[Stage Direction]
Second report of standing committee on railways, canals and tejegraph lines.- Mr. Breithaupt.


Hon. HUMPHREY MITCHELL (Minister of Labour):: Mr. Spea*ker, in announcing on November 27 that a new formula had been agreed upon which I hoped would have the effect of settling the strike of the employees of the Ford Motor Company at Windsor I refrained from giving the details. I now wish to place on the record copy of the letter which was addressed to both parties and signed jointly by Hon. Charles Daley, Minister of Labour for Ontario, and myself.
The letter read as follows:
Ottawa, November 27, 1945
Mr. D. B. Greig,
Treasurer,
The Ford Motor Company of Canada, Limited, Windsor, Ontario.
Mr. George Burt,
Regional Director, UA.W-C.l.O,
Windsor, Ontario.
Gentlemen:
The strike of employees at the Windsor plants of the Ford Motor Company of Canada, Limited, has reached a stage where the welfare of a large number of citizens is in danger and all reconversion plans are being seriously retarded. The strike is now going into its seventy-sixth day and many and earnest attempts have been made to bring about a settlement.
The company has agreed to arbitration of all issues in dispute and we are aware that the arbitration principle is not repugnant to the union.
After very careful and exhaustive investigation we have concluded that the strike can be disposed of by the dominion government appointing an umpire and an arbitrator and through the compliance by the parties of the terms stated herein.
We call upon both parties in the' interest of the many Canadian citizens concerned to settle this strike by putting this plan into effect at once.
The Minister of Labour shall appoint an "umpire of labour relations", to yvhom shall be referred by either of the parties, during the period pending the execution of a collective bargaining agreement, any alleged breach of the conditions of this plan or any injustice alleged by an employee with respect to conditions of his employment and the decision of such "umpire" shall be final and binding upon both parties.
fThe Chairman.]
2.	The Minister of Labour shall appoint an "arbitrator" from among the judges of the supreme court of Canada to whom may be referred by the parties any points remaining in dispute between them following a period of collective bargaining negotiations (not to exceed ten days or such longer period as the parties may mutually agree to) concerning a new collective agreement, and his decision upon the points in dispute with respect thereto and *with respect to the wording in any particular of the agreement to be negotiated shall be final and binding save that all matters over which the regional war labour board for Ontario or the national war labour board has jurisdiction shall not be decided by said "arbitrator''.
3.	The company shall reopen its plants and recall the employees back to work as rapidly as practicable and without discrimination and in accordance with seniority principles. The union shall declare the strike at an end.
4.	Upon compliance with this direction, collective bargaining is to be resumed forth-
* with, and such points, if any, upon which the parties cannot agree shall - be referred to the "arbitrator" to be dealt with as indicated herein. In order to expedite negotiations and in order that the arbitrator may be familiar with the details of the matters at issue between the parties, he shall be present at collective bargaining meetings.	*
Yours faithfully,
(Sgd.) Humphrey Mitchell,
Minister of Labour, Dominion Government. (Sgd.) Charles Daley,
Minister of Labour, Ontario Government.
I was informed by the Ford Motor Company yesterday that the executive of that company found the proposals acceptable. The letter I received, dated November 2S and signed by Mr. D. B. Greig, treasurer of the Ford Motor Company of Canada Limited, reads as follows:
Windsor, November 28, 1945. The Honourable Humphrey Mitchell,
Minister of Labour. Dominion Government, Parliament Buildings,
Ottawa, Ontario.
Dear Mr. Minister:
This letter will acknowledge receipt of the communication dated the 27th instant issued jointly by the Honourable Charles Daley, Minister of Labour, Ontario government, and yourself.
The company is prepared to carry out its part of the plan outlined in the above-mentioned communication.
Yours very truly,
Ford Motor Company of Canada, Limited, (Sgd.) D. B. Greig,
Treasurer.
I have no official word from the union in respect to the meeting of the workers held yesterday, nor have I any details other than those I am sure hon. members of the house ha.ve noted in the newspapers this morning.

Unemployment in Vancouver



UNEMPLOYMENT IN VANCOUVER-SHORTAGE OP SKILLED MEN IN INDUSTRY

[Stage Direction]
On the orders of the day:
Mr. C. C. I. MERRITT (Vancouver-Bur-rard):: Mr. Speaker, I should like to ask a question of the Minister of Labour, of which I have given notice. In view of the-Department of Labour statement of November 24 showing the 8,000 excess of job seekers over jobs in Vancouver to be partly due to lack of skilled key men in certain industries, will the minister state in particular, (a) what steps his department is taking -to overcome the shortage of skilled men in these industries, and (b) give a general statement on the mounting unemployment situation in Vancouver and the means available to him alone or in conjunction with his colleagues whereby the situation can be eased?


Mr. SPEAKER:: Order. The hon. member is out of order. His question should be brief and to the point. In asking a question an hon. member is not supposed to give information to the house. He is asking for information from the minister.


Charles Cecil Ingersoll Merritt: On a point of order, I have asked my question, of which I have given the minister notice. Certainly this is an urgent matter, and he should give an answer to it.


Humphrey Mitchell: I did not receive notice of the question until late this morning. I take the responsbility for it; I did not get to my office in the parliament buildings until eleven o'clock. If my hon. friend wishes, I could answer it verbally, but I think a question of that nature might better be put on the order paper. I believe, Mr. Speaker, that that is the position I must take.	.


Charles Cecil Ingersoll Merritt: Will the minister take this as a notice of question, and answer it tomorrow?


James Horace King: The hon. member should put his question on the order paper.



SS. &quot;QUEEN ELIZABETH&quot; STATEMENT AS TO FUTURE DOCKINGS

[Stage Direction]
On the order for motions:
Hon. DOUGLAS ABBOTT (Minister of National Defence):: Yesterday when I was unavoidably absent the senior member for Halifax (Mr. Isnor) asked if I would make a statement about the report that the Queen Elizabeth would no longer call at Halifax but would call at New York instead, and I am very glad to do so now.
This question first arose about three wTeeks ago, when the quartermaster general informed me he had been advised that the captain of the Qu6en Elizabeth was in doubt as to whether he would be prepared to bring the ship to Halifax during the winter months. She is an exceptional type of ship because of her great' size, and apparently he feared that in a southeasterly gale, which I understand is rare in Halifax, there might be some danger if she were moored alongside the only pier available. I asked him to take up the matter with the captain and with the British shipping authorities, to endeavour to see if that view could' not be changed. He did so. Further discussions have been had with the British ministry of war transport, but unfortunately the captain and the owners of the ship adhere to the view that they would not be willing to bring the Queen Elizabeth into Halifax during the winter months, for the reasons I have mentioned.
I may say that the opinions of our own officials of the ministry of transport do not entirely coincide with the views of the captain and owners of the ship; but, as the house knows, in matters of this kind the captain is master of the ship and is responsible for her safety, and in case of difference of opinion his view must prevail. So the Canadian government has not been able to do otherwise than accept that decision, and for the winter months the ship will call at New York and not at Halifax.


Mr. ISNOR:: Then will the minister consider bringing Canadian troops home in ships other than the Queen Elizabeth1


James Horace King: Order. The statement made by the minister is not debatable. If the hon. member wishes to ask a further question he should place it upon the order paper.


Mr. BROOKS:: Is it not a fact that the port of Halifax has been used by the Queen Elizabeth all during the war years without any complaint?


Douglas Charles Abbott: Yes, it has been used, but I believe not in winter time. The captain takes the view that a certain type of gale, a southeasterly gale, would involve some risk to his ship if it were moored alongside the only pier available for her. The officials of the Department of Transport do not agree with that view, but, as I said a moment ago, this is a British ship, the captain is a British captain, and she is chartered to the British ministry of war transport. Therefore in the final analysis their decision must govern.
Dominion-Provincial Conference


Mr. LOCKHART:: May I ask a supplementary question?


James Horace King: I have refused the hon. member for Halifax permission to ask a question because the statement made by the minister is not debatable. It is the privilege of the hon. member to ask a question on the orders of the day or to place his question on the order paper.


Norman James Macdonald Lockhart: I wish to ask the Minister of National Defence a question arising out of his statement in connection with the troopship Queen Elizabeth. A rumour has reached me this morning that this change would affect the transportation of Canadian troops. I could not believe that that would be so, and I would ask the minister to assure the house that the same proportions of Canadian troops will continue to come home.


Douglas Charles Abbott: There will be no change whatsoever in that regard. We shall have to handle them out of New York instead of Halifax, but they will be handled by Canadian personnel and on Canadian rolling stock. There will be no change in the number of troops brought back.


Gordon Benjamin Isnor: I wish to ask the Minister of National Defence whether there has been a change of master of the Queen Elizabeth during the past month.


Douglas Charles Abbott: I am afraid I do not know. PRIVATE BILLS



FIRST AND SECOND REAMNCS-SENATE BILLS

[Stage Direction]
Bill No. 187 to incorporate The Catholic Episcopal Corporation of Whitehorse.-Mr. Black (Yukon!).
Bill No. 188 for the relief of Harold James Chesterman.-Mr. Maybank.
Bill No. 189 for the relief of Emma Grace Kriticos.-Mr. Maybank.
Bill No. 190 for the relief of Donald John Northey Armstrong.-Mr. Hazen.
Bill No. 191 for the relief of Goldie Boltuck. -Mr. Croll.
Bill No. 192 for the relief of Irene Nelson Johnston.-Mr. Boucher.
Bill No. 193 for the relief of Justinien Joseph Damase Gerard St. Amant.-Mr. Hazen.
Bill No. 194 for the relief of Olive Pashley Mackie.-Mr. Emmerson.
On division.
(Mr. Abbott.]	[DOT]
. DOMINION-PROVINCIAL CONFERENCE

[Stage Direction]
On the orders of the day:
Right Hon. W. L. MACKENZIE KING (Prime Minister):: Mr. Speaker, as hon. members are aware, the coordinating committee of the dominion-provincial conference began a series of meetings on Monday morning of this week, and 'concluded the series last evening. The coordinating committee is composed of the premiers of the several provinces and the Prime Minister of the dominion. At the meetings, the premiers of the several provinces were accompanied by one or more of their ministers or advisers, while the dominion government was also represented by the Minister of Finance, the Minister of Munitions and Supply and the Minister of Justice, and at certain of the meetings by other members of the government.
At these several meetings questions related to the dominion proposals and proposals that have been submitted by some of the provinces were veTy fully discussed, together with questions arising out of those proposals as well as questions quite apart from anything specifically set forth in the proposals but dealing with matters relating to other aspects of dominion-provincial relations. The conference proceedings throughout, riiay I say, were characterized by the utmost harmony. As I said to the press at the end of the first meeting, the meeting itself was interesting and profitable. As the proceedings continued from day to day, I think I added the word "most" before the words "interesting" and " profitable." I would say I could not imagine a better series of meetings than those of the coordinating committee.
At the conclusion of the meeting a statement which was agreed to by all present was approved by the committee. It would, I think, be advisable to have this statement placed on Hansard as part of the records of parliament. The statement is as follows:
The coordinating committee of the dominion-provincial conference (1945) has completed a four day session in which there was a detailed and frank exchange of the views of all participating governments^ While a number of issues were raised, the discussions were cooperative and constructive. It has been decided to establish immediately a dominion-provincial economic committee, the members of which will examine and report to their respective governments upon the economic factors affecting dominion and provincial proposals and relations. The economic committee will proceed forthwith and will hold its first formal meeting on Tuesday. December 4. The dominion and each of the provincial governments will have three members. The chairman of the economic com-

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mittee will be the senior dominion member. The secretary of the coordinating committee. Mr. Alex Skelton, will also be secretary of the economic committee. The coordinating committee will meet again on January 28 to continue its deliberations.



UNEMPLOYMENT INSURANCE


[Stage Direction]
On the orders of the day:
Mr. M. J. COLDWELL (Rosetown-Biggar):: Mr, Speaker, yesterday I asked a question which the acting leader of the house promised to bring to the attention of certain members of the treasury board who- are also members of the ministry. Has he done that?


Mr. R. W. MAYHEW (Parliamentary Assistant to the Minister of Finance):: I believe I have the answer the hon. member wishes. The minister, who has been detained on account of urgent government business, handed me this answer before I came to the house.
The hon. member for Rosetown-Biggar asked yesterday morning whether treasury board has at any time refused to pay the salary of Mr. R. J. Tallon, the employees' representative on the unemployment insurance commission. Mr. Tallon was appointed by the governor in council for a term of five years. This term of office expired on September 25, 1945. This matter is now under consideration.
Mr. MaeINNIS:	In view of the answer
given by the parliamentary assistant, and the answer given yesterday to my question by the Minister of Labour (Mr. Mitchell), it is apparent that there is no unemployment insurance commission now, according to the act. How is the act administered?


Major James William Coldwell: What is the answer?


Humphrey Mitchell: I have nothing to add to what I said very clearly yesterday.
. SUPPLY
The house in committee of supply, Mr. Macdonald (Brantford City) in the chair.



DEPARTMENT OF TRANSPORT

[Stage Direction]
849. Departmental administration, $434,101.
Mr. DECHENE:: Mr. Chairman, I would ask the privilege of the floor for a short time in order to bring to the attention of this committee of the House of Commons a matter which is of great importance to a large number of people in the northern part of Saskatchewan, Alberta and British Columbia. This,
may I assure the committee, is not simply a matter of local interest, nor has it anything to do with any political party or political agitation. In order to bring out this matter in detail I shall have to speak longer than I should have liked to at this stage, but I hope that hon. members will bear in mind the fact that during this session I have been very sparing with their time and- have at no time delayed the proceedings of the house. This is not a new matter, and it does not constitute a new programme. In order that I may be strictly in order I would instruct the Clerk to withdraw from the order paper resolution No. 8 standing in my name.
At times during the last few years I have placed the details of this programme on the record. During the years of prosperity in western Canada,- the period from 1926 to 1929, plans were entered into by the two large railroad companies whereby transportation facilities would be provided for the northern parts of Alberta and Saskatchewan and eventually into British Columbia. This would have provided another ojitlet to the western ocean. In order to save time I shall not go into the full details of these undertakings, nor shall I recite all the possibilities of the country to be served and the advisability of the Canadian National and the government, working in conjunction with the Canadian Pacific, putting through this undertaking. I know that in the past, hon. members have heard reference made to railway lines in western Canada which parallel one another:	Reference has been
made to railway construction which involved the expenditure of public money but which has not proved to be a paying proposition for the taxpayers of this country. The lines I am going to speak about would not parallel any other lines. They would serve one of the finest and most productive sections of this country, as well as other large areas of Alberta, Saskatchewan and British Columbia.
Because of the undertakings that were entered into at that time, not hundreds but thousands of new settlers poured into the northern parts of Saskatchewan, Alberta and British Columbia. They went in there because thejT believed that contracts had been entered into for the construction of the lines mentioned in the resolution I placed on the order paper and to which I have already referred. If at this late stage in the session I seem to be delaying the proceedings at all, let me repeat that I do so because I realize that it is my duty toward these people as well as to Canada as a whole. This programme would help to increase the production and the prosperity of that great country. Besides farming, lumber-
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ing, fishing and mining, there are many other possibilities of development which would be brought about by the provision of transportation to the far north.
One of these lines would extend from Prince Albert to'the north country to join at Lac La Biche with the North Alberta railway running to Fort McMurray. This line would run through the treasure-trove of our north country. It would join farther west at 'a point on the Slave river, or perhaps north of Slave lake-I do not know just where-with the other branches of the Canadian National and Canadian Pacific into the Peace River country.
In 1927 and 1928 and 1929 an important part of this programme was started. I am sorry if I have to burden hon. members by mentioning places which may seem strange and foreign to them. However., I assure them that this is not a local matter; it is something that is of vast importance to thousands of people and to hundreds of square miles of country. At a point, named Ashmont the line coming in from Edmonton branches off in a north easterly direction. The construction of this line to the St. Paul district, where I live, would carry it down to what is known as the Cold lake country. It could then continue through Saskatchewan and down to St. Walburg.
An agreement was made at that time: between the two railway companies-I know' this is history-that the C.P.R. would construct a line from Prince Albert to and through Meadow Lake down to a point south of the Beaver river on the Canadian National, and then from that point on to Beaver Crossing they would have running rights over the Canadian National for a distance of fifty-five miles. Then both railways were to build north of the Beaver river in a northerly direction through the country I have just mentioned to the Lac La Biche region, Athabaska and the Peace River district.
I am sorry the hon. member for Lake Centre (Mr. Diefenbaker) has just left the chamber. Yesterday, and many times previously, I have heard him plead for more public works in order to provide employment. He has suggested a programme of public works in order to carry us through the period of transition when our factories are transferring from war work to peace time activities. If he is afraid of unemployment I can show him a spectacle which I believe will prevent him from ever again referring to a matter of this kind in the future. I would direct his attention to the record of the party to which he belongs from 1930 to 1935.

