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

Mrs. NIELSEN:: 1.	In what plants in Canada have labour management committees been set up?
2.	Where are such plants located, and in which of them has a union agreement been signed?


Mr. MITCHELL:: This question was
answered by the return I made to-day in the name of the hon. member for Rosetown-Biggar (Mr. Coldwell).


VICTORIA BARRACKS, B.C., MILITARY HOSPITAL
Mr. BRUCE:: 1.	Has the Department of National Defence recently constructed a military hospital at the Victoria barracks in British Columbia?
2.	If not, is a military hospital at Victoria barracks now under construction?
3.	What bed accommodation will this provide?
4.	What is the cost of this construction?
5.	Are X-ray and laboratory facilities provided?
6.	Has the Department of National Defence transformed a normal school at Victoria, B.C.. into a military hospital?
7.	If so, how many beds will this provide?
8.	At what cost?
fMr. Ilslev.l
9.	Will this be equipped with X-ray and laboratories?
10.	If so, at what cost?


Mr. RALSTON:: 1.	No.
2.	No.
3.	Answered by 2 above.
. 4. Answered by 2 above.
5.	Answered by 2 above.
6.	Yes.
7.	250.
8.	886,401.
9.	Yes.
10.	88,856.48.


PATRICIA BAY, B.C., R.C.A.F. HOSPITAL
Mr. BRUCE:: 1.	Has the Royal Canadian Air Force recently built a hospital at Patricia Bay, B.C.?
2.	If so, what bed accommodation will it provide?
3.	What was the cost?
4.	What was the cost of equipment, including X-ray and laboratories?


Mr. POWER:: 1.	Yes.
2.	Existing, 65 bed; proposed addition, 45 bed; total, 110 bed.
3.	Existing, 845.000 (approximately); proposed addition, S60.000 (approximately).
Note: Actual construction of the proposed addition will commence shortly.
4.	Medical, surgical, laboratory equipment, including initial issue of drugs, $13,250; X-ray equipment, $6,500; total, $19,750. The extension to this hospital is not fully completed and X-ray equipment has not yet been issued but is on order.


DEER LODGE, MAN., MILITARY HOSPITAL
Mr. BRUCE:: 1.	Has the Department of National Defence recently enlarged or, has it in process of enlargement, the military hospital at Deer Lodge, outside Winnipeg?
2.	If so, how many additional beds will it provide?
3.	What was the total cost of the enlargement?
4.	In connection with this enlargement, was it necessary to provide additional equipment and, if so, (a) what equipment; lb) at what cost?
5.	Did the Department of National Defence approach the board of trustees or governors of the Winnipeg general hospital with a view to having the additional accommodation provided there, by an extension to their present building?
6.	If so, with what result?


Mr. RALSTON:: 1.	No.
2.	Answered by 1 above.
3.	Answered by 1 above. .

Questions
4.	Answered by 1 above.
5.	No.
6.	Answered by 5 above.


ADVANCES TO GOLDEN MANITOU MINES COMPANY
Mr. BLACKMORE:: 1.	What was the amount of the bank loans advanced to the Golden Manitou Mines Company Limited, and authorized under P.C. 9942, December 23, 1941?
2.	What bank or banks advanced the loan?
3.	At what rate of interest was the money advanced?
4.	How much of this loan remained unpaid on March 31, 1943?


Mr. HOWE:: 
SYNTHETIC RUBBER
Mr. ROSS (Souris):: 1.	Have scientific investigations been carried on by national research council, as to possibility of utilizing Canadian-grown cereals to produce butadiene which is used in manufacturing synthetic rubber?
2.	Has the department made scientific research into the possibility of producing alcohol, rubber, starch and other commodities, from certain farm products?
3.	If so, what have been the results?
4.	What is the cost per pound of rubber made from wheat alcohol as compared to petroleum?


Mr. MACKINNON (Edmonton West):: 1.	Yes.
2.	Yes.
3.	(a) Ethyl alcohol. No experimental work is being done on alcohol production from farm products since the general processes are already well established in industry. Information obtained from the wheat-alcohol committee of the United States war production board is available to the national research council.
(b)	Rubber. Promising results have been obtained from laboratory investigations on the production of butylene glycol from wheat and its conversion to butadiene. A pilot plant scheduled to operate in early summer is under construction. The purpose of this plant is to provide necessary data for the proper design of a full scale industrial plant.
(c)	Starch. An improved process for the separation of starch and gluten from wheat flour has been developed on a large laboratory scale. Starch of high purity is obtained by this process without greatly changing the natural properties of the gluten.
4.	Actual production costs are not at present available to the national research council.
QUESTIONS PASSED AS ORDERS FOR [DOT]	RETURNS


ROYAL CANADIAN ARMY SERVICE CORPS-SIXTH DIVISION
Mr. JOHNSTON (Bow River):: 1.	Where was the 6th division of the R.C.A.S.C. stationed prior to November 4, 1942?
2.	Who were the officers in charge of this division?
3.	What was the strength of this division?
4.	What mechanical equipment was it supplied with?
5.	Was this division moved on or about November 4, 1942, and for what purpose? If so, to what part of Canada?
6.	Upon whose orders was this transfer made?
7.	How many officers and/or men were so moved?
8.	How many railway cars and/or engines were required for this transfer?
9.	For how long did they remain at their new destination?
10.	Was this division disbanded shortly after arriving at their new destination, and, if so, why?
11.	Was this division in whole or in part again sent back to its original location?
12.	What was the total cost of this complete transfer?


Mr. RALSTON:: I would ask that this
question be made an order for return. I believe I can bring down the answer to-morrow.



BLACKOUT ON APRIL 9-EXTENSION OF LIFE OF MUNITIONS AND SUPPLY DEPARTMENT


Mr. JOHNSTON (Bow River):: 1.	Did any of the men who were laid off from the Calgary Ogden shops during 1942, and to date in 1943, receive unemployment insurance?
2.	If so, how many, and what amount in each case?
3.	For how many of such men were positions, for which they were qualified, found by the selective service board?
Labour Conditions


LABOUR CONDITIONS
[Stage Direction]
On the orders of the day:
Mr. GORDON GRAYDON (Leader of the Opposition):: Mr. Speaker, I should like to ask a question of the Minister of Munitions and Supply, based upon a wire I received from the president of Bren local 1612, International Association of Machinists, who expresses anxiety in connection with the proposed layoff in the plant of the John Inglis company at Toronto. Will the minister indicate the facts of the situation, and the steps the government has taken to deal with it?


Hon. C. D. HOWE (Minister of Munitions and Supply):: Mr. Speaker, a few employees of the Bren plant are to be laid off owing to the fact that requirements for the Boys antitank rifle have been substantially reduced. The names of the personnel to be laid off have been given to national selective service, and they will be transferred to other positions. I might say that lay-offs of this kind will not be uncommon from now on. The fact of the matter is that the ground army equipment, not only to meet our own requirements but to meet the requirements of all the allied nations, has been filled for a number of items. It is obvious, in looking over our programme, that there will be lay-offs. This will not be an unmixed disaster, because the men and women who will be laid off are urgently needed in other types of production and transfers will be made accordingly. I do not think hon. members need worry when they are notified of a lay-off, because I can say they will be very frequent from now on.


Mr. COLD  WELL@: Will the transfers be made to positions having comparable rates of pay?


Clarence Decatur Howe: I think that is the policy of national selective service.


QUESTION AS TO CANADIANS EMPLOYED IN CANADA ON UNITED STATES PROJECTS
[Stage Direction]
On the orders of the day:
Hon. GROTE STIRLING (Yale):: Is the
Minister of Labour in a position to give an answer to the question I asked a week ago in his absence? Was his attention drawn to it?


Humphrey Mitchell: No; it was only this morning
that I got back to the office.


Grote Stirling: Perhaps the minister will be good enough to look it up in Hansard of the 8th instant.


FRENCH-CANADIAN REPRESENTATION ON NATIONAL WAR LABOUR BOARD
[Stage Direction]
On the orders of the day:
Mr. J. SASSEVILLE ROY (Gaspe):: Mr. Speaker, as the Prime Minister is not in his seat, I should like to ask the Minister of Labour whether in view of the numerous labour problems arising in the province of Quebec he is prepared before the Easter recess to make a further statement in addition to what has been stated by the Prime Minister in reply to the request I have already made for the nomination of a French-Canadian member on the war labour' board.


Humphrey Mitchell: I should like to say first of all
to my hon. friend that I do not think labour disputes are any worse in the province of Quebec than they are in any other province.


Mr. HANSON (York-Sunbury):: That is
not saying much.


Humphrey Mitchell: My hon. friend says
that that is not saying much, but if he will look at the facts he will see that the record of the Dominion of Canada in labour disputes is much better than that of any other of the united nations.
The hon. member for Gaspe will appreciate that the government is giving attention all the time to the appointment of people to the various boards under federal jurisdiction. I cannot say any more at the moment.


THREATENED STOPPAGE OF WORK AT ARVIDA PLANT OF ALUMINUM COMPANY
[Stage Direction]
On the orders of the day:
Mr. ANGUS MacINNIS (Vancouver East):: Is the minister able to inform the house whether his department lias been able to effect a settlement in the Arvida dispute?


Humphrey Mitchell: I am sorry to say that the conciliator whom we sent there had some trouble getting there owing to weather conditions. I have just received information that he arrived on the scene and I hope he will be successful in reaching a settlement satisfactory both to the management and to the employees in that great industry.


SHORTAGE OF MEN FOR COAL DELIVERY IN TORONTO
[Stage Direction]
On the orders of the day:
Mr. T. L. CHURCH (Broadview):: I should like to call the attention of the Minister of Labour to the difficulty experienced by small coal dealers in Toronto in finding men to

Canadian Forces-Overseas Parcels
make their deliveries. This is a very serious condition of affairs. There have been many applications to the Department of National Defence in No. 2 military district and they have all been refused without any hearing whatever. It is only a question of leave for three or four weeks for a very few. The civic authorities were here yesterday and asked the minister to release some men. *


Humphrey Mitchell: I think anyone coming from the city of Toronto should be the last to ask for anyone to be discharged from the army. I say that in all sincerity.


Richard Burpee Hanson: What does the minister mean by that?


Humphrey Mitchell: What I say. My hon. friend can rest assured that anything that can be done by selective service will be done. Our people have been, in conference with them already on the subject.


Mr. ROSS (St. Paul's):: The Minister of Labour says that any member coming from the city of Toronto should be the last to ask-


Some hon. MEMBERS:: Order.


Douglas Gooderham Ross: A matter of privilege, Mr. Speaker: the minister said that a member coming from Toronto should be the last to ask that anybody be discharged from the armed forces. Any member has the right to ask for the discharge of any man from the armed forces if he thinks the man should be discharged and has some grievance in connection with it. I should like to know the minister's reason for the statement he made, and I think he ought to retract those words.


Humphrey Mitchell: My hon. friend comes from a well-known family in the city of Toronto. I want it understood that I was not casting any reflection on the hon. member for Broadview (Mr. Church). Having lived next door to Toronto, in that suburb known as the city of Hamilton, I think just as highly of that community, and I think my hon. friend will agree that the contribution to the fighting forces made by the city of Toronto will compare with that of any other place in Canada. I want it understood that I was not casting any reflection on the hon. member or on the city of Toronto.


Mr. MacGREGOR:: What did the minister mean?


Thomas Langton Church: Selective service for some, not for others. There is no equality of treatment.


Douglas Gooderham Ross: The minister has not said what he meant.


Mr. HARRIS (Danforth):: On a question of privilege, I did not hear clearly what the minister said with regard to Toronto, but he certainly cast an aspersion on that city. I would appreciate it if he would retract one hundred per cent what he said.


Humphrey Mitchell: If I may say this to my hon. friend'-


Mr. SPEAKER:: - Order; the matter is closed. CANADIAN FORCES


STATEMENT AS TO ALLEGED IRREGULARITIES IN CONNECTION WITH PARCEL DELIVERIES OVERSEAS
[Stage Direction]
On the orders of the day:
Hon. W. P. MULOCK (Postmaster General):: A short time ago the leader of the opposition made reference to representations made by the Toronto board of control in regard to alleged charges in connection with mail for members of the Canadian armed forces overseas. The statement was made that it was estimated that only sixty per cent of the cigarettes sent to Canadian soldiers were reaching destination. I stated in reply that the matter had been brought to my attention; that I had already instituted inquiries and that a full statement would be made as soon as the inquiries were completed.
The representations grew out of a letter written to the Toronto Globe and Mail by Mr. J. D. Cumming, coordinator, petroleum wartime shops, Toronto, and, unfortunately, the Globe and Mail gave this letter undue prominence by writing an editorial in regard thereto before ascertaining whether there was any foundation in fact for the charges made by Mr. Cumming.
In addition, other letters were published and a statement was made by Controller Hamilton of the Toronto board of control which was given wide publicity.
I have no objection whatsoever to publicity when the facts are correct, but I take strong exception to this type of publicity when the statements are made without any foundation or justification. The result is' naturally to create a great deal of anxiety on the part of parents, relatives and friends of boys and girls overseas without serving any useful purpose whatsoever.
I have had the various cases investigated. I am not going to burden the house by reading

Canadian Forces-Overseas Parcels
the results of these investigations. I should like, however, to refer to a few, including the charges made by Controller Hamilton.
Controller Hamilton is reported to have made a statement at a meeting of the board of control on Wednesday, March 24, that hundreds of persons in Toronto had complained of the non-receipt of or tampering with parcels destined to members of the Canadian armed forces' on active service overseas, and that thefts had increased until now it is estimated that only sixty per cent of the cigarettes sent reach them.
I ordered an immediate investigation and, when interviewed, Controller Hamilton could only refer to letters which had appeared in the newspapers, and to ' one other complainant, Doctor W. H. Godfrey of Toronto.
He referred particularly to the letter written by Mr. J. D. Cumming, to which I have already referred.
He simply stated a number of people had expressed the opinion that an abusive practice exists involving the pilfering of articles and parcels and in particular cigarettes, either on board ship or when the mail arrived overseas.
In other words, Controller Hamilton had no specific information to support the statement he made.
Doctor Godfrey was also interviewed. He could give no names or addresses of persons who had complained of having had difficulty, nor could he give any evidence in support of his statement that there were racketeers in the post office who were selling cigarettes in the black markets in England.
Doctor Godfrey at first stated that since 1940 he had put in monthly orders for cigarettes with a certain store in Toronto, to be sent to his son. However, he was unable to produce any receipts in this connection. Inquiry made at the store failed to produce any record of cigarettes having been ordered by Doctor Godfrey or on his behalf, and the manager and other employees of the store were definite in their statements that they had no recollection whatever of Doctor Godfrey or any member of his family having given orders for cigarettes to be sent. This denial by the employees was made in the presence of Doctor Godfrey and two post office investigators.
However, in view of Doctor Godfrey's insistence that these cigarettes had been ordered, and having established that the complete records of such orders for cigarettes are maintained at the store's head office in Toronto, the department had a complete check made of all orders received since January 1, 1942. This check disclosed that one order had been received from Doctor Godfrey. This parcel was
IMr. Mulock.]
ordered on February 18, 1942, and was forwarded through the usual channels. When Doctor Godfrey was interviewed again, he denied having made the statement previously that orders for cigarettes to his son had been put through regularly once a month.
Mr. J. D. Cumming, previously mentioned, having also come into considerable prominence in connection with this matter because he apparently originated the statement that only sixty per cent or less of cigarette parcels addressed to troops were reaching their destination, when questioned about this allegation said that he had oftengiven lifts to unknown soldiers while driving in Ontario. He said that some of these soldiers had already been overseas in this war and that they had complained to him about the non-receipt of tobacco parcels while overseas. One man was said to have told him that he lost about one-third of the packages sent to him. Mr. Cumming admitted his evidence in regard to tobacco parcels was skimpy. He assured the post office investigator that he was not blaming the post office in Canada for any of the irregularities he had alleged existed. With regard to specific mistreatment of parcels, Mr. Cumming was able to give only' one name of an alleged complainant. This involved parcels addressed to a member of the Netherlands army overseas-parcels which, in the ordinary course of events, would not be handled through the Canadian postal corps, but would be dispatched from Canada in the British and foreign mail to England and handled by the British post office.
From what I have said, I believe hon. members will be in a position to judge with what justification the good name of the postal service is being impugned, and Canadians in the army postal service, many of whom are overseas, who are strenuously working long hours in the interests of the efficient handling of overseas mail, are having their characters blackened and their reputations besmirched by some thoughtless and uninformed individuals who make statements without having any evidence to support their charges. Fortunately, this is only one side of the picture. There are letters on file in the post office department from parents and relatives of men overseas expressing their appreciation of the services given under the many difficulties with which they have to contend.
As a matter of fact, the total losses of all parcels for our armed forces and civilians, from all sources, including enemy action, theft, fire and other causes, did not amount to three per .cent. In regard to parcels containing .cigarettes and tobacco, during the year 1942, 2,149,974 parcels were dispatched

Canadian Forces-Overseas Parcels
to the troops overseas. Of this number, 61.889 were lost as a result of enemy action alone, a percentage of 2-87. The number of complaints of non-receipt of cigarettes and1 tobacco parcels, received from all sources during that year, was 3,581. Of these, the department was able to account satisfactorily for 3,547. Either the items were delivered after the complaint was made, or we were able to confirm that they were destroyed as a result of enemy action. This left thirty-four cases to be dealt with which were investigated, and in which the addressee could not be located, did not acknowledge receipt, or for reasons undetermined, the item could not be traced.
I do not for one moment mean to say that we have not had losses, but one of the reasons for complaints was the occasion for the passing of Canadian army overseas routine order 2299. under which no member of the armed forces may receive through the mail more than one thousand cigarettes per month.
Secondly, large numbers of cigarettes are dispatched by certain organizations in bulk, by freight, at the rate of about five million a month, over which shipments the Post Office Department has no control, nor is it in any way responsible for their handling or distribution.
Unfortunately there has recently been a rather heavy loss of parcels due to enemy action, 62,425 tobacco parcels and 29,412 ordinary parcels having been lost at sea since the first of the year. As hon. members of this house will realize, the non-arrival of each of these parcels is naturally a potential source of complaint.
The army postal corps and the Post Office Department maintain a permanent full-time inspection staff, who devote their time and efforts to safeguarding armed forces mail and parcels.
Since this investigation commenced, an article appeared in the Toronto Globe and Mail of April 9 under the heading "Charges cigarettes sent troops stolen.'1 This article dealt with an interview given by Captain J. R. Cruickshanks, of the Canadian Legion War Services, who has recently returned from England.	.
A description of this interview was also published in the Toronto Telegram of April 10. under the heading "Private gifts of cigarettes are pilfered."
In this connection I would advise hon. members that, on my instructions, Captain Cruickshanks was immediately interviewed by W. P. Falvey, superintendent of the investigation branch, Toronto. In his report, Mr. Falvey quoted Captain Cruickshanks as stating that in his published interview he was casting no reflection whatever on the Canadian postal corps, either in Canada or overseas, in regard to the handling of packages of cigarettes forwarded by mail or ordinary parcel post, packets addressed to members of the Canadian army overseas. His criticism was of cigarettes shipped in cases and sent by freight, presumably from Canada, and addressed to the assistant, director of auxiliary services in England for distribution to members of the Canadian army overseas. Captain Cruickshanks stated that in making this criticism he had no intention of indicating that the Canadian postal corps was involved in any way. Mr. Falvey further quoted Captain Cruickshanks as stating that he could speak only in the highest terms of the Canadian postal corps, as he had had occasion to come in contact with a postal corps unit which was handling mail for a division of the Canadian army overseas. He spoke very highly of the efficiency with which this unit handled the mail.
Hon. ,J. L. RALSTON (Minister of National Defence): Mr. Speaker, I want to follow the statement made by the Postmaster General with a short statement based on inquiries I have made from the army authorities, particularly those overseas, respecting this matter of cigarettes, which has been receiving considerable publicity. I think perhaps it would be worth while for me to take a moment or two in order to explain the position so far as the army responsibility is concerned.
The first point is with regard to the nondelivery or the alleged non-delivery of mail parcels. The parcels are delivered by the postal authorities to the mail orderlies in the units, and then they are distributed through the units according to their mailing arrangements there. I wanted to find out whether there had been complaints fyom soldiers with regard to the delivery of parcels after they got to the units. I cabled the Canadian military headquarters overseas and I received a reply yesterday. It stated that all complaints of non-delivery are investigated and that their records show that bona fide complaints are comparatively negligible and are continually diminishing.
I want to remind the house that roughly over 500,000 cigarette parcels are every three months dispatched and received overseas by post. That checks with the figure given by my colleague the Postmaster General of over 2,000,000 parcels in the year. Canadian military authorities overseas advise that during the first three months of this year, in which there

Canadian Forces-Overseas Parcels
would be approximately 500,000 cigarette parcels sent, there was a total of eight-four complaints received by the army authorities. On investigation seventy-six cases were satisfactorily accounted for and eight cases were not satisfactorily accounted for. I may say that of these eight cases, seven were in respect of parcels which were dispatched not to army authorities but to a civilian agency overseas. That means that so far as the complaints received by the army authorities are concerned, about one parcel in every 60,000 was not satisfactorily accounted for. What I have been dealing with so far is the matter of postal parcels.
I want to refer to another subject which was dealt with by the officer who was mentioned by the Postmaster General, Captain Cruickshanlcs, in an interview he gave to the newspapers here in regard to the losses of cigarettes sent overseas.


Mr. CRUICKSHANK:: What army is he in?


James Layton Ralston: He is a representative of one of the auxiliary service organizations.
With regard to shipments by freight, they are made chiefly through two agencies-the Buckshee fund, which is maintained by the Canadian Legion, and the Overseas Tobacco League of Canada. There are also shipments by various local organizations to units and formations. The shipment of cigarettes in this way, particularly by the Buckshee fund and the Overseas Tobacco League, amount to something like 8,000,000 per month. That is probably less than ten per cent of the cigarettes which are sent overseas monthly. These cigarettes go to the assistant director of auxiliary services and are distributed by him among the units, from which they are issued free to the soldiers.
This representative of one of the auxiliary service organizations has made the statement to one of the newspapers that there is pilfering in connection with these shipments, and he suggests that the pilfering takes place in transit. The director of auxiliary services tells me that when he was in England there were instances of this kind. These matters are very carefully checked up. The United Kingdom authorities give the privilege of free entry for these cigarettes, and when the United Kingdom authorities at the dock find a box or case showing a certain number of cigarettes on the manifest and then find upon examination of the case that it is short of the number called for by the manifest, they bill the- auxiliary services for duty on the shortage, on the assumption that the shortage has been distributed among the civilian
{Mr. Ralston.]
population and therefore should not have come in duty free. So that they have that way of checking the number.
I have asked the assistant director of auxiliary services, who was in London and is here now, to give me an estimate of the total number of shortages reported while he was there. The figure he gives me is that during the time he was there he does not think there were more than 300,000 cigarettes reported short from these particular shipments. But assume it is a million; even that is a very small fraction of the whole. I have telegraphed Canadian -military headquarters to verify that. I want to point out that this occurred writh regard to the freight shipments and has nothing to do with the post office and nothing to do wdth the army. Even in peace times there is a certain amount of pilfering. Obviously with conditions such as they are in wartime, there are bound to be instances of this kind; and I do not think it will come as a matter of any particular surprise, with commodities such as cigarettes, moving by freight in times like these, when cigarettes are hard to get in the United Kingdom. As will be seen, the number reported missing is insignificant compared with the millions of cigarettes which go overseas. The cases are always reported to the United Kingdom police, and they are most assiduous in connection with it. I know of two prosecutions which were taken, although I capnot inform the house what the results were. One was against private individuals in London who were evidently receivers of some of these cigarettes and had set up an office where they proposed to dispose of them; and the other was against an officer of one of the transportation systems. The number of cigarettes shipped by freight is, however, insignificant compared with the number shipped by postal service to the soldiers.
I wish now to refer to the order mentioned by the Postmaster General. There has been some mention in the newspapers of restrictions placed on the receipt by Canadian soldiers of cigarettes. An overseas order No. 2299 was passed on July 22, 1942.


