this order of the wartime prices and trade board which reduces the price one cent a pound per month. The price has been reduced two cents a pound already, and by next month the reduction will be three cents. These farmers are going to lose money. That is why I say that price will have a detrimental effect upon the production of cattle in Ontario and other parts of the country.
Taken all together, our present set-up for the marketing of live stock, particularly of cattle, is haphazard and unworkable. It is simply a hand-to-mouth policy. The wartime prices and trade board are continually changing their rules and regulations. They do that in order to rectify some mistake that has been made, and almost as soon as that is done they find that things have become unworkable in some other direction. The result is that there is confusion not only among the farmers but among the whole trade. I would suggest to the minister that he take this matter carefully into his consideration to see if something cannot be done to relieve the men in the beef producing areas so that they can carry on.
Here is another situation which the farmer is fearing. I do not know whether his fears will turn out to be justified or not. After the price has got down, which will be in the fall months, to 3^ cents below the level that formerly obtained, it will be allowed to correct itself again, just about the time the farmers in
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the east are purchasing their feeders for the winter. If prices are allowed to go up high again, the result will be that a great many farmers will not purchase western feeders at all. They have had their experience once. They purchased cattle this spring and are going to lose money on them, and I warn the minister and whoever may be responsible that the farmers will not stand for a repetition of that and that cattle will not be purchased in the quantities in which they should be purchased this fall to go on the feeding lots in- the eastern provinces.


Robert Gardiner: I would very much prefer that we defer the discussion of the subject opened up by the hon. member for Haldimand until we reach the item for marketing. I have a very good reason for asking this, because the particular officials who will check me on any figures I might use are not sitting in front of me at the moment, and I would much prefer to wait until I have Mr. Shaw here.


Heber Harold Hatfield: What is being done to encourage the farmer to raise more sheep?


Robert Gardiner: The plan is to attempt to increase the flocks by one million head through the cooperative arrangement made between the federal government and the provinces. The arrangement involves the federal government paying freight on ewes shipped from one part of the country to another in order to make them available to those who will use them for breeding purposes. The government is also supplying rams.


Gordon Knapman Fraser: What is the situation to-day with regard to thoroughbred cattle? Have we many in the country? I know that United States buyers have been buying up herds throughout different districts. They have been in Peterborough county and paid big prices. There is no doubt that the farmer has benefited from that, but the choice cattle have gone over to the United States.


Robert Gardiner: The registrations of beef and other cattle are increasing year after year. To give a few figures registered breeds of beef and dairy cattle numbered 66,060 in 1937. There was a drop from 1937 to 1939, when the figure was 41,822, but in 1940 the numbers rose again to 86,365, an'd in 1941, to 92,392. The figures for breeds of sheep were for 1940, 14,360, and for 1941, 15,432; and for swine in 1940, 12,660, and in 1941, 13,221. It will be noted that the number of pure-breds is very small compared with the total number of live stock in any one of these classifications, but the numbers are going up, not down.


Gordon Knapman Fraser: Have you put any ban on the slaughter of pure-bred calves?


Robert Gardiner: No. The figures would indicate that they are on the increase rather than the decrease.


Heber Harold Hatfield: What is the policy with respect to selecting the best ewe lambs from the stockyards?


Robert Gardiner: The methods are not
the same in the different provinces. Each province is working out its own method of selection from whatever stock is available.


Mr. CARDIFF:: Were any more areas
accredited in the past year, or has that been discontinued?


Robert Gardiner: We discussed the item
with regard to that matter before the hon. member came in. I presume he refers to the T.B. free areas. We are taking in additional counties only where the accredited and supervised herds make up the greater part of those that will be inspected.


Lewis Elston Cardiff: The county of Huron
had an application in for an accredited area. Would it be possible to get that through?


Robert Gardiner: It would not be possible to get a new area opened up unless a very considerable number of herds are already included.


[Stage Direction]
Item agreed to.
Production service.
IS. Plant protection, $280,591.
Ernest Edward Perley: What is the explanation of the increase in this item?


Robert Gardiner: The increases are: for
the Japanese beetle, $15,000; equipment, $6,000; supplies, $2,000; statutory increases, $1,718; making a total increase of $24,718.


Ernest Edward Perley: What is the Japanese
beetle?


Robert Gardiner: The Japanese beetle attacks all kinds of fruit trees. It is a beetle which came in from the United States.


Gordon Knapman Fraser: Does the minister's department have to pay the extra tax w'hich the Minister of Finance has imposed this year? In this item I notice the sum of $2,000 for telephones and telegrams, and in other items throughout the department are sums of $2,000, $4,000 and $7,000 for the same purpose. Will the extra tax make any difference in the minister's estimates?

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Robert Gardiner: The tax is paid. Of course it is a cross-entry.


Gordon Knapman Fraser: I
know it is.


Robert Gardiner: It will be small in comparison with the whole amount; it will not affect it materially.


Joseph Henry Harris: Can the minister make a statement under this item with regard to flax production in Canada?


Robert Gardiner: It will come under No. 19.


[Stage Direction]
Item agreed to.
Production service.
19. Plant products-seeds, feeds, fertilizers, insecticides and fungicides control, including grant of $18,900 to Canadian Seed Growers' Association, $519,582.
Robert Gardiner: Has the hon. member for Danforth reference to fibre flax or oil flax?


Joseph Henry Harris: It is oil flax. While the minister is procuring the information I might make a short general statement, and perhaps he might be able to answer the entire problem. A survey was made as to the possibility of taking care of a flax crop which might approach double the ordinary production, and the feeling was abroad that there would not be enough equipment available to handle the flax and press it, to make the oil cake on the one hand and the linseed oil on the other. The survey was made some six or eight weeks ago, and the question I want to ask-apart from the first one, namely what the production is going to be this year-is, whether or not the equipment, a large portion of which has been idle during the last three or four years, has been inventoried, and whether or not those who were processors of the flax are ready to handle the crop and turn the oil into the channels which are in need of that product. A general statement should be made. This is a very important item.


Robert Gardiner: There is an increase. We have not the exact figures, but there are approximately one and a half million acres as against around a million last year. That is, they are up by about 50 per cent instead of 100 per cent. We did not double the acreage.


Joseph Henry Harris: Has the minister any information as to the prospect of handling this crop by the processors with the equipment which is here?


Robert Gardiner: The increase in acreage, it will be recalled from the discussions last year, was intended to provide for shortage of supplies of oil, not only on this side of the line,
but possibly on the other side as well. There has not been the increase in plants which would make possible the handling of all the flax which will probably be grown this year in Canada, but it has been understood from the beginning that any of the flax which could not be processed here would be processed on the other side of the line.


Joseph Henry Harris: I want to take this opportunity of protesting as strongly as I possibly can with regard to the conduct of those charged with the responsibility of issuing priorities on machine parts for the processors not only of flax seed but of other products which are producing oil from fats in Canada. To-day, within the last two or three hours, the priorities division, on being asked to give priorities to bring into this country equipment of a kind that could be used for the pressing of such products as flax for oil, applied for a higher rating than P.D.1A, which is so far down on the list that it will be impossible to get this equipment repaired and put into condition during this calendar year. I ask the minister in his official capacity and through his department to urge the priorities division to give priority on equipment of a kind which is going to handle this crop for the benefit of the agricultural economy of Canada.
The matter is even more important than that, because, as many hon. members in the chamber, including the minister, know, this shortage of oil is very serious. It is not going to get very much better during the next twelve months, and every possible avenue which will permit of more production should be followed through in the interest of the country. I want to register a protest that the priorities division are not giving consideration and the right-of-way to this necessary industry in this time of war. Of course hon. members know why we are short of oil. The whole Pacific production, which I think the minister will agree is about 75 per cent of world production, is out of our hands and under the control of the axis powers. Our short supply will become more serious, and everything possible should be done. I see an hon. member from western Canada rising to his feet. I hope that when he takes his place, following me, he will ask that consideration be given to having some of this processing done west of the great lakes, so that the stock food value of the oil coming from the pressing of flax will find a ready market right in that part of Canada where the production is going on. By this means more of the finishing of our cattle might be done in the west, and the necessity avoided of sending so many cattle to the east, because,
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as the hon. member for Haldimand says, when they come here they may find a poor market. We should have a rather better balanced economy, and the matter should be attended to now that the need has arisen since Japan has taken over the great oil production areas.


John Gordon Ross: I agree with the hon. member who has just spoken that priority should be given to machinery for oil processing, and I also agree with him as to the desirability of the work being done in western Canada, where most of the product is grown.