Except on rare occasions, and more recently only by way of banter, I have never advanced partisan points of view in this house. I am getting too old for that kind of thing. The' needs of our country and the needs of our young people are too great and too important. These things are too great for us to meddle with them or to lose time in discussing partisan matters. A contract had been given for the construction of this line. I should like the Minister of Transport to pay close attention to what I am saying. As I say, this line was to go from Edmonton to my part of the country, Bonnyville- and district of St. Walburg in Saskatchewan, and then down through North Battleford and then into Saskatoon. But the work was abandoned. I can tell hon. members that no greater tragedy ever occurred. My hon. friend (Mr. Diefenbaker) sometimes becomes very eloquent when he speaks in this house. I do not blame him for trying to show up the failures of this government. However, from 1930 to 1935 I happened to be a member, of the legislature of Alberta. I represented the part of the country .which was to be served by that railroad. The Beaver river is not a large stream, but it extends a long way. It is the first liver north of Edmonton and Prince Albert and takes its source south of Lac La Biche, which forms part of the northern watershed rather than the Atlantic watershed. The waters of the Beaver river flow into Hudson bay. The construction of a trestle bridge over the Beaver river beyond Bonnyville was started over fourteen years ago, and it was the finest piece of work I have ever-seen. The engineer in charge told me that this was only the second time that this method of trestle building had been tried in Canada, and it was used because it gave a stronger, more efficient trestle. It was a very fine piece of work and cost a lot of money. Three cement piers were constructed over the water to enable the trestle to cross the river. A bridge across the river at that point would have saved thei farmers a long journey around, as much as fifty or sixty miles, in marketing their produce. All that remained to be done to complete the! bridge in 1932 was the construction of a relatively short span of steel, but under thei regime of the Conservative government this work was actually stopped. The trestle stands there to-day, unused, useless, extending out 'thousands of feet, still holding out a hand of despair as tragic as the hon. member for Lake Centre holds out to this house when he talks of the failings of this government. The farm-t ers of that north country have to travel all the way around the hills on the north side, and)

Supply-Transport
then across on the other side to market thein produce.. It is a lamentable situation, am example of the sort of thing that we shall never see again in this country, all caused through a lack of *understanding of the needs of the people. I will say something that might sound a little mean. Let us hope that it was the last act of the last Tory government that we shall ever see in this country.
So the trestle stands there to-day uncompleted. Not only was the work stopped at a time when thousands of men were idle and living in despair, walking the streets and lanes and highways and by-wa3rs of western Canada as elsewhere in this country, but the contractor was paid some thousands of dollars to withdraw from the contract he had signed with the Canadian National Railways. The Canadian National Railways or the government of this country actually paid him to cancel the contract and stop the work. Today you have this situation in the ridings of my hon. friends, from The Battlefords and North Battleford. Some fifty or sixty miles of first-class graded roadbed, built at a cost of from $13,000 to $15,000 a mile, have absolutely gone to ruin. Some of it is used by the local farmers as roadways; other parts have been washed right out. A large sum of money has been lost, and the settlers in that country are hauling their produce from fifty to sixty miles to market. This is one of the works that we are asking the Canadian National Railways to resume at the earliest possible moment.
I have seen with my own eyes the settlers who are now in that country drive in there from the so-called dust bowl in southern Saskatchewan, some of which unfortunately we have also in Alberta. They left that dust bowl, not because they did not have the courage to stick it out, but because nature went back on them. Year after year they saw the drought ruining their farms and blowing them into dust. After watching that ruin go on year after year they finally had to leave that drought area in which they had settled, abandon the farms they had developed and the homes they had built, and drive hundreds of miles to more suitable land elsewhere. I can yet see the wagons of those settlers, the old * broken-down rigs, containing a few household effects, travelling along mile after mile up to that north country where land was still available-not the best, some of it, it is true, but where at least it rained once in a while. As this is probably the last time that I shall have the opportunity to address the house during the present session I should like to mention how the women struck me as they travelled with their men to their new homes in the
north. The man of the family looked brokenhearted. He had seen his life work ruined through no fault of his own, but because the sun of southern Saskatchewan insisted on shining the year round. But the woman still sat straight in the old wagon drawn by horses so lean and weak that it could travel only a few miles a day. The woman had the vision before her of a new home in northern Saskatchewan or northern Alberta and was ready to start all over again. It is up to us to see that they are given that chance after making such a tremendous sacrifice. They had a hard time. Don't I know it! They have opened up that bush country only with the greatest of difficulty, and now they are producing surprising crops, but still have to haul their produce a long distance.
The other day when the hon. member for Cariboo, speaking in the debate on the address, asked for a western outlet for the people of that country, I had a good mind to stand up and say that his programme, which was quite just, formed a part of our own. The construction of this work in the northern parts of the western provinces from Prince Albert in the province of Saskatchewan to the Cold Lake region in the province of Alberta, and in the area north of the Beaver river to Lac La Biche, would provide a new great artery of transportation in the western provinces. It is in one of the most productive areas in western Canada, where, entirely apart from agriculture, every possible resource is available. It would guarantee a western outlet and be of much assistance in developing this great new country of which I have so often spoken.
When I was a member of the legislature of Alberta in 1932 we saw with the greatest of alarm that the federal government of that day and the Canadian National Railways had lost their vision of the past and had decided not to help in curing unemployment but rather to make it worse by stopping all public works. Accordingly I moved, seconded by Mr. Falconer, the following resolution:
That this assembly regrets the decision of the dominion government not to proceed with the construction of the extension of the Bonny-ville'-St. Walburg and the Heinsburg-French-men's Butte gaps of the Canadian National Railway lines from Edmonton to St. Walburg and Edmonton to Turtleford
That under existing conditions the farmers of all that great district north and east of Edmonton have no direct access to eastern markets and are compelled to pay a back-haul on all the products shipped out and on merchandise imported into that district;
That a large number of settlers induced to settle in the districts to be served by the proposed lines will find themselves in a precarious position, and a laTge percentage of them, in need of relief;
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That we respectfully urge the dominion government to reconsider the matter and to proceed with the construction of the said lines during the coming season.
The journals go on:
The debate continued.
The motion being proposed, Mr. Speaker declared the motion carried unanimously.
But, Mr. Chairman, nothing was done. In 1935, when it was evident that the worst of the depression was over and that it was time this country woke up to the fact that we were n,ot done in this young country, I again moved a resolution in the Alberta legislature along the same lines, which will be found at page 137 of the journals of the assembly of 1935. It was the same motion except that I recited this, referring to the motion of 1932:
Whereas the dominion government and the Canadian1 National Railways did not deem it expedient to accede to the washes of this assembly and nothing whatsoever was done to relieve the situation,
And whereas the situation complained of in [DOT]the year 1932 has since been greatly aggravated by the large influx of settlers in the territory tributary to the proposed railway extensions-	.
I recite that to show that we have been active all along; we have not desisted from these requests. Also let me point out that there was no politics in this, no difference between Liberal, Conservative, C.C.F. or Social Credit; it was a question of railway, communication in that great country to the northeast of Edmonton and the northwest of Prince Albert. I repeat, to drive it home, that there are immense possibilities in that area. No railway executive can tell us that this will not be a paying line. I happen to know. When I went to the committee in Edmonton, to the house, and later to the C.N.R., with petitions for the construction of that line, we produced figures which showed that the portion of the road from Edmonton northerly to Bonnyville, coming down on the Beaver river and through the town of St. Paul to Heinsburg, contained some of the best paying branch lines on the C.N.R. In 1944 Alberta led the whole dominion, even the province of Ontario, in the production of bacon hogs for export, and our district stood second in the whole province of Alberta.
I shall only briefly refer to the other part of this programme. I know that this is one of the most difficult of the proposed enterprises, but I cannot help feeling that the Canadian National Railway will repair the errors of the past by constructing a line from St. Walburg info Cold Lake, and, with the Canadian Pacific Railway, will carry on the great programme

for the opening up of a part of the western provinces where there is rain, where there are immense fisheries, where there is timber, an area which is at the head of the great waters of the north on a direct connecting link with the vast hinterland of the northwest territories clean up to Great Bear lake and Aklavik. As to this other one, I am told by some people- whether or not they are well informed-that it is not reported upon favourably by the engineers of the Canadian National Railways. I refer to the gap between that place in Alberta called Heinsburg and Frenchman's Butte, in Saskatchewan. There again, in 1931, or 1932, with the kind of government and the sort of policy which obtained in those days, this whole thing was stopped. The surveys were all made, but they would not push through the necessary thirty-nine miles', ivhich was all that was needed.
I want to remind hon. members that there is not one straight railway line in the western provinces north of the Saskatchewan river between Manitoba and the eastern market and the province of Alberta and the western market. If you look at the map you will see half a dozen lines stretching out from Edmonton, like the legs of a spider, in every direction. If you want to visit Athabaska and campaign there you have to go 150 miles away and back to Edmonton, then 100 miles out and back to Edmonton, then 150 miles out and1 back to Edmonton, then 150 miles in another direction and back to Edlmonton. There is no connecting link, there is no through, line in one of the finest productive countries iq western Canada. If we were asking for a branch line to serve the people along this forty miles of gap I might hesitate, because I would be told that there is not sufficient production in that particular area to warrant an expenditure of roughly $1,800,000. But that is not the situation. Surely the directorate and the engineers of the railway know that our farmers, right from the end of that line to twenty miles from Edmonton, are handicapped every day in the year on every hog shipped, every beef exported, every bushel of grain they carry out; that they are paying tribute to someone for the back haul from Winnipeg to Edmonton and 200 miles into that country, where thirty-nine or forty miles of construction would greatly reduce costs, and the local production together with passenger traffic would take care of the additional expenditure. I wish the minister to take note of this; there is not a word of criticism in it. I am the voice, as I know other hon. members are whose ridings have been served by these lines will be the voice, of their people, in asking for some-

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thing reasonable and' fair, and saying that construction should never have been stopped, no matter what conditions obtained in this country in 1931 and 1932.


Mr. DIEFENBAKER:: Did it go on after 1935?


Joseph Miville Dechene: My hon. friend has spoken to us for seventeen hours, I think, during this session. I have sat here patiently listening to him viewing with alarm, shaking his finger in apprehension, and causing me sometimes to shift uneasily in my place because of the descriptions he gave of the terrible things this government was doing. They were hiding bdhind orders in council, there were government employees sneaking around the back yards, and so on. I have not said anything.
I took it all in. Sometimes I felt pretty badly and there were many things I could have asked him. But I held myself down. I hope he will do the same thing. I am not asking too much, am I?
After this little interlude I will resume what I was saying. For some months we have been asking for a better service on that line from Edmonton into our country, and we have got it now. Of course we knew of the shortage of materials and men; and when the war was over, a few weeks ago the Canadian National Railways-I will pay them this compliment-.took note of the situation, and now we have a daily service on this line, both to the town of St. Paul and to Bonny-ville, where I live. But in the meantime truck transportation was resumed in that country. I say this to the minister and to the Canadian National railways; if you do not build this thirty-nine or forty miles of gap the Canadian National is going to lose from 50 to 60 per cent of all the business in that country as soon as a first-class highway is built between Frenchman's Butte andi St. Paul. The trucks are willing and ready to operate in there. When I pressed some two years ago for a better service on the twenty-five mile line beyond Bonnyville to that monument to Tory efficiency on the Beaver river, an official told me, "No traffic originates in that country." They had one train a week, and he told me the number of passengers and the amount of freight which was carried by that single train. But as farmers know, when your hogs are ready for market they have to go to the market; you cannot wait a week, or you will lose possibly one or two grades, or two or three dollars a head; you have got to market them at once. Therefore the farmers
not operate the line at all you would get no
traffic, would you?" He said, "No, of course not." I venture to say that if that railway were built at a cost of $1,800,000 which is the last estimate I saw some years ago- it may cost a little more now-it would prove to be a paying proposition from the day it was finished, because the through traffic would increase by leaps and bounds.
Right now, Mr. Chairman, I am told that some farmers near the town of St. Paul at times have to take their hogs across the Saskatchewan river and go twenty miles away or so in order to market on the C.P.R. line south of the river, and that costs them an additional amount of money. We are losing business because of that little gap. and we should construct a line to bridge it. I apologize to the members of the committee for holding up the business. I know that we are anxious to come to the end of the session and to attend to our own business, those who ftill have some. But this is important. I hold in my hand petitions signed by hundreds and possibly thousands of people all over that country. I am sure that the minister has received those as well, as have the members for The Battlefords and North Battleford. These people are all seeking for consideration toward closing the two gaps. I now leave the matter with the committee.
May I make one more remark. I had hoped to have time to speak of the'necessity of railway development in order to ensure the development of the great far north. When you travel from St. Walburg and get to the vicinity of Cold lake you are only about sixty miles away from the Precambrian shield. There is a large lake north of Cold lake called the Primrose, which produces a lot of fish. Then there are lakes called^ the Buffalo lakes, which are just a few miles beyond. The waters of those lakes flow into Hudson bay. Precambrian belt comes right down I to within a hundred miles of my own town, and from beyond there to the boundary of the Yukon there exists wealth in such proportions that if we could and would develop it as quickly as possible, and if we used the Canadian National and Canadian Pacific jointly owned railway to McMurray to interest them in the development of the tar sands, if we could use the courage and initiative of our young men coming back from the battlefields, men who have shown tremendous courage and initiative, to tackle that north country, many of our difficulties would be over. Do not worry about them; they are willing to . go there. It is another challenge, another battle for them to win. It is the battle of peace, the battle of advancement.
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I have been greatly interested- in listening to the hon. member for Davenport (Mr. MacNicol) speak about that north country. I remember one time when I was a boy, over forty years ago, going down the Athabaska river. When we came back we did not come in a plane as the hon. gentleman does; we had to pull our boat up and down the river with and against the current. Therefore I know that country. As a young man in western Canada I was convinced of its possibilities.
We have our young airmen who fearlessly ascended into the sky against the enemy. They and the men of our navy and armj'- are coming back by the hundreds from the battle of Europe and the battle of every other continent. They are waiting to go up there.. Let us have courage, then; let us build this means of communication and give them a chance. Because if we do so-this may look like a foolish statement, but it is not-we shall find that there is enough wealth dormant in that country at the backdoor of Edmonton to which the riding of Athabaska .is the gateway, mineral and every other conceivable resource, to enable the Minister of. Finance to close his books ten years from now and cease worrying about where we are to get the money.


Mr. HANSELL:: 
Mr. LALONDE:: The house decided that it *would be withdrawn.


Ernest George Hansell: No.
*


Major James William Coldwell: When was the resolution moved?


Maurice Lalonde: The Speaker read it.


The CHAIRMAN:: Order.


Ernest George Hansell: I have no objection to the withdrawal of the motion, and I have not objected; but the house was not asked to decide on the two previous occasions, and this is the third time.


Maurice Lalonde: On a point of order-


Mr. JOHNSTON:: The hon. member for Macleod is speaking to a point of order.


William Ross Macdonald: There is no point of order on a point of order.


Ernest George Hansell: I am not through with my point of order. What I would suggest, Mr. Chairman, is that if the hon. member desires his motion to 'be withdrawn, unanimous consent be given. That is all I ask. I .think that is only right, because when a motion appears on the order paper it is my motion as well as everybody else's.


William Ross Macdonald: Order. I thank the hon. member for Macleod for bringing this matter to the attention of the committee. I should, however, point out that the resolution has not been moved, and neither the house nor the committee is seized of it. The paragraph in citation 454 which the hon, member for Macleod -read is as follows:
A resolution having been moved is in possession of the house-
This resolution has not been moved; therefore it is not in possession, of the house and the hon. member can -withdraw it at any time without the consent of the house.