Gordon Graydon: Is that an army order?


James Layton Ralston: A Canadian army overseas routine order. This is the order which restricts the number of cigarettes which a Canadian soldier can receive through the mails to one thousand per month.
Formal complaints were received from the Dominions office requesting that steps be taken to stop the sale of cigarettes by Canadian soldiers and stating that traders were

Canadian Forces-Overseas Parcels
alarmed and that United Kingdom treasury was disconcerted. It was suggested that Canadian military authorities issue a general warning that the continued sale of gift cigarettes would prejudice continuance of the concession of duty free entry.
Subsequently, informal discussions indicated1 that the situation was giving further concern, and when the new British tax on cigarettes came in last year, it was pointed out that this would intensify the pressure for illegal disposal. A decision was made to pass this routine order No. 2299 in order to avoid the possibility of black market sales and to forestall the possibility of United Kingdom authorities withdrawing the free entry concession. Canadian military headquarters reports that the situation has been very much improved since the publication of that order.
The order is as follows:
22 July, 1942.
2299-Cigarettes
1.	The privilege extended to Canadian troops in the United Kingdom of receiving cigarettes from Canada duty free was granted by the government of Great Britain on the understanding that these cigarettes were for personal use and not for sale or disposal to civilians.
2.	However, the sale to civilians of these cigarettes by certain individuals has reached alarming proportions, and is jeopardizing the privilege enjoyed by the majority who are complying with the regulations regarding disposal.
3.	In order to ensure that the Canadian army in the United Kingdom continues to enjoy this privilege, no individual, as such, will be permitted, from the date of this order, to receive through the mails more than 1,000 cigarettes per month, which is an ample allotment for any individual.
4.	Consignments of cigarettes will be recorded in each unit, and quantities in excess of 1,000 per month addressed to any individual will be held under unit arrangements. In the event of a move which precludes the transportation of the stock, or lack of storage facilities, the surplus will be turned over by the commanding officer to Auxiliary Services for general distribution.
5.	It is emphasized that the foregoing restriction does not apply in any way to shipments of cigarettes addressed to commanders, commanding officers, officers commanding, hospitals and organizations for distribution to various units and establishments.
I should say that there are also certain freight shipments addressed to officers in charge of formations and units which go direct to the units.
That was the order which was passed, and I am assured by Canadian military headquarters that the excess of cigarettes over the 1,000 per soldier delivered each month is held by the unit on behalf of the soldier himself for eventual delivery to him. They are delivered to the auxiliary services only in the event of
a move which would prohibit transportation of the cigarettes, and Canadian military headquarters advise that moves of the kind are unlikely to take place in the United Kingdom.
The contents of the order were brought to the attention of all troops by publication or otherwise, and our information from Canadian military headquarters is that the troops generally feel that the restriction to 1,000 cigarettes a month is not unreasonable.
In addition to gift parcels to individual soldiers, there is what we call the pool which is formed of the cigarettes I have already mentioned sent by the Overseas Tobacco League and the Buckshee fund, and which amount to something like 8,000,000 cigarettes a month. That is a very small proportion of the number of cigarettes which are used. This pool is supplied by shipments of these two associations; also there are the shipments I have mentioned to the units themselves by local and community organizations.
With regard to the restriction, reference was made in one of the Ottawa newspapers the other day to the United States practice. The United States government supplies, direct, cigarettes for their troops. These are shipped in bulk to Great Britain. The American soldier is entitled to buy at cost price seven packages of cigarettes a week. That amounts roughly to 600 a month, as compared with 1,000 per month which the Canadian soldier is allowed to receive I notice a statement in an editorial in one of the Ottawa newspapers to the effect that the United States soldier seems perfectly satisfied, and the suggestion that Canadian army authorities are likely to urge a similar scheme. I do not for a moment criticize the United States system, which has certain excellent points. On the other hand I noticed an article published in Time of April 12 which was critical of some phases at least of their system, particularly the assortment of brands. The virtue of the United States system seems to be that it is more likely to achieve equality of distribution than ours, but on the other hand under their system the folks back home are deprived of the satisfaction of sending cigarettes to their troops, and there is the further point that the American soldier has to pay for his cigarettes, whereas the Canadian soldier, so long as the present .privilege exists, may get his cigarettes free from generous friends at home.
As will be seen, there are restrictions in quantity under both the Canadian and United States arrangements, and restrictions are bound to be criticized. And I remind the house that that applies not only to soldiers but to civilians. Recently we had an opportunity to purchase 100,000,000 American cigarettes in the
2198	COMMONS
Canadian Forces-Agricultural Leave
United Kingdom, on which the United Kingdom authorities had granted a concession of free entry. This opportunity gave us a chance to try out a combination of the United States and the Canadian systems. The soldier with generous friends got the benefit of that generosity by getting his thousand cigarettes a month, and to those who did not receive gifts it gave assurance that cigarettes would be available at the duty free price. However, it involved considerable additional administrative difficulties and responsibilities. Canadian military headquarters have asked us to make a second similar purchase, and we have decided to do this in order further to try out side by side the relative merits of the two systems.


AGRICULTURAL LEAVE-CLASSIFICATIONS, AND APPLICATION OF REGULATIONS
[Stage Direction]
On the orders of the day:
Mr. G. H. CASTLEDEN (Yorkton):: Would the Minister of National Defence place on record a classification of those persons in the armed forces who are now eligible for agricultural leave?


James Layton Ralston: I think I have done that already.


Mr. J. G. DIEFENBAKER (Lake Centre):: This may be the last opportunity before the Easter adjournment to bring again to the attention of the government the unsatisfactory nature of the application of the regulations for the granting of leave to men in the armed services to work on farms for a period not exceeding six weeks. I wish to ask the minister whether or not any. uniform system is being applied. Some commanding officers take the view that they have no authority, others that they have authority only with the consent of the district officer commanding. By the time the matter is settled, unless direct orders go out, it will be too late for many of these men to assist in the work on the farms this spring.


James Layton Ralston: I made it clear the other day that applications for agricultural leave- that is the sort of leave 1 was speaking of at the time-are made to the commanding officer and are subject to approval of the district commanding. They do not have to go for review at national defence headquarters. That order has gone out to everyone concerned in the same form. If my hon. friend will give me, now or at any time, any instance to the contrary, I will endeavour to find out immediately; I will have the district officer commanding called up. When it was called to my attention the other day an intimation was again sent out. There is another sort of leave, compas-

sionate leave, not agricultural leave, but leave on account of family reasons-vocation may enter into it-that requires approval of national defence headquarters. But agricultural leave such as I dealt ivith the other day does not require to be sent here.


John George Diefenbaker: Suppose a commanding officer refuses to give what one might consider fair consideration to an application, may a man in the army make application to headquarters at Ottawa? I realize that it is against army orders, but that is the only way in which it could be done.


James Layton Ralston: No, he may not under the present regulations.


S.S. MONTCALM INQUIRY AS TO GIFT OF ICEBREAKER TO RUSSIA
[Stage Direction]
On the orders of the day:
Joseph Sasseville Roy: Mr. Speaker, may we expect to be given some explanation about the gift of the icebreaker Montcalm which ivas presented recently to Russia by order in council?


James Layton Ralston: I understand that an explanation was given to the house last year. If any further explanation is required by the hon. member and he will put the question on the order paper, any information which can be given will be supplied in due course.


MILITARY SERVICE
[Stage Direction]
On the orders of the day:
Humphrey Mitchell: Mr. Speaker, in view of the
question asked by the hon. member for Lincoln (Mr. Lockhart) I should like to give to the house a statement explaining alterations which have just been made on the subject of utilizing the services of conscientious objectors, who are eligible for military training.
Hon. members will be aware that national selective service mobilization regulations (P.C. 10924 of December 1, 1942, and subsequent amendments) provide the procedure under which a mobilization board shall grant a postponement order, in relation to military training, "where the board is satisfied that the applicant conscientiously objects, by reason of religious training and belief, to war in any form and to participation in combatant military .service in which he might be required

Military Service-Conscientious Objectors
to take human life." This definition of a conscientious objector is taken from subsection 2 of section 13 of the mobilization regulations. Subsection 1 of the same section specifically includes Doukhobors and Mennonites as two categories of conscientious objectors especially in view of committals given to members of those faiths by orders in council passed during earlier administration.
Up to the time of the present change in the mobilization regulations, it had been provided that a mobilization board might order any person to whom a postponement order had been granted by reason of being a conscientious objector, to report for "alternative service".
As shown in an answer given to the house as a result of a recent order for a return, a total of 3,401 postponement orders, as of February 3 this year, had been granted by mobilization boards to those seeking to be excused from military training on conscientious grounds.	.
For some time some of the conscientious objectors have been ordered to report for alternative service in certain camps, operated in some cases by the government of British Columbia, in other cases by the Department of Mines and Resources. The province of British Columbia operates seventeen of these camps, for forest protection. The Department of Mines and Resources operates the remaining twelve-two in British Columbia, five in Alberta, two in Saskatchewan, one in Manitoba and two in Ontario-for work in connection with national parks or in other like projects. A total of 1,273 conscientious objectors were working in these twenty-nine camps as of February 3 last.
It will be observed that as of the date referred to, 2,128 conscientious objectors had not been called out for alternative service. This was due to a lack of facilities which might be availed of to place these men at necessary work. And I should like to emphasize that the camps were by no means intended nor operated simply as concentration camps; in every sense they are work camps, performing useful and necessary functions.
In amending the regulations, our main objective was to endeavour to make use in the national interest of the services of all conscientious objectors, and by so doing to provide somewhat more labour for certain essential industries, than would otherwise be available.
The present change in procedures in regard to conscientious objectors, is embodied in order in council P.C. 2821 of April 7th, 1943. This order, passed pursuant to the War Measures Act and the National Resources .Mobilization Act, 1940, amends the relevant
sections of both the national selective service mobilization regulations and the national selective service civilian regulations, and provides for a new procedure under which it is expected that the services of conscientious objectors may be utilized to greater advantage at the present time.
It is now provided that certain officers in the employment and selective service offices across Canada shall be designated as "alternative service officers".
Under existing regulations men who were adjudged by mobilization boards to be conscientious objectors were ordered to one of the work camps where they earned a stated wage of 50 cents per day and board. This had the effect of assigning these men to useful work but on the other hand the effect was to withdraw their services from ordinary industry, farming, for example.
The statement made on behalf of conscientious objectors by those who speak for them is that they are patriotic Canadians willing to contribute their services to the state and make a contribution to the state but that they are not permitted by their beliefs to bear arms.
Believing that on the whole the claims made on behalf of these men are correct, and that they are ready to accept work in occupations where they are most needed, alternative service officers are given authority to direct conscientious objectors to accept employment on farms or in industry where their services are most needed. Conscientious objectors will have the option of refusing to accept employment to which they may have been directed by these officers in which case they will then be directed to one of the alternative service camps.
Any farmer who engages a conscientious objector for farm work, will be required to pay such wage rate'as is fixed by the Minister of Labour which rate will be from $35 to $40 per month depending upon local conditions. Where conscientious objectors are referred to employment in industry, the employer must pay the going rate of wages for the work performed. In either case, however, the men themselves will receive $25 a month, together with board and lodging, while any surplus earned over and above that $25 will be assigned to and paid to the Red Cross society. The arrangement in respect to the camps will continue to be that the man receives 50 cents a day and board and lodging.
As a substantial number of the conscientious objectors are experienced at agricultural work, it is hoped that many of them may become available to the farming industry. It is not

Yukon-Railway Transportation
expected that all of the men now in alternative service camps will be moved out immediately to other employment, although men with special qualifications, who can be used to better advantage elsewhere, will be so moved.
It is anticipated that the change in procedure will result in an addition to our manpower resources available for essential employments, and it is believed that the plan which has been developed will provide a fair means by which genuine conscientious objectors can make a contribution to the productivity of Canadh and thus prove their loyalty.
The plan will be made effective May 1, 1943.


Richard Burpee Hanson: May I ask if that applies to Doukhobors, and if so, will it be enforced?


Humphrey Mitchell: I think so.


Mr. DOUGLAS (Weyburn):: May I ask the Minister of Labour a question with reference to the statement he has just presented with regard to conscientious objectors? He read it rather quickly. Do I understand that if one of these conscientious objectors goes to work on a farm at S3S a month and board he will receive only $25 a -month and board and the other $10 will be turned over to the government, to go to the Red Cross?


Humphrey Mitchell: That is correct.


Thomas Clement (Tommy) Douglas: That means the man is to be fined $10 a month for his views.


Humphrey Mitchell: I do not think that is a fair way to p-u.t it. At present they -are only getting fifty cents a day, and I think there is a greater degree of sacrifice on. the part of the man who is willing to give his life if necessary.	*


Thomas Clement (Tommy) Douglas: A man should be paid for the work he does.


YUKON TERRITORY
[Stage Direction]
On the orders of the day:
Mr. GEORGE BLACK (Yukon):: Mr. Speaker, since the Easter recess is fast approaching and I may not have an opportunity for some time to make a short statement I should make, I am going to ask you and the house to give me just a few moments to refer to some remarks I made in this house on March 23, at page 1495 of Hansard, when speaking on the budget. At that time I told the house of the unsatisfactory situation in Yukon in regard to transportation. I in-

formed the house that the railway from the coast into Y'ukon had been taken over for the duration under lease by the American army, and that they had made a fearful failure of it, that there was a great congestion of freight and that, actual chaos in transportation had ensued.


James Layton Ralston: Mr. Speaker, I would be the last to interrupt my hon. friend, an exSpeaker of this house whom I hold in the highest esteem, but I suggest that if this were to be done by hon. members generally it would create a precedent and make it. very difficult to get on with the business of the house. If my hon. friend has any question to ask on the orders of the day I am sure we shall be glad to take note of it and endeavour to find gome way to allow him to make his statement, if that can be done. I submit, however, that my hon. friend of all persons would wish, to keep within the rules and not set an example which might -create a precedent, take up a good deal of time, and bring about- a great deal of confusion in connection with the deliberations of the house.


George Black: If I may speak to the point of order raised by the minister.


Thomas Vien: The hon. gentleman,
before coming into the 'house, mentioned to me the statement he intended to make. That statement, I take it, is in a measure a question of privilege in connection with a statement he made in the house the effect of which he now wishes to explain. I suggested to him then that this was really a matter of privilege and that he should have the opportunity to make whatever explanation he wished.


James Layton Ralston: I would go as far as anyone in endeavouring to see that my hon. friend had an opportunity to make his statement, provided it was within the rules of the house. I rose to call your attention, Mr. Speaker, and the attention of the house to the fact that from what I had heard up to that point it did not appear that the hon. member was speaking to a question of privilege. If it is a question of privilege he is of course within the rules and no undesirable precedent is created.


Mr. BLACK (A'ukon):: I promise you, Mr Speaker, and the house that my statement will not be nearly as long as any of the three statements made to-day by ministers of the crown who, if anything, were transgressing the rules. I am going to talk about something more important to the people concerned than cigarettes and .conscientious objectors.

Special War Revenue Act


James Layton Ralston: Let me say to my hon. friend that General MacArthur and Premier Curtin thought enough of the situation with regard to cigarettes to devote a good many hours to a conference in regard to that very subject. That is how important cigarettes are to the troops. Moreover, the statement made by the Postmaster General was in response to a request made by the leader of the opposition.


George Black: Personally I am quite willing to accept the minister's statement, and I hope he is satisfied with the situation.
When Brigadier General O'Connor and his staff in southern Yukon came to Ottawa I had the privilege of discussing the transportation situation with him. He admitted to me and members of his staff admitted that the situation was most unsatisfactory, and promised immediate rectification. I merely want to tell the house and the public, since my criticism received wide press publicity, that General O'Connor did exactly as he promised. When he returned to Yukon he at once removed from office those who had failed in the operation of the railway and replaced them with a competent manager. The congestion of freight has been all cleared up, trains are running on schedule, and both army and civilian supplies are being promptly transported. I think it is only right that I should give them credit for the changed condition and let the public know that the trouble has been remedied.


VICTORIA DAY
[Stage Direction]
REQUEST FOR RESTORATION OF TWENTY-FOURTH OF MAY AS A PUBLIC HOLIDAY On the orders of the day:
Douglas Gooderham Ross: I wish to'
direct a question to the Prime Minister. As he is not in his seat perhaps he will take this as notice. Will the government consider the restoration of the celebration of Empire day, May 24, as a holiday where possible, since the day now has special significance for a great many people in this country?


&quot;DESERT VICTORY&quot;
[Stage Direction]
PARTICIPATION BY CANADIAN FORCES IN NORTH AFRICAN CAMPAIGN On the orders of the day:
Thomas Langton Church: Yesterday hon. members saw the motion picture "Desert Victory". I have had letters complaining that the people do not know what part Canada has played in that victory. Will the government make a statement within a few days as to the part Canada has taken in it?



SPECIAL WAR REVENUE ACT

[Stage Direction]
Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of Bill No. 58, to amend the Special War Revenue Act.
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Blanchette in the chair.
On section 1-"Minister".
Mr. NEILL:: I should like to see a copy of the bill; it is not yet distributed.


Richard Burpee Hanson: We had no discussion on second reading; the only discussion has been on the resolution. I suggest that the minister give an outline of what is covered by the bill. So far as I can observe, after reading the bill, it is largely an administrative measure. There are of course increases in taxation with which the house is already familiar. Perhaps a brief statement would not be out of place.


Hon. C. W. G. GIBSON (Minister of National Revenue):: This bill relates almost entirely to matters contained in the budget resolutions. One or two administrative items have been added for the purpose of clarifying the Special War Revenue Act.


[Stage Direction]
Section agreed to.
Section 2 agreed to.
On section 3-"Die".
Mr. FRASER (Peterborough West):: We
have not had a chance to read it.


[Stage Direction]
Section agreed to.
On section 4-Stamp tax on letters and post cards.
The ACTING CHAIRMAN (Mr. Blanchette) :: Shall the section carry? Carried.


Gordon Graydon: Just a minute; we need some time to look over these sections. In all fairness, if we are to be asked to go over them so quickly we ought to have more than a synopsis of what is being passed. The sections have not been read.
At the end of subsection 2 we find these words:
-nor on any letter or post card if the levying and collecting of such tax would be contrary to the provisions of the universal postal convention concluded between Canada and certain other countries.
What is the reason for that additional phraseology?


William Pate Mulock: As the leader of the opposition probably knows, we dealt with this matter when the resolutions were before the committee. A
Special War Revenue Act

postal convention with certain countries has been in effect for many years. I believe one of the last times it met was at Cairo, on which occasion the Hon. Mr. Sauve, then postmaster general, attended-. The conference had been held every few years, but it has not been held since the beginning of the war. The convention has been in effect for many years, and this provision is merely a compliance with the obligations which this country has to foreign countries in regard to rates of postage. If we did not make this provision we would be really going back on agreements that we have made with other countries in regard to postage.


Gordon Knapman Fraser: This really just affects letters coming in from foreign countries to Canada?


Thomas Langton Church: I should like to ask one or two questions with regard to these increased rates of postage. The city of Toronto has the largest postal revenue in Canada, amounting to nearly $9,000,000. The department is increasing the rates on drop letters, which, in view of the volume of business done, should be carried for one cent. The revenue of this post office is helping to keep'up the rest of the service. It is just a public utility and. it should give service. They cannot give us service in Toronto because they have not the facilities. A large building was erected at the foot of Bay street to handle this work, but what happened to it? It was taken over by the ordnance. Not many of them in that department are going to the war. A number of huts were erected and are available on the waterfront and there is also the exhibition grounds to handle this work.
Yet the government is going to increase the rates on drop letters and even on letters going to our soldiers. These letters should be free, both inside and outside Canada. I realize the country is hard-pressed, but I do not think we should be putting an extra tax on our soldiers. Some of our men are prisoners of war and they are entitled to a subsistence allowance which they are not getting. If we are to have this increase in rates, this public utility should give efficient service. I admit the post office has done excellent work and the present Postmaster General has made many changes. This was shown by the way in which his estimates passed at the last session. But I do suggest that he should get his plant on Bay street working and not have so many delays in getting the mail from the trains.
I do not see why the industrial workers in that city should be imposed upon in this way. Because of the large volume of business done in the city, there should be a reduction

of rates, not an increase. I am hoping that something will be done about this. When you mail a letter here Thursday night, in some cases it is not received until Saturday. I know the Postmaster General is having difficulty in getting men and. all that sort of thing, but I should like him to look into these matters.


James Layton Ralston: My hon. friend has
referred to the ordnance occupying the post office building in Toronto. There are just two things I should like to mention. First, I rather suspect a conspiracy between him and the Postmaster General, because the Postmaster General also feels rather strongly about this. The whole matter has been discussed with Public Works. Secondly, I hope my hon. friend will get it out of his head-if he really has it in his head, and I do not believe he has-that ordnance does mot go to war, that ordnance does not fight. If he saw "Desert Victory" he will realize how important ordnance is. The ordnance staff are going overseas just as quickly as they can be spared here and just as fast as the boats can take them.
The ordnance in Toronto is extremely necessary. The whole question is whether ordnance shall vacate that building and build another, which would take perhaps a year's time. In the meantime all ordnance activities would be stopped, and they are most necessary, particularly this year. I say to my hon. friend, as I have said to my colleague, the Postmaster General, that the army would like to get out of that post office building. We should certainly be very happy to have a new building with the conveniences that would be provided, but we cannot do it under present conditions. We are all trying to improvise and get on as best we can in view of the shortage of labour and materials, especially in building, and in view of the urgency with which these things in the ordnance service are required to be done.