Joseph Henry Harris: And where there is plenty of coal, cheap fuel.


John Gordon Ross: Yes, and where
the product can be used to advantage. What I want to draw to the attention of my hon. friend is this. He asked as to the production figures of flax for this year. The figures already mentioned as regards acreage are probably right-three and a half millions this year as against two millions last year. But we -must remember that last year throughout western Canada there was not a heavy yield of any crop, and the yield of flax would also be below the average. This year, with the moisture conditions which obtain in western Canada, the average yield will probably be much higher than the long-term average. Instead of having this year one and three-quarter times the amount of flax we had last year, there is every probability that we shall have two or three times the amount of last year's yield.


Joseph Henry Harris: How many million bushels would be my hon. friend's estimate ?


John Gordon Ross: Well, at three
and a half million acres, I would say that there is every possibility of a yield of somewhere in the neighbourhood of twenty-five million bushels of flax.


Joseph Henry Harris: That means that we must have the equipment and machinery to handle it.


Mark Cecil Senn: During seeding time this spring there was a great shortage of mangold seeds throughout Ontario. I suppose that is partly on account of the fact that mangold seed came largely from Belgium and other European countries. Has that shortage been taken into account and any provision made for another year?


Jesse Pickard Tripp: If flaxseed cannot be processed in Canada, will permits be given to individuals to export it?


Robert Gardiner: That is not handled through the Department of Agriculture. Export permits will be given through the Department of Trade and Commerce and have been given, I imagine, under the direction or control of the wheat board.


Ernest Edward Perley: That was understood, was it not, when the order in council went through fixing the price?


Joseph Henry Harris: If such export permits are given, I hope the wheat board will see to it through the wartime prices and trade board that a fair proportion, perhaps two-thirds of the oil produced, is returned to Canada; otherwise it will be necessary for Canada to refuse export permits to a degree and to process her own flax in order to keep an adequate oil supply in this country.
That again emphasizes the importance of some pressure being brought to bear on the priorities division that has to do with machinery used for oil extraction.
I want to put on record how poorly matters are handled in priority department 1A. The requests you make are not attended to. You call, get no reply; the individual in charge is not there. When I pointed out the urgency of the matter and said I would have to take it to a higher place, the stenographer answering the telephone replied, "Well, go ahead and do so". It is not conducive to the national interest to have service of that kind in a situation which is so important at this time.


Robert Gardiner: I am sorry that that item also comes under another department. I might say, however, that priorities in connection with steel and other commodities which are necessary for production are of necessity discussed at all times with the United States, and -there do arise difficulties in connection with getting the amount required in Canada, as there are difficulties in providing the amounts necessary in the United States.
As far as the arrangement with regard to flax is concerned, and the oil derived from it, we have an understanding with the United States that we do get a certain supply of soya bean oil into this country. In return for that, we allow a certain part of the flaxseed oil to remain in the United States. I am not in a position to give the exact proportion, but it is an understanding which has been worked out on the basis of the facts as they exist.


Gordon Knapman Fraser: What is the situation with regard to vegetable seeds? The truck farmers in Peterborough riding and others are afraid they may not have enough for next year.

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Robert Gardiner: It will be remembered that at the beginning of the war we set up an organization to try to obtain in Canada the garden and other vegetable seeds required in this country which we previously obtained from Europe. We hope this year to have mangel seed to the extent of 251,250 pounds-


Mark Cecil Senn: Canadian grown?


Robert Gardiner: Yes, as against an
amount for 1941 of 212,714 pounds. That is what we believe our requirements to have been in 1941. It is hoped this year to have a production of 251,000, and therefore we are well in advance of the requirements.


Gordon Knapman Fraser: What about carrot, onion and truck farming seed generally?


Robert Gardiner: Last year our requirement for carrot seed was 73,000 pounds. This year we are producing about double that, and therefore there will be no shortage as far as that is concerned.


Mr. CRUICKSHANK:: In connection with fertilizer, I understand an order in council has been passed that the present subsidy is to be continued in the eastern and western provinces. Last year the fertilizer subsidy was for the production of certain farm produce only, as far as the western provinces are concerned. If my memory is correct, it was to produce coarse grains and pasture. We in British Columbia, and particularly in the Fraser valley, are especially interested in the production of corn for ensilage. In the production of corn for canning about 85 per cent of the value goes into ensilage and 15 per cent for canning. Under the last order in council we were held not eligible for the subsidy on fertilizer; the ruling was that our corn was not produced for feed only. We of the Fraser valley are most emphatically of the opinion that our corn for canning is a by-product, the principal value is the ensilage. Since I understand that the subsidy on fertilizer is to be or has been reintroduced for this year, will the ensilage be taken into consideration as if the corn is produced purely for feeding?


Robert Gardiner: The fertilizer subsidy
was given to increase the amount of feed for the production of dairy and meat products, as part of the policy of increasing production. When we examined into the quantities of fertilizer available it was found that we could not go beyond the classification of which I have spoken, including pasture lands for the same purpose, without depleting our supplies of fertilizer and thus reducing them for the objective we have in mind. In other words, there is a shortage of the essential
ingredients that go into the making of the fertilizer, and we are using it only in connection with those crops which we consider essential to the production of feed. If we were to go into such things as corn for canning purposes, of course that would lead us into gardening generally, the growing of different kinds of crops for direct food purposes, and we have not considered it advisable to go into that field.


George Alexander Cruickshank: With all due deference I should like to correct the minister. Last year he did that very thing; he provided the subsidy to encourage the growing of corn for canning purposes, and that very thing is being done under last year's act. What I am suggesting is that the minister should pay the subsidy on fertilizer used to grow corn for ensilage purposes. I am sorry the minister has been misinformed. Last year the subsidy was paid in connection with corn for canning.


Robert Gardiner: If anyone is getting
away with that, we did not intend him to do so. The provision now covers ensilage corn; the term used is field corn, but it is the intention that it should include corn grown for ensilage purposes or corn grown as food for live stock, that is, fodder corn. This has been done under an order in council passed early last summer, which is now being extended to cover the period to December 31, and I presume it will be extended even beyond that. At the moment, however, the order in council provides for this subsidy to December 31, and our main objective in extending the date was to put fertilizer on pasture lands this year in the period between July 1 and December 31.


George Alexander Cruickshank: If I am correct in my understanding of what the minister said, the subsidy was intended for that very purpose, to increase the production of com for ensilage?


Robert Gardiner: To increase the production of food for live stock, and ensilage is food.


George Alexander Cruickshank: Then am I correct in understanding that this subsidy will be paid in connection with corn principally used for ensilage? That is exactly what I am asking for. Am I correct in that understanding of the purpose?


Robert Gardiner: I am not fully acquainted with what they do in the Fraser valley of British Columbia, from which the hon. member comes. If they are growing com for canning purposes, picking off the corn and using the remainder for ensilage, then I do

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not believe they would be able to collect the subsidy on the fertilizer. But the subsidy may be paid on fertilizer put on land on which corn is grown which is used for feeding purposes.


George Alexander Cruickshank: That is not quite clear to me yet, and I should like to have this straightened out, because I took it up with the minister last year. The Fraser valley is the only place in British Columbia, so far as I know, where corn is grown for canning purposes, and the point I want to impress upon the minister is that of the protein value of that com, 85 per cent is used for ensilage purposes and only 15 per cent for canning purposes.


John Gordon Ross: Is that out of the same field?


George Alexander Cruickshank: Just a moment.
They grow a lot of wheat in Moose Jaw, and they get a bonus for everything they can grow. In the Fraser valley, according to the information I get, not only from the farmers but also from the canners, 85 per cent of the value of the corn grown goes into ensilage and only 15 per cent for canning purposes. If we are to be penalized in regard to the subsidy, if I may put it in that way; if it is to be paid only in connection with fertilizer used for corn grown for canning purposes-


Robert Gardiner: No, for feeding purposes.


George Alexander Cruickshank: Just a moment; I am getting a lot of advice here.


Robert Gardiner: The hon. member is asking for information, and I am giving it to him.


George Alexander Cruickshank: Then I want it
to be authentic. I do not think the minister follows me. We will call this domestic corn. To a farmer in the Fraser valley 85 per cent of the value of domestic corn is in ensilage, but if I am not misinformed, in order to get the subsidy it must be domestic corn. Am I correct in that?


Robert Gardiner: I do not know what the hon. member means by domestic corn.


George Alexander Cruickshank: Well, corn grown for canning purposes?


Robert Gardiner: It is not paid on corn grown for canning purposes; I have said that several times.