Mr. BOUCHER:: I do not wish to delay the committee unduly, but I think that we as members of the committee owe it to the .personnel and employees of our various railway systems to express our appreciation of the diligent and patriotic services they have given our country, the commonwealth and the particular cause we have fought for in- the past five years. The transportation and railway Systems of Canada were really the nerve centre of our war effort in the transporting of men and materials from place to place. If we reflect we shall realize that we have passed through a very critical period1 -without any serious labour disturbances among our railway employees, without any difficulty having arisen in our country in regard to our railway systems beyond those which war may have brought about. The railway employees have worked under difficult conditions and have given excellent transportation service with inferior rolling stock and impaired or deteriorating roacjtbeds. They have undertaken their task under our policy of stabilized wage control, and they have done a noble deed' for our country.

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I believe the hon. member for Lanark will join with me in saying that in his county, as well as in mine, -we have a great number of railway employees, to whom we all personally owe a very great debt of appreciation and thanks. I believe that under the estimates of the transport department it is only proper that as a member of this house I should go on record) as expressing our appreciation for the good work they have done.


Mr. COCKERAM:: Will the minister not
make a statement?


Mr. CHEVRIER:: I will make statements
as we go along.


Mr. CAMPBELL:: First I wish to commend the hon. member for Athabaska for the eloquent plea he made in behalf of the people of his part of the country, and I wish to support him in that plea. I do not think anyone in this house fully realizes the hardships people undergo when they have to haul their products long distances to town. I left the , city of Montreal when I was fourteen or fifteen years old and for the first year I was sixty-five miles from a town, so I realize the difficulties and hardships people have to endure in hauling goods such long distances. I think the railways have a duty to perform. A few days ago I heard someone on this side of the house say that what we were afraid of in future was that the Canadian National would have huge deficits as it had in the past. I should like to say something about one reason for those deficits. I have seen trainload after trainload of grain, actual wealth produced on the prairies, going east; and I have seen those same trains coming back empty. That is not a good condition, when we have loaded trains going one way and empty trains going the other way. We want two-way traffic. In order to have it we must see that we produce wealth in this country, and then we will not need to worry about our railways having deficits.
Here we have an instance, as the hon. member for Athabaska says, of a railway built from both ends and then a gap left of thirty-eight miles. It seems to me when a railway begins a project like that, the railway should be compelled to close the gap. It is the duty of a railway to complete any project it starts. In that same district there is another situation I should like to mention, and this applies pretty well all through the west. The Canadian National built its main line, and then this government or its predecessors allowed the Canadian Pacific to come in and run branch lines al'l through, taking away the traffic the Canadian National should have. That is something for which previous governments must answer.
I had intended to speak at some length on the completion of this gap, but the hon. member for Athabaska has dealt with the situation so well that I need not take very much time. I want to say, however, that these people feel they have been discriminated against. They believe they have a right to have that railway completed. If they had good roads up there it would not be so bad, but they do not have good roads. They cannot do much of this long-distance hauling by truck, and therefore they are in desperate need of this railway line. The hon. member for Athabaska stated that if this gap was not completed, highways would have to be built so that trucks could carry the freight. But 1 do not think that should be necessary. That road should be completed during the coming summer. It is only a matter of thirty-eight miles, so- it will not cost a great deal of money. The cost of a battleship or two, as someone said a few days ago, would not make veiy much difference one wray or the other, but these people feel they have been discriminated against and that now the war is over the government should get busy and see that this gap is completed.


Mr. FAIR:: I want to endorse the impassioned plea made by the hon. member for Athabaska, and to assure him and the committee that he need not apologize for taking time to present his case. The language he has used in describing the hardships of these people in the north country is not new to me, because for the greater part of the time I have been in- the west, more than thirty years, I also had to do without the services of a railway, and I do not think he has put the case nearly as strongly as it deserves to be put. If the few words I am about to say will strengthen the plea he has made, I do not think there , is any need for me to apologize for taking up the time of the committee for a few minutes. It is only in the interests of Canada and of the Canadian National that the project mentioned by the hon. member should be completed in- the very near future. It is the de-sire of the government to create jobs, and this is a good way in which jobs can be created, while at the same time it will be in- t)ie interests of the Canadian people as a whole.
Perhaps at the same time I should put in a word for the completion of another line, the Unwin-westerly line, which just prior to the depression was completed by the Canadian Pacific as far as my shipping point, and there it remains to-day. As in the case of the lines going from Edmonton in different directions, when the traffic comes to Paradise Valley it
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has to go back again and start afresh at Lloydminster. I should like to see that company extend its line from Paradise Valley also.


Lionel Chevrier: The question which has been raised by the last three hon. members is very broad, in that it has to do with the relocation or the construction of lines all across this country. The one naturally involves the other, because the Department of Transport and the Canadian National Railways have been receiving representations from various communities across the country in connection with branch lines which should be extended or proceeded with, f'hat brings me to a point raised by the hon. member for The Battlefords, namely that the railways should not worry in future about having deficits. That is one thing which I believe must be taken into serious consideration when we decide upon the construction of branch lines. I believe it was the hon. member for Saint John-Albert who the other evening pointed to the fact-and rightly so-that the operating expenses of the Canadian National Railways had gone up considerably in the last year, and he went into some detail in discussing what those expenses were. He said the Canadian National should be extremely cautious in the next few years to make sure that the over-all surplus it has at present is continued. I make that statement not desiring in any way to criticize what has been said to-day, but to point out to the committee that this is a matter which certainly must be taken into consideration when discussing new or abandoned lines of railway.
In reference to the gaps which have been mentioned, namely that between Heinsburg, Alberta, and Frenchman's Butte, Saskatchewan, on the one hand and between Beaver River, Alberta, and St. Walburg, Saskatchewan, on the other, I can say that many representations have been made to the Canadian National Railways and to me urging the completion of these gaps. I have received and read a large number of petitions. Many of them have been brought to me by the hon. member for Athabaska, and I know he has taken a keen interest in these two projects, as have other lion, members. My own view is^ that the gap between Beaver River and St. Walburg is one which deserves serious consideration. So far as the other one is concerned, I can make no statement on it. It is not a fact that it has been reported upon unfavourably by the Canadian National Railways. All I can say in this connection is that it goes through a certain number of Indian reserves where little traffic is anticipated. I

should make this additional statement, that the Canadian National Railways have set up a committee to consider and to review those two lines. They are making surveys, and those surveys are not yet completed. I understand it will be some time before they are completed, and until they have been, I can make no final statement.


Mr. FRASER:: Earlier this morning I had occasion to go to the Canadian National Railways ticket office here in Ottawa. I was dumfounded to see pieces of paint hanging from the ceiling-not one, but a dozen of them, and all of a large size. While I was in there particles of paint or dirt were, dropping from the ceiling. Surely the railway company should not allow that condition to continue. I may say that I looked at the ceiling only once, because I was afraid of getting an eyeful. 1 he workers in the office are working overtime, and I do not think it is fair to them to have this condition continuing year after year. They should not have to work in such dirty surroundings.
Is it the intention of the department to have the Trent canal finished some time in the near future? Plans have been prepared,
I understand, for two locks, and I believe everything is in shape in the minister's office so that the work can proceed. The locks on the Severn river end of the canal should be completed as soon as possible. Now that the war is over the Trent canal will be used by American tourists. Their pleasure boats will come in there; and as the tourist business is one of the greatest we have, we should give it all possible encouragement. If locks were in place rather than the marine railway which now exists, the business on that canal would increase a hundredfold. Small boats numbering two or three thousand passed through the Severn end of the canal in July and August of each year before the war. I hope the minister will see that that section of the canal is completed. During the war years very few motor boats or boats of any other kind, have passed through the canal, owing to the lack of gasoline and also the fact that in many cases the operators of those craft have been away fighting for their country. A condition has developed which, I believe, would not have arisen had those boats been running. In certain lakes weeds have grown up to such an extent that motor boats, even outboard motors, cannot get through. In this respect Rice lake is very bad so far as the landings are concerned. I have my cottage on Stoney lake and, while the condition does not affect me at all, I do know that down at Clark's bay, at the end of concession two, there is a

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landing which is used by more than a hundred cottages. During the last few years the water out from the landing has grown up so badly with weeds that outboard motors and other small craft have found it difficult to get in during the summer months. I went to the minister's department about the matter and was told that they would not clean out the weeds. I suggest that they should be cleaned out, because it is in the interests of Canada to get all the American money we can get. I hope the minister will look into these matters and see what can be done.


Lionel Chevrier: The hon. member has raised three points. He spoke first about the condition of the ceiling in the city ticket office of the Canadian National Railways. I do not know what the position is with respect to that building, whether it is leased or not. If it is a leased building, it would not be the obligation of the railways to do that work.
I shall bring the matter to the attention of my officials.


Gordon Knapman Fraser: Even if it is leased I hope the minister will see that it is cleaned up.


Lionel Chevrier: 
Gordon Knapman Fraser: That is for maintenance,
is it not?


Lionel Chevrier: Well, it is to provide for work at Buckhorn and' Fenelon Falls, to restore concrete and canal structures, arid to rebuild and repair piers and sills. But so far as the two new locks are concerned, I shall have to ask the superintendent of canals for a statement. I shall be glad to pass along to the hon. member any information I get.
I shall bring to the attention of my officials the matter of cleaning the weeds out so that small motor craft can get through.


Mr. ROSE:: As some hon. members have spoken about railway lines, perhaps I might be permitted to say a feiw words about the merchant marine. I hold in my hand a pamphlet issued by the Minister of Transport in 1945, and in it the minister says:
No body of men has contributed more to the prosecution of the war effort than those gallant seamen who man the ships of the allied merchant navies, and to which Canada's contribution in ships and men has grown from small beginnings to now play a substantial role.
Farther on he says:
Great strides have been taken to build up the man-power for a powerful Canadian merchant marine.
That is -all very well, but will these men be used to build up a powerful merchant marine? Will they -have jobs? Will they have a merchant marine to man? Is Canada to have a merchant marine? I submit the time has arrived for a clear statement of policy from the government regarding this matter.
A few weeks ago the Canadian seamen's union issued a statement to the press in which it; pointed out that in its campaign for a Canadian merchant marine of three hundred ships it has received support from the city and town councils of Quebec City, Montreal, Verdun-, Chatham, Ontario; Strathroy, Ontario; Preston, Ontario; Winnipeg -and Transcona, Manitoba; Lethbridge, Alberta, Prince Rupert, and Kamloops. A government controlled merchant navy is favoured by city and town councils throughout -the country -and other organizations who believe that Canada's prosperity is linked up with a merchant marine. This same press statement quotes the Minister of Transport as having said:
I think we -are gping to have a permanent merchant marine. I don't know if we shall have three hundred ships, but I think we shall have something along that line.


Lionel Chevrier: I will tell the hon. gentleman right now that I made no such statement.


Fred Rose: That is quoted from the press of August 30, but whether or not the minister ' made that statement to the prriss is of no importance to us. We here in the House of Commons believe that we should have a statement regarding government policy.


John George Diefenbaker: Mr. Chairman, I did not have an opportunity to speak when the question of continuation of the railway line from Prince Albert through Meadow Lake and on to Lac La Biche was under discussion. I come from the city of Prince Albert, and I want to say that that plan has the support of all the boards of trade in northern and central Saskatchewan. The work should be completed. There are reasons why it was stopped in'1933, but I am not going to enter into any controversy in that regard with the hon. member for Athabaska. Between 1935 and 1939 nothing was done. If the Hudson Bay railway is to be made the instrument it should be in the development of western Canada and Canada in general, this line should be completed, not only for the benefit of the pioneers who settled in those areas believing they would be served by this railway, but also in the interests of better transportation facilities for Saskatchewan and Alberta.
I rose, however, to bring up a matter under the heading of departmental administration,
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namely, the salaries paid to employees of the Department of Transport. Recently, because of the interest taken by the hon. member for Lanark in this matter, information was brought down to the house which showed that of the 130,000 odd employees in the civil service, both permanent and temporary, some 6,000 received what are known as war duties supplements. The other day the hon. member for Victoria, B.C., endeavoured to explain the circumstances under which these supplements were granted. He told us that they had not been granted to all employees of the government who had given themselves so devotedly to the service of this country during the period of the war. The explanation given by the hon. member did not satisfy me, and I think I can speak for many other hon. members and say that it did not satisfy them. It was not a sufficient explanation as to why certain individuals had been picked out while others equally deserving had not been given a war duties supplement.
I should like to get from the minister this information:	How many permanent and
temporary employees in his department received war duties supplements? My information is that in certain cases a simple expedient was followed in order to raise salaries which had been frozen, that of reclassifying or seconding employees to other departments or to other types of work within the same department. How many were seconded and how many reclassifications were made in his department? I should like to have a statement as to the basis upon which the decisions were made as to who should be. entitled thereto.
In his explanation the other day, the hon. member for Victoria, B.C., stated that in making these grants there was no question of departure on the part of the government from its stabilization policy with respect to wages. Once it bad been dtecided that war duties supplements were to be made to those who gave unusual and unstinting service to the war effort, they should have been given much more generously than they were. As the matter now stands, anyone who received supplement bonus is placed in a preferred position, while those who did not receive it, but who gave equally good service, feel resentment because they believe they have been discriminated against.
I am not criticizing this policy if it is fairly and properly applied. There are many men and women, in Canada whose wages were frozen at low levels during the war. Why should not the government allow private industry to reward with a Christmas bonus employees who have given extraordinarily

good service? Up to the present time no bonus over $25 is allowed unless it had been given prior to 1941. To permit this to be done would not break down the stabilization plan. It would be in keeping with the stand taken by the government itself in the granting of war duties supplements and would be welcomed by employers and employees alike across this dominion, employees who throughout the period of the war have given of their best and utmost but who have been denied any increases or reward other than the cost of living bonus and Christmas bonuses in the limited scope that I have mentioned.
Only the other day the Financial Post indicated that some new wage policy was to be declared for 1946. A similar declaration has been made in the United States. But whether there is to be a new wage policy or not, I suggest to the minister that he indicate to the Department of Finance that to permit the giving of this extra reward would be just and proper. It would enable private industry to reward employees who have done exceptional work during the war period.
11 should like to refer to the manner in which expense accounts have been increasing in the last few years. While salaries have not been going up, expense accounts have been climbing. On looking over the record of the minister's department I find that the trend is not as definite as it is in some other departments. But when in another department I find living and travelling expenses of $5,507, $7,852, $5,938, and so on, I wonder whether a policy is being followed of allowing expanding expense accounts in place of increases in salaries or other allowances. When I look over the record of some of the medium salaried men, running from $2,600, I find expense accounts from $2,658 up to $4,817. These expense accounts are increasing year by year without any commensurate increase in responsibilities. Is the government condoning large expense accounts as an indirect means of increasing salaries? I should like the minister to deal with that point.
I am not arguing that salaries should not be fair and reasonable. The time has come for a complete revision of the salary schedules. Mention has been made during the last few days of the loss of outstanding men to this dominion, and all of us know that that is true. Only recently I was reading an article by one of the press men, Mr. Hardy, and had occasion to appreciate for the first time just how low some of the salaries of the technical men are. For instance, a man with a bachelor's degree in science and four years' experience is receiving $1,080. Another man with a

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Manitoba degree, a master of science, from Cornwall, with three years' experience, is receiving $1,620; and so it goes, the salaries utterly out of keeping with the responsibilities of the position. Within the last few weeks several outstanding Canadians, three in particular, have left Canada. They were in the government service as scientific men and were receiving .respectively salaries of $4,200, $3,900 and $4,200. Immediately they left the government service their salaries were jumped to $14,000, $15,000 and $8,000. This issue of salaries and reasonable compensation for unusual ability calls for a complete reclassification and a reconsideration of the whole problem of salaries. In addition to making that general plea I am asking particularly about the situation respecting the war duties supplement, and if the minister would be kind enough to make a general statement in this regard it would be appreciated.