Thomas Langton Church: It should be the duty of the government to see that the delivery of mail and parcels and the payment of sustenance allowance to prisoners of war in alien enemy countries is not left to a private agency or a protecting power. I think the first duty of the government is to see that soldiers who are prisoners of war get their mail and parcels and also a sustenance allowance. This is being left to a protecting power and to a private organization. This matter was criticized in the British House of Commons. I admit that the Postmaster

Special War Revenue Act
General is doing good work under difficult circumstances, but I repeat that this matter has been raised in the British house and the sam_ principle applies to Canada. These things should not be left entirely to a private organization. If some of these men are not getting their parcels the government should take the responsibility. With due respect to the Postmaster General and the Minister of National Defence, in some cases they are not getting them. I can quote cases reported in the British Hansard where men are not getting their mail and parcels, and the camps are named. I have great confidence in the Red Cross; I believe they have done a glorious work in this war, but we should be sure that prisoners of war get everything they are entitled to.


Grote Stirling: I do not follow the Postmaster General in his reference to subsection 2, which states that the collecting of such tax would be contrary to the provisions of the universal postal convention. I understand him to say that it would apply only to letters arriving in. Canada.


William Pate Mulock: I have sent for the particulars of that provision and when they arrive I can give full information.


[Stage Direction]
Section agreed to.
Sections 5 and 6 agreed to.
On section 7-Repeal.
Gordon Graydon: Is this section designed to cover one of the resolutions that was passed?


Colin William George Gibson: This section should be read in conjunction with section 10. Manufacturers of cigarettes and tobacco have complained that the excise tax imposed at the last session on these commodities and which was .payable at the time they purchased excise duty stamps to be affixed to the packages required an outlay of a great deal of capital which remained frozen, not only until the goods were sold, but until the purchaser paid for them, which was in most cases two weeks and sometimes longer after he received the goods. With the doubling of this tax it was felt that the situation would become much more acute, particularly in the case of the smaller companies who would not have the necessary liquid assets available to pay those taxes in advance. The deletion of this section removes the requirement for the payment of the tax when the stamps are purchased.


Gordon Graydon: When we come to number 10 it will actually take the place of section 7.


[Stage Direction]
Section agreed to.
Sections 8 and 9 agreed to.
On section 10-Security that true returns rendered.
Gordon Graydon: Mr. Chairman, I do not want to be continually reminding you that there is a limit to how fast we can travel, even with this abbreviated procedure of simply calling the marginal notes. I think section 10 should be read in full. It adds an entirely new subsection, and we may have some questions to ask upbn it.
The ACTING CHAIRMAN (Mr. Blanchette) having read section 10:


Gordon Graydon: A very large bond is asked for in this case. The minister gave a partial explanation a few moments ago in connection with the repeal of section 7. Might I ask why security is being asked in this particular case of the manufacturer, producer and packer, that he will render true returns of his sales? Is this a new provision? Has no similar security been required hitherto?


Colin William George Gibson: Hitherto payment had to be made when the stamps were purchased, so that there was no risk to the government of any loss. But now payment is deferred. It is intended that the excise tax on cigarettes and manufactured tobacco will be collected during the month following that in which the goods were produced, instead of at the time of production as it stands at present; and in granting this delay, an average of forty-five days, it was felt that the manufacturers should be called upon to give security for payment. This section is designed to require the posting of security in such amounts as may be required. The principle is not new; it already applies under this act to licensed wholesalers.


Douglas Gooderham Ross: What is meant by the producer?


Colin William George Gibson: That would be the manufacturer.


Douglas Gooderham Ross: Not the man who grows the tobacco?


Colin William George Gibson: Oh, no; he does not pay it.


Douglas Gooderham Ross: The bond is to be not less than $1,000 and not more than $250,000. What is the basis for that?


Colin William George Gibson: The method is that they take the largest month's production in the previous year and then call for a bond of just double that amount.



Special War Revenue Act


Gordon Graydon: The bonding arrangement contemplated by this section is regarded by the department as a sufficient guarantee for the payment of the money?


Colin William George Gibson: Oh, yes; the bond will be quite sufficient.


Douglas Gooderham Ross: What is the term of the bond?


Colin William George Gibson: It is a one year bond.


[Stage Direction]
Section agreed to.
On section 11-Producer or manufacturer.
Gordon Knapman Fraser: Why is the dresser or dyer of raw furs taken out and any packer of olives sandwiched in between "publisher" and "commercial artist"?


Colin William George Gibson: This section deletes the
words "any dresser or dyer of raw furs." An excise tax of 25 per cent is imposed on raw furs dressed and/or dyed in Canada under the provisions of section 80A of the act. This was done at the last session. This wording, which is in the sales tax part, should have been deleted when the amendment was made last year.


[Stage Direction]
Section agreed to.
On section 12-Deductions.
Gordon Graydon: You are still going at a very rapid rate, Mr. Chairman. Is section 12 being replaced by any other section?


Colin William George Gibson: It is being replaced by
section 16,


[Stage Direction]
Section agreed to.
On section 13-Free goods, in unfair competition with domestic goods.
Gordon Graydon: Is this a straight repeal, or is another section being substituted?


Colin William George Gibson: The section to be repealed was enacted in 19?3, its object apparently being to ensure that goods of Canadian production would not be at a disadvantage with goods imported from other countries free from customs duty. If this should occur, the obvious remedy would be by appropriate amendments to the customs tariff. The officials tell me that they have not had occasion to use it, nor has an application for its use been received for several years.


Gordon Graydon: How many years have to elapse before a section is -repealed through lack of use? This seems a strange reason to advance.


Colin William George Gibson: I gave that as an example, not as a- reason. It did not seem reasonable to retain the section.


Gordon Graydon: Is there no possibility of cases arising when the section might be needed?


Colin William George Gibson: There has not been a case in fifteen or twenty years, and if there was a case I think the appropriate remedy would be an amendment to the -customs tariff. We could provide protection in that way rather than by a reduction of the sales tax.


Douglas Gooderham Ross: How would this be operated if there were occasion to use it- by regulation, or by order in council?


Colin William George Gibson: It was operated by the minister himself. If he believed it should be applied, he had the authority to apply it, but in the last twenty years that authority has never been exercised.


Gordon Graydon: Why was this particular year, 1943, singled out for dropping this section? Why not last year, or the year before?


Colin William George Gibson: All the refunds and deductions are being put into one section now that we are cleaning up the act.


[Stage Direction]
Section agreed to.
On section 14-Refund.
Gordon Graydon: Mr. Chairman, you might just as well read these short sections as read the marginal note. We plan- to help the government as much as we can, but there is a limit to what we can do.	-
The acting Chairman (Mr. Blanchette) having read section 14:


Gordon Graydon: Is another section substituted for the section that is being repealed?


Colin William George Gibson: Yes, that is covered by section 16.
Section agreed1 to.
On section 15-Drawback.


Gordon Graydon: Does the same thing apply here?	.


Colin William George Gibson: Yes.


[Stage Direction]
Section agreed to.
On section 16, subsection 1-Deductions and refunds.
Gordon Graydon: With respect to new
section 105, can the minister give us an explanation for the inclusion of paragraphs (a), (b), (c), (d) and (e)? What was the underlying reason for this change?


Colin William George Gibson: In the Special War Revenue Act provision has been made for refunds and

Special War Revenue Act
deductions in case of sales tax, but not in the case of other taxes imposed by this act, and the auditor general has questioned the authority for the payment of refunds made where overpayments or errors had occurred and taxpayers had sought to obtain reimbursements. In addition, there were references to refunds in a number of sections of the act now to be repealed by clauses 12, 13, 14, 15, 16 and 17; and by repealing these and reenacting them in the order shown in section 16 of this bill, consolidation of these sections is effected and at the same time authority is given to make refunds in cases of the other taxes imposed by this act. There will be no change in so far as the administration by the department is concerned.


Mr. HAZEN:: Referring to section 105, subsection 1(d), what goods if any are exported now on which a deduction or refund is being allowed? .


Colin William George Gibson: No goods exported are subject to these taxes. So that, in case any payment had been paid, a drawback would be payable.	[DOT]


George Hugh Castleden: Will the minister explain paragraph (c) ?


Colin William George Gibson: Where, for example, goods are brought in and later sold to -a provincial government, which is entitled to freedom from tax, that would be an example of the application of the provision.


Douglas King Hazen: I am not quite clear about the minister's reply to the question I asked. Subsection 1(d) reads:
. . . where goods are exported, under regulations prescribed by the minister;
And then, going to the first part of the subsection:
(1) A deduction from, or refund of, any of the taxes imposed by this act may be granted:
Are any taxes imposed at the present time on goods which are exported?


Colin William George Gibson: No.


Douglas King Hazen: Then what is the purpose of subsection 1(d)?


Colin William George Gibson: The tax may have been paid on the goods, and then the goods are subsequently exported, in which case the exporter is entitled to a drawback of the taxes which have been paid.


Richard Burpee Hanson: That would be in the case of a Canadian manufacturer who imports large quantities of ingredients such as cocoa and pays duty on the cocoa, and 72537-140}
if he exports goods to, say, Newfoundland, this government gives him a drawback.
Subsection 1 agreed to.
On section 16, subsection 2-Refund on goods sold to province if province exempt from tax.


Mr. SLAGHT:: Would the minister explain subsection 2? I note that a manufacturer is entitled to a refund for goods sold to His Majesty if they are purchased for any purpose other than resale or for the use of any railway, commission, board or public utility of a provincial type operated by a province. It does not include a railway or public utility which is operated by the dominion. Is there any reason for that distinction? If so, what is it?


Colin William George Gibson: This subsection is part of the original act; it is not new. But the dominion does tax its own operations, such as railways.


Richard Burpee Hanson: What is meant here is that the dominion will collect the tax in the first place and then refund it in the case of a bona fide provincial purchase for its own use.


Colin William George Gibson: That is right.


Arthur Graeme Slaght: Take the case of a manufacturer who sells half his product to the government and the other half to private users; why do we refund to him the taxes paid on the half he sells to the government? Will not that create confusion when he comes to make up the balance sheet with his profits for the year and the period? Offhand it would seem to me that we might properly tax him both for government used goods and other goods which he sells to a private user.


Colin William George Gibson: We do not tax the provinces, and consequently when the provinces buy from the manufacturer they will not pay a price which includes the tax. Consequently the refund1 is made to the province of any tax which has been paid before the purchase is made by the province.


Richard Burpee Hanson: Under the provisions of subsection 2 of section 105, the government now compels the Canadian National Railway Company or the Bank of Canada, as the case may be, to pay sales tax on goods purchased for their use. Why should not the government make the Canadian National Railway pay income tax? It makes it pay sales tax, it makes it pay customs duties, it makes it pay every other kind of levy, but it exempts it from the payment of income tax.
Special War Revenue Act


Arthur Graeme Slaght: I think that raises an interesting question, which might properly be debated under an appropriate item, but it does not come under this item.


Richard Burpee Hanson: Oh, I suggest it does.


Colin William George Gibson: I think that might be discussed when we come to the income tax act.


Richard Burpee Hanson: I may not be here. I have not been able to get a copy of the bill. This is a question which naturally arises under this legislation. Why is one company taxed differently from another? When it suits the convenience of the administration the Canadian National Railway is a separate entity; and when it suits their convenience, it is not. We blow hot and we blow cold over this situation. I submit it is quite pertinent to ask this question; it is a matter of public policy and it arises naturally out of the provisions of subsection 2.


Arthur Graeme Slaght: Well, they are taxed under this.


Richard Burpee Hanson: They are not subject to income tax.


Arthur Graeme Slaght: This is not dealing with income tax.


Richard Burpee Hanson: I know,
but the principle is there, I submit. We should have a statement of policy from the minister as to why that is so.


Colin William George Gibson: I am not prepared to make
a statement on this item with regard to income tax; I do not think the question whether or not a company is taxable for income tax purposes has anything to do with this section. Subsection 2 of section 16 is not new; it is a repetition of a section in the original act, concerning other taxation entirely and having no connection whatever with income tax.


Richard Burpee Hanson: Then I
will put the reverse argument. On the assumption that the Canadian National Railways is not called upon to pay income tax, why should it be called upon to pay sales tax or customs tax or any of the other taxes the treasury imposes upon it under present laws? Surely that is pertinent.


Colin William George Gibson: In connection with the
sales tax, I think government-owned enterprises should pay it, the same as any other industry in this country, and they are called upon to do so.


Richard Burpee Hanson: Well, that is the law, I admit, but if they are not called upon to pay income tax why are they called upon to pay any other imposition? The minister has expressed an opinion but he has not given any reason for it.


Douglas Gooderham Ross: Dpes the Canadian Broadcasting Corporation come under this category as well? Does it also pay these taxes?


Colin William George Gibson: Yes, it pays these taxes.


Richard Burpee Hanson: But it
does not pay income tax.


Colin William George Gibson: No.


Richard Burpee Hanson: I understood that at the end of the year they had a million dollars on deposit in the banks, more than they knew how to use. The report is that they have a substantial sum in cash unexpended, yet they pay no income tax. The report would indicate that with this substantial bank balance they should be reducing the licence fee.


Douglas Gooderham Ross: Do I understand
that this section takes the place of section 13?

Special War Revenue Act


Colin William George Gibson: It takes the place of various other sections.


Douglas Gooderham Ross: But does it take
the place of section 13?


Colin William George Gibson: No.


Douglas Gooderham Ross: I suppose section
13 was put there in case of an emergency, so that action could be taken quickly. Suppose something like that should occur now; will the minister be unable to give relief to a company that needs it?


Colin William George Gibson: The governor in council
always has power to remit any tax where there is an emergency.
Subsection 2 agreed to.
Subsections 3 and 4 agreed to.
On subsection 5-Application for refund to be made in writing within two years.


Colin William George Gibson: This is all part of section
16, and these are not new subsections but only repetitions. The only amendment in section 16 was in subsection 1.


Richard Burpee Hanson: But they
are being re-enacted.


Colin William George Gibson: Yes.


[Stage Direction]
Subsection agreed to.
Subsections 6 and 7 agreed to.
Section agreed to.
On section 17-Repeal.	Deductions and
refunds.
Richard Burpee Hanson: What does this imply? There is no explanatory note.


Colin William George Gibson: Section 117 of the act is
now incorporated in section 105.
Mr. HANSON -(York-Sunbury): This deals with refunds of money paid by mistake of law or fact.


Colin William George Gibson: Yres.


Richard Burpee Hanson: This raises an interesting question. In law money paid under a mistake of law cannot be recovered, because everyone is presumed to know the law; but money paid under a mistake of fact may be recovered. Under this provision if any person, whether by mistake of law or fact, has overpaid, the money may be refunded but there is a limitation of two years. Why is that?


Colin William George Gibson: Well, it is really a matter of preventing stale claims from coming in. There must be some finality as to the period within which claims will be considered.


Richard Burpee Hanson: That is
just an arbitrary limit?


Colin William George Gibson: Yes.


[Stage Direction]
Section agreed to.
On section 18-Weekly returns of taxable receipts.
Richard Burpee Hanson: Under what circumstances would the minister use his discretion to waive the requirements of the subsection which provides for weekly returns of taxable receipts? Under what circumstances would the minister use that discretion, if he has ever used it, and how frequently? Here is a statutory provision directing that every person liable to pay the tax shall make a weekly return showing the amount received from prices of admission. I suppose this is in connection with the amusement tax. Why has the minister discretionary power to waive the requirements of this section?


Colin William George Gibson: Well, it is really to grant an * extension of time for a day or two if certain exceptional circumstances should arise.


Richard Burpee Hanson: Has the minister exercised it, and if so how often?


Colin William George Gibson: We have not had to exercise it under this section, but we have had occasion to do so in connection with the sales tax.


Richard Burpee Hanson: When you could not collect?


Colin William George Gibson: No, to give an extension of time.


[Stage Direction]
Section agreed to.
On section 19-Tax on place of entertainment.
Thomas Langton Church: I should like to know what "entertainment" means, because the former section did not accurately describe it. Is there any control of the rates charged for these entertainments? Some of them are conducted by the men of the forces all over Canada, at which they raise large sums of money. Sometimes they charge as much as $1.50 for admission. The federal government has decided on a tax in this connection, and there must be a principle behind it. What is the principle of the government with regard to entertainment for the remainder of the war? What has the government decided will be its policy in this connection, and does it apply to professional and amateur sport; and to theatres; and is there to be any change? Some of these places allow soldiers in uniform to enter free. Surely it does not apply to them. Then there are sports by the forces, and national contests
Special War Revenue Act

may travel all over Canada from Halifax to Vancouver. Are there audits made of all these entertainments? The minister should also be able to say what the policy of the government is for entertainment and sports for the remainder of the war. How *will it affect the provinces and municipalities? The municipalities do not get any of this money, but they have to supply police and fire protection, and help to regulate the crowds. Is there any control of rates? You go on the street and see long lines of people in front of shows. They may interfere with the man in business next door. We do not want to curtail any more than can be helped entertainment or sport for sport's sake; the days are dark enough. I think the general public would like to see it, but the prices should be reduced in some cases, and twenty-five per cent is a pretty stiff tax for some of these amusements or entertainments. Surely they should not be taxed for soldiers in uniform. Nobody wishes to curtail entertainment; it is part of the British way of life; we have always had it, but it should be under some regulation. A deputation met the government last session. The government should inform the committee as to its policy for the remainder of the war.


Colin William George Gibson: I think the hon. member is confusing this entertainment tax with the amusement tax. The rates of the amusement tax are not being changed. The definition of a place of entertainment is:
"Place of entertainment" means any place
1.	Where liquor, beer or wine is sold or provided, if facilities for dancing are provided for the patrons, or
2.	Where liquor, beer or wine is sold or.provided, if entertainment by one or more paid performers is provided for the patrons, or
3.	Where facilities for dancing and entertainment by one or more paid performers is provided for the patrons, whether or not such place is enclosed or is in a building or other structure; but a place shall be deemed not to be a place of entertainment at any time when neither facilities for dancing nor entertainment as aforesaid by one or more paid performers are provided for the patrons.
This section does not touch the amusement tax.


Richard Burpee Hanson: When does a place cease to be a place of amusement and become a place of entertainment?


Colin William George Gibson: It is a place of entertainment when any two of these forms of entertainment come together, as where there are liquor, beer and wine and dancing, or liquor, beer and wine and entertainment; when the two are combined on one programme.


Richard Burpee Hanson: That is a very limited form of entertainment.


Colin William George Gibson: A place of amusement has another definition under the amusement tax.


Douglas Gooderham Ross: What about a place of entertainment where there is no profit, for example a charitable institution; is there a tax on that?


Colin William George Gibson: Special submissions are
made in those cases where they are for charity and not for the benefit of any individual, and consideration is given. Section 136 states:
The minister, may in his discretion, exempt any person from payment of the tax for which provision is made in section 134 of this act whenever any place of entertainment is, in his opinion, operated principally for a charitable purpose rather than for the operator's gain or profit.


An hon. MEMBER:: Is the word "operator" defined in the act?


Colin William George Gibson: Yes.
"operator" means every owner, manager or operator who operates any place of entertainment, every employee or agent of any such person, every person selling or supplying goods or services in, or in connection with, a place of entertainment and every employee or agent of any such person.


[Stage Direction]
Section agreed to.
On Section 20-Schedule II.
Douglas Gooderham Ross: What is the total tax on a five-cent cigar?


Colin William George Gibson: On the lowest priced cigars the tax is increased from $1.25 per thousand to S6.25, or an increase of $5 per thousand.


Richard Burpee Hanson: Is that the only tax?


Colin William George Gibson: This tax, under the Special War Revenue Act, is in addition to the flat rate tax of $3 per thousand levied under the Excise Act.


Douglas Gooderham Ross: There is a tax on the tobacco itself, is there?


Colin William George Gibson: Not if it is of Canadian origin.


Richard Burpee Hanson: There are not many imported five-cent cigars, I think, although a celebrated statesman in the United States said once that what the nation needed was a good five-cent cigar. The tax, then, is $9.25 per thousand on the lower priced cigars?


Colin William George Gibson: The tax on cigars valued at not more than $40 per thousand was $1.25, it is now $6.25.


Richard Burpee Hanson: And there is a sales tax?	.


Colin William George Gibson: Yes, eight per cent.

Special War Revenue Act


Richard Burpee Hanson: Is there any other tax?


Colin William George Gibson: If the tobacco is imported there would be customs duty.


Douglas Gooderham Ross: There is an excise tax on domestic tobacco entering into the manufacture of cigars.


Colin William George Gibson: Not on domestic tobacco.


Douglas Gooderham Ross: I have here a cigar. I suppose this cigar now would sell for ten cents.


Colin William George Gibson: No; it should be u>p only one cent. The five cents will now be six cents.


Douglas Gooderham Ross: On 100 cigars how much is the total tax?


Colin William George Gibson: On one thousand cigars it is $9.25', plus sales tax.


Richard Burpee Hanson: What is the situation with respect to the tax on sugar? It used to be two cents; then went back to one cent, then back to two cents, and is it one and a half cents now?


Colin William George Gibson: No. Two cents.


Richard Burpee Hanson: Is this an increase under section 3 of the schedule?


Colin William George Gibson: No, it is just reprinting the schedule. Only sections 1 and 2 were amended.


Richard Burpee Hanson: This regularizes what was done by the government by order in council when parliament was in session?


Colin William George Gibson: No; this is repetition of the section as it stands already.


Richard Burpee Hanson: When was the change made last year? I think it was done by order in council.


Colin William George Gibson: There is no change this year.


Richard Burpee Hanson: Was the shuffling that took place not done by order in council, within a few months? The minister announced it one day in the house.


Colin William George Gibson: There was an amendment by way of order in council in connection with beet sugar; but it does not affect this section.


[Stage Direction]
Section agreed to.
Section 21 agreed to.
On section 22.
Gordon Knapman Fraser: I
mentioned this matter last year. Has it not something to do with booklets coming from the United States and other countries?


Colin William George Gibson: No. Since the inception of the act exemptions have been granted for bibles, missals, prayer books and the like. That exemption, however, has not extended to the materials used in the manufacture of those books. In order to put the domestic producers on the same basis as producers outside the country, this section is amended.


Richard Burpee Hanson: Of what class are these materials?


Colin William George Gibson: Paper, ink and binding
materials.


Richard Burpee Hanson: How are they segregated? There are lots of papers and binding materials in the country. We do not import paper materials exclusively for the manufacture of bibles, do we?


Mr. JACKMAN:: It is still the best seller.


Colin William George Gibson: Every manufacturer is under licence. We have access to his books, and we can ascertain how many bibles or books of some other type he produces.


[Stage Direction]
Section agreed to.
On section 23-Proviso.
Douglas Gooderham Ross: I note the expression "clocks and watches adapted to household or personal use." Where does the minister draw the line?


Colin William George Gibson: Before a railwayman in the running trades can be appointed he must have a special type of watch. Those watches are provided only under licence, and are strictly controlled. They cannot be bought by the general public.


Richard Burpee Hanson: Are they special watches?


Colin William George Gibson: Yes, with about twenty
jewels. While they are sold at various prices, they are high-class watches and are now under rigid control.