George Alexander Cruickshank: Well, that is not according to the statement made under the minister's own signature last year.


Robert Gardiner: Why not read the letter, and then we shall have the information?


George Alexander Cruickshank: Just a moment. We endeavoured to get the subsidy on the fertilizer we used for the corn produced in the Fraser valley . last year. We were not given that subsidy, and we were told over the signature of the minister why we did not get it. We were told that canning corn or domestic corn, as I call it, which I think is the term the department used for it-


Ernest Edward Perley: Golden Bantam.


George Alexander Cruickshank: Very well; Golden Bantam. I took up the matter with the minister last year, and I- was informed that we could not get it because this corn was not produced principally for ensilage purposes. Chilliwack Canners and Canadian Canners could not get it, so what chance had a private member? The minister's department maintained that this corn was produced primarily for canning purposes. I am stating that in the Fraser valley 85 per cent of the value of the corn produced goes into ensilage and only 15 per cent into the cannery. I hope I have made myself clear now.


Robert Gardiner: Yes, and that is exactly what I said three minutes ago.


George Alexander Cruickshank: Then can I take it from the minister that corn produced for the canneries-I know some of the Ontario members will realize what I am getting at- of which 15 per cent of the value goes for canning purposes and 85 per cent for ensilage purposes, is entitled to the subsidy on the fertilizer?


Robert Gardiner: I can only say that we have an advisory committee in the province, set up by the provincial people, who agree with the interpretation we have placed upon it, just as other committees in other provinces have agreed, and we are following that out. The interpretation is just as it has been recited, that we do not pay the subsidy on the fertilizer placed upon land used to grow corn for canning purposes.


George Alexander Cruickshank: That is not clear to me yet. I am not particularly interested in the interpretation of the provincial government; I am elected not as a provincial member but as a federal member. I am asking the minister if corn produced for canning purposes, which in the Fraser valley is used for ensilage to the extent of 85 per cent of its value, will be entitled to the subsidy.


Robert Gardiner: I have said "no" three times.


Joseph Henry Harris: In view of the fact that the potash which formerly came from Germany is now cut off, what steps has the

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department taken to supplement our supply of this essential ingredient? Also, is any propaganda going out by way of literature from the department to make sure that agricultural communities do not waste wood ashes, which are perhaps the other source of supply.


Robert Gardiner: Most of the supply, in fact I think practically all we are able to obtain from anywhere outside Canada, to make up for the shortage of potash which previously came from Germany, is coming from the United States, and I believe to a great extent from New Mexico. But a plan has been worked out whereby the amount of fertilizer which is available will make it possible for us to do what we propose to do under the order in council.


Joseph Henry Harris: Are we having any success with the million dollars invested in the Consolidated Mining and Smelting
company at Trail?


Robert Gardiner: We have not the information here with regard to that.


Percy Chapman Black: Has the department made any investigations as to the possibility of obtaining a potash supply in the salt deposits at Malagash, Nova Scotia? It has been reported from time to time that there is an extensive potash deposit there awaiting development, one of the largest deposits in Canada, comprising millions and millions of tons. They have been operating it for a number of years, and are hopeful that it may be developed as a war industry. Materials such as chlorine and other chemicals could be produced there for war purposes. Potash would be one of the substances which might be obtained if a plant were put in there. Has the minister's department made any inquiries as to the possibility of developing a refinery there for the production of potash, for fertilizer purposes?


Robert Gardiner: My information is that we are in no serious difficulty with regard to potash supply. The supply now available is sufficient to look after our requirements. But I might add that this information could be obtained to better advantage from the Minister of Mines and Resources, .'ny development in that connection which takes place would take place under the direction of that department, rather than the Department of Agriculture.


Percy Chapman Black: Would the minister not agree it would be far better from the Canadian point of view, as well as the point of view of the industry, and especially from the point of view of the people in
44561-296J
eastern Canada who are entitled to more interest in the development of their industries, if this product were secured within Canada from the deposit there available, rather than have it imported and necessitate the sending out of exchange and the giving of employment to people in another country who do not need it? It would have the further advantage of creating an industry in war time which would have a post-war value of great importance to Canada, and would be of particular importance to that locality.


Lewis Elston Cardiff: I believe the subject of feed would come under this item. In my constituency we are very much interested in feeds. We grow considerable quantities of coarse grains and feeds, which we consume. During the year we buy large quantities in carload lots from western Canada.	We
appreciate the fact that in the past year the dominion government has paid the freight on carload lots coming from the west, and we hope that policy will be continued.
We are also interested to know that a ceiling has been placed on coarse grains. Because of that fact it is impossible for us to get what we call cheap grain, other than screenings. We could use great quantities of screenings, if we could get them at the price we think we should pay. If the western farmer were getting anything worth-while for those screenings, one could realize that perhaps there might be some reason for the price being where it is. But in these times, when we are engaged in such a fight for our freedom, I do not believe commission firms' charges and handling charges could bring the price of the screenings to the price we have to pay before we get them. The western farmer pays the freight on the screenings to the head of the lakes, and when it reaches that point it is taken off him as dockage. It does not cost anybody anything that far. When we get it in our part of the country it costs us at least $25 a ton, or thereabouts. Why is it that screenings are as dear as that when we receive them in eastern Ontario?


Robert Gardiner: Again we are discussing a matter which does not directly come under my department. As I remember the figures the last time I investigated the matter, the value of screenings at Fort William was about $8.50. That was the price for screenings, just as they are taken from the grain. After that, of course, they are cleaned and graded, and then they are finally shipped to Ontario and ground into feed. By the time the screenings reach Ontario the price, which includes freight *-or at least did include freight until the federal government began to pay that charge-
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is increased. Then there is the further fact that a considerable percentage of it has been cleaned out, and does not appear in the product which is purchased at the higher price here, as compared with the $8.50 at Fort William.
The main reason why the feed would not be shipped back to the farmer in western Canada would be that there is not sufficient value in it to warrant the payment of freight for taking it back there. The value is really put into it by cleaning it and having it ground and supplied to the farmer, who can utilize it as a mixture in connection with other feeds. The western farmer would probably have enough of the grain from which the screenings had been originally screened, without having it shipped back.
I would say, however, that during the last war-and I am not sure about this one; the hon. member for Qu'Appelle may know more about present conditions-we were credited with our screenings from the grain, when the grain was at a veiy high price. At that time we were credited with certain amounts for screenings which were taken out of our grain at Fort William. I imagine wheat has not risen to a price sufficiently high to make it pay at this time. There is the question as to whether the price will be high enough in the future. However, we have had returns, and there are certain returns which can still be secured. For example, a man can get his grain cleaned at the elevator without sending it to Fort William. Many of the local elevators have cleaners in them. If the farmer cares to draw his grain to an elevator which has a cleaner in it, he can have his grain cleaned at that point, and save the freight on the screenings to Fort William. However, because there are so many factors involved, and because I have not before me the prices either at Fort William, in the west or in the east, I would not care to say more than that in the matter.


Mr. DONNELLY:: I think when the dockage is over 3 per cent the farmer is paid for it.


Lewis Elston Cardiff: Would the minister care to say where he gets his figure of $8.50 at the head of the lakes?


Robert Gardiner: I got it from a farmer from the middle of a meeting in London.


Lewis Elston Cardiff: Maybe one of the western members would give an answer?


John Gordon Ross: I should hate to disagree with the minister's figure, but I have not yet heard of screenings being worth $8.50 a ton in western Canada. Recleaned

screenings would be worth that, perhaps; that is, refuse cleanings, with the valuable parts cleaned out. I can remember during the last war when screenings sold in western Canada for $20 a ton. As the hon. member for Wood Mountain (Mr. Donnelly) says, when we are docked over 3 per cent on our grain we are paid for the screenings. The refuse screenings from the elevators are recleaned and sold, but I question if they would be worth over $8.50 per ton.


Lewis Elston Cardiff: I do not mind paying
that to the western farmer if he has it coming to him; I would rather pay it in that way than by way of bonus, but the fact remains that he does not get anything for it and he pays freight on it to the head of the lakes. As far as I figure out, it does not cost anybody anything.


James J. Donnelly: The farmer does not
pay for having his grain cleaned. When it is under 3 per cent it goes to the man who cleans it.


Lewis Elston Cardiff: It does not cost $8.50
a ton to clean it.


Percy Ellis Wright: The farmer in western Canada pays for the cleaning at the head of the lakes.


Ernest Edward Perley: I think the matter should
be referred to the agriculture committee next session.