Mr. QUELCH:: I should like to say a few words on the branch line from Scapa to Loverna about which I am sure the minister has received petitions. The laying of steel was completed around 1930 and a skeleton line has been maintained from Scapa to Spon-din. Occasionally a freight train is backed into Spondin to take out wheat and bring in coal. But, from Spondin to Hemaruka, the line has not been ballasted. In the early days the steel was laid and a few trains ran in winter, but now the line is in a bad state of repair and no trains are run. From Hemaruka east the line is in repair, and the train goes in there from Loverna once a week. The farmers are under a great handicap. They cannot ship their live stock west to Calgary; it has to go east to Saskatoon, a much longer distance. I agree with my hon. friend that it should not be a question whether it would pay to run trains over that line. The line was built in the first instance and the area settled, and the farmers were given to understand that a railroad service would be given. A few trains are running, but there is no real railway service at all. This matter was brought to the attention of the Minister of Reconstruction and the president of the Canadian National Railways, and I wish to quote a line from the president's reply. He said:
The territory which would^ be served does not appear to be very promising unless irrigation were resorted to.
As the minister knows, there has been a lot of discussion of the Red Deer diversion scheme in the whole of that area. During the last election it was most emphatically promised that the Red Deer diversion scheme would be carried out in the very near future. As a matter of fact many Liberals became so
enthusiastic and optimistic that they stated that the scheme had already been started and . that men were at work on the dam. Unfortunately it was merely a survey party; no work has been started on it. I should like the minister to give the assurance that if the irrigation scheme is carried out, that line will be completed, because with proper irrigation there would be no question at all of there being enough business to support the line. It would be possible to bring another thirty thousand people into that area, which would make all the difference to the traffic carried on that line.
I concur in what the hon. member for Battle River has said regarding the line that ends at Bodo, which is within Alberta. The grade was built from Bodo to Bulwark but the line has never been completed. In that area there is a good deal of business. There is a jjreat deal of live stock raised in that whole area and I do not think the railways could make the same complaint about not having sufficient business to warrant completing the line. If that line w:as completed I think it could be run at a profit without any difficulty.


Mr. GAUTHIER (Portneuf) (Translation):: Mr. Chairman, I hope I shall not transgress the standing orders in making a few remarks on the merchant marine estimates. First, I wish to thank the Minister of Transport for fiis unflagging interest in the settlement of the thorny question that concerns the men who were shipwrecked when the Nereus and the Proteus were lost in 1942. Fifteen young sailors from two communities in my constituency of Portneuf were reported as missing after that disaster. I hope the minister will continue to investigate, as he has done since the beginning, and that he will do everything in his power to settle those cases to the satisfaction of the stricken parents.
I do not wish to discuss at any length the Canadian merchant service. The time is not appropriate and I do not want to prolong the debate. However, may I say to the minister that, if a Canadian merchant service is ever established, it will be able to secure the best sailors and the best pilots in the world without any exception. Speaking especially on behalf of the St. Lawrence river pilots, I urge the minister to give sympathetic consideration to their requests, which in nine cases out of ten are quite reasonable. Let the minister keep in mind that the St. Lawrence River Pilots Association, whose members are on duty between Montreal and Quebec, is a body which, ever since its inception, has never joined in any strike. Ever since pilots have been operating on the St. Lawrence
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river, there has been one strike in the history of the country. And it lasted but one day. In the most critical times, when Canada needed the services of all her citizens, when frequently strikes were breaking out in other sections of the country, the St. Lawrence river pilots, operating from Montreal to Quebec City, have remained at their post. Sometimes there arose problems which were rather difficult to settle, but always, through the intervention of the Dominion ministers, a satisfactory solution wras arrived at. I wish to thank the various ministers who at one time or another have headed the Marine or Transport Department.
I also deem it my duty to pay tribute to the St. Lawrence river pilots for their good work and the public-spiritedness they have shown throughout the history of our country. Therefore, I again urge the hon. minister to consider their requests favourably, even if they relate to pilotage dues. They have the right to bring up the matter of pilotage dues, because the dues charged by the St. Lawrence river pilots are the lowest in the world. They carry out their work on a river where navigation is very difficult, especially in the section between Quebec City and Montreal, where the channel is quite hazardous even it it has been improved by the department. Further, the distance they cover is' the longest. Frequently pilots' on duty between Quebec City and Montreal remain at their post for twenty, twenty-two and sometimes twenty-four hours, with little or no sleep, facing fog or storms without ever sitting down. Some say this is normal because they are sailors to the core. Ours are the best sailors in the world, and from the moment a young Canadian, whether he is of French or English descent, has gone to sea, he faces storms and gales with a smile on his lips. If ever one has deserved to be called an "old salt" it is the Canadian sailor.
I, therefore, ask the hon. minister to always consider favourably the requests of the Canadian pilots and sailors, and I wish to thank him once more for the interest he has shown to the grief-stricken families of the fifteen sailors from my constituency who have perished at sea during the war.
(Text)


Lionel Chevrier: The hon. member for Cartier asked if Canada would have a merchant marine in the post-war period, and requested a statement of government policy. I wish the hon. gentleman were in his seat now. Unfortunately I am not able to tell him what the government policy is with reference to the merchant navy. I can tell him this, however, that for the last twelve months and longer the matter has been under consideration, an interdepartmental commit-

tee has been set up to report- to the government on the subject matter, but until such time as the united maritime agreement has come to an end I doubt whether there would be anything to be gained by making a public pronouncement on this important subject. Shipping is still pooled, and will be for some months to come. I believe the pooling agreement ends early in March. Again, the matter is one which affects not only the Department of Transport but several other departments. Hon. members listened, I am sure, to the statement which the Minister of Reconstruction made on this whole subject; I believe he covered it very well, and I am prepared to leave it at that for the moment.
The hon. member for Lake Centre raised several questions, some particularly with reference to the salaries of officials of the Department of Transport and other departments. Of course I can speak only for my own department. I am informed that, with reference to war duties supplements, the procedure is for the department to recommend to the civil service commission that one or more employees should under the circumstances be entitled to a war duties supplement; the civil service commission make an investigation and decide whether the recommendation made by the Department of Transport is warranted and whether the supplement should be awarded. It then goes to treasury board, and treasury board must finally approve. I am informed that so far as the Department of Transport is concerned every recommendation for a war duties supplement which it was possible to make, was made, and I further understand that the majority of those going forward have been awarded. The hon. gentleman asked for a statement of them. I have not such a statement here, but I shall be prepared to give it to him later.
With reference to travelling expenses, the hon. gentleman read from a pamphlet or a memorandum of some kind, and I do not know whether he was referring to the travelling expenses of the Department of Transport-


John George Diefenbaker: No, I specifically said that, that these were much lower.


Lionel Chevrier: I thank the hon. gentleman for that, because I think the travelling expenses of the Department of Transport have gone down rather than gone up; in fact they have gone down substantially this year from the amount last year.
Speaking generally, so far as salaries go- and the same statement was made by the Minister of Reconstruction when, I think, he was asked a similar question-these salaries for technical and professional men are under review.

Income War Tax
(Translation):	Mr. Chairman, the hon.
member for Portneuf had the kindness, a few moments ago, to compliment the Minister of Transport for his interest in the pilots and the merchant marine, and to thank him for the work he has done in connection with the sailors from the Nereus and the Proteus, two ships which were lost at sea during the war years. I can tell the hon. member that I shall note his remarks and that my officials will do everything in their power to obtain further details concerning the fate of the sailors from these two ships. I also- wish to assure him that the pilots in whom he is so much interested will always have our sympathetic consideration.
(Text)


Mr. HODGSON:: I want to say a word to the minister-it will take only a minute- following up what the hon. member for Peterborough West has said. All along the Trent waterways system has grown up a great tourist industry. There is plenty of room for further development. I thank the minister for the new gates which are going on at Fenelon Falls lock. A repair job there was very necessary. While his men are working up there, I might point out that some mud has accumulated in years gone by from a saw mill at the mouth of the canal where it goes into Cameron lake. If that mud were taken off by a sucker, we would have a wonderful sand beach and it would be a splendid place for tourists. There is also a repair job to be done on the dock at Coboconk and other places along the canal system where it empties into Balsam lake. Quantities of rock and mud have piled up on the sides of the canal, and if it could be levelled down, the place could be made a beauty spot. There is in fact a considerable amount of beautification which could be done along this waterways Astern with the help of the department. I should be glad to go into these matters in detail in the minister's office at any time, or to take it up through the departmental engineer at Peterborough, Mr. Ryan. I might say here that Mr. Ryan has given me the very best of cooperation in any business I have had with him since he became the official located at that particular point. I repeat, Mr. Chairman, that any information that I can give the minister in detail I shall be glad to give him.


Lionel Chevrier: I can tell the hon. gentleman that my officers will cooperate with him at any time and give him the information he requires.	[DOT]	i


Clayton Wesley Hodgson: Thank you.
Progress reported.
At one o'clock the house took recess.
The house resumed at three o'clock.



WAYS AND MEANS

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

[Stage Direction]
18. That the right of a corporation, association, syndicate or exploration partnership, formed for the purpose of exploring and drilling for natural gas, to deduct 30 per centum of exploration and drilling expenses be extended to expenses incurred in 1946.
Mr. SENN:: Shortly before the house rose last evening I made an appeal to the minister to increase the percentage of the reduction from income tax on gas wells for exploration and drilling purposfes. The minister was emphatic in his reply, but I found some difficulty in following his arguments and his explanations. He said he was probably stating it in the Greek way, but Greek is a language of which I have no knowledge. He said that because a certain amount was allowed for depletion of gas wells, amounting to some twenty-five per cent of the income, thirty per cent was a sufficient reduction for exploration and drilling purposes. I say definitely to the minister that in the circumstances neither is sufficiently, high. I pointed out to him last night as clearly as I could the importance of the natural gas industry to certain sections of Ontario, particularly the Niagara area, in which I happen to live. The greater proportion of the people in that area depend on coal gas for fuel. Everybody knows that to-day coal is in very short supply, and that it is even more necessary than ever to have sufficient gas produced to allow the people who have already installed gas fixtures to continue to use gas. As I pointed out last night, it is impossible to change over gas equipment to the burning of other kinds of fuel.	[DOT]
In the riding which I have the honour to represent, Haldimand, there are some 1,800 gas wells in operation. In the past number of years since the natural gas industry has flourished there, some three or four times that number have gone out of existence; they have been abandoned. Some of them have been dry wells. I venture to say that at least three times as many as are in existence to-day have been abandoned because their usefulness has gone. At the present time drilling is going on in that area, because, as I have already pointed out, it is necessary to keep up the supply. I think I am safe in saying that at least ten per cent of the wells drilled turn out to be dry and of no value whatever. That is a strong argument in support of my request for an increase in the reduction of thirty per cent.
Income War Tax

The amount for exploration and drilling should be increased to at least forty or perhaps fifty per cent.
It is clear that there is no use in a company spending all their profits in the driling of new wells to keep up the supply. After all, the average life of a gas well is not very long. I am on safe grounds, I think, in asking the minister to increase that percentage of reduction.
Later I shall have something to say about the depletion allowance, which is twenty-five per cent, I thinly. I believe that they are entitled to a certain increase in the depletion percentage as well. Mining and oil wells are getting a larger depletion rate than that. However, in the meantime I should like to appeal once more to the minister to enlarge that thirty per cent reduction for exploration and drilling to at least forty per cent, if not fifty per cent.


Mr. ILSLEY:: The point raised last night
was that thirty per cent was given to one class of company, forty per cent to another and twenty-six and two thirds to another. The question asked was. why is the tax credit for natural gas companies only thirty per cent on exploration expenditures, while that for certain oil companies is forty per cent. The hon. member for Haldimand suggested that the tax credit for natural gas companies should be higher. I shall explain how these various tax credits were derived and why they are not the same for all kinds of companies.
I should explain first of all that exploration and drilling expenses are capital expenses laid put on new ventures, and ordinarily are not properly chargeable against profits from existing producing wells. If as a result of exploration expenses new wells are found, the cost of finding them is properly chargeable against the new production. If, however, the exploration and drilling prove unsuccessful, the cost of this unsuccessful capital venture could not in the past be charged against profits from existing producing properties. In war time, in order to encourage the search for much-needed oil, gas and minerals, the government decided to allow these capital costs of exploration as a deduction against profits in computing taxable income. Now, in order to prevent undue benefits being secured by any company which might be in the 100 per cent tax bracket, the write off privilege was given in the form of a tax credit, the tax credit being equal to the tax saving which would be secured by a company taking a write-off under a forty per cent tax rate. Thus the appropriate tax credit in the case of oil companies which paid tax on total earnings and received no' depletion
[Mr. Senn.3
is forty per cent; that is, on every $100 of exploration expenditure charged against taxable income the tax saving or tax reduction is $40. In the case of natural gas companies there is a depletion rate of 25 per cent. Thus only 75 per cent of earnings are subject to tax. A forty per cent-


Mark Cecil Senn: Is that correct-only twentyfive per cent of the expenses for depletion? Is it not twenty-five per cent for drilling and exploration?


James Lorimer Ilsley: No. What was the question? The statement I am making here is correct; that is. that altogether apart from new ventures the depletion rate allowed is 25 per cent. That is to say, the company pays income tax on only 75 per cent of its earnings.


Mr. SMITH (Calgary West):: That is 25 per cent per year, is it?


James Lorimer Ilsley: Yes. It varies with different kinds of companies, of course; and I will come to that. It is the same for gas companies, 25 per cent.


Arthur Leroy Smith: That is what you are referring to?


James Lorimer Ilsley: 
Mark Cecil Senn: That is just the point I was going to raise, that I believe these producers are more or less in a class by themselves. The need in that locality is very great; the gas produced is used in many homes and in processing in different industries. During the war years the use of gas for processing in various industries increased very greatly, so now the demand for this purpose is cutting to a greater extent than it should into the supply available for domestic heating. I am very much afraid

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that with the shortage of coal and of all kinds of fuel, unless something is done to increase exploration and drilling for gas we in that area are going to find ourselves very short indeed of natural gas for heating our houses. I still think the minister, without doing harm to any other industries, might increase this amount by at least ten. per cent.


[Stage Direction]
Resolution agreed to.
19. That a corporation whose chief business is that of mining or exploring for minerals be allowed to deduct 26§ per centum of prospecting, exploration and development expense incurred in 1946 in searching for minerals.
Alan Cockeram: I should like to say a few words with respect to the business of prospecting. For a number of years I believe the minister has received deputations and briefs not only from the Ontario prospectors' association but from the Canadian Institute of Mining and Metallurgy, Ontario Mining Association and the mining industry as a whole, with regard to the question of prospecting and the future of mining development in this country. For some time I have felt that the departmental officials have not understood the question of prospecting and its effect on the future prosperity of this country. The history of prospecting started with Sudbury; then to Porcupine, Kirkland Lake and many other centres. To-day prospectors are going farther and farther afield. In the old days prospecting was carried on close to the railroads. To-day prospectors must travel greater distances, with the result that the expense of prospecting is very much greater. Later in this debate I propose, to introduce some statistics bo show how the mining industry, instead of going ahead as we all hoped it would, is being retarded through excessive taxation. I do not think any industry can do more for this Canada in the days to come than the mining industry. It was mining that carried our economy through the depression days of the thirties, and it was that industry which in the early part of this war, when the government was looking for foreign exchange, the minister appealed to produce more gold with which to establish credits to make purchases in the United States, with the result that it was not necessary for Canada to go on a lend-lease basis with the United States at that time.
The minister has been interviewed in the past by many delegations, and I should like to read the paragraph dealing with prospecting from the report of the Ontario royal commission on mining of 1944. In this connection I would suggest to the minister that he might be able to supply members of this house with
copies of this report, as well as with copies of a brief on the taxation of the Canadian mining industry as presented by the Canadian Institute of Mining and Metallurgy, together with copies of any other briefs that have been prepared by the prospectors' association with regard to the whole field of prospecting. This is what the Ontario royal commission had to say in regard* to the decline of prospecting in Canada;
The commissioners are convinced that if mining in Ontario-	I
This would apply also to Canada as a whole.
-is to continue on a worthwhile scale prospecting for new mineral resources must be stimulated to a far greater extent than is now possible under existing conditions in respect of tax levies and governmental restrictions.
The following excerpts are taken from *a brief prepared for submission to the dominion Minister of Mines and Resources and the Minister of Finance, by the Canadian Institute of Mining and Metallurgy and made available to this commission.	_
"Prospecting for new mineral deposits in Canada has all but ceased and. if the mining industry is to continue on any worthwhile basis, this unfortunate situation must he corrected immediately. Emphasizing the necessity for quick action is the fact that under war-time demands for maximum metal production, coupled with a labour shortage, development work at producing mines has been necessarily and drastically curtailed, and ore reserves are being dissipated at an accelerated pace.
"The incentive for continued prospecting, with its inherent physical and financial risks, lies in the prize which rewards success, i.e., a valuable deposit of mineral. No mineral prospect can justify the risks attendant upon development unless the attainable prize, in the form of commensurate profit, is available to one who succeeds. This prize has been so reduced in value by progressive increases in taxation that it no longer holds sufficient attraction for those who would venture. Private enterprise in the exploration and development of mineral deposits laid the foundations for the production success attained by the Canadian mining industry. The decline in prospecting activity is clearly illustrated in the accompanying briefs.^ "In the province of Ontario, the decline in prospecting activity began in 1929, with the downward trend obscured somewhat during the period 1933-1936 following the increase in the price of gold. In the province of Quebec, experience has been similar. It was plainly evident long before the emergency of the present war."
In that connection I would suggest to the minister that if we are to go ahead and find new mineral deposits in this country, greater consideration than he now .proposes should be given those mining companies who are prepared to expend their money on prospecting and1 development in the Dominion of Canada, I have been in the prospecting business for a great many years and I know that to-day our mineral fields are getting farther apart.