Douglas Gooderham Ross: I understand that, and I commend the minister for that control. A young man going into the running trades must pay about $90 for one of those watches, and a rate of 25 per cent is high. But I do not understand the meaning of the expression "household or personal use". Is there a distinction? Is the tax higher on those not adapted for personal use?
Special War Revenue Act


Colin William George Gibson: Yes; it is intended to tax the personal articles.


Douglas Gooderham Ross: In order to keep down consumption?


Colin William George Gibson: Yes, consumption by
individuals.


Mr. ADAMSON:: This provision is made exclusively for railwaymen. There is another class of essential services. I refer to members of the armed forces, and particularly officers. They have to have reliable watches, because timing is of the utmost importance. Their watches must be shock-proof and waterproof, and are very expensive. Would the minister consider allowing watches for members of the armed forces to come under the same tax-free provision? I know that a reliable watch costs at least $50. I do not know whether watches are included in an officer's equipment under the British system, but certainly such essential equipment as compasses and chronometers are issued tax-free to officers of the armed forces in England. To-day a good watch is essential military equipment.


Colin William George Gibson: No standard watch is supplied exclusively to the army. If we began exempting watches for special services, the loophole would become very wide, and control would be difficult. An officer might purchase a watch, but it would be difficult to follow the watch after the sale was made. On the other hand, a railwayman is not allowed to dispose of his vatch. If he leaves the service, the watch s taken out of his control.


Richard Burpee Hanson: The minister will admit that this is a special concession made to a special class. The service of the railwayman is not comparable with that of the man in the armed forces. I am disposed to think that the door should never have been opened. All should be treated alike.


Harry Rutherford Jackman: Was the restriction with regard to railwaymen's watches in operation prior to the war, or is it a war-time restriction. When a man leaves the service must his watch be turned in, and in ordinary times must he have permission of the divisional superintendent to purchase a watch?


Colin William George Gibson: I am not sure of that. I do not think there was any control before the war. There is control now, however, and the jewellery controller has supervision over all these watches.


Harry Rutherford Jackman: In conformity with the recommendation of the hon. member for York-Sunbury, I suggest there would be no
<Mr. Douglas G. Ross.]
evasion in extending this privilege to officers in the armed services, who must have accurate watches. The minister could use the same precautions as are set out in this section. A provision could be made whereby an officer in the armed services could not purchase his watch, except under authorization in writing by the officer commanding his unit. Surely that would do away with any possibility of evasion?


Colin William George Gibson: In many instances watches are presented to officers upon their joining the forces. There is no standard type of watch; this is-not something which could be controlled. It would be much too broad, if we permitted any extension. Then, various types of watches are used by officers; there is no one standard type.


Richard Burpee Hanson: The minister is saying that preference is given to one class, and that it will not be extended to other classes.


Colin William George Gibson: In order to earn a living a man in this class is required to have a watch. They cannot be appointed unless they have watches;.that is a prerequisite of employment. The watch costs anywhere from $75 to $150. That is a great deal of money to ask a man in the running trades to pay, out of his own pocket, and then ask him to pay a tax of twenty-five per cent in addition.


Richard Burpee Hanson: They
always had to do it.


Colin William George Gibson: Oh, no; this is a new tax. It became effective only last year.


Douglas Gooderham Ross: An officer or a sergeant in the army has to have just as accurate a watch as the railwayman. The minister has said that it would be unfair to ask the railwayman to pay the tax on his watch. It is a good deal more unfair to ask a member of the forces to pay it out of the small pay he receives. Why not have some kind of standard watch which could be bought by the army?


Colin William George Gibson: That is up to the army.


Douglas Gooderham Ross: If the army does it, will the minister give the exemption?


Colin William George Gibson: Oh, well-


Gordon Knapman Fraser: If there is any doubt as to the watch an army man should have, I would suggest that they should have a watch made in Peterborough by Westclox. There are thousands of them in the Canadian army, all giving good service.

Excise Act


[Stage Direction]
Section agreed to.
Sections 24 and 25 agreed to.
Bill reported, read the third time and passed.

[Stage Direction]
Hon. C. W. G. GIBSON (Minister of National Revenue) moved the second reading of Bill No. 59, to amend the Excise Act, 1942.
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Bradette in the chair.
On section 1-Definitions.
Colin William George Gibson: I should like to explain that this bill deals almost entirely with administrative items. Most of the amendments are made necessary by modern methods of production and improved procedure. Certain sections now being amended could not be enforced on account of the fact that they are based on manufacturing practices long obsolete, while others are amended to clarify the text. The whole are submitted to bring the Excise Act in line with present-day practices, conditions and methods of merchandising. With the exception of the sections increasing the rates on spirits and Canadian brandy, which are mentioned in the budget resolutions, none of these amendments affect the revenue.


[Stage Direction]
Section agreed to.
Sections 2 to 4 inclusive agreed to.
On section 5-Yearly inventory of stock. ,
Richard Burpee Hanson: Why
change the date?


Colin William George Gibson: The change in the date is a clear expression of what actually takes place, namely, that the inventory of manufactured products and materials is taken at the close of business on March 31 in each year.


Richard Burpee Hanson: What is a stemmer?


Colin William George Gibson: A stemmer is a man who pulls the stem out of the leaf, and formerly he was licensed.


Richard Burpee Hanson: He is not now?


Colin William George Gibson: No.


[Stage Direction]
Section agreed to.
On section 6-Horses, vehicles, et cetera.
Richard Burpee Hanson: This section raises a question which has been up many
times. Under the law as it is at present there seems to be some doubt as to the right to condemn horses, vehicles, et cetera, used in transporting in violation of the act, or the regulations made thereunder. This section gives the right to condemn, by regulation, such methods of transportation. In days gone by, the question of condemning automobiles, the owners of which had been caught in illegal transactions, was a vexed question as between the customs department and the acceptance companies or finance corporations. A finance corporation might have a lien on a vehicle, and there would be the greatest injustice done by condemning that particular vehicle. A finance corporation might make a loan on an automobile which had been sold in the utmost good faith by a dealer to a law-abiding citizen. The equity in that automobile might come into the hands of a law breaker, who is caught. If the vehicle is seized, the people who have an investment in it lose their money without any right of redress.


Harry Rutherford Jackman: Or it may be a ship or vessel worth a considerable amount.


Richard Burpee Hanson: As a rule, ships which are caught smuggling have always been condemned. I do not know what the mortgagees of such ships do. The finance companies have always claimed that where the title to a vehicle is vested in the lending authority by operation of law it should not be subject to seizure or at least to condemnation. They are always seized when an owner has been caught in an illegal transaction, and the condemnation does not take place until after certain things have taken place. I contend that the man who has a legal title to the vehicle ought to have some rights and be able to protect it. I have forgotten the legal position of the mortgagee of a ship, but my recollection is that he does not have much of a chance to protect his investment. What is the legal position to-day, and are you seeking to change it by this section?


Colin William George Gibson: In this section the word "transporting" is being used in place of the word "removing". This change was made some time ago in other sections of the act.


Richard Burpee Hanson: I think "transporting" is a much clearer word.


Colin William George Gibson: In connection with the other matter raised, I refer my hon. friend to section 69, paragraph (a) of the Excise Act. which was passed a few years ago. It provides that a person who claims interest in a horse, vehicle, et cetera, may apply to a judge for an order and the judge may grant an order to protect

Excise Act

the claimant's interest, and he shall be entitled to an order that his interest be not affected by such seizure.


Richard Burpee Hanson: What is the position with respect to mortgagees of ships and vessels?


Colin William George Gibson: They are included in the section.


Richard Burpee Hanson: The mortgagee would be protected?


Colin William George Gibson: The section covers horses, vehicles, vessels and other appliances.


Richard Burpee Hanson: The old rum-runner is rather out of practice in our part of the country. I am glad to have the minister's assurance that the man with a legitimate interest will be shown some consideration.


John George Diefenbaker: I * should [DOT] like to know when that amendment was passed, because I remember a case before the Supreme Court of Canada about 1932 or 1933.


Colin William George Gibson: It was just about that time; I am instructed that it was about 1933 or 1934.


John George Diefenbaker: Let me place this case before the minister and ask what the situation is under the law as it now stands. Suppose a purchaser buys an automobile and, being unable to finance it, enters into a conditional sale agreement. The purchaser then uses the automobile for the transportation of liquor without the knowledge or consent of the conditional vendor. Is it not a fact that the law is that the motorcar may be confiscated and the conditional vendor lose his entire interest in the car in so far as his rights of recovery against the car are concerned?


Mr. MARTIN:: The explanation is-


John George Diefenbaker: I was asking the minister.


Colin William George Gibson: The car is forfeited without reference to ownership, but anybody having a financial interest in it has the right to have his interest determined.


Richard Burpee Hanson: I think
that is hardly correct. The car in the first place is seized. There is an act of forfeiture on the part of the minister at a later period. That used to be the law. In the first instance there is not a forfeiture. My recollection of the law is that there is not a forfeiture at the time of the seizure but there is a forfeiture at a subsequent date when the whole matter is

before the minister. If that is not the law, I should like to know when it was changed and why it was changed.


Paul Joseph James Martin: I tried to tell the hon. member for Lake Centre.


Richard Burpee Hanson: The hon. member for Essex East ought to be an authority on these things, but I am not sure that he is.


Paul Joseph James Martin: Well, I am, in spite of the hon. member for Lake Centre.


Colin William George Gibson: The car is automatically forfeited at the time it is seized.


Richard Burpee Hanson: Is that the law to-day?


Colin William George Gibson: Yes.


Richard Burpee Hanson: How long has that been the law? In the old days I had quite a lot to do with these seizures, and I used to have to come to Ottawa every once in so often about them. I found that you could always get an article that had been seized by a customs officer released if you paid down about four times what it was worth, and I always advised my clients never to pay until the last minute because, when they did pay, they could kiss their money good-bye. Acting on that principle, we used to get the case deferred until all the facts were before the minister. But there was no legal forfeiture at the time of the seizure.


Colin William George Gibson: That was under the Customs Act.


Richard Burpee Hanson: The Excise Act never was quite as lenient? Is that the idea? It was always forfeiture immediately under the Excise Act?


Colin William George Gibson: Yes.


Richard Burpee Hanson: Is the customs Jaw the same as I apprehend it to be?


Colin William George Gibson: Yes; it is as the hon. member stated.


Richard Burpee Hanson: Why the arbitrary distinction? Why should they not be on the same footing?


Mr. ROSS (Moose Jaw):: Customs law is gypper's law.


Richard Burpee Hanson: I never
found it so. I always found that it was the government that was gypping when it comes to fines and forfeitures.


John Gordon Ross: That is what I meant. They gyp you in everything.

Excise Act


Richard Burpee Hanson: Oh, I misunderstood by hon. friend. I would say that the customs men are not as severe as the excise man. The excise man in Britain, as far back as you can go in history, away back in the eighteenth century was about the most abhorred man in the kingdom.


[Stage Direction]
Section agreed to.
On section 7-Recovery of penalties.
John George Diefenbaker: Would the minister advise the committee what he has in mind and what decision of the court of appeal makes this amendment necessary?


Colin William George Gibson: It is not a decision of the court of appeal. But it is desirable to make it clear that the limitation on the jurisdiction of the magistrate is not to be affected by any term of imprisonment which arises out of failure to pay a fine. The amendment does not make any real change in the meaning of the section, but it is reintroduced on account of a confusion which seems to have arisen in the minds of certain magistrates. I refer hon. members to section 169 for an example of penalty for first offence and penalty for non-payment of fine, which would have the effect of rendering the accused liable to imprisonment for a maximum of two years.


[Stage Direction]
Section agreed to.
Sections 8 and 9 agreed to.
On section 10-Duty how computed.
Agar Rodney Adamson: What is the significance of the wording "from the tail of the first worm."?


Richard Burpee Hanson: Has a
worm a tail? *


Colin William George Gibson: In modern distilleries, distillation and rectification are continuous processes, and it is not possible to measure the spirit at the tail of the first worm.


Agar Rodney Adamson: Formerly it was done in several stages, and now it is a continuous process?


Colin William George Gibson: Yes. .


[Stage Direction]
Section agreed to.
Sections 11 to 21 inclusive agreed to.
On section 22-Drawback on beer exported.
Richard Burpee Hanson: I was very much disturbed to read that in certain communities of this country recently the slogan went out, "No beer, no bonds." What is the government going to do to meet that position in view of the approaching victory loan?
72637-141i


Colin William George Gibson: The expression, "no beer", is certainly overdrawn. I am informed that before the war the consumption of beer was about sixty-two or sixty-three million gallons a year. At the present time the amount being permitted for sale is eighty-eight million gallons, so. that there is a considerable quantity of beer in the country.


Richard Burpee Hanson: But whai about the rationing of it?


Colin William George Gibson: The government has set a quota on how much beer can be sold, and the rationing is in the hands of the provinces.


George Hugh Castleden: What are the regulations, and what is the amount of drawback on the beer exported?


Colin William George Gibson: The amount of the drawback is the amount of the duty paid on the malt that- has been used in making the beer.


George Hugh Castleden: What is the amount of the drawback?


Colin William George Gibson: It depends upon the amount of the beer exported.


George Hugh Castleden: I meant, what was the drawback last year on the beer exported?


Colin William George Gibson: I have not the figures of the drawback last year, but I could get them.
Section agreed :o.
Section 23 agreed to.
On section 24-Repeal. Wetting, drying or removing grain.


Gordon Graydon: Is that substituted for any other section?


Colin William George Gibson: No. The procedure in malt houses has greatly changed in recent years. New machinery and new processes have rendered obsolete many of the sections of the Excise Act which deal in detail with the procedure in a malt house.


[Stage Direction]
Section agreed to.
Sections 25 to 32 inclusive agreed to.
On section 33 -Imported manufactured tobacco and cigars to be marked.
Richard Burpee Hanson: I hardly think that the marginal note is correct. It provides that all manufactured tobacco and cigars to be imported shall have stamps affixed. That is, of course, a method of paying the tax. Are they to be marked as such? Is there any provision with respect to that; because it seems to me the marginal note is
Excise Act

misleading. It might be a good thing if they were marked and had the authority of being imported cigars or tobacco.


Colin William George Gibson: This clause does not mean that they have to be marked if they are imported; it means that they have to be stamped.


[Stage Direction]
Section agreed to.	.
On section 34-Repeal. Caution notice.
Richard Burpee Hanson: What was the caution notice?


Colin William George Gibson: The caution notice was a notice which had to be stamped or marked on the box stating that the box must be destroyed when the contents have been removed. Now that so many cigars are being sold in cardboard cartons, the section is not considerd to be necessary any more.


[Stage Direction]
Section agreed to.
Sections 35 to 42 inclusive agreed to.
On section 43-Canadian brandy. Proviso.
Agar Rodney Adamson: Would the minister give us a definition of Canadian brandy? I know that Scotch whiskey can be called Scotch whiskey only if it is malted and matured and bottled, or made, in Scotland. Is there any "proprietary" on brandy? What is the definition of brandy?


Colin William George Gibson: Canadian brandy as defined by the act is hereby defined as:
... a spirit distilled exclusively from the juice of native fruits without the addition of sugar or other saccharine matter and containing not less than forty-two seventy-five-hundredths per centum of absolute alcohol by volume.


Richard Burpee Hanson: Is there any such thing.


Colin William George Gibson: Yes; that is manufactured in this country.


Agar Rodney Adamson: How much?


Colin William George Gibson: It is manufactured by at least two distillers. I could not say how much, but I could get the hon. member the figures as to the quantity.


Richard Burpee Hanson: Is it
potable?


Grote Stirling: Is this quite apart from the spirits used in the reinforcement of wines?


Colin William George Gibson: No, this does not apply to the fortification of wine.


Richard Burpee Hanson: Is it a
potable spirit? One hon. member has asked me, is it inflammable?


Colin William George Gibson: I am told it is all poison; I do not know.


[Stage Direction]
Section agreed to.
Section 44 agreed to.
Bill reported, read the third time and passed.

[Stage Direction]
Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of Bill No. 60, to amend the customs tariff.
Motion agreed to, bill read the second time and the house went into committee, thereon, Mr. Bradette in the chair.
Section 1 agreed to.
On section 2-"Additional" duties amended.
George Hugh Castleden: Will the minister
please explain the effect of section 2?


Mr. COLDWELL:: Why are there no explanatory notes to this bill? Usually bills are printed with explanatory notes; and I believe that, if we cared to be rather nasty about it, we might insist that this bill should carry them.


Mr. ILSLEY:: I am informed that there
are never explanatory notes to this kind of bill. It follows the resolutions. I must say I think the rules do direct the government to supply explanatory notes. I have heard that point raised in the house. As a matter of fact, however, they never are appended to these bills.


Major James William Coldwell: I thought the rule
covered all bills.


James Lorimer Ilsley: I think it does. But it has
never been done.


Richard Burpee Hanson: There is
a question I wish to ask about the customs department. I assume it can be asked only on this bill. Since the appointment of Mr. Scully as Consul General of Canada in New York, who is the acting commissioner? Is it the intention of the government to unite the two departmental branches of customs and excise, or to keep them separate, as they are to-day?


Colin William George Gibson: Mr. Scully has not yet
received his actual appointment; I think his commission must be signed. In the meantime an order in council is being sent forward recommending that Mr. Sim be appointed acting commissioner of customs.


Richard Burpee Hanson: And you
are going to keep the two branches separate?

Income War Tax


Colin William George Gibson: There has as yet not been
an announcement of any change in policy.


Richard Burpee Hanson: Is any
change contemplated?


Colin William George Gibson: The matter is receiving
consideration, but no decision has been reached.


George Hugh Castleden: The question I asked
was whether-the effect of this section will be merely to increase the duty on the goods mentioned by $2 a gallon.


James Lorimer Ilsley: Yes; that is it.


[Stage Direction]
Section agreed to.
Section 3 agreed to.
Schedule agreed to.
Title agreed to.
Bill reported, read the third time and passed.

[Stage Direction]
The house in committee of ways and means, Mr. Bradette in the chair.

[Stage Direction]
21. That the taxes payable and paid to a municipality pursuant to the provisions of subsections 6, 9 and 11 of section 39 of the Assessment Act (Ontario) R.S.O. 1937, chapter 272 which are deemed to be taxes on real property, may be allowed as a deduction from the income of any mining company; provided that the said Assessment Act is so amended as to provide that in assessing the said taxes payable to the municipality, taxes payable by a mining eom

pany under the Income War Tax Act and the Excess Profits Tax Act are not allowed as a deduction.
Richard Burpee Hanson: Last evening the minister stated that he would submit his proposed amendments to all the resolutions prior to the introduction of the bill. Has he those amendments ready?


James Lorimer Ilsley: I am afraid I cannot do that until eight o'clock.


Richard Burpee Hanson: What does this resolution mean?


James Lorimer Ilsley: This relates to certain municipalities in northern Ontario which obtain part of a tax on the incomes of certain mining companies. The effect of our law and the law of the province of Ontario, as contained in their taxing statutes, is this. If, for example, a mining company has an income of $3,000,000, it is taxed in this manner. If the company is paying a combined income tax and excess profits tax of forty per cent on its income,
which is the case with the gold mining companies, the forty per cent is reckoned on the income of $3,000,000. That tax would amount to SI,200,000, and that is paid to the dominion government. It is deducted from the $3,000,000, which leaves $1,800,000, which then is subject to a tax, all or part of which goes to the municipality. Let us say that the municipality's share of the tax is two per cent. The two per cent is reckoned on the $1,800,000. which would amount to $36,000.
These taxes, while income taxes, are not greatly distinguishable in purpose at least, and perhaps it would be fair to say not greatly distinguishable in essence, from real property taxes. If the municipalities imposed real property taxes on the property of the municipality, the procedure would be just the reverse; that is to say, the two per cent which I have taken for purposes of illustration would be reckoned on the $3,000,000, which would give the municipality $60,000. This S60,000 would be subtracted from the $3,000,000, leaving $2,940,000, which would be subject to the forty per cent dominion tax.
The effect of this resolution is to do just that, provided that the province of Ontario amends its assessment act in the appropriate manner, so that this is designed to give the northern municipalities a tax on the income of the company before the dominion tax is calculated, instead of after the dominion tax is deducted. That is the effect of this section. It means a loss in revenue to the dominion and a gain in revenue to the municipalities, provided that the necessary amendment is made by the province. I am informed that there is no similar situation anywhere else in Canada. Ordinarily a company doing business in a municipality is subject to municipal tax, which is assessed on something, either the property, the business or something of that sort. It is either a business tax or a property tax. The municipality gets that first; that tax may be deducted from the income, and it is upon the net income after that deduction that the dominion reckons its income tax and excess profits tax.
This question was discussed at conferences between the dominion government and the province of Ontario, and it was not agreed that this would be done. On the other hand, the general principle is that provinces and their municipalities are entitled to impose taxation upon their resources, to tax real estate for municipal purposes-


Richard Burpee Hanson: Including schools.
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James Lorimer Ilsley: Yes, including schools; and that tax comes out first before the income is subject to dominion taxation. That does not apply to true income tax, but these taxes have elements of non-income taxation. They have strongly argued and the province has argued that it is a production tax, a tax on the output of the company, not an income tax.


Richard Burpee Hanson: It is measured by income.


James Lorimer Ilsley: It is measured by income, but with certain variations; it is not the same income exactly. But the income tax division has ruled that it is an income tax. I do not know whether the Department of Justice has been consulted, but at any rate we have always taken the ground that this was an income tax, and therefore we have not so far permitted it to be deducted. It requires legislation to enable us to do so.


Richard Burpee Hanson: On the same theory that any other municipal income tax could not be deducted.


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: And now you are giving it to them?


James Lorimer Ilsley: Now we are giving it to them.


Richard Burpee Hanson: On what theory?


James Lorimer Ilsley: Last fall we had representa-,Ions from certain mining municipalities of lorthern Ontario pointing out, among other things, that as a result of the dominion's high corporation and excess profits tax acts the taxes payable by mining companies to these municipalities under the provisions of subsections 6,
9 and 11 of section 39 of the Ontario assessment act had been substantially reduced and consequently these municipalities were threatened with financial difficulty, particularly since gold production had been declining. The municipalities therefore requested the dominion to regard the tax payable by a mining company to a municipality under the Ontario statute as a deductible expense for the purpose of calculating dominion income tax and excess profits tax.
At the time I thought we could do this by a ruling of the Minister of National Revenue, since the taxes in question are the equivalent of, or at least are paid in lieu of, ordinary municipal real estate taxes. They are prevented by law from imposing real estate taxes on these mining companies; they cannot tax them at all.


Richard Burpee Hanson: The intention here is to ameliorate the condition of the municipalities in the gold mining centres?