Mr. STOKES:: A great many dairy farms
in eastern Ontario contain large areas of permanent pasture, land which cannot be cultivated and upon which the dairy herds get most of their early summer sustenance. In many areas a small, low-growing weed is practically crowding out the grass, and I should like to know if any study with regard to the eradication of this weed and the improving of these pastures, has been made. The average dairy farm of eastern Ontario contains about 50 per cent of land of this type. The farmer may not always have the lush grass he has this year and may be faced with a serious shortage of pasturage.


[Stage Direction]
Item agreed to.
Production service.
20. Grants to fairs and exhibitions, in the amounts detailed in the estimates, $65,000.
Joseph Henry Harris: At this time
an item of this sort is really not called for, and I should like to ask the minister if consideration should not be given to dropping it. These buildings house race horses and so forth, and I am sure the communities where these places are located will forgive us if we do not go on with these buildings under war

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conditions. I notice the minister has supervision of race-track betting across Canada. Last year the amounts wagered totalled $21,355,037; the pari-mutuel commission and gate receipts amounted to $2,189,749, and the prize money, $1,051,824. Surely they could provide their own requirements out of those amounts? In the communities where there is no race-track, this work could be left out. Does the treasury of Canada get any portion . of the $2,189,745 gate receipts? Does the dominion put up any of the prize money of $1,051,824?


Robert Gardiner: This amount of $65,000 is not, strictly speaking, a grant to fairs in the sense in which the hon. member has referred to it. We were making considerable grants to fairs up until two years ago, but the first year of the war we cut out all ordinary grants. These amounts are to take care of commitments made over a period of years which have not yet run out for assistance in connection with buildings. Racing is regulated by the Department of Agriculture, and a charge is made for all the services performed by the department. I am not in position to state what revenue is obtained from the race-tracks because that information can be obtained only from the Minister of Finance or by consulting the records of the Department of Finance.


John Ritchie MacNicol: Did I understand the
minister to say that no grants are being made to fairs, such as the Canadian National exhibition?


Robert Gardiner: There are no grants for the operation of fairs, but there are some grants in connection with the operations of agricultural associations.


John Ritchie MacNicol: In one way I am sorry that that is so. The Canadian National exhibition will not be in operation this year, and a number of handicapped and crippled men who have acted as gate-keepers and so forth for a number of years will not have employment. They are in the greatest distress. These men looked forward to having two or three weeks work in the fall looking after gates or ticket offices, to obtain a few much needed dollars.


Robert Gardiner: The larger fairs, particularly Toronto, have been closed as a result of the use of the buildings by the military people. That was the beginning of the difficulty, and it has developed to such proportions that it was thought unwise to continue the fairs.


Ernest Edward Perley: According to the particulars on page 65 of the estimates only four fairs will benefit. Are there any fairs in Saskatchewan and Manitoba that will receive grants outside of the grants for building purposes?


Robert Gardiner: There are no outstanding grants. Any grants that were made in connection with buildings at those fairs have been completely paid out. The only ones left are
enumerated here.


Mr. McNEVIN:: The buildings at the Toronto exhibition are almost entirely used by the Department of National Defence. I do not think we should take any action to discontinue these grants.


Robert Gardiner: They are a matter of contract as between the federal government and these boards. We must continue to pay them; that is why they are there.


Ernest Edward Perley: The supervision of racetrack betting should be considered. The minister's report, at page 159, contains a table giving certain information in this connection by provinces. The total amount wagered in the dominion was $21,355,037; the parimutuel commission and gate receipts were $2,189,745 and the prize money amounted to only $1,051,824. According to the table Saskatchewan does not go in too much for this kind of sport, because the people of that province wagered only $429,894; the people of Ontario wagered $12,859,315; the people of Quebec, $1,427,549 and the people of British Columbia, $3,387,588. A lot of this should be cut out. It is just a disgrace, a graft, so to speak, when one considers the amount that was paid in and the amount paid out in prize money. There must be something wrong. Do I understand that there is no revenue from this supervision?


Robert Gardiner: There is sufficient collected to pay the costs of supervision. These races are operated not under legislation of this department but under the criminal code. All we do is to supervise the holding of the races and the betting that goes on there. We supervise the pari-mutuels.


Ernest Edward Perley: Do they require a permit from the minister's department before they can hold a race-meet?


Robert Gardiner: They have to comply with certain conditions which are set out in the legislation. They must be a recognized chartered association before we issue a permit.


[Stage Direction]
Item agreed to.
Marketing service.
22. Marketing service administration, $94,457.
Alexander Malcolm Nicholson: This is the item that provides for the services that were performed by Doctor Allen of Great Britain?
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Robert Gardiner: Yes.


Alexander Malcolm Nicholson: I understand that a
recent appointment has been made of a successor to Doctor Allen. What is the type of work to be done by the commissioner in Great Britain?


Robert Gardiner: It will be recalled that this position was created about four years ago, and a year or so before the war Doctor Allen was appointed to the position three years to a day before he lost his life crossing the ocean to become active in his position. The reason for establishing the position was that we desired to have one man in Britain in charge of the different officials we had there to check cargoes and the nature of the food products we were shipping to that important market. Doctor Allen acted in that capacity until the war started, and for some time after. He returned to Canada during the war in order to make known to the people here what the requirements of Britain were and the standard of commodities they required. After performing that service here he was on his way back to Britain to take up his further duties there, those duties having to do largely with the inspection of cargoes in order to see that the commodity arrives in Britain in a proper condition to supply that market satisfactorily with the food products from this side.
Mr. Robertson, who has been appointed to take his place, was the live stock commissioner for Saskatchewan. He is a returned man of the last war and has given long service in connection with the live stock industry of Canada. He is going overseas to take the position which was vacated through the death of Doctor Allen.


Percy Ellis Wright: There was a good deal of complaint last year of the quality of our bacon, that it was shipped too green. Has that been overcome? Are there any complaints this year?


Robert Gardiner: Some very small quantities of bacon shipped to the old country may not have been quite up to standard, but so far as our records show, almost all, if not all of it, was reported to be excellent.


Percy Ellis Wright: There was a report last year that some six million pounds were not up to standard, and there was a good deal of complaint about it.


Robert Gardiner: So far as we know, there was no such amount as that which was below standard.


Alexander Malcolm Nicholson: There is a reference
in the annual report of the department to discussions which the minister had last fall with the British ministry of food. Would the minister care to make a statement with regard to those discussions? Might not the British ministry of food be prepared to accept Canadian wheat at a price more in line with the prices of other commodities that are being bought by Great Britain under the terms of our billion dollar gift? I can think of no good reason why the British ministry of food wants to buy our wheat at such a very low price when it knows the cost of producing commodities here in Canada. Is there any possibility of reconsidering the price which is to be paid for Canadian wheat in view of the fact that Canada is making a billion dollar gift?


Robert Gardiner: The marketing of wheat comes under the Department of Trade and Commerce, and the minister of that department is sitting here waiting for his turn. The proper time to bring the matter up would be when my colleague's estimates are before the committee.


[Stage Direction]
Item agreed to.
Marketing service.
2-}. Dairy products, $365,098.
Thomas Bruce McNevin: I wish to make a few
remarks on the marketing of whole milk. I am well aware that under this item there is a dual responsibility and a dual control inasmuch as in Ontario, particularly, we have a provincial milk board which has substantial authority and jurisdiction in this matter. The Department of Agriculture is also interested. Then the wartime prices and trade board control the retail price of milk.
When speaking on June 3, with regard to dairy products, I referred to the fact that there was a satisfactory arrangement with respect to the price of whole milk and cheese, but that a similar situation did not obtain with respect to butter. At that time no public announcement had been made with regard to the discontinuance of the subsidy of 30 cents per 100 pounds for whole milk produced for retail consumption in the cities. If I remember correctly, when this bonus was put on it was expected that during the months in which the bonus would be paid, the distributors in the various areas affected would inaugurate certain economies whereby, on the discontinuance of the bonus, the producer would not be expected to bear the full weight of its withdrawal. The bonus