James Lorimer Ilsley: The answer is that they are.


Alan Cockeram: Then why this section?


James Lorimer Ilsley: 
Alan Cockeram: I cannot see that.


James Lorimer Ilsley: Well, I gave an explanation to the hon. member for Haldimand only a minute ago. There is a depletion rate of thirty-three and one-third per cent. The tax rate is forty per cent. Assuming that they are paying forty per cent-and this is on the assumption that forty per cent is the combined income and corporation tax rate paid by the company-then this resolution, is the equivalent of that for which the hon. member is asking, because forty per cent of sixty-six and two-thirds per cent is twenty-six and two-thirds per cent.


Alan Cockeram: Well then, I congratulate the minister.


James Lorimer Ilsley: Thank you.


Mr. ADAMSON:: I have listened with some attention to the explanation given by the minister to the hon. member for Haldimand. However, his interpretation is not the one I have seen placed upon the resolution-that it will mean a deduction of one hundred per cent for purposes of exploration. In other words, if a producing company takes on another property and spends $100,000 in 1946 on exploration, and if it decides at the end of 1946, or before the end of that year, that the property is not worth while, then all the money the mining company has spent in failing to develop that prospect-and let us not forget that most of them will fail; there can

Income War Tax
be no rosy ideas about that-will be allowed as an expense, and deductible from the income tax.


James Lorimer Ilsley: How much does the hon. member think they should have off their tax bill? Tell me that. Is it not $26,666.66?


Agar Rodney Adamson: They get a reduction of $26,000.


James Lorimer Ilsley: Correct. That is equivalent to $100,000 off their income, for tax-purposes.


Agar Rodney Adamson: That was the question I wished to ask.


James Lorimer Ilsley: That is correct.


Mr. JACKMAN:: I do not know how hon. members can be expected to know exactly how some of these complicated calculations will work out, and what the real incidence of taxation will be, unless we can have some help from the minister or his department. Session after session I have pleaded for & committee-not a committee of the whole house, but one on taxation and fiscal matters -before which we could call witnesses and through which we could receive expert advice. If we had such a committee we could learn about these matters. We do not all have to know about them, but those of us who are keenly interested would like to have a clear understanding, so that we may know what the minister is talking about. I hope the drafted resolutions will come down in good time in the bill so that hon. members on this side may have an opportunity to study them and give them the consideration which they will require.


James Lorimer Ilsley: That is right.


Mr. GREEN:: Will the minister give a brief outline of the position with respect to taxation of gold mines at the present time? Part XIII of the act made provision for metalliferous mines. I believe there was a time when gold mines were given three years free of tax.


James Lorimer Ilsley: Correct.
Mr: GREEN: There was also some provision made for depreciation allowance and pre-development cost. Can the minister give us a brief summary of that picture?


James Lorimer Ilsley: It would take a long time to make a statement such as that. Gold mines are entitled to one-third depletion; they pay income tax on only two-thirds of their profits. Throughout the war they have had a special formula for increasing their standard profits as tjieir volume of production went up. This was a special concession to only two
classes of companies, gold mining and oil producing. There was an exemption some years ago which was repealed at the time we decided we did not want people to produce gold, that we wanted them to produce strategic minerals.


Howard Charles Green: What year was that?


Alan Cockeram: 1936.


James Lorimer Ilsley: It ran three years and expired in 1943, I believe. It is being continued this year by a later resolution.


Howard Charles Green: Where does that come in?


James Lorimer Ilsley: It is in the excess profits resolutions. They have this advantage or benefit that we have been talking about; which is a new thing. We passed this two or three years ago, authorizing them to write off their prospecting, exploratipn and development expenses out of profits. It is not put in those words; it is put in the form of a tax credit, but it amounts to the same thing- that is, allowing capital expenditures to be written off out of profits. There are not very many people in this country who can do that, but they can. It is not only gold mining companies, but companies whose chief business is that of mining or exploring for minerals. 'I think those are the most important tax concessions or advantages that mining companies have. Resolutions, Nos. 16, 17, 18, 19 and 20, are just extensions of present provisions in the act. The only change in the wording of the resolutions is a change in the date of expiration.


Howard Charles Green: Is there any significance in the fact that resolution No. 19 refers only to corporations; it does not apply to an individual or partnership?


James Lorimer Ilsley: We have never had any claims from individuals or sole proprietors, as we call them, or partnerships, for this concession. This is done by corporations. It is the mining companies that enjoy this concession. I do not know why the question has never come up, but it never has so far as I know.


Howard Charles Green: In other sections of the act the word "taxpayer" is used, and that would include an individual or partnership. I suggest that that word should be used rather than "corporation".


James Lorimer Ilsley: The rate perhaps would have to be different if that were the case, because this provision proceeds on the assumption that the company is earning forty per cent. If it is in what we call the hundred percent class,
Income War Tax


Howard Charles Green: Sometimes.


James Lorimer Ilsley: It is always a company.


Harry Rutherford Jackman: That is how they all start.


Mr. STIRLING:: A syndicate would hardly be a corporation.


James Lorimer Ilsley: I think they are taxed as corporations; I am not sure.


Howard Charles Green: Will the minister give some consideration to that before the amending bill is brought down?


James Lorimer Ilsley: Yes.


Howard Charles Green: As I understand it, this resolution is designed to assist mining. At the present time there is a great deal of concern over the situation with regard to silver. The main objection seems to be that the price in Canada is being held down whereas silver sold in the United States is bringing a much higher price. The minister may not wish to say anything about it at this particular time, but I think an announcement of government policy with regard to the domestic price would be welcome to the mining industry.


James Lorimer Ilsley: I cannot make a statement on that on these resolutions. It is a matter which has been given much consideration, but an advance statement'would appear to me to be hardly wise.


Agar Rodney Adamson: I want to get this matter clarified, because it is very important. On other occasions rulings have been given by the minister's department which were different from what we in the house thought should be given. Let us assume that a mining company has profits of $100,000 which it spends on exploration work which fails. If it did1 not spend that money on exploration and'paid it to its shareholders instead, it would be taxed $40,000 less 33 .per cent of the $40,000. In other words, it would be taxed on that, $26,800. .

Mr. ILSLEY': $26,666.


Agar Rodney Adamson: Yes. Because of the exploration work that they have done you would allow the total amount of that $26,666 as a further deduction.


James Lorimer Ilsley: It is a tax credit.


Agar Rodney Adamson: That is right. It is a tax credit; it is not a deduction for income.


James Lorimer Ilsley: Right.


Agar Rodney Adamson: So that the $100,000 expended on exploration will be completely tax-free?	.


James Lorimer Ilsley: That is right.


Agar Rodney Adamson: That is the question I wanted answered.


Harry Rutherford Jackman: Provided that there are profits against which to write it off.


James Lorimer Ilsley: That is right.


Arthur Leroy Smith: I know that the oil item is passed, Mr. Chariman, but suppose I have a mine. We very often have no profit to write it off against. Is there a distinction made between mines and oil?


James Lorimer Ilsley: I do not understand the
hon. member's statement that we must pay even if we have no profits. We must pay for the work we have ordered done; we must make our capital investment. Is that what the hon. gentleman means? Or does he mean we must pay the government?
Mi<SMITH (Calgary West): It is more for information that I am asking the question. Suppose I have a mine in which I invest $200,000; then the mine becomes -exhausted. I have now got my capital back, $200,000, and I go abroad and get another mine. I would rather talk about oil if the chairman would not look at me so severely.


The ACTING CHAIRMAN (Mr. Golding):: It would be perfectly in order, because we are still dealing with resolutions 17 and 19.


Arthur Leroy Smith: Then I put my $200,000 in an oil well. It turns out to be a dry hole. I have lost all my capital. I have no profit. Yet I must pay a certain amount on the $200,000 which I got back out of my first venture. In other words I would be paying taxation on something which never was a profit. I think that is a correct statement.


James Lorimer Ilsley: You got a profit on the first venture and paid your tax on your profits. Then you went into another venture and lost your money. There is nothing we can do about that.

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Arthur Leroy Smith: With great respect, I do not think that is what happened.


Mr. BLACKMORE:: You still believe in Santa Claus.	,


Arthur Leroy Smith: Unlike
General Chisholm, I do. What I have in mind is this, and the point I think is worth considering. I spent my $200,000 in the first oil well, and the minute the oil comes from the well I begin paying the tax. I am sure I am right about that. Then I drill for another well with my $200,000. It is a dry hole and I lose all my capital. I never had a profit, and yet I have paid a tax which cannot be on anything else but eaptial, since I never had a profit.


James Lorimer Ilsley: Why did not the hon. gentleman, have a profit? He had a profit out of his first venture.


Arthur Leroy Smith: No, I just got my capital back.


James Lorimer Ilsley: Our system is not that an investor must get his capital back before he begins to make a profit.


Arthur Leroy Smith: I believe
that is sound, and I am not complaining about that. I know that the government need the money, andi I am not complaining because they go out and get it where it is. But it is a hazardous business to drill for oil. Once a man has got his money back and he is engaged in continuous operations, tax all you like. But one well is not much by way of a capital investment. I was. merely seeking information, and I am grateful for the minister's answer.


Mr. CASE:: I assume that the purpose of resolution 19 is to encourage the search for minerals, gold and so forth, and1 yet I am constantly wondering just how valuable gold is to Canadians. I recognize * that it represents one of our richest natural resources, but even though you make it attractive for people to dig for the yellow metal, at the present time at least we are treating gold solely as a commodity. We are exporting it to the United States, still treating it as a commodity. When the late President of the United States changed the price of gold to $35 an ounce it did not seem to result in the increase in commodity prices that was expected at that time. I am going to ask the minister a question which I hope he will answer and not misunderstand me. Why do we not use our richest natural resource, gold, as a monetary base, store the gold in our own vaults, and use it to expand our own currency and still remain on sound money?


James Lorimer Ilsley: That is a big question, and I would have to prepare something on it before I could answer it. It is a question of what is the basis of what our monetary system should be, and it opens up the question, why do we not return to the gold standard. I do not think it is germane to the resolution. I do not think it would be a very good thing for us to return to the gold standard in the sense in which that term was used before the *first world war at any rate, 'because it was pretty rigid. Countries .generally have left the old-fashioned gold standard. But I do not want to argue the gold standard on this resolution. I am afraid of provoking a discussion if I do.


John Horne Blackmore: What is that?


James Lorimer Ilsley: I said I was afraid of provoking a discussion. I did not say of whom I was thinking.


Wilfrid Garfield Case: I think it has a direct relationship to the resolution because it offers an , inducement to capital to risk its money to discover more and more gold. By . international convention a country is considered to be on the gold standard if it has a twenty-five per cent gold backing for its currency. I believe that gold should be used for the benefit of the people.


William Henry Golding: I do not think this discussion is relevant to the resolution.


Wilfrid Garfield Case: I submit that it is relevant, Mr. Chairman, because the resolution offers an inducement to the gold-mining industry.


William Henry Golding: I will read the resolution:
That a corporation whose chief business is that of mining or exploring for' minerals be allowed to deduct 26| per centum of prospecting, exploration and development expenses incurred in 1946 in searching for minerals.


John Horne Blackmore: I must observe to the hon. member for Grey North that if it were established in the public mind in Canada that every dollar of gold mined could be used as backing for four dollars of Bank of Canada bills, and that every one of those dollars would be a good dollar, not a rubber dollar or a "funny money" dollar or a dollar of any other such kind as our foolish monetary experts have accused Social Crediters of supporting-if that could be shown, the value of the gold mining industry to Canada-if gold is the backing of money, if gold is the thing which gives money value-would surely be established in a way which would completely justify a good many concessions in the matte-of taxation.
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Agar Rodney Adamson: I am sorry to go after
this question like a terrier after a rat, but I can assure the minister that I am thankful for it.


Harry Rutherford Jackman: The terrier or the rat?


Agar Rodney Adamson: If I had the rat, the
terrier would have a lot of fun. This applies only to the expenditures from one fiscal year to another, or apparently from one calendar year to the other. At the end of the calendar year, in other words at December 31, 1946, this clause ceases to be effective, and I may say through you, Mr. Chairman, to the minister that I hope this clause will perpetuate itself, and I think that spme assurance that that will be done would tremendously help the industry.
If at the end of the calendar year the pre-development money-shall we say $100,000 -is spent but the prospect is still under development, and during the next year, 1947, another $100,000 is spent, and in that year an ore body is discovered on this property-and this is quite the sort of thing which happens; things look good and they say, "We will bet another $50,000 and, we will bet $100,000, w'e would like to explore this end of the property'', or "we would like to explore this, break", or a number of things, and in 1947 they find an ore body which justifies a mill, and they have a mine, what happens? They have received a tax credit for the calendar year 1946 of $26,000. In 1947 they discover a commercial ore body which they proceed to develop; they incorporate a company. They have had in 1946, $100,000 worth of pre-development expenses, in 1947 they have had another $100,000 pre-development expenses. What happens? Are they given their pre-development expenses in 1947 and the 1946 period is a dead . period, is finished as far as taxation goes, or are they liable for refunding of the tax concession they got because they found an ore body? I think that should be clarified, because the matter of pre-development expenses is a very important one, particularly with the young mines. I propose to have something to say on it in connection with section 6 of the Excess Profits Tax Act. I do not suppose the minister can answer that at the present time.	1


James Lorimer Ilsley: No, I cannot answer it, but
I should not think it would be right to allow it to be written off again.


Agar Rodney Adamson: No, I quite agree with
the minister; I would not think it would be right. But this is the sort of contingency which your department is going to have to meet, and I think it should be clarified now. I agree

that they should not be allowed to write it off; that is perfectly satisfactory; but if they have written it off and in 1946 they have got the tax credit of $26,000, if they start again in 1947 they use the 1947 figures as pre-development expenses?


James Lorimer Ilsley: That is what I should think, yes.


Agar Rodney Adamson: That would seem to be
fair, yes.


Mr. GLADSTONE:: I suggest to the hon. member for Calgary West that if he is completing the two holes in one year he would not have to pay any tax; that is, on the first he would have made his $200,000 and on the second he would have lost it. This leads to the question of the equity, even in connection with industrial companies, of taxing them on the profits of the good years but with no allowance for the lean years. One wonders whether or not our system should be revised in accordance with what, I believe, they have in England, where taxes are on the basis of an average of three years' profits. .


James Lorimer Ilsley: Great Britain is not on a basis of averaging. We go very far towards averaging by our provision that losses may be written backward and forward. Those provisions were put in the budget of 1944.