James Lorimer Ilsley: That is correct. I therefore requested my colleague the Minister of National Revenue to have the matter studied. After examination of the Ontario statute the commissioner of income tax ruled1 that this tax on mining companies, although in lieu of the real estate tax, was not a real estate tax but a tax on income. Consequently he was unable under the existing law to regard such taxes as a deductible expense for dominion tax purposes.
. The municipalities, I' believe, had taken the matter up with the Ontario government with a view to securing a change in the provisions of the Ontario statute which would have made dominion taxes paid by mining companies non-deductible for the purpose of calculating the tax payable to the municipalities under the Ontario act. At the time I had some correspondence with the government of Ontario, which was under the impression that someone on behalf of the dominion at the time of the dominion-provincial tax negotiations had agreed that this tax should be regarded as a deductible expense for dominion tax purposes. I could not find any statement by a dominion official or any communication which indicated such an undertaking on the part of the dominion. Nevertheless it seemed that the understanding of the municipalities was justified and I agreed to provide, such an amendment in the forthcoming budget. I may say it was wholly agreed with the provinces that this was not an income tax that they had to discontinue, because it was in its true nature a tax on natural resources or output or something like that. They have similar taxes in other provinces in just a little different form.


Richard Burpee Hanson: Is it not _a tax in lieu of a tax on real estate, to make up revenue?


James Lorimer Ilsley: It is. It is more a technical matter than anything else that it has to be in this form. When we began to draft the legislation it became' apparent that our action in making the tax paid by the mining companies to the municipalities a deductible expense for our tax purposes would have to be contingent on the province of Ontario amending its legislation to provide that in assessing

Income War Tax
these taxes payable to the municipalities the tax payable by the mining company under our legislation would not be allowed as a deduction. If we did not provide for this concurrent action by the Ontario government, the result, would be that the concession we would be making would not redound to the benefit of the municipality but rather to the benefit of the mining companies, which, was not the object we had in mind. The action we are now taking leaves the tax on the mining companies exactly the same.


Mr. HANSON (York-Suobury):: But it diverts part to the municipalities?


James Lorimer Ilsley: Yes; on the ground that it is in lieu of real estate tax. Resolution 21 therefore requests authority to make these taxes paid by a mining company to a municipality under the Ontario assessment act a deductible expense for dominion tax purposes, but this concession is to be contingent on the action to which I have just referred being taken by the province of Ontario. The result will be that the relevant provision in our act will become effective only when the Ontario government has made the necessary amendments in its act.


Richard Burpee Hanson: I think I understand the position, but this seems to me a precedent that ought not to become very general. It arises only by reason of the fact that under Ontario legislation the municipalities are not allowed to tax these gold mining companies on their real estate.


James Lorimer Ilsley: That is correct.


Richard Burpee Hanson: I do not know on what principle a company like, say Lake Shore, should escape real estate taxation. However, that is the law of Ontario and I suppose it is none of our business. Under this resolution and the legislation to be founded on it, the amount of the tax that will ultimately reach the municipality will be deducted as between the company and the dominion authorities?


James Lorimer Ilsley: For income tax and excess profits tax, yes.


Richard Burpee Hanson: And,
speaking generally any municipal or school tax, if it is imposed by a separate authority under provincial legislative jurisdiction, is deducted from operating expenses?


James Lorimer Ilsley: Speaking generally, yes.


Richard Burpee Hanson: I call the minister's attention to a situation which has arisen under section 6 (o) of the act. That is the section regarding new provincial levies after a specified date, namely, June 24, 1940. I have pointed out to the minister what I call certain hardships that will ensue if that statute is strictly construed. I understand, of course, that a discretion is left in the Minister of National Revenue. But circumstances arising in New Brunswick under proposed provincial legislation will greatly increase the burdens of school taxation in that province on owners of real estate, particularly on certain classes of taxpayers. Under a strict construction of this statute I could go so far as to argue that the whole of the new levy being set up now under the statute would not be allowed as a deductible expense. I would assume, of course, that that is contrary to the general practice followed heretofore. It might be that, on a liberal interpretation of section 6 (o), only the increase would not be allowed as a deductible expense; but on a strict construction none of the new levy would be allowed.
I point out to the minister that this would work a great hardship, and would be an exception to the general principle. And when the proper time comes and representations are made to the minister I would hope it might be taken care of by legislation. I understand, however, that this was a matter of consultation between the provinces and the dominion. The minister would not care to amend the legislation at this time to take care of a new tax, which is not a provincial levy, in the sense that the money will go to the province directly, but rather a new levy within the province imposed by the provincial authority for the benefit of schools.
I am not objecting to the purpose, but I suggest that the position of the taxpaying public should be taken care of so that the whole of the levy under the new act may be allowed as a deductible expense. I shall have occasion to make representations to the Minister of National Revenue at a later date with respect to this subject matter, in the hope that he will exercise his discretion in favour of the taxpayer, who has always received the benefit of school taxes as a deductible expense, and who has every right in principle to continue to expect that, notwithstanding a special provision of this kind, one which could have been enacted only by reason of special circumstances.


Major James William Coldwell: It is six o'clock.
Income War Tax


Richard Burpee Hanson: Just a moment.


Major James William Coldwell: It is six o'clock.


Richard Burpee Hanson: If you
want to go, go; but I wish to finish my sentence.


Major James William Coldwell: Mr. Chairman^-
' Mr. HANSON (York-Sunbury): I should like to finish what I have to say, in spite of the hon. member.


Major James William Coldwell: If the hon. member is going to reply in that manner I must say I shall not extend the courtesy of making it unanimous that he be permitted to continue.


Mr. BLACK (Cumberland):: It is up to the Chairman.


The CHAIRMAN:: I hope the committee will make it unanimous for a few minutes.


Richard Burpee Hanson: Yes, just for a second. I think it is rather discourteous of the hon. member to call six o'clock when I am trying to get my point over.


Major James William Coldwell: It is now five minutes past six.


Richard Burpee Hanson: Have I
the unanimous consent of the committee? If so, I will finish now and be done with it. Otherwise I shall have to come back at eight o'clock. What I wish to ask the minister is- if I -have permission-if I have made the position clear, will he at some later date give consideration to the representations I have tried to frame in general terms?


Colin William George Gibson: I will give the matter consideration.


Joseph-Arthur Bradette: Shall resolution 21
carry?


Some hon. MEMBERS:: No.
Resolution stands.
At six o'clock the committee took recess.
After Recess
The committee resumed at eight o'clock.


Joseph-Arthur Bradette: We were discussing
resolution 21.
Resolution 21 agreed to.


James Lorimer Ilsley: I stated: that I would try
to give the committee notice of any additional resolution. These are important resolutions that are to be added, and I suppose the best thing to do is to move them. Then,

if some delay is desired so that hon. members may study them, it will be granted. The first resolution reads:
That any payment to or for any person in connection with any duty, whether as per diem allowance, living allowance or expenses, marriage or dependent's allowance (other than supplementary grants paid by the dependents' board of trustees) or otherwise, if ascertained and capable of computation (except statutory travelling expenses and travelling expenses paid to members of the armed forces in Canada) shall be regarded as salary of such person for tax purposes, provided, however, that living allowance paid to an employee of the dominion government or a member of the armed forces of Canada who is serving outside Canada in the western hemisphere but maintaining a self-contained domestic establishment in Canada shall be deemed to be taxable income of such person only to the extent that it exceeds such an amount as may be determined by the minister in his discretion.
That this resolution shall be applicable to the income of the years 1940 and subsequent years, but shall not affect any assessments, appeals from which have been lodged prior to April 16, 1943.


Richard Burpee Hanson: That is
a new resolution.


James Lorimer Ilsley: Yes. This resolution, among other things, deals with the taxing of living allowances. Its purpose is to achieve in the law what has been the government's general policy regarding these allowances, namely, that they must be treated for tax purposes in the same manner as wages and salary. The legislation will extend back to cover allowances received in 1940 and thereafter. This might appear to be unjustifiably retroactive, but I should like to make it clear that its application to the years 1940, 1941 and 1942 is necessary because the government entered into arrangements with a substantial number of employees at the time they were employed to the effect that their living allowances -would be fully taxable as income in all respects as though they were salary. In other cases no specific arrangements with regard to taxation were made, but the persons accepted employment with the government, knowing of the arrangement to which I have referred and fully expecting and intending that their living allowances were to be taxable, and the presumption will be that all persons accepting such employment had that knowledge.
It is fair and right that the persons in both these classes to -which I have just referred should be taxed in 1940, 1941 and 1942 according to these arrangements, expectations and intentions, and it is necessary that this resolution apply so that they will be taxable. Persons serving the government in these years, if they are able to show to the satisfaction of the government that it was their clear

Income War Tax
understanding that they were not to be taxable on these allowances, either in whole or in part, will receive treatment in accordance with this clear understanding under the re- mission section of the Consolidated Revenue and Audit Act, and these remissions may apply to classes of public servants as well as to individuals.
Dependents' allowances to members of the armed forces have always been included as taxable income of the person in respect of whom they are paid. In legislating with respect to allowances generally, it was felt desirable to make it clear that dependents' allowances are not excluded -by not -being specifically mentioned. As the committee will realize, this js an important resolution, and one to which hon. members will wish to give careful consideration.


Olof Hanson: This goes farther than, curing the Samson case.


James Lorimer Ilsley: Not much farther. Dependents' allowances are included, but they have always been taxed on an opinion of the Department of Justice given in, the fall of 1939. All exemptions and arrangements that are made are based on their taxability, and the floors of SI ,600, $2,150, S2,615 and 'so on are based on the assumption that they are taxable. Before I come to that, let me deal with the question of living allowances.
This is a -most unsatisfactory and difficult situation with which to deal. There are a great many persons in the employ of the government who receive substantial allowances and- who are pretty steadily in the employ of the government. They may not be here all the time, but they are here nearly all the time. The living allowances paid range from $25 down to small sums of $4 or $5 a day. The rule which has been applied for the last two or three years has been that these shall be regarded as taxable income, but in the Samson Case it has been decided that they are not taxable income, at least in- the circumstances which existed in that case. A great many public employees were employed on that basis, in many cases there being an express understanding that these allowances were to be taxable, that they were to be regarded as salary. They now find themselves with a great advantage which is unmerited.


Gordon Graydon: Why was it not called salary instead of allowances?


James Lorimer Ilsley: I do not know; sometimes they prefer that it be called living allowances.


Richard Burpee Hanson: Are there a number of cases where there is no salary, but living allowances are paid? These are the typical dollar a year men?


James Lorimer Ilsley: Yes. It must, howe-ver, be borne in -mind that there are others who had- no such understanding, those who are drawing living allowances but who came here in ign-orance of the rule or who were told, perhaps by whatever government department brought them here, that their living allowances were not taxable. In many cases it was quite apparent from the size of the living allowances that they were not regarded as taxable, that they were regarded as being pure reimbursement for expenses. The fair way to do it would be just to leave it to the income tax division of the Department of National Revenue to tax in accordance with the justice of the case.


Gordon Graydon: Whose word are you to take on that?


James Lorimer Ilsley: I think it will work out very well in this way. What I started to say was that that would be the fair thing to do, but of course I could not ask parliament to pass any such general legislation as that, and perhaps it would not be constitutional anyway to leave it to the governor in council to tax this man and not tax that man. On the other hand, it is mainfestly unfair to let all these people out from taxation. I have talked to the odd man myself and said, " What is your understanding? You are getting a living allowance." [DOT] I was talking to one who was getting $25 a day and he said, " I know it is taxable. I know the rule is that it is the same as salary. It is called a living allowance but it is a salary." On the other hand, there are some who should not have to pay the tax.
The only way in which that general situation can be covered, so far as I know, is to tax them all and give this undertaking, that if the governor in council is satisfied that it was their clear understanding that their allowance was not to be taxed, there will be a remission of the tax under the provisions of the Consolidated Revenue and Audit Act.


Richard Burpee Hanson: That is not very satisfactory either.


James Lorimer Ilsley: If the hon. gentleman can think of a more satisfactory method I wish he would suggest it, because I cannot. The question has been canvassed from every point of view and every angle.


Richard Burpee Hanson: I would think that the proper thing to do would be
Income War Tax

this: Drop the present arrangements and start de novo on a clear understanding that all living allowances are to be taxed. Then they can stay or go.


James Lorimer Ilsley: That does not cover the past at all. It does not cover 1942, or 1941, or 1940.


Grote Stirling: Are there many of these people who did not pay for 1940, 1941 and 1942?


James Lorimer Ilsley: I do not know. There are some, I think, who have not, but they have been assessed, and there has been a great deal of discussion back and forth as to whether they are taxable. We have to make a choice. We have either to let them out completely from taxation in cases where it is called a living allowance, on the strength of the Samson judgment, or appeal that judgment, or do what parliament thinks is the right thing to do about the matter. I do not know of any better way than this. In the Department of Munitions and Supply particularly, there are quite a number drawing a living allowance; I do not know how many. But the rule that we laid down early in the war was this, and we thought we had it fairly firmly established, that if a person were here, away from home, and working here for what he said were his expenses while away from home, he could charge his expenses and submit his vouchers, and then he was not taxable at all. He was on a basis of actual expenses.


Richard Burpee Hanson: That is
what ought to have been done.


James Lorimer Ilsley: That is what we encouraged in every way possible. But many did not want to do that on account of difficulties of accounting, or on account of inconvenience. Therefore we laid down as emphatically as we could, and it was well known in the Department of Munitions and Supply and I think in other departments as well, that if they elected to take a flat amount per diem they would be taxable on that as if it were salary. That might turn out to be entirely too much. They might take $20 a day, and it might only cost them $10 a day in expenses. But if they wanted to take a flat amount per diem, the rule laid down was that that was taxable as if it were salary. On the faith of that ruling quite a lot of them, or at least some of them, got their allowance raised. They said: " If it is taxable, I want to be paid on a flat basis. I do not want to be submitting vouchers and sending in bills. Let us have it this way."
Consequently you have on the one hand those who are getting their actual expenses and who are not taxed. Then there are those

who are getting paid so much per diem and are getting taxed and are willing and prepared to pay the tax. Then you have others who did not know anything about it at all but just drifted along or were never told about it, or something like that.


Richard Burpee Hanson: That is a third class.


James Lorimer Ilsley: That is a third class. So that we have to have some elasticity in dealing with these cases, and the only way we can do it constitutionally, so far as I can see, is to confirm the rule we laid down and then do justice by a remission under the powers of the Consolidated Revenue and Audit Act. I cannot state it in any better way than this. This is not in the law, but it is the undertaking I am prepared to give: That persons serving the government on an allowance, if they can show to the satisfaction of the government that it was their clear understanding that they were not to be taxable on this allowance either in whole or in part, will receive treatment in accordance with this clear understanding under the Consolidated Revenue and Audit Act, and these remissions may apply to classes of public servants as well as to individuals.
There are substantial classes of public servants, for example, the employees of the comptroller of the treasury and the employees of the auditor general's office who perhaps get so much per diem when they are away from Ottawa. It is obvious that that allowance should not be taxed. That is more like travelling expenses. They never considered that they were under this rule and they should not be under this rule. Maybe the rule should never have been established; I do not know. But it did seem that the man who was getting $20 a day 300 days a year, or $6,000 a year, should be taxable, just as much as the man who was getting a salary of $6,000 a year, who was working away from home. There were some of these who were in essence dollar-a-year men, who came here at a salary that was fixed to cover what they thought would remunerate or compensate them for coming to Ottawa. Surely we had to tax those on a yfearly salary, also the monthly salaried employees. Therefore we thought that this was the only way we could get this thing wound up.
Then as to the allowance for dependents-


Gordon Knapman Fraser: In order to carry out resolutions 1 and 2 you would have to earmark the living allowance as salary, earned income.


James Lorimer Ilsley: That is right.


Mr. LEADER:: I wish to say something on resolution 1 if I am in order, Mr. Chairman.

Income War Tax
The minister has brought this matter to parliament and is asking for our opinions and advice. I can agree in a certain measure with what the hon. member for York-Sunbury has said. But I want to point out that I agreed with the minister the other night when he said we cannot practise discrimination. I still think the minister would be better advised to adhere to the arrangements made with these dollar-a-year men when they came here first. They understood that their living allowance would be treated as salary and therefore would be subject to income tax. Others came in later, the minister tells us, without that understanding. I have read that ignorance of the law excuses no one.


Richard Burpee Hanson: This would be ignorance of the fact.


James Lorimer Ilsley: It did not turn out to be the law.


Harry Leader: Some did not know that this arrangement had been made. I do not suppose that the government went out of its way to tell them that this arrangement had been made, and the employees may never have asked. But there is a condition, and I think if you start to discriminate now between one class and another-and the minister said that there were three classes-you will have plenty of trouble.
The other night, when the question of the farmers paying income tax was under discussion, I said that the farmers were willing to pay their share of the income tax, and I still believe that is true. I noticed in the paper tonight that one hon. member had given an interview to an Ottawa newspaper in which he suggested that indemnities of members of parliament should not be subject to income tax. I do not agree. I am firmly taking the stand that we should not discriminate in favour of anybody. The minister should continue as he did when these men were engaged. Others who came in later should accept the same conditions. If once you begin to leave the matter to the discretion of the treasury officials the difficulty will not be cured; it will be increased, with consequent dissatisfaction all round. Therefore, speaking as a member of parliament, I say that my advice to the minister is to treat them all alike. When someone is receiving $6,000 by way of living allowances each year, as some are doing, besides a fairly good salary from the parent company, perhaps as the president or the manager, he can very well afford to pay income tax on the living allowance. There was a legal decision the other day that they are not subject to this tax. Well, it seems to me that
this is the institution which can, change the law, and if that is the law, it should be changed.
I wonder whether the minister remembers an incident which occurred in regard to the taxation of the C. P. Fullerton estate. As hon. members know, the late Mr. Fullerton got a salary of $30,000 a year as chairman of the board of the Canadian National Railways. He lost the job, but there was a provision in his agreement that he could collect a gratuity, as it was called, of one year's salary if for any reason he should be discharged. He collected his gratuity of $30,000 and was assessed income tax on it. He paid, under protest; the case was taken to the court of appeal, and ultimately over $9,000 of this tax was refunded to the estate. I do not think that sort of thing is justice. That is the sort of thing which makes for dissatisfaction among our people. Many of them get the idea that there is one law for the rich and another for the poor. I would not go that far; but instances like that inspire in the minds of a good many people the notion that there is discrimination in favour of some classes.
In conclusion, I would urge the minister to adhere to the arrangement and carry it through without exceptions. I believe these people should pay income tax on their living allowances.


Richard Burpee Hanson: I suggest to the minister that he submit the other amendments and let us consider this after we have finished the schedule of amendments. Here is one sentence sixteen lines long. It takes about three minutes to read it, and it will take half an hour to dissect it. Let us go on with something else in the meantime.


James Lorimer Ilsley: All right.


Richard Burpee Hanson: legislature * few years ago, when the government of the day introduced legislation while a matter was under litigation, so that the dispute could go only one way,. I thought that was the .most horrible example of abuse of the powers of government that this country ever experienced.


Paul Joseph James Martin: That was in reference to a judgment of Mr. Justice McTague.


Richard Burpee Hanson: Yes. _ I know of a case in New Brunswick in which, while it was under appeal from the trial judge to the court of appeal, the attorney general of the day, who was counsel for one of the parties to the litigation, amended the conditional sales act, and so clinched his case in court; and the judges of the court of appeal used appropriate language with reference to that kind of action. I do not think the parliament of Canada ought to be put in a position where we are doing that sort of thing. I suggest that the minister sleep on the matter. I think it would be very bad legislation. As regards those who came here with the understanding that they were to pay, let them pay; as regards those who had a clear understanding that they should not pay, let us adhere to the arrangement with them. There is a third class of persons to whom the minister has referred, with whom there was no understanding at all. I do not know what you should do about them. I would have to think that over.


James Lorimer Ilsley: I do not think it can be worked out with any more justice than it is now.
I wish to say a word first to the hon. member for Portage la Prairie. He talked as though the ones who came later did not know about the understanding. Well, for the most part it was the ones who came early that did not know about the understanding rather than the ones who came later, and it would be veiy unjust to tax certain of these people. It is quite obvious, looking at their scale of allowances, that it was designed barely to cover their expenses.


Harry Leader: In that case the tax they
would have to pay would not be very large.


James Lorimer Ilsley: No; it would not be a very large tax. The governor in council has power of remission under the Consolidated Revenue and Audit Act, but it is not a power which it is desirable to exercise unless parliament knows about it. That is the reason why I am publicly stating here the intention of the government, so that it cannot be said that we are giving remissions contrary to the statute. But the remissions mainly will be in true travelling allowance cases. It is impossible to

draw a line, at least, my advisers cannot think of any way of drawing the line between per diem travelling allowance and per diem living allowance. It is impossible to do so. And it is quite obvious that if accountants in the employ of the auditor general, for example, are getting $5 a day when they are away from their headquarters, because they are away from their headquarters, that should not be taxed. It has been the understanding for years that that was merely a way of estimating their travelling expenses or their expenses when they were in travel status, away from home, and there will have to be remissions for classes of employees like that. For that reason we have made an exception of the members of the armed forces in Canada. I believe the rule formerly was that they received their actual expenses when they were travelling; but then, for purposes of convenience, they were put on a scale; they got per diem allowances. The captain would get so much, the major so much and the colonel so much; but the allowances were reasonable; they were very, very close to what their actual expenses were. Now, rather than say that they must go on actual expenses again, since we have confidence that that scale is all right, we are not going to touch those classes at all. But for other employees in future-and not only other employees of the government but of industry, for it must be borne in mind that this is a general provision-as a war-time necessity we want them to go on actual expenses, not on these per diem allowances, because these allowances may very easily grow into a great abuse. They can be made a way of getting a great deal of salary without taxation. Consequently we say that if they want to go on a per diem allowance, it must be treated as salary, and if they want to avoid that, they may do so by going on actual expenses. It will mean some change in business practice here and there, though not a very great change because the practice is not so very widespread. Most employees in private business are on actual expenses; most of them are obliged to submit their accounts and get their travelling expenses in that way. That is all right; that is not taxable. But if they go into the other realm and get a flat per diem allowance, we say that is regarded as salary and is taxable. With regard to these employees of the government who have been employed within the last two or three years, it will not be very difficult to sort them out. The only solution I can see is to make these allowances taxable for that period and give remissions in cases where we are satisfied that it was the clear understanding that they were

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not to be taxable. A great many of them cannot say that. The deputy minister or the minister would know better; he would know that their understanding was that they were to be taxable, and there the law will apply. In other cases there would be remissions.
I should now' like to say a word with regard to the retroactive feature. There is an exception in this resolution in regard to cases in litigation or that have been litigated, as follow's:
This resolution shall be applicable to the income of the years 1940 and subsequent years, but shall not affect any assessments, appeals from w'hich have been lodged prior to April 16, 1943.


John George Diefenbaker: How many appeals have been lodged?


James Lorimer Ilsley: I know of only one; that is the one that went to the exchequer court.


Richard Burpee Hanson: That was typical of many, was it not?


James Lorimer Ilsley: Yes; but I do not think anyone else appealed.