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was discontinued as of the first of June, and unfortunately these economies had not been put into effect. Therefore the full weight of the deduction has fallen upon the producer of whole milk.
The base price set in the base period would return to the farmer $1.93 per 100 pounds at the farm for 3-6 milk. That is taking into cdnsideration that 15 per cent of the milk shipped is paid for at a' lower price. I think since that time the provincial milk board has authorized an increase in the price of that 15 per cent up to $1.95, which is the price for milk for manufacturing purposes. That, of course, is an advantage, but only a very slight advantage. I am quit-5 sure that, as the matter stands at present, there is widespread dissatisfaction on the part of milk producers throughout the whole of Ontario with regard to the present set-up.
However, I want to point out this fact. I think the price of milk on the farm for manufacturing cheese will net the producer from S1.75 to S1.S0 for 3-5 milk, so that at the price of $1.93 the producer of the whole milk for city consumption has an advantage of only probably about 15 cents per 100 pounds over the producer of milk for manufacturing into cheese. I think it is an undisputed fact that, for a number of reasons, the producer of whole milk is entitled to a substantially wider spread. For example, the cheese factory takes the entire production, whereas the producer of milk for retail in the various urban centres can deliver only up to his quota, and then he must do something else with the surplus. I think also it is generally recognized that milk produced for the whole-milk trade requires a great deal of additional care in order that it may reach the consumer in first-class condition. Then, again, the producer of whole milk must maintain a quota throughout the entire year, whereas the producer of milk for other kinds of dairy produce can produce greatly increased quantities at certain seasons of the year and greatly lessened quantities at other times of the year. Therefore, taking the whole situation into consideration, I think that at a not very distant date some definite action should be taken to correct the situation with respect to the production of milk for city consumption, or I am of the opinion that the supply will be inadequate. I know that at a recent meeting of representative milk producers within this category there was a lot of talk about a strike. It is possible that that feeling may grow. Therefore I call attention to these facts in order that full consideration may be given the matter. Doubtless the supply will hold good under present pasture conditions during the month
of July, but it is quite likely that in August and September the supply will be short unless some action is taken.
As to economies, we know, for example, that the price of bottles has been passed on to the consumer. He must pay if there is any wastage of bottles. Extra deliveries have been discontinued. As a further item of economy, as far as the distributor is concerned, milk cannot be sold on credit; it must be sold for cash.
In the light of these circumstances I want to say as a milk producer that, while my individual relations with the dairy to which I have shipped for about twenty years have been very satisfactory, producers of whole milk under present conditions are not satisfied collectively. I believe that during the last war the average price paid to the producer for milk was, from 1915 to 1918 inclusive, around S2.S0 per 100 pounds, and that milk retailed at about 12 cents a quart. Under present conditions the quart price in many of these markets is 13 cents; yet the producer is getting, including his transportation costs, approximately $2.35 for 3-5 milk.
I may have something further to say on this matter when the estimates of the Department of Finance are under consideration. But I ask now that provision be made at an early date to increase the present price by at least 40 cents per 100 pounds.


Mr. SOPER:: Would it not be possible under this item to do something for dairy butter producers? The creamery butter producers are bonused or have a subsidy now, but the dairy butter producers are not getting that. Dairy butter production in Ontario is from 20 to 25 per cent of our production; in western Canada, I understand, it is higher. While I know it is quite a difficult matter to deal with, possibly it could be handled through the creameries. These people are living in most instances a considerable dis-stance from creameries, and the creameries are not inclined to extend their routes on account of shortage of trucks, curtailment of tires, and other considerations, and those who produce dairy butter are not equipped to deliver cream to the dairies every day. I certainly think they are entitled to some protection in this matter.


Mr. FURNISS:: I should like to say a word in support of what has been said by the hon. member for Lanark. The district of Muskoka, which I represent, contains about twenty-two townships, and throughout the district there is not a creamery. It might appear that there is not sufficient milk to warrant the establishment of a creamery, but that is not so. The
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fact is that the farmers are scattered throughout a wide area and the distances are so great that it does not pay to gather the cream to the creamery. These people are not allowed to participate in the bonus. I was home a couple of weeks ago and was talking to a hard-working man and his wife. They had just completed their haying. I asked him if he had a man, and he said "no". His wife, who was standing behind him, said, "I am the only help he has. Besides helping with the hay I churn sixty pounds of butter every week." That woman is not able to participate in the bonus and is deprived of about S3 a week. I understand that about
100,000,000 pounds of daily butter are made in Canada. A considerable portion is used on the farms, but at least half of it is sold, and the loss to the farmers who are not able to get their cream to the creameries amounts to about $2,500,000. I wish to say on behalf of the farmers and farm women of this country that, apart from the armed forces, no other persons are making a greater contribution to the war effort than are farmers, farm wives and children, and if anything can possibly be done to allow these people to participate in the bonus it should be done. To my mind it would have been an easy matter if the price could have been allowed to rise 5 cents so that everyone could participate.


Lewis Elston Cardiff: I do not wish to repeat what the hon. member for Victoria, Ontario, has said. I think he covered the ground very well. I should like to mention one point in connection with the bonus paid on milk. It was put on at a time when I believe the minister will admit that if something had not been done, there would have been a great falling off in the supply. The result was that many farmers not only maintained the herds they had but bought other cows, with the result that many of them purchased milking machines. These machines are expensive. About the time they thought they were going to get a little cheap feed to help to pay for them, the bonus was cut off and they found themselves without sufficient returns to finish paying for the machines. Others who wished to buy machines to help to solve the labour problem in the summer found the firms selling these machines cut to a certain quota, with the result that such people could not buy the machines. They could not get help or buy milking machines. I realize that the government tried to take care of these people, because it increased the quota 200 per cent from 1940 to 1942, which looked reasonable at the time.
[Mr. Furniss.l
But when one considers that in the last six months there were probably more milking machines sold- than in the last ten years, he will realize the serious condition in which some people found themselves. They find themselves now with their herds on their hands and their summer work in progress, and they are unable to get help. Some time ago I placed a question on the order paper with regard to this matter. The question was:
Will the government give consideration to having mechanical milkers removed from the restriction placed upon them by an order in council dated January 19, 1942?
The answer in part was:
The quota on mechanical milkers was set at 200 per cent of any manufacturer's or importer's sales in 1940,

Which at the time seemed reasonable.
-whereas the average for all units was 84 per cent. In establishing this percentage for milkers consideration was given to the essentiality of these machines as well as the existing labour shortage.
If the minister would consider having that restriction removed to allow these people to buy milkers to help overcome the shortage of labour, it would be a fine thing.


Robert Fair: May I add a word in support of giving a bonus on dairy butter. I do not think it necessary to go into details, because the government knows very well the position of the producers of dairy butter.


Robert Gardiner: The subsidy is paid, of course, under the wartime prices and trade board. The difficulty they find is being able to be sure that any subsidy paid on dairy butter will go to the producer. The butter is purchased at so many places and marketed in so many different ways that it is hard to work out a plan under which payment of the subsidy can be made. The suggestion made by the hon. member for Lanark is one worthy of consideration, but that would not by any means cover all those concerned. It might lessen the number who are more or less discriminated against, if it is desired to' use that term, as compared with patrons of creameries, but it would not entirely remove the difficulty.
There are no complete or official figures with regard to the production of dairy butter in Canada, but we have always kept estimated figures and they are something like this: Creamery butter, 286,000,000 pounds. That figure is as authentic as possible for figures of this kind. The estimated production of dairy butter across Canada is 94,000,000 pounds. That is to say, between 20 and 25 per cent of the butter production of Canada is estimated to be dairy butter. Much of that is consumed right on the farm and does not enter the mar-

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ket at all. It has been found difficult by the wartime prices and trade board to work out a plan under which the payment can be made. It was hoped that it would be possible for a considerable percentage of the people who are now making dairy butter to send their milk to the creameries. Of course we know there are certain areas where that is impossible. Generally speaking, however, it is hoped farmers will be able to do that and get the advantage of the six cents a pound butterfat subsidy.


Robert Fair: If that is the only hindrance, I would suggest asking the western farmers to work out a plan.


Robert Gardiner: I am sure the wartime prices and trade board would be pleased to have a plan submitted.


Robert Fair: Is it guaranteed that the western farmers will get the bonus if they provide the plan?


Robert Gardiner: The hon. member will have to submit that question to them.


Mr. KINLEY:: This matter is of interest to the small farmer. My experience is that if you raise the price of creamery butter you immediately raise the price of dairy butter. Farmers come into town, find out the price at the store, and usually sell their butter just under the creamery butter price. It seems to me that the bonus is reflected in the price which the consumer pays for the creamery butter.


Robert Gardiner: The subsidy is not in the price paid by the consumer. The price to the consumer is the same as if the subsidy had not been paid. The subsidy is paid through the creamery to the producer of the butterfat.


John James Kinley: That is rather a discrimination, is it not?


Robert Gardiner: Well, that is the question which is raised.