[Stage Direction]
Resolution agreed to.
20. That the right of corporations, associations, syndicates or exploration partnerships whose principal business is production, refining or marketing of petroleum or exploration or drilling for petroleum to deduct 50 per centum of expenditures made directly or indirectly in connection with deep test oil wells which prove to be unproductive, be extended to wells spudded in before the thirty-first day of December, 1946.
James Lorimer Ilsley: The hon. member for York-ton asked me a question last night which should properly have been asked under this resolution. He asked for the number of wells proved; the number is 20; the number of wells completed is 11. Footage drill with completed wells is 78,979. Estimated1 footage for uncompleted wells, 75,200. Number of successful wells, nil. Cost to treasury in tax credits on the wells completed, $1,050,000.


Wilfrid Garfield Case: What is a "deep-test" oil well? That is where the exemption comes in.


James Lorimer Ilsley: I cannot give an accurate definition. Officials in the Department of Mines and Resources could do that. But it is something like this: it is a well which is sunk on a new location through a new structure; and that is the meaning of the word "test". It is a deep-test oil well, and therefore an expensive one.

Income War Tax


Mr. COCKER  AM@: Is it the test or the well that is deep?


James Lorimer Ilsley: We do not give this tax credit except in cases where the spudding in of the well, as they call it, takes place, and after recommendation of the Minister of Mines and Resources and after it is approved by the governor in council. They look into the question whether it is a suitable project for the somewhat abnormal tax treatment.


Agar Rodney Adamson: What happens, as I understand it, is that in a new area they wish to find out some important geological information. They ask a private company to drill a very deep well in order to test the geological formation at depth. It might not be, and probably would not be, in the ordinary commercial policy of the company to drill a well in this location. I understand that is one of the reasons behind it, and that is why the rather more favourable treatment is given in this case than to an ordinary commercial operation in what might be considered a proven field.


James Lorimer Ilsley: That is substantially correct; I think that is entirely correct.


Agar Rodney Adamson: The geological branch of the Department of Mines and Resources recommends and suggests where the deep-test wells should be put 'down. The companies then either proceed or do not proceed, according to their own geological information. I wanted to bring that out, because when the estimates of the Minister of Mines and Resources are up I shall have something to say about doing exploratory diamond drilling as a part of the geological survey of Canada. That is the principle that is being established here.


Mr. HACKETT:: Could the minister give us in a few sentences, in the language of the ordinary mortal, the distinction between a deep-test well and one that has been recently spudded in? It does not convey a very clear idea to me.


James Lorimer Ilsley: The distinction is not between the deep-test well and one recently spudded in; the distinction is between a deep-test oil well and one which is a much shallower well, and where it is not necessary to get a knowledge of the stratum and structure of the subsoil. There may be indications that if you go away down you will be able to find that there is a lot of oil in the locality. It is a risky thing for a private company to undertake that heavy capital expenditure unassisted; therefore if they were not assisted they probably would not do it. The same conditions do not apply to the 47696-173
much smaller expenditures where it is not intended to drill as deep, and so the distinction is drawn between deep-test wells and others. The drilling of a shallow well might cost, say, $50,000 while the drilling of a deep-test well might cost as much as $500,000. Therefore we adopted this policy, which has been fruitful in experience and in nothing else to date, of allowing those large tax credits, in effect paying fifty per cent of the cost of drilling deep-test oil wells. Does that answer the question?


John Thomas Hackett: Yes, thank you.


Mark Cecil Senn: May I be allowed to ask one question on this item in regard to natural gas? I know it is not strictly in accordance with the rules. I do not depart very often from the rules, and do not ask for any concessions, but I did want to ask one question, which I missed when resolution 18 was under discussion. Subsection 8 of section 8 of the Income War Tax Act provides for thirty per cent of exploration and drilling expenses as an exemption on taxation. From a brief which I have here of the Natural Gas and Petroleum Association of Canada I understand that recently the deputy minister of taxation made a ruling or statement in regard to that subsection which did not altogether clarify the situation; and if his statement was correct, it would hardly satisfy this association.


James Lorimer Ilsley: What did he say?


Mark Cecil Senn: I cannot tell the minister
exactly what the statement was, but I should like to know if such a statement had been made, and what the interpretation of the section is.


James Lorimer Ilsley: I cannot trace the statement unless I know what it was and where it was made.


Mark Cecil Senn: The minister does not know at all?


James Lorimer Ilsley: I do not know, no.


[Stage Direction]
Resolution agreed to.
21. (a) That in respect of persons other than corporations the tax for 1945 be -reduced by 4 per cent of the aggregate of the normal tax, the graduated tax and the investment surtax;
(b) That in respect of persons other than corporations the tax -for 1946 be reduced by 16 per cent of the aggregate of the normal tax, the graduated tax and the investment surtax.
Mr. ROSS (Souris):: I should like to
raise a question or two on this resolution. When other departments of government have been before the committee it has been stated that we are receiving this year $255 million on our grain crops alone less than we would

Income War Tax

receive in, the open markets of the world if there were no controls. I know this is not directly relevant to the resolution under discussion, but it is a lead to what I have to say. We have wheat participating certificates which pay us in 1946 for our 1943 production. That is three years later, and we are not allowed any interest even though the wheat producer may have to borrow money on which to operate. On the other hand, when he pays his income tax he is always charged interest on overdue payments. I cite that as an example. Added to this, we are taking 40 to 50 per cent less for our live stock, and we have the greatest production and the greatest sale in the history of this nation. We are selling this live stock at from 40 to 50 per cent less than the world market price. The point I am coming to is the matter of a breeding herd being allowed as capital. I know this question has been raised in other sessions. Suppose a man is going out on a mixed farm or a grain farm; he buys land and equipment, and it is allowed as capital. But take a man who has a ranch where there is no other income than that which is derived from the live stock. He purchases a herd of breeding cows. If he is forced to sell that herd, even through no fault of his own, in one year, the entire herd must be shown as income. I submit that is a most unfair ruling. I know the breeders of this country have interviewed the government on past occasions. They have asked that the breeding stock be all shown as capital, which was disallowed. Finally, they asked that they be allowed at least 75 per cent of their breeding cattle as capital. .
I came back from the west not very many days ago. I met a rancher who had sold out in southern Alberta. He received some sixty odd thousand dollars for his herd. Those were the only assets that man had. He, his wife and family, had spent all their life accumulating this herd. He thought he was going to settle down in town and enjoy his old age. I do not know that I need to go into any further details to explain to the committee the headache which that man had when he interviewed the income tax officials. I think that is an impossible situation. Because of these controls the producers of this country have been forced to take a real licking during the war years, and certainly I believe they are entitled to more consideration in the matter of income tax, especially in connection with the older people, many of whom wish to retire. After having made a great effort during the war years; after having accumulated a fair herd of good stock, now when they come 
to sell they are not allowed to keep enough of the proceeds to provide for their old age.
In raising that point I should like to mention also the other question of the farmer and his wife as compared with the man and his wife who work in the city. The farmer and his wife are allowed an exemption of only $1,200, or whatever it is, while the -man and his wife working in the city are allowed an exemption of something like $1,800. That has been a most vexing problem throughout the rural parts of Canada, and if the minister has not brought about some adjustment already I hope he will be able to do so soon.
These are the two particular points I should like to bring to his attention now, and I should be glad to have him' explain them as to date.


James Lorimer Ilsley: The farmer who is paying income tax on a cash basis as distinguished from an inventory basis is taxed on the proceeds of the sale of his stock, which is regarded as gross income, just as any expenditures he makes for stock are regarded as expenses. If the man about whom the hon. gentleman talks had been buying cattle during the last few years every purchase he made would have been regarded as an expense which he could deduct from his income for tax purposes! Then when he comes to sell his cattle what he gets is regarded as income for tax purposes. There is a way of setting up the books on a different basis, an inventory basis, as I understand it; and I believe the Department of National Revenue have gone just as far as they could in allowing retroactive adjustments over five years, or something like that. I thought the situation had been reasonably met by administrative rulings, but without departing from all fundamental principles I do not think you could regard as capital the cattle as they are bought and sold.


John Thomas Hackett: What happens where
herds have been developed through natural increase, where there has been no purchase? "When they are sold, are the proceeds treated as taxable income?


James Lorimer Ilsley: Oh, yes, just as the expenses of feeding them and securing that natural increase are regarded as deductible expenses. The difference is what the farmer makes out of raising cattle; that is his profit.


John Thomas Hackett: The minister suggested that there might be some means of spreading the profit, as in the case just mentioned by the hon. member for Souris, over a number of years. If a herd has been developed over a period of, let us say twenty years, and it

Income War Tax
is necessary to allocate the proceeds to each of the past twenty years, surely the interest on the amounts that have been owing since the beginning of the period would run to such a figure that in the result there would be very little relief for the taxpayer.


James Arthur Ross: Could the minister explain this in some detail? As he will realize, now that the war is over, many people who' worked hard to produce for the war effort are getting on in years and wish to sell out and retire. With the experience some of their neighbours have had,'they are rather fearful about it. To be asked to submit the proceeds of their sales to the department for a ruling is hardly satisfactory. There must be some basis on which this is worked out, and I should like the minister to explain that in some detail. Take an arbitrary figure of $10,000 or $20,000 and spread it over the maximum number of years to show how it would work out. That would give useful information to many people. That figure may be too high, but take some figure and give us an example. Could the minister do that?


James Lorimer Ilsley: Not immediately, but I can do so later on. That comes under the Department of National Revenue, and I will get a statement from them.


Mr. FULTON:: Following up this question,
I should like to point out to the minister that it is difficult to accept his general statement that breeding cattle cannot be regarded as capital, because if you analyse the position I think it is fair to say that a farmer needs a certain proportion of his herd to carry on his business, just as much as any other business man needs capital assets before he can earn an income. In the case of those who confine their agriculture almost entirely to the breeding and sale of beef cattle it is not only their land and buildings that form part of their equipment but also a certain percentage of their herds, because if they did not have that herd in the first place they would not have any annual increase which they could sell and from which they derive their income. Therefore, if you analyse it and compare it with any other business you will see that a portion of the herd must be kept from year to year in order to have any crop at all to sell, and surely it is fair to say that this portion of the herd should be regarded as working capital. One might say it is all the female animals in the herd, though perhaps that is setting it too high. The figure suggested by the hon. member for Souris is seventy-five per cent. In any event we are not concerned here with such details, nor 47696-173J
should we demand that these matters be worked out at this moment. I know, however, that the Department of Agriculture has submitted a brief or a recommendation on this subject to the Department of National Revenue. Apparently as yet the details have not been worked out between the two departments, but in view of that recommendation I earnestly hojie the minister will give this matter his serious consideration and see if some fair basis cannot be worked out by the time next year's budget is brought down.
The minister mentioned that some relief is given at the moment by averaging up profits and losses over the years. I was in communication with the Department of National Revenue yesterday, and this cau be done in two ways. One is by going on what is called the cash basis. A man pays perhaps $10,000 for the purchase of a herd of cattle and he is allowed to deduct that amount from his income. That is the basis of his herd. The proceeds from anything he sells from then on are regarded as income, on which he pays a tax, even though he might sell the whole herd again. The other way is to go on the inventory basis: to establish the value of the herd as-at a specific time, and then from year to year declare either an increase or a decrease in that value and pay the tax on the increase whether or not you sell. That goes part way toward meeting what we suggest, because to some extent it recognizes that a certain proportion of the herd is working capital, and you pay income tax on the increase over that from year to year. But in order to do that a farmer has to go back to 1935 and very few farmers in the west, particularly those who went through the depression years, have their records back that far. They have to establish their herd back to the basis of 1935, and that is almost impossible. But it is a beginning; and in recognizing that principle I suggest to the minister he is recognizing actually the principle that a certain proportion of the farmer's herd of cattle, namely his breeding stock, is capital and not income.
I should like to say a word about the seriousness of this matter. On Tuesdey in this chamber one hon. member made some remarks, which I do not believe were intended in any sense to be derogatory, about farmers who are always complaining. This, perhaps, is not so important at the present time, because to-day farmers are' relatively prosperous. I am in no sense denying that. They are now in the income tax group, and they are paying taxes. Everyone is pleased aboqt that. But may I remind hon. members who would sometimes believe that farmers complain too much, that those farmers do not get workmen's compen-
Income War Tax

sation. A farmer will go through bad times and good times; but in the bad times he will not go on strike.


Some hon. MEMBERS:: Order.


Edmund Davie Fulton: He will continue to produce, and even though times may be bad' he will not get compensation or unemployment relief. I would ask hon. members to bear that in mind when to-day, in good times, vre ask for some relief on their behalf from income tax.
The ACTING CHAIRMAN (Mr. Golding); Order. I believe I shall have to read the resolution again. It states:
(a) That in respect of persons other than corporations the tax for 1945 be reduced by 4 per cent of the aggregate of the normal tax, the graduated tax and the investments surtax.


Edmund Davie Fulton: My intention was to emphasize that what I have said is serious, and it is a situation which is felt keenly by a large section of our population. I do not think I need emphasize it further.
Might I close by saying that this condition affects a large number of the primary producers of this country. Now that they are being taxed, they do not ask for more than they feel is due them, but they do ask to be put on a fair tax basis which will allow them, when times are good, to expect no more or to be under no greater obligation than when times are bad. In this way they will be able to even up the situation between good times and bad.


Mr. WRIGHT:: May I direct the attention of the committee to the class of farmers who, I believe, are most adversely affected by this resolution. I do not believe the commercial breeders or the large ranchers are most adversely affected. My impression is that there is a regulation permitting them to keep their books on a different basis, and to take care of themselves in that way. But there is a group of farmers who are not able to take advantage of those regulations. I refer to those average farmers who build their herds, not through purchasing but through breeding on their own farms over a number of years. Perhaps in those years they have never had great increases in their herds which - would place them in the income tax group. Over a period of twenty years they may have accumulated considerable Stock. One of those farmers may want to retire, and to sell his stock. There are dozens of farmers in Canada in that position to-day. Many of them carried on during the war longer than they should have. Now they want to retire, and they find that if they dispose of their stock, a con-

siderable portion of the return will be taken by the income tax people, even though the accumulation of that stock has been spread over a number of years, and in those years it has not been taxable. I think this is unfair, especially in those cases where a man would not normally have paid a tax during the years in which he was accumulating his stock.
However, now when he sells he finds that he has to pay perhaps twenty-five per cent, thirty per cent or forty per cent of the sate value. I suggest that the minister should introduce a regulation whereby perhaps seventy-five per cent of those sales would not be taxable. The present situation is certainly not fair, and is causing a great deal of discontent and dissatisfaction, particularly among the average farmers who have accumulated their herds throughout the years. I hope the minister, through his department, will give some thought to this group of people.


Mr. ZAPLITNY:: Much of what I had intended to say has already been said by the hon. member for Melfort, and the hon. member who preceded him. I wish only to endorse what they have said.
However, there is another class of primary producers concerning whom I should like to say a few words. I refer to the fishermen who produce fish, from our fresh water lakes in Manitoba, and the other provinces. They have heavy capital expenditures. I have known some of them to provide 200 or 300 fishing nets and, after placing them in the water, to have them frozen in the ice. Then, with warm weather coming along, probably about this time of the year, the ice will break up and their nets will be swept away. I do not know whether there is anything in this resolution which would give them relief in respect of their loss of capital equipment-because nets are undoubtedly in that class. In the past they have suffered heavy losses by having to provide new nets. When their catches are good, however, they still have to pay income tax.
I wish also to refer to the tax relief of sixteen per cent of the aggregate of the normal tax, the graduated tax and the investment surtax. In this connection I believe there are two things which are not right. It is our belief that the income tax exemption level should have been raised. This would have been a more effective way of giving relief to those in the lower income brackets who need it most. Under the present arrangement they will obtain less benefit.
Second, we believe that the income tax relief should be graduated so as to give those in the lower brackets greater relief from the

Income War Tax
tax than is given those in the higher brackets. I shall not say more at this time. I do not expect that what I have said will have any great effect, but it was my wish to register this protest.


Edmund Davie Fulton: Would the minister indicate how he feels in this matter?


James Lorimer Ilsley: On this question of live
stock, we undertook to get a statement from the Department of National Revenue as to the way in which they are treating the matter. I shall read that statement when it is received. I am told that it will not be available at eight o'clock, so that it will be offered when the bill is before us, or at a later stage' in the discussion on the resolutions. I shall not have it to-day.