Richard Burpee Hanson: Perhaps they were awaiting the outcome of that appeal.


James Lorimer Ilsley: They may have been; I do not know.


Gordon Graydon: I think a good deal of time is being taken up in the discussion of something of which notice has not been given to many hon. members. I think those in the chamber w'ho have not the amendments before them must be very much in the dark with regard to what is going on generally, and I would suggest to the minister that he might bring in his amendments and give hon. members an opportunity to scrutinize them, and then, start at resolution 22, where I think everyone expected we would start.


James Lorimer Ilsley: All right; but I w'ish to give some explanation. This resolution will appear in Hansard; hon. members can look at it, and they can also see the argument on it, w'hich will be very helpful in their understanding of it. I do not, however, know the status of the resolution I have just moved. I suppose it is moved and it stands; is that it?


Richard Burpee Hanson: Yes.


Gordon Graydon: It stands as a notice.


Joseph-Arthur Bradette: This is not an amendment; it is really a new clause, so that it w'ould have to go at the end of the resolutions we are discussing at the present time,
as resolution 26. H it were possible to make it a subsection it would be different, but that cannot be done.


James Lorimer Ilsley: Very well; that will be resolution 26. Then, on Tuesday, April 6, I gave notice in Votes and Proceedings of certain resolutions, which I suppose will follow along as to number. Let us take this one:
That section 32A of the said act be amended to prevent reduction or avoidance of liability to tax.
That will be resolution 27, and I will move it now.


Richard Burpee Hanson: It is in Votes and Proceedings'!


James Lorimer Ilsley: Yes, as a notice; Totes and Proceedings of April 6.


Mr. COLD  WELL@: Can that be moved in committee?


James Lorimer Ilsley: I am moving it now.
Mr. COLDWrELL: Can that be moved in committee? I think a motion has to be moved in the. house, has it not? I am not sure about that.


James Lorimer Ilsley: I do not know about that; I took it that this was notice. However, I never move these resolutions in the house; I move that the Speaker leave the chair for the house to go into committee of ways and means.


Joseph-Arthur Bradette: On the question raised by the hon. member for Rosetown-Biggar, these new resolutions do not have to be moved now because they are new sections of the general resolution. They will have to be taken in order, after we are through with the resolutions now before us.


Mr. COLD  WELL@: They are part of this general resolution?


Joseph-Arthur Bradette: Yes


James Lorimer Ilsley: Then I will move this, which will be resolution No. 27:
That section 32A of the said act be amended to prevent reduction or avoidance of liability to tax.
That does not mean very much without explanation.


Richard Burpee Hanson: Is that all there is in the amendment?


James Lorimer Ilsley: That is it; that is new resolution 27. Section 32A is as follows:
Notwithstanding any of the provisions of this act, the treasury board may in its discretion determine that any transaction has artificially reduced or would artificially reduce taxation and has no reasonable business purpose other
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than that of avoiding or minimizing taxation hereunder and that no deduction shall be allowed with respect to any expense or disbursement resulting therefrom and the treasury board may determine the extent to which taxation hereunder has been avoided, minimized or prejudiced thereby, and there shall be assessed, levied and paid by any taxpayer such tax as the treasury board may direct and such tax shall be payable as in this act provided.
(2)	In the case of any appeal from an assessment, the court shall have jurisdiction to review the ruling of the treasury board hereunder.
That section is designed to prevent evasion, avoidance or the minimizing of taxation, or the artificial reduction of taxation. There was a section passed in 1938 which was the predecessor of this section, and then this section in its present form was passed in 1940. It gives the treasury board very wide and sweeping powers.


Richard Burpee Hanson: To do
what?


James Lorimer Ilsley: To levy taxes, almost. It says:
. . . there shall be assessed, levied and paid by any taxpayer such tax as the treasury board may direct and such tax shall be payable as in this act provided.
Mr.	HANSON	(York-Sunbury):	That	is
terrible.


James Lorimer Ilsley: It may be. An appeal is provided. Whether it is terrible or not, it is not a very effective section. It cannot be made very effective. There are a good many ways of so transacting business that it is not applicable.
Mr.	HANSON	(York-Sunbury): Is the
minister proposing to repeal that?


James Lorimer Ilsley: We are proposing to amend it and to add other sections.
Mr.	HANSON	(York-Sunbury):	But	to
retain the principle of that?


James Lorimer Ilsley: Yes.
Mr.	HANSON	(York-Sunbury):	Well,	I
think that is terrible.


James Lorimer Ilsley: I should like the committee to argue this out. I do not know how far we should go, but I know that with our high rates of taxation the incentive to transact business in such way within the law that taxation is avoided is very great. The long-established principle in the English courts is that a taxpayer is entitled to avoid taxation if he can. If parliament is not clever enough or artful enough to enact legislation which makes him taxable and he can find some way of escaping the provision, he is entitled to do so.
[Mr. Usley.j


Richard Burpee Hanson: That is hardly a fair way to put it. The decisions say that the citizen may be taxed only by clear and express language, and the government of the day, being the father of the legislation and having the carriage of the legislation, must be taken as meaning what it says in its legislation. If they have not drafted the legislation so as to make a man taxable they cannot tax him. To turn round and say that because the government of the day in promoting tax legislation did not use apt language to make the subject taxable, a non-representative board like the treasury board may legislate to impose taxation, violates our conscience. That type of legislation breeds contempt for the law. Necessity makes bad law. For the minister to ask parliament to delegate to the treasury board the power to impose taxation as to the quantum and, I assume, perhaps the rates, and in the absence of the right of the citizen to be heard, is terrible. I cannot imagine parliament doing anything much worse than that, except to legislate to hang a man or to confiscate his property. To tax him without his knowledge or consent when the statute law of the country has said that he shall not be taxed, or a judicial interpretation has been given that he shall not be taxed, and after the act has been before parliament too, is shocking. I wonder who is the father of this idea. This is a star-chamber procedure. To give the treasury board the power to impose taxation is too shocking to think of. If the public understood that these powers were being conferred by . this parliament on irresponsible bodies they would say, what has happened to the mind of parliament? And to make it retroactive is just that much worse. I cannot condemn it any more strongly than that, and I think I carry with me the judgment of every legal man in this house, of every fair-minded man in this house, I do not care where he is sitting. We ought not to give our sanction to this sort of legislation.


Major James William Coldwell: I am amazed at the proposal made by the minister. I often disagree with the hon. member for York-Sunbury, but on this I am thoroughly in agreement with him, speaking not as a lawyer but as a student of British history. This is bringing back in another form the old struggle between parliament and the crown, the right of the crown to tax without the consent of parliament. The crown is represented by the minister, and what the government is asking this parliament to do is to abdicate the right for which parliament fought for hundreds of years.


Richard Burpee Hanson: Taxation without representation.

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Major James William Coldwell: This is in another form taxation without representation.


Richard Burpee Hanson: This is what the American colonies rebelled against.


Major James William Coldwell: This is what the
American colonies rebelled against and I say that a democratic parliament which granted this to the crown-and I am speaking of the crown as represented by the government- would be nullifying the effect of the age-old conflict for the right of parliament alone to impose taxation and to make grants to his majesty.


An hon. MEMBER:: The bill of rights.


Major James William Coldwell: This is a proposal that parliament ought never to consider, on account of its constitutional impropriety.
As far as the other matter which we discussed, the right to tax people on living allowances and so on, this parliament must decide on that, and I agree that living allowances ought to be taxed. But I will not give my consent to losing that right for which parliaments based upon British principles fought for hundreds of years and won after a long and rather bloody struggle. This proposal is a negation of the fundamental right of parliament, and I hope the minister will not proceed with it but will allow parliament-no, I will not say that-I hope the minister will not proceed with it because parliament will not allow him to proceed with it; that is the point. This proposal is entirely wrong, my hon. friend says, from the legal point of view; I say, from the point of view of general history.


Richard Burpee Hanson: And good morals, too.


Paul Joseph James Martin: Will the hon. member state the principle to which he is objecting?


James Lorimer Ilsley: I can state it.


Mr. KNOWLES:: Will the minister state where this is?


James Lorimer Ilsley: It is in the Income War Tax Act, section 32A.
The provision that is being attacked has been in the law since 1940, perhaps since 1938. So that I am not introducing it here to-night. I am reading what the law is, but I must say that I was going to leave it there and I was going to add some sections. I want to be reasonable about this; I do not want to go a bit further than parliament wants to go; I do not intend to try to force anything down anyone's throat. But hon. members have to understand the situation that exists to some
extent and may exist more in the future. I attended one case before the treasury board under the predecessor section. I wish I could remember the facts of that case with sufficient accuracy to state them, but substantially they were these: A company which had ceased to do business had accumulated a large surplus, several million dollars, and the income tax authorities were wondering when that surplus was coming out, because when it comes out it is taxable in the hands of the individual taxpayers. It must be remembered, when we are defending our taxation system, we say that our corporation income tax is heavy. It is a minimum of forty per cent, and 100 per cent under the Excess Profits Act, hon. members know all about that. When the hon. member for Rosetown-Biggar attacks us because our taxation is not yet heavy enough with respect to corporations our answer is it must be remembered that if the corporation does make too much money-if it does-despite our taxation, when that money goes out to the shareholders, either on liquidation and division of a surplus, undistributed income, or if it goes out by dividends, it is taxed again in the hands of the individual.


Richard Burpee Hanson: And that is double taxation.


James Lorimer Ilsley: The hon. member for York-Sunbury always refers to it as double taxation.


Major James William Coldwell: I do not agree with that.


James Lorimer Ilsley: It is capable of another interpretation.


Richard Burpee Hanson: When Mr. Euler was minister he brought it in, and he admitted it was double taxation.


James Lorimer Ilsley: It is capable of another interpretation. That is what happens. Back in the late thirties or the middle thirties, when the rates on individual income tax were not as high as they are to-day, and when therefore the incentive to employ an artifice to withdraw the surplus free of individual income tax was not as great as it is to-day, the company so arranged things that they got the surplus out without any individual tax. They did it by going to one of the British islands in the Atlantic, incorporating a company, employing intermediaries, and so on, with the final result that $3,000,000 was not there. It was in the hands of the shareholders, and the company and the shareholders were not paying any income tax.
The treasury board under the predecessor 1938 section decided that they would attack that transaction, because apparently there was no business purpose whatsoever, except the avoidance of taxation. Therefore they gave
Income War Tax

notice to everybody concerned-they gave notice scrupulously; there were no star-chamber methods employed at all. All persons concerned appeared before the treasury board. I do not think their counsel appeared with them, but witnesses were brought from those islands in the Atlantic and gave their evidence. Finally an order was made nullifying or in some way reversing the transaction. That section was so weak that we really did not have much power under it. However, they did pay in settlement of that a verj' large sum, by way of taxation. I know it was a very, very large sum. We got that taxation.


Richard Burpee Hanson: Under the gun.


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: I am not objecting, if they took it out of the country. I have no sympathy with that.


James Lorimer Ilsley: It may be that that section goes too far. I must say I do not like the sound of taxation being imposed in that way, without some safeguards. It may be that that section goes too far. I invite the views of hon. members in this matter, because I am sure that with the growth of surpluses, as a result of war-time prosperity, there will be many fees paid to corporation lawyers to advise shareholders how to withdraw those surpluses, without the payment of income tax. This is one of the important problems, I may say, before the taxation authorities at the present time.	.
We keep on amending the act, and trying to keep up with requirements. Ever since the act was passed in 1917, ways of legal avoidance would be worked out. And, mind you, there is nothing necessarily immoral about legal avoidance. The courts have given their sanction to it. They have said that anyone is entitled so to arrange his affairs that he may minimize his tax, if he wishes. But these methods are worked out, and it is just impossible for parliament to keep up with them.
Consequently I am proposing certain amendments to this section. I am just giving parliament notice that there is a very important problem here which in some way will have to be met. There are two large problems, the first of which was the matter of depreciation ' about which I spoke the other day. There is the matter of the appreciation, perhaps, of plants which were virtually paid for by the government. The other important problem is the one I have been discussing.


Mr. GRAHAM:: Would the minister read the section?


James Lorimer Ilsley: I read the old secton.


Roy Theodore Graham: Yes.
[Mr. Ilsley.j


James Lorimer Ilsley: I shall read what I propose. My proposed section will be placed on Hansard, so that hon. members may study it. I am quite willing to accept any amendment or suggestion which will improve it. But I do say we should not let this year go by without knowing the situation, or giving some thought with regard to this matter. It is not wholly a matter of dissipation of surpluses, but it is to a considerable extent.
I repeat that I want the views of the committee in the matter. I do not mind listening to speeches such as we have heard to-night. It is my view that if there is a defect and if the treasury board is to have powers, there should be safeguards upon the exercise of those powers, and those safeguards should be inserted. The proposed w'ording of section 32A of the Income War Tax Act is as follows:
32A. (1) Notwithstanding any of the provisions of this act, the treasury board may in its discretion determine that any transaction or series of transactions has artificially reduced, or but for the application of this subsection would artificially reduce taxation hereunder, or that its main purpose is the avoidance or reduction of taxation hereunder, either immediate or prospective, and in such case the treasury board may determine the extent to which taxation hereunder has been or, but for the application of this subsection, would be avoided, reduced or prejudiced thereby and in accordance with such determination there shall be assessed and levied upon any taxpayer such tax as the treasury board may direct and such tax shall be payable by him as in this act provided.
That does supply the principle and, to a certain extent, the quantum of the tax; but whether it is still objectionable, I cannot say. The rest of it is new:
(2)	Notwithstanding anything in this act contained, if upon examination of any transaction or series of transactions made directly or through the medium of third parties or the creation of new or intermediary companies, it appears to the treasury board that any payment or benefit in cash or otherwise, received by any person subsequent to the year 1939 as a result of such transaction or transactions has been received directly or indirectly from a company having undistributed income on hand, then the treasury board may find that the main purpose of such transaction or transactions was to reduce or avoid taxation, and it shall thereupon be deemed for the purposes of this act that such person, whether he received any such payment or benefit in the form of capital or otherwise, has received income subject to tax in such year or years and in such amount as treasury board may determine, and tax shall be assessed and levied upon such person and shall be payable as in this act provided.
Any such finding by treasury board may be made notwithstanding that such transaction or transactions may have been entered into either within or w-ithout Canada or prior or subsequent to the coming into force of this section.
(3)	Notwithstanding anything in this act contained, if substantially all of the shares of a company having undistributed income on hand have been purposed by any other company or

Income War Tax
companies, treasury board may find that the main purpose of the sale by the vendor was to reduce or avoid the tax which -would have been paid by the shareholders of such company having undistributed income on hand on the distribution to them of the said undistributed income, and in such case, notwithstanding section 4 (n) of this act, the dividends paid by the company having undistributed income on hand and received by any such other company or companies shall be taxable income of such company or companies and tax shall be assessed and levied upon such company or companies and shall be payable as in this act provided.
(4)	In the case of any appeal from an assessment the court shall have jurisdiction to review any ruling of treasury board made under the provisions of this section.
That is what I was going to propose, subject to any observations that members of the committee might make during the course of this debate which commend themselves to the government.


Major James William Coldwell: This is a vepf long
section, and I do not think we can discuss it intelligently to-night. I may say that I agree thoroughly with the minister that methods have to be found to prevent people from escaping taxation. I was one of those who were insistent upon that point several years ago. I think I raised this matter in 1936 as a result of something that came to my knowledge. If we are to decide whether a person is escaping taxation improperly, the only place where this can be decided properly is in a duly constituted court. I think the weakness here is that you are placing in the hands of what is in effect a non-judicial body, a body with practically no responsibility to parliament- the treasury board is responsible to the cabinet -a power which should not be exercised except by this parliament or by a disinterested court.
If we could frame a law so that we can make this-I was going to say offence-a matter which should be decided by the proper court, then I think we are following out parliamentary procedure in the proper manner. As I say, I should like to see the proposed amendment and give some study to it. It is quite long, and it. contains a number of implications. What I said at the outset still stands. I know what the minister said about people setting up companies in Jersey, Nassau, the Bahamas and other places. That went on for a considerable time, and it had to be stopped. But there is a way of doing it. We have complete control over the movement of money in and out of the country, and the physical assets upon which that money is based lie within the borders of Canada. In that way it seems to me that we are protected, pending the decision of a properly constituted court.
As I say, I should like to look into this amendment more carefully than I have been
able to do by just hearing it read. We should be able as a parliament to find ways and means of providing protection, pending what a court would be able to do later, against attempts by persons and corporations to escape obligations they should assume.


Richard Burpee Hanson: I do not
think anybody in this parliament has any sympathy with the procedure adopted by the people in the company referred to by the minister. I think we all frown upon that sort of thing. I cannot understand the patriotism of a millionaire who leaves Canada and establishes himself as a lord down in the Bahamas in order to escape taxation.


George Alexander Cruickshank: Or in England.


An hon. MEMBER:: In Surrey.


Richard Burpee Hanson: He is
paying much heavier taxes in Surrey, believe me.


John Gordon Ross: That does not
help Canada.


George Alexander Cruickshank: He took it out of
Canada.


Richard Burpee Hanson: I think he helped Canada much more than the hon. member for Moose Jaw did1. But a single case, shall I say of wrongdoing-it is not wrongdoing if it was within the law-should not make us pass bad law such as this. The weakness was that they were not compelled to distribute within a reasonable time the earned surplus. Because parliament perpetrated a weakness by passing a bad statute which was taken advantage of, through legal advice, you are going to turn round and enact a new law to give power to a nonrepresentative body like the treasury board. The thing is absolutely wrong in principle. Let the matter stand so that we can think it over. I should think there would be some other medium outside the treasury board through which this could be handled. After all, what is the treasury board? It is just a committee of the cabinet. The taxing master and the tax gatherer are going to sit on these cases instead of parliament passing a law. That is wrong in principle.


John George Diefenbaker: This discussion has been most interesting, particularly since this section in the main has been on the statute books since 1941. I am one of those who have objected consistently to the tendency on the part of this parliament to delegate to administrative bodies the power to determine the rights of individuals in their absence and without giving them an opportunity to present their case. This section is
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in keeping with some of the sections to be found in the War Exchange Conservation Act and the Income War Tax Act. The great danger of this type of legislation is that the servant of the crown becomes in fact the master.
The minister has asked for some sugges-' tions. I think it would be well for him to study the report given to the British House of Commons in 1929 by a committee headed by Lord Sankey. That committee was appointed to look into the whole question of powers delegated by legislation and the effect of judicial decisions by administrative bodies. It was instructed particularly to report on what safeguards were necessary in order to assure constitutional liberty and the supremacy of the law.
The committee sat for a considerable period of time. They took for granted the tendency that has been all too evident during the past few years on the part of parliament to delegate its rights to administrative bodies, to permit the passing of regulations having the force of law and generally to deny access to the courts on the part of his majesty's subjects whose rights have been interfered with. While the discussion was going on, I sent out to get a summary of the report which was made by Lord Sankey, and I think some of the principles enunciated in that report might well be incorporated into this section in order to assure those safeguards which are so necessary when rights are delegated to bodies independent of and not responsible to parliament. Under the section as it n.ow reads discretion rests with the treasury board. True, there is provision for recourse to the courts in the following subsection, which reads:
In the case of any appeal from an assessment the court shall have jurisdiction to review any ruling of treasury board made under the provisions of this section.
That does not give the court the right to determine whether or not the discretion has been properly exercised.


James Lorimer Ilsley: It is intended1 to.


John George Diefenbaker: It grants only the right of appeal against the principle of the assessment. We realize that in time of war, in order to secure the ends that were referred to by the hon. member for Rosetown-Biggar, the law must be strictly enforced and there must be no evasion. But if there is one thing that we in this parliament must insist upon, it is that the rule of law shall grant to each and every subject equal access to the courts and equal opportunity to' establish his rights before any body set up by parliament.

I am not going to go into the recommendations in detail, but here is the next one:
There should be supervisory jurisdiction of the high court of justice where there has been any arbitrary or illegal unfairness with private rights.
In order to assure that there shall be no suggestion of the possibility of discrimination being exercised by the treasury board or any other administrative body, a certain rule should be observed. I see in his place the Minister of Justice, the former distinguished president of the Canadian'Bar association, an institution which throughout the years has stood firmly for the necessity of upholding the rule of law in the face of a tendency on the part of government gradually to recede from its application, gradually to legislate for parliament, and in process of time to place this country in a position where the major portion of its legislation does not come before parliament but comes before administrative bodies independent of parliament. It may be said that the minister and the government must answer for the acts of these administrative bodies. But in essence the servant set up by the crown becomes the master of the individual in the decisions that he makes.
I will refer to just' one or two more of the recommendations by Lord Sankey's committee:
1.	In future legislation parliament should proceed on the principle that no minister (in which word we include any officer of a minister acting under his orders) should give a judicial decision in any dispute in which the minister has a kind of departmental interest. If such cases appear likely to arise, parliament should provide for determination of the dispute by a ministerial tribunal functioning independently of the minister.
Certainly bodies such as the treasury board do not function independently of the minister within the terms of what this committee has in mind.
2.	Each of the parties to a dispute should be given the opportunity of stating its case-not necessarily orally-and should also be given the opportunity of knowing the case which it has to meet and of answering that case if it can.
There is no suggestion anywhere in the original section or in the amendment proposed by the minister this evening that he will grant to the individual the right to have his side of the case placed before any body.
3.	Any party affected by a decision should be informed of the reasons on which the decision is based.
This is one of the most fundamental rules that we as a parliament are gradually abrogating. We are certainly abdicating our rights in not insisting that each party to a decision

Income War Tax
rendered by a government tribunal shall be made aware of the reason for the decision. Often to-day we have decisions made by these various war-time boards that have been set up which interfere with private rights, interfere with the small business men, take away their rights and then deny them the right of recourse to the courts. Against that tendency I protest. In every case where a decision is made by a government board affecting the right of the individual I believe that parliament has the right to demand that that decision shall be subject to appeal to the courts. We have had these decisions on every hand made by the various boards that have been set up, boards in the munitions department that take away individual rights, that say to one member of a class that he shall have certain rights and say to other members of the same class that they shall not have the same rights. If out of this debate this evening there should come a determination on the part of this parliament to insist on behalf of the people we represent that from any decision of a war-time board or any other administrative body set up by this government which takes away an individual's rights or interferes with his livelihood, which takes away not that individual's rights as a member of a class but his own individual rights independent of his class, there shall be the right of appeal to the courts, then I think this debate will have been worth while.
Finally, Lord Sankey recommended:
4.	Such a decision should be in the form of a reasoned document available to the parties affected. This document should state the conclusions as to the facts and as to any points of law which have emerged.
This principle enunciated in 1929 and accepted by the British government of that day and by all succeeding governments there is denied every day in this dominion, not only in matters particularly affecting the war but in matters of business which by no stretch of the imagination can be considered to contribute in any way to the winning of the war. Practically the sole voice raised anywhere in this dominion against this practice has been the voice of the Canadian Bar association. It has often been said that we have in this house a large representation of lawyers. Throughout the ages lawyers in parliament regardless of their political affiliations have insisted on the rights of the individual. We as lawyers in this parliament week in and week out have seen the gradual diminution of the powers of parliament and the gradual whittling down and denial by administrative boards of the right of the individual of appeal to the courts when there has been interference with private rights. But very few have raised their voice against
that tendency. If out of this debate will come a determination on the part of the members of this house to insist that its rights which mean so much to any member of a British parliament shall not be abrogated, except where necessary in the interests of the security and safety of the state, something worth while will have come out of the discussion here this evening.
I need only conclude with the words of Mr. Chitty, editor of the Fortnightly Law Review, who in the last few months has been dealing with interferences with private rights and with the gradual diminution of the powers of parliament by a parliament that has not stood up for those rights. Only the other day he made this statement:
It may be necessary to set up certain controls by which the parliamentary sanctions are administered, but not dictatorships such as we have to-day, for which as the chief justice has said-
That reference is to the Chief Justice of Canada and the judgment he gave with reference to the chemical controller:
-parliament is responsible, but which clearly show that they acknowledge no responsibility to parliament. One has only to point to England-perhaps not a popular example-to show' that even in w'ar time parliament can still function and exercise the necessary control without the interposition of dictatorships to institute and administer those controls.
I have not the judgment of the supreme court before me, but I invite hon. members to read it. Take the judgments of Chief Justice Duff, Mr. Justice Davis and Mr. Justice Rinfret. They accept as legal the set>-ting up of controllers in war time under provisions contained in the War Measures Act. They indicate that unless there is a scrutiny, a care, a determination on the part of parliament to assure that private rights shall not be destroyed by controllers set up and uncontrolled by parliament except through the route of ministerial responsibility, we approach a position dangerous to the welfare of parliamentary government in this dominion.
There is one other course which the minister could follow. One hon. member suggested the other day that orders in council should be submitted to a committee of parliament for the purpose of considering them and recommending changes. I do not agree with that. I believe that the tendency toward order-incouncil government has arrived at a point where the government to-day, when it does not wish to bring a matter before parliament, takes the easier course of passing an order in council determining rights, setting up offences, and creating responsibilities. We members of parliament accept what is done without objection.