[Stage Direction]
Item agreed to.
Marketing service.
ZS. Agricultural economics, $96,935.
Alexander Malcolm Nicholson: I believe we skipped item 23. I understand the department has carried on a good deal of work in connection with land utilization in different parts of Canada. During the past ten years, as a result of the drought and depression, I think at least 20,000 families have been established in northern Saskatchewan. Many of those settlers are on sub-marginal lands. With the prospect of 250,000 additional people being needed in industry within 'the next year, now would seem to be a good time to take action to
move some of these people from the submarginal areas. We are now experiencing the difficulty that many expected in the earlier stages; some of the settlers after spending three or four years on inferior land are moving away, and now we have a very small group responsible for maintaining schools and other social services. With the great shortage of labour, it would seem there would never be a better time than now to take action to see that these people are enabled to move to other parts of Canada.
Would the minister say something about the machinery available to make use of the land utilization services that have been carried on, so that the Department of Labour, for example, might look to the areas in Canada where people are on sub-marginal land and the possibilities of having them moved to other places where they can find employment? Many of them are engaged on very small units, operating ten or fifteen acres of land, and I can think of a great many other ways in which they might use their energies now to assist the war effort. Could the minister make any statement on this question?


Robert Gardiner: Most of the activities referred to were carried out under a separate vote which is not now in the estimates. When it was in, it came under the special items, where the estimate in regard to prairie farm rehabilitation now appears. Under that vote we are still carrying on certain activities, in that we accept from the provinces the definition of submarginal lands, and then we do form some of those submarginal lands into pastures and assist in moving the people out. But I do not think that is the problem which the hon. member has in mind. There is at present a vote under the Department of Labour, I think starting with $60,000 at the beginning of the war and going up to $100,000 this year, for the purpose in the first instance of taking people who desired to move from just such areas to Ontario, which desires farm labour to be moved here if that is at all possible. That item was put in the estimates for the purpose of assisting such movements from the west or anywhere else to this province, or from one part of the province to another. Very little of the money was spent the first year; I believe a good deal was spent last year, and I think more will be spent this year. My understanding is that either the Minister of Labour has signed an agreement with the province of Ontario or the agreement has been negotiated and is practically ready for signature, and that the plan is to enter into certain arrangements with any other provinces
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that desire to do so. I have not the terms of that agreement before me at the moment, but no doubt the Minister of Labour will have them when his estimates are under consideration. The intention is to encourage and assist provinces to move labour about within the provinces, and, where necessary, to move it from one province to another, in order that any surplus labour now on small holdings such as have been referred to, where a proper living cannot be made, may be made available to other areas where there is employment. In general terms that is the plan.


[Stage Direction]
Item agreed to.
Marketing service.
25. Subsidies for cold storage warehouses under the Cold Storage Act, and grants, in the amounts detailed in the estimates, $108,350.
James Alexander Marshall: I think it very unfair to compare an estimate of 1127,197.12 for the year
1941-	42 with an estimate of $108,350 for
1942-	43. In order to obtain a true picture we should have the amount actually expended under this estimate in 1941-42. Is the minister in a position to give the exact figures in that connection.


Robert Gardiner: It will be recalled by hon. members that we have an act which provides for these expenditures. Under that act we agree to pay 30 per cent of the cost of cold storage. Of that we agree to pay half in the first year, the other half being divided into four payments. The fact of the matter is that we announced as a matter of policy, I think two years ago, that we were not going to undertake any new cold storage obligations. Therefore the amount voted last year was only sufficient to take care of previous commitments, and of course the amount this year would not be exactly the same for the reason I gave a few moments ago, that half the total amount is paid the first year, and the payments are very much reduced in succeeding years. I am told that this was just the amount necessary, and that the whole amount would be paid out.
I should say that this policy has been reconsidered and that there are now under consideration supplementary estimates which will be brought down at a later time by the Minister of Finance and which will have to be discussed when they reach this committee. This is one of the items for which we have decided to provide an estimate in the supplementaries. The vote will not be as large as that of previous years, but we are finding that there is a shortage of cold storage facilities across Canada, on account of the fact that such large quantities of food are being shipped to Britain. At times our cold storage facilities are filled

to capacity, and we could make use of more. Therefore we are resurrecting this vote and putting in an amount to take care of a certain limited number of cold storage plants. I am not at liberty at the moment to state exactly what the amount will be, because it has not been finally passed by treasury board and council.


Bert H. Soper: I notice two very large items here, one for $23,000 to the Trenton Cold Storage Limited, and one for $56,000 to the Winnipeg Cold Storage Company Limited.


Robert Gardiner: Those were two cases
where construction is still going on, and the first payments amount to half of the 30 per cent we contribute. That is why they are particularly large this year.


Mr. WEIR:: Having regard to the comments of the minister and his reference to a supplementary estimate in connection with assistance to cold storage plants, I should like to refer to another feature of preserving foodstuffs; that is what is called the quick-freeze method. As I understand it, no assistance has so far been given to this process. There is, however, a considerable development going on in connection with it, particularly with regard to fruits. As I understand it, under this process fruit is preserved by quick freezing and kept in that condition without the necessity of using sugar, which, of course, is an important consideration at the present time. If this policy is going to be reconsidered in the light of more recent developments, and having regard to what the minister has already said as to the necessity for added assistance in this regard in relation to the war effort, I wonder if at the same time he would consider making use of this policy to assist in the development of these quickfreezing plants throughout the country. I have in mind more particularly the type of plant that might be developed in communities on a cooperative basis. Of course I recognize the fact that at the present time we are stymied, as it were, because of the rulings of other branches. I presume that, for the present at least, the priorities will pretty well eliminate any possibility of the immediate construction of plants of that type. However, I do think it of sufficient importance to be worthy of consideration, and I should be obliged if the minister would keep it in mind.


[Stage Direction]
Item agreed to.
Marketing service.
26. Fruit, vegetable and maple products and honey, including grant of $5,000 to Canadian Horticultural Council, $523,520.

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John Ritchie MacNicol: I should like to invite
the minister's assistance to the vegetable growers in certain outlying parts of Canada: first, in northern Ontario north of Hailey-bury, on up as far as Cochrane, about parallel 50, and west of Cochrane. There are many areas in which large quantities of vegetables could be grown, but most of them would only decay because there is no place to ship them. I have been wondering if the department has ever considered a scheme whereby a small cannery could be erected in that area, and the canned vegetables sold to the large mining companies in that district. The same applies to northern Manitoba, and particularly to the constituency of the Minister of Mines and Resources. I have in mind the area of the Pas, about the 54th parallel. There are some of the finest lands in the world there, a million acres of it, just west of the Pas. I have been over it, and in that area I saw the finest of vegetables, among which were sugar beets.
The farmers upon whom I called, and who showed me their vegetable crops, remarked that if there were some way of getting their produce to the mines at the north it would greatly help their position. Apparently they have great difficulty in getting their produce up to Flin Flon and to Sheridon. There is great opportunity now, because there is quite a development I believe along the Hudson Bay railway.
I have been wordering if the minister would consider, first, doing something to assist the farmers in northern Ontario to market their vegetables, either after canning or in some other way, and if he would do the same in northern Manitoba, in northern British Columbia and in northern Alberta where that splendid experimental farm at Beaverlodge has been established. The experimental station there is doing a great work in all that area, and I would assume that it is because of that experimental farm that vegetable growing there has become such an important industry.
At Dawson Creek, Pouce Coupe and Sweetwater, and all through there one finds very fine areas of splendid land, but no place to dispose of vegetables, with the result that too much goes to loss. I remember stopping at Peace River, about the 56th parallel, in the constituency of Peace River, and I remember that on the day I arrived there they were showing the vegetable products they were growing in their vicinity. It was almost incredible to see cabbage weighing twenty-two pounds, and turnips of such a tremendous size. Not only were there magnificent vegetables, but grapes in abundance. To my great amazement I saw as fine grapes on that market as I
have seen grown anywhere. While I was in the town members of the board of trade asked me if I would place their predicament before parliament.
That day I saw a large truck of the very finest of tomatoes, which had been ready a few days before to ship to Edmonton. However, owing to the dreadful state of the roads they could not be taken away, with the result that they had rotted. I was told that the same thing had happened to cucumbers. There had been hundreds of baskets of cucumbers permitted to rot because they could not be taken to the market at Edmonton, which is in fact their only market. I promised myself that when these estimates were before the committee I would ask the minister if some consideration could not be given to northern Manitoba, northern British Columbia and that fine area near and west of the town of Peace River, where the land seemed perfectly adapted to the growing of vegetables. I promised to ask if the minister's department would not consider some action whereby farmers in those districts who raised quantities of vegetables might find some way of disposing of them, either through the erection of a small canning factory-perhaps it may not be an economical proposition-or through some other means. However, those people are pioneers, and it is too bad to see the result of their hard labour rot on the trucks because it cannot be carried to market.
If there were small canneries in those areas, northern British Columbia products could be sold along the Alaska highway to the thousands of men who are on that road; northern Manitoba product could be sold to the mines in that vicinity, and the Peace River product shipped out. I would ask the minister to do something to assist the farmers in those areas and in other areas with which I am not at present familiar, but which I may visit this year.
The farmers in outlying areas are pioneers who perhaps deserve more assistance .than the farmers immediately adjacent to cities, such as those in the constituency of the hon. member for Peel. The farmers in that constituency raise vast quantities of vegetables which they have to take only a short distance to the county town, where quantities of vegetables are purchased and to the communities along No. 2 highway. Those which cannot be disposed of in that way go to either Hamilton or Toronto.
Because the farmers in the outlying areas are pioneers I do urge that something should be done for them to enable them to dispose of their vegetables properly, even if it is necessary for the department to erect or to assist in the erecting of small canneries.
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Robert Gardiner: I would say at the outset that there is one difficulty at this time, and that is to obtain tin with which to begin any kind of canning operations. Only yesterday I was waited upon by a very considerable delegation from Ontario who were trying to make sure that they would receive even a percentage of the tin they required in the past, in order to carry on their canning operations this year. We shall probably experience some difficulty in that regard. Therefore that is one practical difficulty which stands in the way at the present time.
There is under consideration at this time the question as to whether food can be supplied out of the Peace River country, part of which is in British Columbia and part in Alberta, to the Alaska highway; and in that connection we are considering the supplying of not only vegetables but meats as well. I do not know just what plans can be or will be worked out, but the matter is under discussion and consideration.