Mr. CHARLTON:: On the surface, the
process of spreading income in respect of live stock sales sounds very well. However, the question I would ask is this: What happens to previous income? For instance, a man is making $2,000 a year on a farm. Then he will have a sale which nets him $10,000. Would that $2,000 a year be added to his income for each of the previous years, and would he pay income tax on the extra $2,000?


James Lorimer Ilsley: Yes, of course.


John Alpheus Charlton: It would not be of very much advantage to him, then.


James Lorimer Ilsley: That is what is being asked for, that he should not have years of loss or very low income, and then in the next year have a very high income on which he pays all the income tax on a high rate. That is the complaint.
Mr. MoMASTER: I come from a city, but I am wondering what the difference is, in principle, between a farmer who sells out his whole stock and assets, and a man in the city who sells his hardware business, or any other business. I never heard of a man in the city who was made to pay an income tax when he sold his business.


James Lorimer Ilsley: If the hon. member is talking about selling a building, that would be different from selling stock in trade.


Mr. McMASTER:: I mean stock in trade.


James Lorimer Ilsley: Almost every business man is on an inventory basis. At the - end of the year if the value has gone up, that is a profit and he is taxed. If it goes up some more the next year, there is more profit. If it goes down, there is a loss. But he has paid as he
has gone along and when he sells out the whole thing he has not much profit in that year upon which to pay income tax.


William Alexander McMaster: He may have left in some of his profits in order to build up his business. That is what many farmers do over a period of years. By thrifty living a man may make a small profit and from year to year he builds up capital from earnings from year to year which is nomtaxable.


James Lorimer Ilsley: Is the hon. gentleman talking about a merchant or a farmer?


William Alexander McMaster: I am talking about a farmer. After he has allowed! that non-taxable profit to remain on his farm-this may be in the form of cattle or implements or other items-he may build up a considerable value over a period of years.


James Lorimer Ilsley: Most farmers are in the business of buying and selling cattle.


An hon. MEMBER:: No.
Mr. ILSLEYt They are certainly in the business of selling them.


Mr. LENNARD :: Breeding and selling, not buying and selling.


James Lorimer Ilsley: It does not make any difference in principle. If he is breeding cattle, he has the expense of raising them. The price he gets for the cattle is not clear profit; there would be a lot to set off against it. If he elects to conduct his business on, a cash basis, then every animal he buys, all the feed he buys and all the costs of looking after them can be set off against his income for taxation purposes. What he receives for an animal or animals when sold must be regarded as income for taxation purposes. If he wishes to go on a different basis, on an inventory basis like the merchant, he can do that as well. If he does that he can spread his profits more evenly than if he keeps on a cash basis.


William Alexander McMaster: I think the minister has missed my point. The profits in any year may be so small that the farmer would not be taxable, and would not put in an income tax return. As I understand it, the income tax authorities would investigate to find out whether the man should be taxed in any one year, and they would take, the accumulation of his life's efforts over a great many years and then tell him what part he must pay income tax on, and what part he should have put in a return or consulted the income tax authorities. They would consider taxing the income for that year and having regard to the fact that for the remainder he had never been taxable, that his farm equipment and1 stock had1 been built up from non-taxable profits.
Income War Tax


James Lorimer Ilsley: I stated in the budget speech that I intended to introduce some system of averaging. It is going to be a hard job because you will have to .draw a distinction between classes in .the community. You cannot average everybody. If we are to avoid charges of discrimination we shall have to go very slowly in this. It may be that we can 'take the primary producers, the farmers and the fishermen, put them on one side of the fence and then put everybody else on the other side. .But then we are going to have continual claims from those who consider they are on the wrong side of the fence. That is something we shall have to< face.
They have a system in Australia-I do not know just how it works-whereby they give primary producers a little different treatment. There is a better case for primary producers than there is for anybody else because of the dangers of loss on account of weather and market conditions. In the past, market conditions have not been at all steady, or at least not as steady as they have been in most other businesses. But it is only a matter of degree. There are a lot of businessmen who have had their years of losses and their years of low profits and perhaps years of high profits without any averaging. During the war with the high taxes we have gone part way in allowing losses to be written off against profits of the previous year or against profits of the three following years, and that applies to farmers as well as to everybody else. But that system is objected to on the ground that there may never be a year of loss; there may be years of just small profits, as in the case of these cattle producers. These men will go on without selling very much. They will continue to buy but will not be in the income tax category. Then suddenly the time will come when they want to sell a lot and then they must pay income tax that year. They are put into the higher brackets by that transaction. I understand that the Australian system is to keep them in an average bracket or something like that. I am determined that we are going to do something like that if we can work it out.


Robert Fair: I am very grateful to hear the minister make the statement he has to-day and the one he made on the budget. As he has suggested, consideration will have to be given to this whole problem, not only the problem of taxation but the complete picture. We must have-a proper policy for agriculture as a whole, because it cannot go on in the future on the basis it has been forced to operate on in the past,

If you look back over the depression years you will see the losses that have been suffered by our farmers when they had to work year in and year out and hardly made their expenses. We are supposed to have been making profits since the war broke out, but I think it will be found that most of those supposed profits have been used to pay debts that were contracted during or before the depression years. I should like to see a period of five years taken as a basis for fixing profits in the case of farmers.
I wish to suggest raising the exemption for both single and married people. I would urge also a reduction in the income tax. I think the minister realizes that in the period after the war" the people must have purchasing power if our industries are to be kept busy and be able to take care of our unemployment problem.


Frank Exton Lennard: Dealing with the unfairness of the present method of taxing the sale of cattle, I should like to cite one instance. I have in mind a man who lives near my home. For the past twenty or twenty-five years he has been a successful farmer. He bought farms for four or five of his children and he owns several himself. If he sold any of those farms the proceeds would not be taxable. If, instead of buying land, he had put his profits into the purchase of stock and thdta. sold those cattle, the proceeds would be taxable. There are many farmers in my district who are under a great handicap. They are getting on in years and during their lifetime they have built up a considerable herd. If they sell their herds most of the profits would go to the income tax department.


James Lorimer Ilsley: If he puts his money into cattle instead of into farms he would have reduced his income tax that year to a marked extent because it would have been treated as an expense.
I think I ought to say in .reference to working out some system of averaging for farmers and fishermen that it will be a complicated arrangement, and members of the house who object to complexity and espouse simplicity will be disappointed. It will not be possible to get in and out either; there will be a great temptation to want to average sometimes and not at others. There will have to be an element of rigidity about it, as well as an element of complexity. All this is entirely unavoidable.
Mr. FRAiSER: I believe that wage deductions would cpme under this resolution.

Income War Tax


James Lorimer Ilsley: This is a resolution affecting tax liability, not the method of collecting the tax, but I have no objection to my hon. friend discussing what he has in mind.


Gordon Knapman Fraser: I was wondering whether it would not be wise to deduct 100 per cent of the tax on wages at the source instead of only ninety-five per cent as at present, and then not make it compulsory for the wage-earner to fill out an income tax return covering that year's income. Could that not be done? It is quite a chore to many people to have to make out the form. I know that many labour organizations have asked that 100 per cent of the tax on wages be deducted at the source.


James Lorimer Ilsley: I would be willing to give consideration to a system of that kind. I was under the impression, although I am told by the officials that I am wrong, that they have enacted something of that kind in the United States. I do not know whether that is so or not. A system of that kind would be convenient but it would not be just.


Gordon Knapman Fraser: I think the minister has in mind the suggestion made by a senate committee in the United States that that system be adopted. But I do not think it has as yet been put into force.
Another matter I should like to discuss is one that I have mentioned more than once before, and that is in regard to the portion of the 1942 tax which has not been paid. I will read the item:
The deferred tax portion (if any) item 5, in respect of investment income in excess of $3,000, becomes due on, and is thereby deferred until the date of the taxpayer's death,.with interest from that date at 8 per cent per annum until paid, unless the taxpayer elected to pay and paid on or before 30th April, 1944, at a 2 per cent per annum life expectancy discount.
I would suggest in regard to these taxes that have not been paid on 1942 income that they be allowed to be paid at any date at the same rate that prevailed before, two per cent per annum life expectancy discount, but that when the taxpayer dies his estate should be allowed at least six months. In the United States I believe they allow fifteen months. Six months at least should be allowed, and then after that date charge interest, although I think eight per cent is too high.


James Lorimer Ilsley: It runs from the exact date of death, does it?


Gordon Knapman Fraser: Yes, interest at eight per' cent per annum has to be paid from the date of death. The minister knows that the estate cannot pay it on that day and many estates cannot pay it for many, many months because there are succession duties and this, that, and
the other thing to look after. Personally I owe a little myself. I do not know what my estate would do. It might have a hard time getting any money.


James Lorimer Ilsley: I think the suggestion is well worthy of consideration. I did not realize that the penalty rate started so promptly.


Gordon Knapman Fraser: I brought this matter up when we were discussing the income tax last year and the Minister of National Revenue, now the Minister for Air, I believe said that I was wrong. I hunted up my tax bills and I know I am right.


James Lorimer Ilsley: I do not agree with the first part of my hon>. friend's suggestion that the taxpayers have an option to pay at any time before their death because they pay on a discount basis, the discount being on their life expectancy. The only thing to do in cases of that kind is to fix a date beyond which they can take their option. We may have fixed the date too early, but I do not think so. It was stated in the house that they have a year and a half to two years to exercise this option, and a lot of them did. I do not think I would extend that date. They can pay any time if they want to.


Gordon Knapman Fraser: Yes, they can pay any time, but not with advantage.


James Lorimer Ilsley: Not on a discount basis, no.


Gordon Knapman Fraser: The reason I bring this matter to the minister's attention is that, as he knows, we have had good times and there is the chance that many of those who owe money to the government might in another five or ten years not have a nickel when they die, so that when they die the government would not get a cent. The minister knows that. There is a chance that some of these taxpayers will be absolutely flat broke when they die and the government will be out just that much. That is why I suggest that this be extended for at least a further period, I have made a few suggestions and I'hope the minister will look into them. I hope he will look into deducting 100 per cent of the income tax at the source from wages and then forget about the return which the wage-earner is supposed to make in the following year.


Wilfrid Garfield Case: I just want one question in my own mind clarified because it is a question that we are often asked in connection with the tax on farming. I understand from what the minister said that if the farmer proceeds on the inventory basis from year to year he pays his income tax on his increase in inventory as though it were income. But if he has a farm sale, will the farm sale be
Income Tf'ar Tax

subject to tax? Will he be in the same classification then as the hardware merchant if he is paying on the inventory basis?


James Lorimer Ilsley: If he has paid on the increment each year in the value of his herd he does not have to pay on the total value of the herd when it is sold.


James Arthur Ross: When we were talking about the treatment of married couples for taxation purposes, I have in mind the case of the farmer and his wife who work on the farm. There was the distinction that the farmer and his wife were allowed an exemption of only $1,200, whereas the couple working in the city were granted an exemption of $1,800. I was wondering whether the minister has found any way of dealing with that situation.


James Lorimer Ilsley: I know exactly what I intend to do about it. I do not know whether it is policy to state it.


James Arthur Ross: Can we be hopeful?


James Lorimer Ilsley: The concession we made in
1942 was essentially a concession to war workers, to get married women to work in war factories. When a single taxpayer's exemption was put down to $660 the penalty upon a married couple in a city, each of whom worked in a factoly, was very great when the married woman earned more than $660, because she then put her husband from the married status into the single status; in many cases he had to pay several hundred dollars more a year in taxes, and they started to leave the factories in very substantial numbers. We just had to change it, as a war necessity.


James Arthur Ross: So that we can guess what the minister is going to do now.


James Lorimer Ilsley: It is wrong in principlethere is no doubt about that-and it will have to be changed. When a man is in receipt of a higher exemption because his wife is dependent upon him although in fact his wife is not dependent upon him, he should, of course, lose that exemption. We could not do that in time of war so that we passed the law we did. We have gone over this argument here time after time. But that is the way in which I expect to be meeting the situation, before too long; I do not know whether it will be in 1946 or not, but it was all gone into at the time we prepared the budget. I do, not agree with the reasoning behind the hon. member's argument. I believe that if we were to grant what is asked for, that is if we were to allow farmers to pay their wives $660 a year because they work on the farm) it would not be a month before we 	* ;	:
would be driven into allowing everybody to do the same thing, and we would just be increasing the married man's exemption to that extent all along the line. I do not think we can do that.


Wilfrid Garfield Case: Not only that, but a lot of
wives would demand it. The minister had better leave it alone.


James Lorimer Ilsley: I do not think that can
possibly be done, and I think the other will have to be done.


Robert William Gladstone: I have been trying to find a place to ask about single and married status for income tax purposes depending on circumstances of residence. I might give as an example the case of an unmarried lady, a schoolteacher. She and her sister live in her own home. She supports the invalid sister and accordingly, I believe, receives marriage status. Circumstances in connection with her qualification may cause her to lose her position in that city and compel her to go to another town and board there. She still owns her home in the city and maintains her invalid sister in that home. According to a ruling of the income tax department she is therefore placed in the status of a single person. This seems to be a hardship. I have taken up the case with income tax officials, and they so admit, but apparently they have no discretion in the matter. They promised that the case would be brought to the attention of the department. I think it is a matter of principle and justice: it may be difficult from an administrative point of view; nevertheless in justice she should be granted the married status.


James Lorimer Ilsley: That cannot be done under
the law as it stands now, and i must say I do not see any way in which we could change the law so that it could be done, because there is a big difference between the obligations assumed by a person who has a self-contained domestic establishment and by one who has not. All I can do is give consideration to the hon. gentleman's representations. I do not anticipate that any change in the law can be made this session.


Percy Ellis Wright: The question I wish to ask is perhaps more directly concerned with the Ministry of National Revenue than the Ministry of Finance. I understand that there is some regulation whereby part of the farmer's income, say the portion received from the poultry flock where the wife is taking care of the poultry, may not be included in his tax return as income. I am wondering just where the department draw the line with

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respect to that. On one1 farm is a poultry flock of a hundred head, where the income is not very large; on another farm a thousand hens may be kept and the income may be quite large. I should like the Minister of National Revenue to indicate where they draw the line with respect to the amount which may be taken from the farmer's income with respect to special lines such as poultrykeeping or, say, bee-keeping, or maybe where they milk only two or three cows, on a grain farm, and where the cream cheque goes to the woman and is not included in the income of the farmer himself.


Mr. McCANN:: It has been the custom of the department to allow the income from a small partial occupation on a farm such as the hon. member has indicated to go as income to the wife. But it will all depend on what that proportion is to the whole operations of the farm. For instance, if they start out in that way and finally develop into an entirely poultry-raising farm, that becomes the chief occupation of the husband.


Percy Ellis Wright: Has the department established certain percentages? I want to get at where the line is drawn.


James Joseph McCann: No, it is not laid down as a certain percentage. It depends in the individual case entirely upon the weight- we may call it-or proportion which that bears to the total income of that particular farm.


Percy Ellis Wright: I think there should be some definite percentage or weight to go by; otherwise it will be entirely subject to the discretion of some, departmental official who may be fair in all cases, or may not.


James Joseph McCann: What does the hon. member suggest?


Percy Ellis Wright: I think the percentage
should be fixed.


James Joseph McCann: What does the hon. member suggest As a percentage?


Percy Ellis Wright: I am not going to make a suggestion. The Minister of National Revenue knows the circumstances much better than I do and knows the intention of the government with respect to this provision. I do not know whether it is the intention of the government to place the farmer's wife in the same position, say, as the woman who is working .in industry whom the Minister of Finance has just described. I think there was some suggestion that that is what the department were doing when they made this regulation, and I want to get the thing clarified so that people will know just what they can 47696-174
and cannot do under this provision, because I know there is a tremendous variation in what has been done under it.


James Joseph McCann: No better system has been found of doing it than to weigh each individual case and do what we consider to be fair. As I have said, if it becomes the chief line on that particular farm then it goes in as income for the owner who is in most cases the man.


Mr. HLYNKA:: What consideration is being given to men who came to Canada in the late thirties, settled here and took out their naturalization certificate, and who have families in the old land? I have had several of those cases brought to my attention, and in each case the individual was taxed as a single man. Cpuld not some consideration be given to these people, particularly at the present time when they have to send money and assistance to members of their families in Europe?