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We have another thing coming up at the present time, in connection with debt adjustment in western Canada. The Minister of Justice said the other day: What we will do is this; we will amend the Farmers' Creditors Arrangement Act by making it applicable to Manitoba as well as Saskatchewan and Alberta, and then we will pass an order in council setting up the machinery, such as it is, creating rights, because parliament is too slow, too dilatory. That is what I gathered from the minister's remarks.
Mr. ST. LAURENT: Will the hon. member allow me to correct him on that point? What I did say was that there would be an order in council passed now to enable the courts to grant staying orders in the land debt cases, and that there was being prepared a bill to amend the Farmers' Creditors Arrangement Act to make it a more effective instrument, and to extend its application to Manitoba as well as to the other provinces; that that measure would be introduced as soon as possible after the Easter recess, for the consideration of parliament; and that an order in council to enable the courts to render valid staying orders in the form provided for hitherto by, I think 't is, section 15 of the civil rights act of the province of Saskatchewan, would be passed so that it might be available immediately and might stay or permit the courts to stay, if it were thought necessary, the avalanche of actions which, the hon. gentleman said in the house some time before, was preventing effective agricultural production in the western provinces.


John George Diefenbaker: The words of the hon. gentleman are these, as reported in Hansard at page 2097:
I understood there was some urgency about this, and my experience during the very short time I have been in this house is that when matters are urgent it is sometimes inconvenient, for those who require them, to have them delayed until they can be dealt with in the form of a bill.


An hon. MEMBER:: Read further on.


Mr. DUPUIS:: The hon. gentleman should read it all.


John George Diefenbaker: That is exactly the point I make. Members of this government, instead of submitting legislation to the house where it could be debated, are gradually arriving at a point where action is taken by order in council and parliament is not consulted at all. My suggestion is this. Since there is no hon. member, no matter what his position, who can say with reasonable certainty what the law is on any of the subjects dealt

with by order in council, there should be a committee of this house set up for the purpose, not of changing orders in council which are passed, but of placing before parliament from time to time the record of the orders in council which have been passed which interfere with private rights, which depart from time-honoured principles of legislation, which deny rights to one individual while granting them to another, to the end that parliament will at last have supervision over legislative action taken by the various boards and controllers.


James Lorimer Ilsley: I know it is my duty to follow the hon. gentleman in his general attack on the system of organizing the country for war. There has to be a certain amount of what might be called regimentation, I suppose, w'hen a country is at war; and things have to be done when a country is at war that would not be normally done in times of peace. The hon. gentleman did not show in his speech any awareness that there was any necessity for a different organization in time of war from that in time of peace.


John George Diefenbaker: Oh, yes. This is the point I made, that many of these boards pass regulations which have no possible connection with the winning of the war.


James Lorimer Ilsley: Well, that is only an assertion. I should like to have some instances before I would assent to it. It is easy to make, but it is difficult to prove. It sounds well and perhaps would command some assent from persons who resent too many restrictions and controls. But the hon. gentleman must understand that to build up a country's war organization as rapidly and as far as has been done in Canada requires us to make very rapid changes in our system of organization of the country's industry and trade and business. The control of prices, of supplies and of industry in such a way as to turn them from peace-time activities to war-time activities means a great deal of clashing with individuals who w'ould like to do something which would be a little more profitable if it were left to themselves. There is no way that I know of whereby that can be done without the vesting of a large amount of power in the hands of officials. As I said to the house one day, parliament cannot do it itself. I would point to the fact that parliament has been in session now for nearly three months, and the amount of actual deeds of parliament, of action taken by parliament, is not very great. It has had a different value, and a very considerable value, but it has not lain in that direction. It is necessary, if the tremendous volume of necessary business, acts,

Income War Tax
decisions, one after the other, day and night, is to go forward in proper sequence, that an immense amount be done by order in council. As I told the house, I believe, a while ago, about 12,000 orders in council were passed last year. Did we pass 12,000 orders in council to get ahead of parliament or to keep business away from parliament? Did we do it because we enjoyed the work that was necessary in getting all that business through? Not at all; we did it because decisions had to be made and action had to be taken. It had to be taken every hour of every day, every day of every week, every week of every month, and every month of every year. The war will not wait; that is all. When we get into more leisurely times; when, instead of having an expenditure of 85,500,000.000 a year, we have an expenditure of 8500,000,000 or 8600,000,000 a year again, we can refer a very much greater volume of business to parliament. We did not do these things because we did not want to bring these matters to parliament. Why, we bring everything we can to parliament. Unless I am greatly mistaken, an hon. gentleman suggested action by order in council in reference to debt legislation; at least one hon. member opposite did. It was suggested that the matter was so urgent, that these farmers in the west were threatened by creditors to such an extent, that action should be taken in this way. It may have been the hon. member for Weyburn-


George Hugh Castleden: I believe I did.


James Lorimer Ilsley: Well, some hon. gentleman suggested that action should be taken by order in council. Could we have taken action by legislation? When would our legislation have been introduced, and when would it have been passed?


John George Diefenbaker: You have not passed the order in council yet, although it is so urgent.


James Lorimer Ilsley: But we can pass it. Does the hon. gentleman say we should wait for legislation? I should like to have his view on that. Does he want us to wait until legislation can be introduced and passed after the Easter recess, to deal with that matter?


John George Diefenbaker: I could understand perfectly well that if there were urgency and an order in council were passed and put into effect immediately, there could be no objection, if the legislation were introduced afterward. But where is the urgency? The judgment has been handed down for several months; the opportunity has been before parliament and the government for several months to introduce legislation. The reason
given by the Minister of Justice was that he had not been able to consult with the Minister of Finance.


James Lorimer Ilsley: The hon. gentleman has evaded the question; he has not said whether he would like us to deal wth this particular matter by legislation rather than by order in council. If he really wants the matter dealt with, he wants it dealt with by order in council, because it certainly would not be dealt with for months by legislation, even if we introduced the bill. There are certain matters that can very properly be dealt with by orders in council, and certain other matters that have to be dealt with by controllers' orders and boards' orders. Everyone who has any appreciation of the practical phases of the war knows that this must be the case.
That does not have much to do with the matter before the committee, but the hon. gentleman was attacking the actions of civil servants or administrative boards, saying that we must not set them up and put them above parliament so that parliament loses its control. The principle of this proposal is that a committee of the government, which is not an administrative board in any sense, but a committee of the government which is responsible to parliament, should go into these transactions and make an assessment on certain principles which are set out in general form in this section, with an appeal provided to the courts. The hon. gentleman says that the courts cannot review the discretion of the treasury board. The ruling of the treasury board is a discretionary ruling, and it is expressly provided' that this ruling is reviewable by the court. This matter was debated in this house in 1940, when subsection 2 of section 32A was added. The clear understanding was that the court was to be able to review the discretion of treasury board. It is now suggested that the matter be referred to the courts and that the courts make the assessment. There is a difficult task involved here. First, there is the difficulty of ascertaining how much income has been avoided and in what years, and then an assessment of tax in respect of that income. Before you can get it into court I think someone has to do that work; I do not think the court can be expected to do it. I believe a preliminary hearing by some tribunal is necessary.
As I say, however, I should like to hear the views of hon. members on the principle and the provisions of the section, because we should put something in the bill. It is a problem, I am telling the committee. A great many of these surpluses in the hands of individuals will decline and perhaps eventually
Income War Tax

disappear without taxation unless something is done. For years the commissioner of income tax has advised that it is impossible to foresee or envisage the methods that will be adopted, and that the only possible way of dealing with the matter is to express general principles and leave it to some tribunal to decide. I do not care whether it is the treasury board. If hon. members would like to have it done by one of the boards that the hon. member for Lake Centre loves so much, I could give it to one of them. But I should think the treasury board' would be more responsible to parliament than an outside board. Somebody has to be entrusted with the duty of watching these transactions, determining how much tax is avoided and whether the main purpose was to avoid taxation. If the main purpose was not to avoid taxation; if it was a legitimate business purpose, then the transaction should not be impugned. But the treasury board should have the power to make that finding where the main purpose was to avoid or minimize taxation and then make an assessment, and let the people concerned appeal if they wish to do so. If it is a glaring case, I imagine they will not be likely to appeal, but if it is an honest case they will appeal and the courts can uphold or reverse the action taken by the treasury board. I edn tell the committee that there is a great problem here which has to be dealt with in some way.


John Gordon Ross: I have listened with a great deal of interest to much legal argument here to-night. Stripped of all these legal points, is the situation not simply this? In the ordinary course of events, when an individual makes an income tax return, if the commissioner of income tax does not believe it is a proper return I understand he assesses that individual, and thereupon that individual either pays the assessment or goes to the exchequer court. Is that not the situation? Under those circumstances, if these companies are trying to avoid something, instead of the commissioner of income tax making the assessment the treasury board makes it, and the company concerned can go to the exchequer court. I may not be right in that, but I thought that was the procedure.


James Lorimer Ilsley: The commissioner informs me that the income tax division does not make arbitrary assessments; it gets some evidence upon which to make its assessments before doing so. Perhaps that is what the hon. gentleman means.


John Gordon Ross: But they make
the assessments?


James Lorimer Ilsley: They make the assessments.


John Gordon Ross: And if an individual wants to appeal from the assessment he can go to the exchequer court. In this case, instead of the officials of the department making the assessment, which is how it is done in practice, the treasury board is to make the assessment on these companies, and if they do not like it they can appeal to the exchequer court. I do not know why we need all this legal argument about the matter. If we use a little common sense ini regard to it we shall get along faster.


Richard Burpee Hanson: In the
one case the commissioner makes the assessment under the sanction of law, as laid down by parliament. In the other case the assessment made by the treasury board has not the sanction of law.


John Gordon Ross: We are trying
to give it that, are we not?


Richard Burpee Hanson: I do not
know what we are trying to do.


Major James William Coldwell: Would it not be possible to enact legislation which would make it a crime under the law to evade taxation? If the penalties were sufficiently severe, that would be a deterrent, whereas it seems to me that to-day it is just a sort of game as to how you can get out of it, and when you are assessed you pay only a small penalty by way of interest.


James Lorimer Ilsley: It would be much harder
to draft a defensible section creating a crime, making the avoidance of taxation a crime, than it was to draft this section. We must not lightly make things crimes. It is not a crime, has never been regarded as a crime so to arrange one's affairs that taxation can be avoided. It is something that should not happen, and the taxation should be obtained, but start to draft a definition of a crime there and you will find yourself in great difficulty. I should have a great deal of sympathy with what the hon. member for York-Sunbury said in respect of that, because it would sweep in transactions that are all right, that are not even undesirable. I do not think you could draft a definition in such a way that it would not.


Richard Burpee Hanson: Let this
stand.


Roy Theodore Graham: The amendment is lengthy.
I thoroughly agree that not only hon. members of the opposition but some on this side of the house would wish to discuss such an

Income War Tax
important and lengthy amendment. I certainly caflont agree with members of the opposition who suggest that it is in contravention of magna chart-a, the bill of rights and almost the rights of man. I think that is absurd, and there is no such suggestion in the amendment in any shape or form. As the minister pointed out, we have of necessity to stream-line our machinery of government so that it will work effectively. I presume that will be the case not only during the war but for at least a considerable period after its termination. Therefore, so far as the method suggested is concerned, namely, delegation of a certain power by the government or by this parliament to the treasury board, I see no great conflict with many other acts that we have passed not only during the war but prior to the war and will continue to do after the war.
I feel, however, that the amendment requires careful reading and consideration. I suggest to the minister that since there is a retroactive provision in it, there can be no immediate urgency for having this passed to-night or even before the Easter recess. I think it would be time well spent and the mind of the minister would be better satisfied if hon. members could have an opportunity in the quiet of their rooms to study the provisions in detail and form an intelligent opinion regarding the measure.


Joseph-Arthur Bradette: Shall resolution 22
carry?


James Lorimer Ilsley: No. I do not want to take that up now.


Joseph-Arthur Bradette: What does the minister wish to do?


James Lorimer Ilsley: I should like to proceed with these matters that are not before the committee. It is important to get everything before the committee.


Richard Burpee Hanson: Could we not have them stated without debate?


James Lorimer Ilsley: No; I think it is better to go on. The next could be called resolution 28.


Gordon Graydon: Is this the last?


James Lorimer Ilsley: No; there are several more. This is in Votes and Proceedings of April 6:
That in order to make possible the use of a simplified return and facilitate the calculation of tax by all individuals (except proprietors and partners in any manufacturing, trading or merchandising business) in receipt of incomes for 1942 from all sources not exceeding $3,000 and not in receipt of investment incomes of more than $1,500, such individuals shall be subject to the appropriate amount of tax set forth in
a table to be approved by the governor in council. The said table shall specify the tax payable on incomes falling within ranges of not more than $10, and the amount of tax payable on incomes within each such range shall be that amount of tax in dollars (excluding the cents) lying approximately midway between the amounts of tax payable on the highest and the lowest incomes within such range, calculated in accordance with the rules set forth in the first schedule of the act, and reduced by one-half in accordance with resolution 1 hereof.
I wish to explain, to the committee exactly what they will be doing if they approve that resolution. It will effect a computation of tax which will not be exactly accurate. I am informed that the farthest that any tax will be increased or decreased from the exact amount payable is SI.70 a year. Most of the errors, if they may be called that, will be less than that amount. But it will mean that some taxpayers by using this form, which is a highly simplified method of determining what their tax liability is, will pay a few cents and up to SI.70 less than they ought to pay and some will pay up to SI.70 more. We think it is worth doing in the interest of simplicity. We think it would cost them more in time at least and perhaps mi money to use the long method of computing their tax and struggle through that rather than using this. That is the reason why a resolution is necessary, because it does impose an additional burden on some taxpayers and relieve others, but substantially effects justice, I think. I have the form here, and tables, but that is really all there is to it.


Joseph-Arthur Bradette: Are these clauses intended to be added?


James Lorimer Ilsley: Yes; that is resolution No. 28. It can either be carried or stand.


Joseph-Arthur Bradette: They can be carried now, because we have to go on with the resolutions as they come. We have to go back to resolution 22.


Richard Burpee Hanson: We ought to have notice of them anyway.


James Lorimer Ilsley: Do I understand we are not discussing these as I move them?


Richard Burpee Hanson: No.


James Lorimer Ilsley: We are debating them?


Gordon Graydon: We should not be, but we have to.


James Lorimer Ilsley: I suggest No. 29 be one of which notice has not been given. It is simple:
That the information return required to he filed by employers showing the amount of salaries or other remuneration paid to persons in their employ in the preceding calendar year and the amount of tax deducted at the source
Income War Tax

under the provisions of the act from the salary or wages of such employees shall in respect of the 1942 taxation period be filed on or before the 31st day of May, 1943, and in respect of all taxation periods subsequent to 1942 shall be filed on or before the last day of February in each year.
I do not know the reason for that or the explanation.


Richard Burpee Hanson: It is a matter of administration. Let that stand with the others.


James Lorimer Ilsley: All right.
Now I suggest that No. 30 be the one relating to merchant seamen. That is found in Votes and Proceedings of April 6. It reads:
That any amount received by an officer or man of the merchant marine as bona fide war risk bonus in accordance with the usage of the merchant marine, and any value of board or lodging on shipboard received by such a person while performing services in respect of which war risk bonus is payable, shall not be considered as income subject to tax under the Income War Tax Act.
I do not know whether it requires an explanation now; I am merely giving notice.


Richard Burpee Hanson: I think that is understood.


James Lorimer Ilsley: I may add that there may be further development of it in the act.


Alan Webster Neill: I wash to take only about ten minutes to place before the committee certain circumstances regarding certain Canadian members of the flying personnel of the Royal Air Force ferry command. These men are engaged in flying aeroplanes, bombers, land planes and so on from this continent to the British isles. They are being charged income tax, and their basis of claim or their contention is that they should be totally exempted, like all those in the armed services, who are described as being on active service overseas. Certainly I maintain, and I do not think it can be contradicted, that that description applies also to the men about whom I am going to speak.
They are regarded for taxation purposes as civilians, although many of them wear uniforms, because they are compelled to do so, and they are all trained to use guns. There are guns on the flying boats. They have been attacked in the air by enemy aircraft and by enemy anti-aircraft guns. This indicates the danger of attack and the liability, if captured, of being treated as guerillas. But normally they appear to be recognized only as civilians. Members of the Royal Canadian Air Force, the corresponding body in Canada and on the other side, are exempt from taxation when overseas or on the Atlantic, and even on the Pacific. Resolution 22, which I understand we are now dis-[Mr. Ilsley.l
cussing, provides that if such men are outside Canada they shall pay no tax for doing work ordinarily performed in the air or in watercraft.
I have said that they are constantly open to attack by enemy craft, both enemy aircraft and anti-aircraft guns. That surely constitutes war	risk.	They	are also subject to	whatmight be called flying risk, extra to ordinary war	risk.	And	that is	greater than anycomparable operation, because they are flying a long route from this continent to Great Britain. They have the added risk of flying new	boats	on such long	trips, almost	theirfirst	flying	trips.	These	boats might	quite
readily develop unforeseen and unexpected flaws, which would leave them out in the middle of the Atlantic. When they are put down there, their fate is doomed. There is no recourse and no rescue in a situation of that kind. There are no landing fields at intervals of fifty miles, as there are in land flying.
The loss of their personnel is deeply significant of the importance and the danger of their operations. It cannot be calculated exactly to a percentage, but it is something like thirty-five per cent of loss of personnel in two years. That is a tragic record, and I believe it is not comparable with any other field of active service.
Then, there is the other side of the picture. It is true that they are paid what might be considered a large salary, which is supposed to cover all risks. But it does not do so. At the time of the origin of this service there was no time to train men. It would have taken many months, or a year or two to do so. Men had to be secured quickly. The government had to get fliers in a hurry, and they had to take just what they could get. The result was that they picked up a large number of what are known as bush fliers, men who had had long experience, painfully acquired experience, in building up a fine record in connection with flying supplies into the north country, or into the mines in the northern parts of Ontario and Manitoba. The government had to pay above the standard civilian rates, on account of the extra risk involved. Possibly the men who were hired did not understand-indeed, perhaps no one could then understand-what their actual risks might be.
I should like to point out at this stage the difference between hiring a fully experienced airman, with years of experience behind him, lots of flying in the north country which called for the development of the greatest degree of initiative and enterprise on the part of the airman, and the man such as the raw

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recruit on which the government would have to spend money for the purposes of giving one or two years' training. What would that experienced bush flier be worth, as compared with the recruit whose training would require a year or two? It would be just like the army picking up a first-class doctor, and comparing his services, ability and experience, acquired over long years, with those of a man who has come in as a medical orderly, or who worked in a hospital.
Or, if I might put it in this way-if such a thing were possible-the difference would be the same as that which would exist between recruiting a general with all his training and experience, as compared with recruiting the ordinary private soldier. That would be a fair comparison.
It developed that the risk was greater than had been expected, not only from the point of view of attack, but because new and untried planes were used. Again, there is no pension for the widow or the children of these men. Any insurance they have is held at their own expense. To provide a very moderate pension would require insurance to the extent of something like $15,000. And the rate of premium is so high it would require payments of something between $1,000 and SI,200 a year. All that must come off his .pay. The insurance that he would get is of such a nature that it could not be taken off the savings portion of his income tax.
Of course they are provided with no ration allowance while in Canada, no living-out allowance, no allowance for a wife, no allowance for children, no medical care and no dental care. And if they are sick their pay stops the minute they become sick, or meet with an accident. All responsibility for and the results flowing from an accident or sickness must be borne by the man himself.
Another and perhaps greater line of dissatisfaction is the discrimination between two different men who belong to the same command, doing exactly the same kind of work and sharing the same risk. There is nothing more calculated to promote friction than to have two men doing the same thing, one of whom is treated entirely different from the other.
When this work was first started it was necessary, as I have said, to get men in a rush, not only Canadians, but Norwegians, and men from the United States. They were all eagerly picked up and taken on. I hold in my hand a copy of the contract entered into between the air command and the employees who, in this instance, were citizens of the United States. I should like to quote only one paragraph from it. Let me explain 72537-142
again that this is the exact contract made between air command authorities and an employee of United States origin. It reads as follows:
In the event that .the employee is a bona fide citizen of the United States of America and a non-resident of Canada, the employer-
That is, air force command.
-shall indemnify the employee against aqy and all claims for British or Canadian income or national defence taxes in respect of the remuneration to be paid to the employee hereunder and shall reimburse to the employee, upon demand and proof of payment wherever required, the full amount of any such taxes in respect of such remuneration as may be deducted or withheld therefrom at the source or which he may otherwise be legally obliged to pay.
It does not require anyone with even a superficial knowledge of legal terminology to understand that. It is clearly expressed that when these United States citizens were taken on and signed the contract they were entirely indemnified against having to pay income tax either for British or Canadian sources. And as a matter of fact they do not pay it. As a matter of fact they do not pay anything out. I do not know who pays it, but it is not paid by them and they do not pay any United States income tax either. That provision is not in the Canadian contract. I have not the Canadian contract before me, but I am satisfied that that clause does not appear in it. The fact that our men have to pay a tax constitutes an unfair discrimination as between two classes of men doing the same work.
There is another factor that should be considered which places an unfair burden upon these men. Many of the Canadian flying personnel are sent down to work at the R.C.A.F. ferry office at Nassau. There is no price control or rent control in Nassau. Prices have sky-rocketed and living costs are from seventy to eighty per cent higher than in Canada. No subsistence allowance is made to the Canadian men when they are sent there. This may seem a minor grievance, but it is important to these men.
I submit that all this makes a good case for the exemption of the Canadian men from income tax, especially when it is realized that the United States men are protected by their contracts from having to pay any income tax. It will be said that they get a large salary which is intended to cover all these risks, but I submit that their salary is not high enough to cover the extra risks involved. It may be argued that it covers some of them. I wish to be absolutely fair and I think there is some argument that part of their salary should and

Income War Tax

is, as a matter of fact, considered as compensation for the war risk. In fact, it is so expressed. I would suggest that the government decide what proportion of the civilian pay is intended to cover.war risk and how much for insurance, and then permit these men to credit these sums against their ordinary income tax.
I dp not think anyone can deny the justice of this claim. This is a minor concession, but it would help these men considerably. The loss of revenue would be trivial, because I think the total personnel is under 200 men, something like 178.
It is suggested sometimes that the habit of the Minister of Finance is to railroad his bills through, regardless of any representations that might be made. Some people may concede that it is his duty to get his bills through without any change. At the same time he has shown a readiness in the last day or two to make adjustments where necessary, provided, as I understood him to say, they did not interfere with the main policy of raising revenue.
In this instance I suggest that we would not be deviating from the policies he has laid down. There never has been a measure of finance, certainly no measure that amounted to anything, which, if it were based on straight policy, did not create incidental injustices here and there. I think our duty is to point this out and to ask the minister to look into these matters and smooth off the bumps, so to speak. That is the purpose of this discussion. If he gave his sanction to this, he would in no way deviate from his main line of policy. If it was a question of an enormous reduction in revenue, I could quite understand that he could not be expected to agree to that, but this is a small thing.
The obligations and satisfactions of mankind are generally made up of small things. A thing like this may appear small when considered in the light of the budget, but it is most important to these people. I should like the minister to give me an assurance that he will look into this and see if he cannot adjust these grievances.