John Ritchie MacNicol: I am glad to hear the minister say that.


Robert Gardiner: The difficulty, of course, in connection with canning in outlying areas in order to sell the supplies outside those areas is the old difficulty of producing commodities of that kind in quantity and marketing them in quantity. It would obviously be impossible for them to put up surpluses and ship them out of areas of that kind into areas where there are larger populations and where there are canning plants which are producing at a rate cheaper than the plants in the outlying areas can produce, especially when they have to add shipping charges for the longer distances to the greater areas of population.
In certain very limited areas in Canada and in much greater areas in the United States plans have been worked out under which canning is done in the homes or in small community ventures, to supply those communities themselves. In the United States these ventures are promoted by women's organizations. I recall that when the farm women were here last winter quite a number of them who came from the United States spoke of that as one of the most important works being done by their organizations in that country. I do not know whether it is because Canada is newer, but the fact remains that we have not found it possible to develop the idea to as great an extent. There seems to be some reason why it is more difficult in Canada. It has been tried in a number of provinces, but it has not gone as far as we would like to see it go.
The main problem I believe is that, first, of having sufficient quantity in a community

to warrant the establishment of a factory; and then even if there is the quantity and the factory, there is the further problem of competing with others who are producing in areas such as those immediately adjacent to Toronto, Hamilton, Winnipeg or other smaller cities farther west. It will be realized by the hon. member who has just made the suggestion that some difficulty would be experienced if the products had to be shipped out. I quite agree that there are some possibilities in connection with making supplies available to the works along the Alaska highway and to the mines in the immediate vicinity. I really think most of these possibilities could be overcome by local organizations where the amount canned was not so large as to warrant establishing a factory.


Gordon Knapman Fraser: While I do not want to delay the proceedings of this committee unnecessarily, I feel that I should say a word on this item. This item covers one branch of the work of the Department of Agriculture which has suffered considerably in 1939, 1940 and 1941. I refer to the apple-growing industry in the different provinces of Canada. I have had the pleasure of working in close contact and cooperation with the fruit growers of British Columbia, with the fruit growers of Nova Scotia, with the pomological society of Quebec and with the Ontario fruit growers' association. Having had that close association, I should like to offer the sincere appreciation of the apple growers of those provinces to the minister; to the deputy minister; to Colonel Wheeler, the fruit commissioner; to Mr. Conger, and to the various inspectors and departmental associates who have given of their time and thought in order to protect the apple-growing industry which had become a war casualty.
I do not know whether it is fully appreciated, but the apple grower cannot take advantage of a diversion of crops. An apple orchard produces only one crop and is a lifetime investment. It is only because of the foresight and the cooperation of the gentlemen I have mentioned that the apple growers of Canada were able to survive in those years of depression caused by the cutting off of our export markets by the war. It is anticipated that arrangements for 1942 will continue these good results. I want to thank the minister and his departmental heads for the fact that this grant to the Canadian Horticultural Council is being continued. This council, formed in 1916 under the secretaryship of Major Leslie Burrows, has been one of the finest agencies for dealing with the problems of the fruit and vegetable industry. At all times

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these problems have been directed to the minister and his officials. I hope the committee will forgive me for taking up time in order to place these few words of appreciation and gratitude upon the record.


Percy Ellis Wright: During the base period last year there was a wide variance in the price for which honey was being sold in western Canada. Certain of the cooperative honey producers in western Canada had made agreements with the wholesalers for the sale of their product. Others who waited a little while to make their final agreement got better terms. As a consequence, prices varied considerably during the basic period, and an anomalous position was created as between Manitoba and Saskatchewan. Has the position been cleared up? In northern Saskatchewan we have one of the largest honey cooperatives in the province. I believe they handle about 50 to 75 per cent of the honey, a large part of which has been going to the export markets. An order in council has been passed closing the export market, and I should be obliged if the minister could make a statement on the marketing of honey?


Robert Gardiner: There have been negotiations with Great Britain for the sale of our honey, but it is a little difficult to make arrangements for the shipment of this .product because there is a market for it in Canada at a price higher than the British feel like paying. In other words, this commodity is consumed here in considerable volume at prices higher than we could obtain elsewhere. The hon. member referred to the fact that selling prices were not the same during the basic period last year. That is one of the problems before the wartime prices and trade board. It is somewhat similar to the problem that exists in connection with milk and other commodities. It sometimes happens that a commodity is not sold at the same price in all communities, or even in all parts of a certain community, because of certain undertakings that have been made. The question is being considered by the wartime prices and trade board, and an attempt is being made to arrive at a solution of the problem. This does not come under the Department of Agriculture, although our officials are consulted with regard to it.
I want to say to the hon. member for Northumberland, Ontario (Mr. Fraser), that the Department of Agriculture and I as minister greatly appreciate the associations that have existed between the horticultural council and the department. I had thought that if the hon. member for Haldimand (Mr. Sean) had been here I might have referred to the remarks he made about the
marketing of beef and other products, to the effect that there should be producer representation. Since I have had the privilege of being Minister of Agriculture the one group of farm producers who have maintained ideal relationships between the department and their industry are those people who are' associated with the horticultural council, and particularly the apple boards. They have not asked the department or the government to be represented in certain .places. They set up an organization of their own; they have made known their needs and seen to it that the department at all times knew what their organization thought ought to be done. They have worked consistently at the task of taking care of the interests of their producers. They have not wasted any of their energies in other directions. While the thanks of the growers of fruit, and particularly the apple growers, have been extended to the departmental officials and to myself as minister, I must say that a great part of the credit is due to the fact that the industry has been so well organized under the council. They made their needs known from the first days of the war. I think they found the officials of the different departments ready to sit down with them to work out their problems. The problem could not be dealt with entirely by the Department of Agriculture. The Department of Finance played a considerable part in the negotiations, and also the Department of Trade and Commerce when the problem was associated with trade outside Canada. That organization at all times has been well informed not only with regard to their own industry here but also with regard to the possibilities of marketing their products. They have stayed with the job until they, in cooperation with our officials have worked out plans which would be helpful.
I am sure hon. members will agree with me that we have heard very little complaint from the apple growers across Canada in spite of the fact that the earliest war problem in all of the different branches of agriculture came in the apple industry. The apple growers had been exporting 50 per cent of their crop to Britain and were told in the very early weeks of the war that they could not depend upon exporting any more apples to the British market. While Britain took 50 per cent of her requirements that year, she took none at all the next year, and she took some the following year. The information given to us by the British government was that Britain did not want our apples and did not wish us to expect to be able to market them in the British market during the war, but she has come in from time to time and
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taken some of them. In view of all these difficulties I think there is a lesson for all of us who are interested in agriculture in the splendid way in which this business has been handled through cooperation between the producers as represented by their boards and the departments, as the hon. member for Northumberland states it has.


Grote Stirling: I should like to present my own thanks to the minister for the way in which he has referred to the Canadian Horticultural Council. I feel sure that the recognition which he has given this evening will be greatly appreciated by the many associations which go to make up that council.
This grant which the government is paying annually is but a fraction of the revenues of the council. I cannot state accurately how many associations there are now as members of the council, but I will hazard a guess that it is between thirty and forty, and each of these associations, whether they be apple growers, or small fruit growers, or flower growers, or whatever they are, makes large contributions to the horticultural council. So long as I have been a member of this house, in my endeavours to represent the fruit growers of the part of Canada that I represent, it has been of very great assistance to me to be able to turn to the information always available through the secretary of the horticultural council.
I should like to add this also, that the negotiations which the minister has carried on, particularly with Nova Scotia and with British Columbia, have been greatly facilitated in that he had to deal in both those parts with boards which were set up originally under the Natural Products Marketing Act. Although that act came to a sad end, the boards persisted in the excellent work they had been doing. The functions of the fruit board in British Columbia are now being carried on for this purpose of cooperating with the dominion government, and the functions w'hich they carry out are carried out under an order in council of the War Measures Act. I very much trust that with this information it will be possible at some not very far distant date to resuscitate the marketing act under which such boards will be perpetuated.


Wilbert Franklin (Frank) Rickard: I should like to endorse what the hon. member for Northumberland, Ontario (Mr. Fraser) has said. Several times I have given credit to the Minister of Agriculture, the officials of his department and those connected with the horticultural council for the work they have done in connection with the apple grower, but I think we should also give credit to the hon. member for

Northumberland, Ontario, because I believe that no man has had a keener interest and spent more time and energy in trying to do his part for the apple growers than he, and I should just like to put that on record.


Robert Gardiner: I want to endorse what has just been said. The hon. member for Northumberland, Ontario, is, I think, as well informed with regard to not only the growing of apples but also the barrelling of them, and the making of the barrels-


Wilbert Franklin (Frank) Rickard: And the selling of them.


Robert Gardiner: -and the selling of them as anyone in Canada, and he has been of great assistance. I should say, too, that in what I said with regard to apples I had special reference to the boards that have been mentioned.


Percy Ellis Wright: Have any regulations or orders in council been passed with regard to the marketing of honey this fall, and if so, what are they?


Robert Gardiner: That is entirely under the wartime prices and trade board, and I would prefer it to be discussed under the appropriate item.


Alexander Malcolm Nicholson: I have received a number of letters regarding a rumour that large quantities of honey were sold to the liquor interests. Can the minister say whether this valuable food can be purchased by the distilleries to be used instead of sugar?


Robert Gardiner: The use of honey for industrial purposes is being restricted by the wartime prices and trade board to the same quantity as was used last year. Therefore it would not be possible to have any increased use of honey for liquor purposes this year over last.


Alexander Malcolm Nicholson: Would it be possible to buy honey and use it for liquor purposes instead of sugar?


Robert Gardiner: There could be no
increased use of it as a substitute. That is the idea they have in mind, to prevent honey from being used as a substitute, thus making it possible to put more sweet into commodities than the regulations provide for.


Mr. DOUGLAS (Queens):: We have heard a great deal about apples and other agricultural products. I represent Queens, a constituency in the smallest province in Canada. I think every hon. member will admit that Prince Edward Island produces the best potatoes and turnips grown anywhere in the world. I should like to say to the Minister of Agriculture and his department that I

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think we have the most efficient inspection department of anywhere in Canada. The certified inspection department is headed by Mr. S. G. Peppin, who is well known to the department, and he and his staff carry on very efficiently. Mr. C. E. Shaw, head of the table stock inspection, and the staff under him, certainly understand their business.
I have been connected with the potato business for the last twenty-five years, growing, grading and shipping. Without boasting I might mention that I organized the table stock potato inspection service in Prince Edward Island about twenty years ago, and about that time the farmers went into the growing of certified seed and table stock on a fairly large scale. A few years ago our province produced nine or ten million bushels of potatoes in one season, which was very creditable for a small province like Prince Edward Island. It was not an unusual sight in the fall of the year to see eight or ten large steamers, each canying from 150,000 to 200,000 bushels of potatoes from Prince Edward Island to Cuba and south American markets.
I should like to ask the Minister of Agriculture to cooperate with the Minister of Trade and Commerce and see w'hat he can do in helping to provide steamers for the shippers to carry our products to south American markets. I understand from the large shippers that it is almost impossible to get a large steamer to take our seed there.
I am sure our people appreciate everything that is being done by the department to encourage and assist in the growing of potatoes.


Ernest Edward Perley: I notice in the minister's report-since a little apple sauce is being passed along right now-there is an item that a new plant has been established for the manufacture of apple sauce. It has been greatly expanded and can produce three thousand cases a day, and the total output was 150,000 cases. The minister might tell us where the market is for this apple sauce, and whether we in western Canada are likely to get any of it. It was apple juice last year; now it is apple sauce.


Robert Gardiner: The plant is, of course, carrying on in accordance with the agreement which we made with the apple growers, and a considerable amount of apple sauce has been made. It has all been disposed of, most of it to the army, and the product has been found very acceptable.


Bert H. Soper: I understand that a product known as apple coffee is put on the market. Does the minister know anything about that?


Robert Gardiner: Apple coffee is to be made in a plant which has been established out on the Pacific coast, and which, I believe, is practically complete.


Grote Stirling: It is at Vernon, is it not?


Robert Gardiner: I do not think any of the product has been put out, except in an experimental way.


Grote Stirling: It is not on the Pacific coast.


Robert Gardiner: It is not on the coast; it is in the coast province, at Vernon. The plant is not quite completed, but I believe it will be turning out the product in a short time.


[Stage Direction]
Item agreed to.
Robert Gardiner: I wish item 29 to stand, and to take items 32 and S3 if the committee will permit.


Ernest Edward Perley: Before we take up these special items, I wish to ask the minister with respect to an item in the budget items, Votes and Proceedings of June 23. On page 6 of the appendix is. an item at the very top, under the heading, "Statement of expenditures by major categories and by departments for the last five fiscal years," and then it gives an estimate for agriculture for this year amounting to S8,437,000. I wonder whether, before we get to the special items, the minister could give us a break-down of that. It was not taken up when the Minister of Finance was dealing with the matter.


Robert Gardiner: Those are the items that we have just gone through. The break-down would be of that item.


Ernest Edward Perley: Does that include the special items?


Robert Gardiner: No; it includes all but the special items. It is reported here at the bottom of the estimates: Ordinary expenditure, 88,771,000; special $9,725,000.
Special.
33. To provide for assistance for the replacement of maple production equipment, $50,000.


Mr. HAZEN:: I made some inquiries about this item when the estimates were up last year or the year before-I have forgotten which year it was-and the facts are not clear in my mind, but if I remember correctly the minister said that this amount was paid under some agreement which had been made with, I believe, the maple producers of the province of Quebec and that it was to extend over a period of years. I am sorry that I have not
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the details of his statement before me, but what I have in mind is this. If there were an agreement of that kind, why has the amount been reduced this year by $25,000? How can it be reduced if there were such an agreement?


Robert Gardiner: The committee will remember that some years ago it was found that there was lead poisoning in the maple products produced from the province of Quebec and from the neighbouring states. Much of the product was being shipped to the United States, and they were protesting these shipments, so that an investigation was made and a process developed whereby certain equipment could be provided from which lead poisoning would not find its way into the product. The government of Quebec, this government and the producers entered into a three-way agreement which was intended to extend over a period of some three or four years. Our proportionate amount to be paid was about $300,000 a year. The province was going to pay a similar amount, and the producers were going to be responsible for a small amount in order to replace the old equipment with new. The war came on after we had been working at that for one year; the necessary material with which to make the new equipment is not available, and accordingly the plan has not been gone on with to the full volume of activity which we expected. This amount is what we expect to be able to spend this year under all the conditions existing. If it were not war time we would be asking for considerably more.


Douglas King Hazen: Does this lead poisoning come from the sap itself?


Robert Gardiner: It comes from the equipment. Those who are familiar with the gathering of sap in the forests of the east will recall that the old buckets used to rust; they were just ordinary tin and became very badly rusted. Some person developed a new product that would not rust, and it appears that this product was covered with a coating of lead which found its way into the sap. The sap was allowed to stand under certain conditions in the buckets, and a very small percentage of lead poisoning got into the maple syrup. The result is that those who are careful of food supplies, to see that they are absolutely pure, have been insisting on eradicating that difficulty. It was to assist in that that we had undertaken this provision.


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

Saturday, July 25, 1942.