John Gordon Ross: I agree entirely with what the hon. member for Comox-Alberni has just said in regard to pilots of the ferry command. He gave a figure of about 200, but there are actually 330 men engaged as pilots, co-pilots and radio and flight engineers. Of that number there have been 121 casualties in two years, making the losses something around 19 per cent per annum. Their insurance rates are exceedingly high, and all most of them can get is accident insurance, the premium for which runs about 9 or 10 per cent

if it is to cover duty in different parts of the world, and about 6 per cent if it is to cover flights to the old country.
I agree with the suggestion of the hon. member that the minister should allow that portion of the salary paid to these men which might be considered as war risk as an exemption from income tax. I have talked to these men and I know something of the work they have been doing. They are in danger every time they fly. Sometimes they go right in behind the troops with supplies, at times without any great protection. Certainly, if any men should get consideration from the income tax division, it is these ferry command pilots of Canadian origin.


Richard Burpee Hanson: Are they residents of Canada?


John Gordon Ross: Yes, but sometimes they have to set up temporary residence in Nassau or in other ports. As my hon. friend has said, there is no income tax to speak of in Nassau, but there are very high taxes on food, rent and one thing and another. Where a man has to maintain a home here and keep himself there, he finds himself up against the income tax here and greatly increased costs of living there. I think every consideration should be given to these men, and I am sure the minister will give it.


Major James William Coldwell: I should like to support what has been said by the hon. member for Comox-Alberni and the hon. member for Moose Jaw. I think these men have a very real case. I do not intend to go into the matter in detail to-night, but I should like to point out that recently there was another casualty list which brings the number up to that given by the hon. member for Comox-Alberni. This was from a Catalina flying boat on the way from Africa to Great Britain which was intercepted by the enemy and destroyed, all the men being lost. The minister and his department will note that the casualties in this service have been exceedingly high. The number of personnel was given by the hon. member for Moose Jaw as 330, and there have been casualties of 121. This does not mean that only 330 men have been employed in this service in the last fifteen or eighteen months, or whatever it is, but that the average on strength throughout that time has been 330. After all, that is the number we should take. Men drop out to go into something else and are replaced by other men. You have to take the average number engaged in the particular work over the period of time. During that time 121 have been lost. When compared with the men in the Royal Canadian Air Force who hold comparable ranks, after deducting income

Income War Tax
tax and adding what the Royal Canadian Air Force men receive-they deserve every nickel they get-by way of subsistence and other allowances; after allowing for insurance costs, several categories of men in the ferry command are getting less than the men in the Royal Canadian Air Force.


Paul Joseph James Martin: Do they get pension benefits and the like? [DOT]


Major James William Coldwell: They have no pension benefits whatsoever.


John Gordon Ross: And no medical
benefits?


Major James William Coldwell: 
Paul Joseph James Martin: I do not disagree; in fact, with the general principle I agree, but for clarification may I ask the hon. member if it is not a fact that the ferry command is not exclusively under our control? The United Kingdom has something to do with it?


Major James William Coldwell: I think it is exclusively under the control of the United Kingdom. But these are Canadian boys domiciled in Canada, and that is why we have the right to tax them. They are working for the R.A.F. ferry command, but they are Canadian citizens who are technically domiciled in Canada, and therefore as citizens their incomes can be assessed for income tax just like all the rest of us.
I think the hon. member for Comox-Alberni was quite right. These boys are not anxious to escape any obligations which they should properly assume in the war. But if it is argued,
as it sometimes is argued, that the rate of pay which was granted to them was in some degree
to compensate them for the war risk they assume, it seems to me that they have strong grounds for asking that that portion of their pay which is to compensate them for the war risk they assume should not be assessed for income tax purposes. I think that is a perfectly sound request on their part. Indeed, I would go further and say that on account of the shortness of the life and the fact that many of these men are married and are too old to be enlisted in the regular R.C.A.F. the minister should consider exempting them from income tax entirely. But if he will not do that, certainly a case can be made out for exempting from income tax that portion of their pay which is to compensate them for the war risk they assume on this work. If that were done I believe it would be a measure of justice, and they would deeply appreciate it.
A number of other members of the house know of these cases. I met one of these young men from my own province on the train one day, and that is how I came to learn about this. I can assure the minister that as far as we in this group are concerned, if he grants this legitimate concession which is being requested from every corner of the house, we shall be glad to give him every support.


Richard Burpee Hanson: Undoubtedly a case has been made out for these young men, but one factor has been understated if it has been stated at all. When these men entered into this employment at a comparatively high rate of remuneration the income tax was relatively low, but the tax to-day, applied to a man making $900 a month or whatever it is, is a very severe tax. I hope the minister will give consideration to the request that is being made on behalf of these men. I happen to have met some of them, and I know they feel that they really have a just grievance in view of the very high rate of income tax. The British government induced the Americans to come over here, and I was talking to one of them when we were flying across. They are indemnified against the imposition of income tax. But the Canadian government has not done that with respect to our residents here, and of course there is a measure of discrimination there. Just what proposal would be just and fair, I am not prepared to say, but I think a case has been made out for some concession to these men. They are engaged in a very hazardous occupation; there is no question about that. Outside of actual combat in the air I do not know of any more hazardous occupation than flying on the bomber command.
Income War Tax


Douglas Gooderham Ross: I should like to
lend my voice in support of those who have spoken on behalf of these men who are flying on the bomber command. It may be said that they went into it with their eyes open, but they will be engaged on this hazardous work for only a short time and they have to provide for their families. Theirs is an occupation as hazardous as there is in the world to-day.
There are some other inequities. We have in Canada on the east coast and on the west coast troops who have enlisted for active service. Some of these troops may be located on a lonely island, where they are shut off from everything. Perhaps a little distance away on a boat in the harbour are some naval officers whose incomes are exempt from taxation because they are afloat. The men of whom I am speaking, located in some lonely spot, and who are liable tO' be called for service anywhere at any moment, find that their incomes are not exempt from taxation.
We have other troops who have enlisted for active service and are located somewhere along the border in Canada. Right across the border in the United States or in Alaska there are other troops, and our soldiers see a discrimination there in the matter of income tax.
Some concession in the matter of income tax exemption should be granted to these men who have enlisted for active service and are located in some lonely post. They should have the same exemption as those who are located just outside Canada. Surely some scheme could be worked out to remove the present cause of discontent. Troops who are serving on the east coast or away up in Labrador are just as much on active service there as troops in the Yukon or Alaska or Newfoundland, and they feel that there is a great deal of discrimination under the present circumstances.


Angus MacInnis: This is the first time I have taken part in the discussions of the income tax resolutions, and as I have listened to what has gone on now for a considerable time, I have frequently wondered where the taxes are to come from or who is to pay them. Nevertheless I think this is a case to which the minister should' give very serious consideration. One point which has not been mentioned is that our Royal Canadian Air Force flyers in Canada who have more than 400 hours of operational flying are, I understand, exempt from income tax. This ferry flying 'is undoubtedly more dangerous than operational flying in Canada, and I am sure that the exemption of the men engaged in

it would be well received everywhere. As far as other civilians are concerned, those of us who are getting a reasonable standard of living have no reason to complain of the taxes we are asked to pay, and would have no complaint even though they were higher. So far, after all, we have not sacrificed anything. I trust the minister will give favourable consideration to this request.


Gordon Graydon: I rise primarily for the purpose of joining those who have pleaded so eloquently and convincingly for the men serving in the ferry and bomber commands. In my own constituency one of our finest boys, a member of the ferry command, lost his life some months ago. I knew something about his case, and I have taken close interest in the details of the hazardous and dangerous job to which hese men are assigned. I would simply add a word to what has been said in favour of exempting them from this taxation. In a period of war we must not lose our sense of relative values. Many men and women to-day are doing extremely hazardous work, and although some may not be as close to the scene of battle as others, the danger is there.
I think the minister might also reconsider the matter of the legislation he proposes to bring down based upon resolution 22. This seems to me to go only part way to meet the situation which has developed.


James Lorimer Ilsley: Had we better not leave that until we get to that resolution?


Agar Rodney Adamson: Are we still on resolution 21?


James Lorimer Ilsley: We are on the notice to introduce the one relating to the merchant marine.


Gordon Graydon: I was out of the chamber and have just come in. I would rather reserve my remarks for resolution 22.


Joseph-Arthur Bradette: Order. I have called resolution 22.


Gordon Graydon: That just shows that the man. who is outside the house seems to know as much as those who are inside. If I may do so, then, I will continue.


James Lorimer Ilsley: Excuse me just a minute. I shall have to propose some changes in resolution 22; there is no doubt about that; and that was the reason why I was avoiding the calling of it until we had dealt with everything else. I certainly did not know that, number had been called. I know that the Chairman tried to call it two or three times, and I said, "Do not take it up now."

Income War Tax
I am in the hands of the Chairman. But if we undertake a discussion of that now, we shall be just wasting our time, because I have to propose some amendments.


Gordon Graydon: Perhaps we might regularize the proceedings by my simply closing my remarks with respect to the matter to which I was referring a moment ago, and reserving what I have to say until resolution 22 and the amendments which the minister is apparently intending to bring down are before the committee, because they may alter the _ whole structure.


James Lorimer Ilsley: As I understand' it, we are on resolution 30, which is the one relating to the merchant marine; at least, I gave notice of the moving of that resolution. I am not clear about the procedure: I thought all I had to do was to move the resolution and discuss it. But apparently resolution 30 is to be reached later; yet discussion has been permitted, to which I take no objection, on that resolution; and because the matter of the ferry command is connected with the subject of the merchant marine, several hon. members have asked that some consideration be given to exempting from income taxation part of the salaries of the members of the ferry command. I may say that consideration is being given to that proposal, and later I will communicate to the committee the decision of the government. It is a matter which does not have to be dealt with by resolution because, if anything is done, it would be an alleviation of taxation rather than an imposition of taxation.
I just wish to remind the committee that the fact that we exempt certain persons from income tax and partly relieve others from income tax creates tremendous difficulties for the government and for the departments of Finance and National Revenue, because the moment an exemption is given to one particular class, the demand is made that it be extended to a somewhat similar class. Last year I was rigid in my position that we should not extend any exemptions beyond those who were members of the armed forces. Yet the case of the merchant seamen presents such a tremendous appeal to the sympathies, and not only that, but the merchant seamen are doing such remarkable work, work so necessary for the defence of our country and for the carrying on of the war, that it is very difficult to be deaf to their requests. Those requests for the most part, I may say, are based upon a dislike of discrimination more than upon a desire to escape taxation. Possibly, if we had followed the English rule, which is to tax all residents of the United
Kingdom regardless of whether they are in the forces or out of the forces, whether they are on the seas or off the seas, whether they are in the air or on the ground, there would not have been very much complaint. But we took the other course.


Gordon Graydon: Are there no exemptions on these grounds?-


James Lorimer Ilsley: I have never heard of any
exemptions at all. This is the situation that exists. Members of our navy sometimes will be serving in the same ship with members of the British navy. The members of the British navy will have a very large proportion of their pay taken in taxation, while the members of our forces serving on the same ship will not be taxed at all. In Great Britain the members of the British forces will be subject to taxation; the members of our forces will not be subject to taxation at all. I presume the members of this ferry command who are residents of the United Kingdom are subject to United Kingdom taxation.


Major James William Coldwell: If they are on this
side they are given a living allowance which brings their pay up considerably, to help them meet that obligation.


James Lorimer Ilsley: I see; they get a special
allowance, but they are subject to United Kingdom taxation. So that these requests create almost intolerable problems, because the moment one is granted it leads to another. As a matter of fact, the appearance of the merchant marine resolution on the order paper immediately caused representatives of the ferry command to come to Ottawa and say they should be treated as well as the merchant marine.


Major James William Coldwell: They were here before that, though, were they not?


James Lorimer Ilsley: Yes; they were, but this
caused them to renew their representations in a much more emphatic manner than ever before. All I can say is that with regard to the merchant marine this is a concession as far as part of it is concerned, namely, the meals and so on. That is not based on any principle at all; it is just a concession to the merchant marine, and I just wish the committee to appreciate the great difficulties of the taxing authorities in drawing lines, because- we are driven from position to position.
After having said all that and having made my appeal for such sympathy as it may be possible to get, I wish to say that we are giving consideration to the representations of the ferry command.

Income War Tax


Gordon Graydon: I hope they will be
favourable.


James Lorimer Ilsley: Well, that remains to be
seen.
I suggest that we now take up resolution 14 which was allowed to stand.
* 14. That the tax payable by a corporation shall be paid by twelve monthly instalments commencing in the sixth month prior to the close of its fiscal period
(a)	as to the first eleven 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 twelfth month, the balance of the tax payable, having regard to the income and applying the rates of the taxation year;
provided, however, that should any instalment paid in each month of the seventh to eleventh month, both inclusive, be less than one-twelfth of the tax actually found to have been due, such deficiencjr shall bear interest at the rate of 5 per cent per annum from the close of the company's fiscal period.


Gordon Graydon: As I recall the situation, the Minister of National Revenue had made some amendments to this resolution but had not gone through the formality of having the amendments brought to the attention of the committee in the usual way.


Colin William George Gibson: At first we thought a change might be necessitated here, but the resolution as it stands will be the foundation for the section in the act, though we are going to make a concession to the taxpayer in this way, that if he pays on the basis of the previous year's income no interest will be payable for the six months prior to the end of his fiscal year.


Gordon Graydon: I do not wish to raise any unnecessary questions about this, but resolution No. 14 has been changed; it has been altered; it has been amended, actually, and if the resolution meant what it said in the first instance then it cannot mean the same thing now. It is very difficult for me to follow the line of reasoning of the Minister of National Revenue, who says that if not the principle then the details in connection with the resolution are to be altered, but still there is to be no amendment to the resolution itself. The minister should make it a little clearer than that.


Colin William George Gibson: The only point was that if there were to be any increase in the tax there would1 have to be an amendment. There is not to be an increase; as a matter of fact, if anything there will be a decrease in the tax on account of the fact that no interest will be charged on those payments which were worked out on the basis of the previous year's income.
 *


Gordon Graydon: Then may I ask the minister if, when the bill itself is brought before the house, the appropriate section will have an exact relationship to the terms of the resolution, or whether it will be changed?


Colin William George Gibson: It will be in the same relationship to the terms of this resolution.


Gordon Graydon: If that is the case, it does not make very much difference what the resolution calls for. I am not going to block the passing of this resolution, but I wish to protest against what I think is a very irregular sort of procedure. If, however, the minister wants to take the responsibility in connection with it, I suppose I should1 not object further.


James Lorimer Ilsley: What is the irregularity? I understood the minister to say that the section would follow the resolution, which to my knowledge has not been amended. I was out of the chamber part of the time, but this resolution stood in order that it might be examined with a view to determining whether or not an amendment was necessary. No amendment is deemed necessary. I thought the situation was that the section would either follow the resolution or impose a burden less than that imposed by the resolution. That was what I took to be the situation, and I think that is correct.
I find it a little hard, without remembering the terms of the act which was passed last year, to determine exactly the effect of this resolution, but I think it is this. The tax is payable by a corporation beginning in the middle of its fiscal year, and that payment continues for twelve months; that is, the last six months of the current fiscal year and the first six months of the following fiscal year. I understand that in the present act some interest is provided for underpayments during the first six months, but that this imposed a higher rate, really, for the six months beyond the end of the fiscal year, because the 5 per cent applies from the end of the fiscal year even,if the deficiency arises after the end of the fiscal year. I understand that the act will either follow that exactly or lighten that to some extent. It is not a very big matter one way or the other, but that is the situation. I do not think there is anything irregular. It may be that hon. members shou.ld watch closely the section of the act, and if we start trying to jack up any taxes that would be irregular.


[Stage Direction]
Resolution agreed to.
28. That in order to make possible the use of a simplified return and facilitate the calculation of tax by all 'individuals (except proprietors and partners in any manufacturing, trading or merchandising business) in receipt﻿APRIL 15, 1943
Income War Tax
of incomes for 1942 from all sources not exceeding $3,000 and not in receipt of investment incomes of more than $1,500, such individuals shall be subject to the appropriate amount of tax set forth in a table to be approved by the governor in council.	The said table shall
specify the tax payable on incomes falling withm ranges of not more than $10, and the amount of tax payable on incomes within each such range shall be that amount of tax in dollars (excluding the cents) lying approximately midway between the amounts of tax payable on the highest and the lowest incomes within [DOT] such range, calculated in accordance with the rules set forth in the first schedule of the act, and reduced by one-half	in accordance with
resolution 1 hereof.
James Lorimer Ilsley: Copies of the resolution will be found in Votes and Proceedings of April 6, page ii.


[Stage Direction]
Resolution agreed to.
29. That the information return required to be filed by employers showing the amount of salaries or other remuneration paid to persons in their employ in the preceding calendar year and the amount of tax deducted at the source under the provisions of the act from the salary or wages, of such employees shall in respect of the 1942 taxation period be filed on or before the 31st day of May, 1943, and in respect of all taxation periods subsequent to 1942 shall be filed on or before the last day of February in each year.
Gordon Graydon: I fail to find this amendment in Votes and Proceedings.


James Lorimer Ilsley: I read it earlier in the evening. It is an administrative matter, a formal matter. The hon. member for York-Sunbury listened attentively when I read it; he did not agree with it, but he seemed to agree that it was merely an administrative matter.


Gordon Graydon: We have never had an opportunity of seeing the resolution. I do not wish to ask impossible things, but it seems to me we ought to see these resolutions before we pass them.


Mr. NICHOLSON:: We are not going to be able to pass all these resolutions to-night. It might stand so that we may have a chance at least to look at it.
Resolution stands.
30. That any amount received by an officer or man of the merchant marine as bona fide war risk bonus in accordance with the usage of the merchant marine, and any value of board or lodging on shipboard received by such a person while performing services in respect of which war risk bonus is payable shall not be considered as income subject to tax under the Income War Tax Act.


James Lorimer Ilsley: I give the committee notice that there may be some slight changes in the bill, but the principle of the resolution will be
observed. There may be some method of ascertaining the extent of the war risk bonus in cases in which it might not otherwise be ascertained. That would be one thing.


Gordon Graydon: Unfortunately I was not in the committee at the time the hon. member for Comox-Albemi spoke. No doubt he dealt with this at some length.


James Lorimer Ilsley: No; he talked about the ferry command.


Roy Theodore Graham: What is actually meant by "bona fide war risk bonus in accordance with the usage of the merchant marine"?


James Lorimer Ilsley: I think they receive a special payment in certain areas, called the war risk bonus; that is those who are subject to salary and wage control. The bonuses are subject to approval by some governmental body here; I think it is the national war labour board.


Grote Stirling: Has it the force of a
statute, or a regulation, or an order in council, or what?


James Lorimer Ilsley: I am afraid I cannot answer those questions. By to-morrow afternoon I shall be much more definite. If hon. members wish to get more definite information as to the authority under which it is paid and the degree of control there is in governmental agencies here I would have to get more definite information than I have at present. But I thought it was safe to pass the resolution because I am not going to depart from the principle of it.


Gordon Graydon: This does not mean that the full pay of the merchant marine is being exempted from taxation?


James Lorimer Ilsley: No; it does not.
Some'hon. MEMBERS: Carried.


Harry Rutherford Jackman: I thought the minister
wanted to amend this resolution.


James Lorimer Ilsley: No; I do not think any
amendment will be necessary.
Mr. GRAYDON-: Is this "bona fide war risk bonus in accordance with the usage of the merchant marine" a substantial amount or a very small proportion of the amount received by the ordinary seaman? If it is only a small proportion, this exemption from income tax on it is rather futile. My view has always been that the merchant marine is about the most hazardous occupation a man can follow in war time under present conditions. I do not wish to enlarge on that, but I do not know of any job outside perhaps one or two of a similar nature that is more hazardous. It
Privilege-Mr. Graydon

seems to me that if the exemption is to be for only a small portion of the actual amount received by seamen who make these perilous trips, it does not go far enough, and I would not feel like letting the resolution go through without further debate.


James Lorimer Ilsley: Let it stand, then. It is
substantial. I will get the information.


Gordon Graydon: If the minister is prepared to indicate that it is a substantial amount, and a worth-while concession, I shall have no objection to the resolution passing. I do not wish to hold it up, and that is not my object. But if it is just a small amount I would not be satisfied.


James Lorimer Ilsley: It might better stand until
to-morrow.
Resolution 30 stands.
Progress reported.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Friday, April 16, 1943