Mr. MATTHEWS (Brandon):: The point raised by the hon. member has caused a good deal of anxiety among certain residents of Canada who are in the exact position which he has mentioned. They have been supporting their families in Europe at such times as they could send remittances there, and when they could not do so they made other provision for those families. They do feel keenly that no allowance has been given them in the matter of income taxes. I know one instance very well, and I feel that the man is labouring under a disadvantage which probably cannot be helped under the existing legislation. However, it is still unfair and places him in an embarrassing position.


James Joseph McCann: That is not a great problem to handle, because any married man who for income tax purposes claims married status and can prove to the satisfaction of the department that he is a married man is taxed at the rate for a married man. If those people of foreign birth, who have, as they claim, a wife in some other country, will produce a certificate t!o that effect, supported by an affidavit, it is usually accepted; or if they will go to the consul of the country from which they came and obtain a certificate from him to the effect that So-and-so is a married man, that is accepted and1 he is taxed accordingly; or he is given the allowance which he should be given as a married person.


Anthony Hlynka: In that connection I have many of those cases and in not one instance was any exemption allowed. The income tax inspector would usually refuse and say to him: "Well, you have no proof that you have been

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helping your family, and during the past five years while the war was on you could not be helping your family." That is final. He has no place to go. He cannot appeal from the income tax inspector's decision in that instance. Would it not be advisable for the minister to send out a circular or inform the various divisions or income tax branches that they should allow such exemption, provided, of course, that these men can prove tiiat they are married, have families and are helping them from time to time. I think that would simplify matters greatly, and, of course, it deserves serious consideration.


John Thomas Hackett: Has any thought been given to extending deductions or exemptions to second generations? A great many young people went away to war and married. They returned. They are handicapped in earning a livelihood because they are unprepared at the present time for their life's work. They are going to school; they are undergoing training and they have lusty broods of children. The parent of the soldier is supporting those grandchildren who are dependent upon him to the same extent as his own children were twenty or twenty-five years ago. It seems to me that there is a big category of dependents who are overlooked by the statute in its present form.


James Joseph McCann: That is already provided for in the act and in the regulations. If it is indicated and proven that a grandchild is dependent upon a man's parent for its support, the grandparent gets exemption in that regard in his income tax return.


John Thomas Hackett: The proof of matters of this kind must, of course, be submitted to the department. But I think it is generally [DOT] accepted that so long as the parent is alive the grandchild is not a charge upon the grandparent, although most frequently and inevitably for some years the grandchild is and will, in fact be such a charge.


Robert Fair: The question of double taxation has been brought to my attention by-


John Thomas Hackett: Would the hon. gentleman let me get an answer to my question, please?


James Joseph McCann: I think this section covers the question of the hon. member. It reads as follows:
A taxpayer may deduct from the normal tax otherwise payable by him in any year under this section 28 for each person who was during that year wholly dependent upon that taxpayer and was ... his grandchild.
Then there are a lot of others included. Jt goes on:

. . . except such dependent person by reason of whom such person is taxable under rule 1 of this section who being a taxpayer employs a fulltime housekeeper or servant in a self-contained domestic establishment where he supports a child by reason of whom he is taxable under rule 1 of the section, he may not notwithstanding the exception contained in this rule make the deduction permitted under this rule for all the dependents described by him.


Alfred Johnson Brooks: I do not think that covers it. It says, "wholly dependent", and the soldier who has dependents and is going to college at present gets a certain allowance from the government for each child. The child could not be considered as wholly dependent. The phrase "wholly dependent" would shut him out of the income tax deduction.


James Joseph McCann: The child is probably not dependent upon the grandparent at all, if the child's own father has sufficient income to keep him.	-


Robert Fair: The question of double taxation of income has been brought to my attention on a few occasions. By that I mean that a person working in the United States pays income tax on the earnings he made there for part of the year. He then comes back to Canada and earns some more money. He pays tax here; but in addition to paying tax on his earnings in Canada he is also compelled to pay tax on the amount earned in the United States. Is that correct? Why should that Canadian who has already paid tax on his United States earnings be compelled to pay income tax on the whole amount in Canada?


James Lorimer Ilsley: He pays a tax on the entire income because he is resident in Canada for part of the year, but he gets credit for that part of the tax which is payable in the United States.


Robert Fair: I did not understand it in that way. Two parties who brought this matter to my attention claimed they had to pay the full tax without getting any credit. If that is the case I think the department should see to it that the credit is given.


James Lorimer Ilsley: That is correct.


Grote Stirling: There is a point in connection with the forms to be used for the payment of income tax which I wanted to take up with the minister. Since income tax has become heavier in recent years, more and more individuals and business people have had recourse to the assistance of accountants. One such accountant in Vernon, British Columbia, puts a point to me which he thinks has not been mentioned so far, in these words:

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Reference to company form T-2 discloses that a company receives a clear six months to file their form from the close of their business year, and as far as I am aware are always able to use the last form printed.
Now, how about the unincorporated individual. He neither knows what the form T-l general is going to be like nor when it will be printed
In my humble opinion, proprietors and partnerships should be treated equally and should have six months to file their form T-l general from the time they are available to the public and in no case less than six months from1 January 1 unless they are available by December 1. An increasing number of taxpayers are requesting services from accountants which they are unable to give and the disparity in time is very unfair.
This particular accountant has previously raised matters in connection with the forms that have to be used, and I remember that last year there was a delay in the printing of the forms. His grievance is that in many instances the accountant is unable to give service to his client because he has not time to do all the work necessary after the printed form becomes available.


James Joseph McCann: At present the regulations provide that all individuals are given a period of four months from the end of the calendar year. The return must be made by the end of April. With companies the period given is six months. I submit that by far the greater number of individuals do not need and do not use expert people like accountants to make out their returns, and that four months is ample time in which to do so. I do not think giving another couple of months, to the end of June, would either have the forms filled in any better or see any greater number of returns made within the time limit. There are always people who are dilatory in making returns; if you gave them eight or nine months the returns would not come in until the tenth month. That is about the experience of the department in reference to income tax returns. When you establish a deadline of April 30, the people who want to have their returns in by that time will do so. So that I do not believe an extension would be of any great advantage to the individual, and I am sure it would slow up the work of the department in making the assessments.


Grote Stirling: May I draw the minister's attention to the fact that this complaint partly arises from the fact that the form T-tl general has by no means always been available as early as the end of the fiscal year. If my memory serves me aright, in 1944 the T-l general form was not available in this part of Canada until a very short time before the date it had to be presented.
47696-174;


James Joseph McCann: I will admit some of that is true, but there are many difficulties in getting out the forms. For instance, the forms for 1945 cannot be put in shape until these resolutions and the bill based upon them actually become law. Then we have the matter of printing difficulties. During the war years particularly, not only the printing bureau but other printing establishments throughout the country whose services we use have been so busy and so short of help that it has been an absolutely physical impossibility to get out the forms as quickly as we would have wished. However, the representations the hon. gentleman has made will be taken into account and we will see if we cannot have the forms out in plenty of time for individuals and companies to make their returns within the time limit.


Grote Stirling: The minister will agree, I think, that no leeway is given the unfortunate taxpayer who, for the reasons the minister has mentioned, was not able to get hold of a form in time.


James Joseph McCann: I will just state this, that the records show that although there are four months in which to make the returns, the great bulk of them are made in the month of April and most of them in the last week, so that lack of forms has not held them up.


John Thomas Hackett: I should like to draw the attention of the minister to the fact that the provision which he was kind enough to read, and with which I am not unfamiliar, does not cover the situation I was drawing to his attention. A young man in this position receives a certain amount monthly, which is increased slightly if he is married and to which is added $10 or $12 a month for each child; but that is available to him only during the period of the year he is attending a college or university. It is enough to disqualify the grandparent entirely for any relief under the income tax act, and makes it impossible for the child and grandchild to survive unless they are helped by the grandparents during that portion of the year which is not devoted to study. Of course on the other hand everyone realizes that the assistance given by the government is totally inadequate for the maintenance of those people even during the period they are attending college or university.


Alexander Maxwell (Max) Campbell: There is another group of people I should like to bring to the attention of the minister, although I do not know whether or not he can help them. I refer to settlers who moved from the dried-out. areas into the semi-bush country and who just had
Income War Tax

their first crops about the time they began to get good prices. When they first moved in they put up temporary shacks: I know that last year quite a few wanted to build themselves decent houses, but because they had quite good crops which were worth a good deal of money the income tax was very heavy, and ' they were precluded from building their homes. I was wondering if there was any way of giving these people a little help.


James Lorimer Ilsley: It would be quite inconsistent with all income tax principles to permit capital expenditure for houses to be regarded as deduction from income for taxation purposes. What I am about to say may not be entirely relevant, but if they w-ere settlers who had suffered losses in the place from which they moved, such losses may now be set off against profits in other years. That is, the loss in-any particular year may be carried back against the profits of the previous year, or against the profits of the three following years. This system has been in force for only a year or two; nevertheless, in cases where there are actual losses there is some mitigation of the rigours of the income tax in years of high profits and high gains. I cannot see any hope of making any change in the law which will allow persons to build houses for themselves out of their profits, and of that being allowed as a deduction for income tax purposes.


Alexander Maxwell (Max) Campbell: This particular group will have to start all over again. They lost practically everything they had.


Mr. HERRIDGE:: Has the minister given consideration to the greater decentralization of income tax administration? In British Columbia the administration is centred in Vancouver, and the great majority of the people have no contact with it. I have heard it suggested on many occasions that if the administration were decentralized it would do a great deal to speed up the service of the department, and1 in this way the department would be able to give more satisfactory service and advice to the majority of the people.


James Joseph McCann: The matter of district reorganization has been under review for the past year. A year ago a committee was set up to study the whole problem with respect to the matter. Ten days or two weeks ago I tabled in the house-and a copy was tabled in the other place-the report of that commission. Although this report has not yet been accepted by the government, there is an outline of a plan for greater district organization from one end of the country to the other. This is done with a view to giving better

service to the public. Then, it will give assistance to some of the offices in the larger centres by the setting up of subdivisions to assist offices which are already overworked.
I am not prepared to make a statement as to the exact location of these new offices until such time as this report has the endorsa-tion of the government. I can only say that the matter is well in band', and that it is the purpose and the aim of the taxation division of , the Department of National Revenue to give the public better service, both by opening up new districts, and by adding to the staff as many competent people as we can get and are needed.


Gordon Knapman Fraser: Every year I have referred to these district offices. I hope that an office will be put in Peterborough. Last year one man was sent up there, and was placed in the back of the customs house. Very few people knew he was there.
In many instances the final receipts for income tax payments are not sent out for two or three years. Taxes may be due, but the taxpayer may believe he has made a full payment. Then the govfernment will come along and tell him that he should have paid a tax on this or on that. In my view this condition is not fair to the taxpayer, particularly when he must wait two or three years for his bill, and have included on that bill interest for that length of time. We have noticed that this has happened in the Belleville district, -which serves Peterborough. I must say, however, that that district is served much better since the addition of more staff. I do not think the taxpayer should be charged interest until he gets his bill. It would be proper to make the charge from the time he receives it until the bill is paid. What does the minister think about this?


Mr. ROBINSON (Simcoe East):: What is the present position of those persons who have maintained in their homes British refugee children during -the war, and who are still maintaining the-m? Has the department given any consideration to extending income tax deductions to those people? They have been put to a great deal of expense and are worthy of great credit.


James Lorimer Ilsley: Perhaps the hon. member is familiar with the history of the situation respecting British children. A distinction was drawn between children from- the United Kingdom who came under a government-sponsored scheme, and those who did not. With regard to the former class some deduction for income tax purposes was allowed the Canadian taxpaper who took these children

Income War Tax
who were moved under an arrangement made between the governments. However, no such deduction was allowed in other cases.
The relevant amendment in 1944 was as follows:
In this act, unless the context otherwise requires, words referring to a child of a taxpayer include
(b) a person who is under 18 years of age and wholly dependent on the taxpayer for support and of 'whom the taxpayer has in law or in fact the custody and control.
That was the first time parliament accepted the principle that a deduction could be allowed in respect of a child who was not a child of the taxpayer, either in fact or by adoption. But since that time a taxpayer may get a deduction in respect of any child who is wholly dependent or, as the section says, any child under eighteen years of age who is wholly dependent on the taxpayer for support, and of whom the taxpayer has in law or in fact the custody and control.
I would suppose that some of the British children who are here are not wholly dependent upon the Canadian taxpayer for support. In that event, if they are only partly dependent, there would not be a deduction. But for those who are wholly dependent the deduction is now allowed.


James Ewen Matthews: What is the status for tax purposes of children from the United Kingdom maintained in Canada?


James Lorimer Ilsley: I do not know whether there is any special advantage there or not. The provision with regard to government-sponsored transfers of children was never repealed, so far as I recollect. So that the taxpayer who has custody of one of those children has two sections under which he might come. Whether one section is more advantageous than the other, I do not know.


Gordon Knapman Fraser: I should like the minister to tell us what he thinks about my suggestion that the interest should not start until the taxpayer receives his account from the department.


James Lorimer Ilsley: I do not agree with it. Here you have one taxpayer who correctly computes his tax liability and pays his money. You have another taxpayer who incorrectly computes his tax liability and keeps part of the money which it is eventually decided should have gone to the crown. The suggestion is that he keep it interest free, and I do not see the equity in that.


Gordon Knapman Fraser: I doubt very much whether the minister could probably make out an income tax form and be absolutely correct according'to the decisions of the offices across
the country. Every one of them has a different idea as to the rulings. The matter must come to Ottawa when any one. objects or is not sure; it goes through the office here and eventually gets back to the district office. Perhaps a year or two or three years may elapse. There may be a dispute over an amount that should be payable. I know of one case where there was a difference of $700. The taxpayer thought he was entitled to it, and it was two years before it was decided that he was not entitled to it. I understand that the district office said he was entitled to it but the head office said he was not. When there is any doubt about the matter I do not think the taxpayer should pay interest.


Percy Ellis Wright: A few moments ago the minister said that it was against the principles of the income tax that deductions should bo allowed for the building of homes.


James Lorimer Ilsley: That is right.
Mr. lYRIGHT:	When the minister considers the matter of taxation before his next budget I think he should give some consideration to changing that principle. I would suggest that it be done this year, because there is a scarcity of material and it might bring about an increase in the price ceiling, but in another year serious consideration might be given to permitting deductions from income tax for what is spent on the building of a home. We need homes in Canada and we need better homes. It is very difficult for people, especially those in the lower income groups, to acquire a home under our present income tax structure. I am not suggesting that deductions be allowed where a home costing $10,000 or $20,000 or $50,000 is built, but I think serious consideration should be given to allowing some exceptions in the case of the moderate home costing from $5,000 to $7,000. There is a tremendous need for homes of that type; there is a tremendous need for housing on our farms, in our industrial areas and in our towns and villages practically all over ' Canada.


William Alexander McMaster: I should like to bring up a matter which perhaps should have been brought up earlier. It has to do with ministers; not ministers of the crown but ministers of the gospel. I believe it has been decided by the income tax authorities that no allowance for an automobile can be made to ministers. Take a minister out west or in some parts of Ontario; he may have several charges and it is imperative that he have an automobile. Some fair allowance should be made on an annual basis without its being necessary for these men to keep the receipts
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they get every time they buy gas or oil. There should also be a reasonable depreciation allowance. An automobile is absolutely necessary in their work and some fair allowance should be granted.


Harry Rutherford Jackman: This question has come up in previous sessions. I am not going to press it now, but I want to let the minister know that at some time or another we want some action. There should be not only an allowance not only for automobiles which are needed by ministers to visit their flocks, but be some exemption in regard to the cost of the automobile. This brings to my mind the old question of clergymen of the Protestant religion who are paid so much money as against priests of the Roman Catholic church who do not receive salaries or stipends. Some take the vow of poverty and do not have a fixed income.	At any rate they are not
assessable and I think that point will be granted. Whether a man has a family or whether he is a celibate he has to have a roof over his head. If we are to have equality between the two religions in this country, some consideration should be given to ministers of the Protestant persuasion who must provide themselves with a manse or a lodging of some description. If the church sees fit to give the minister a manse, the rental value must be computed and added to his income and he pays on the total amount.
I am only asking that equality prevail as between the two religions. I think all members of this house believe that we must have equality, no matter what faith one belongs to. I will leave it with the minister at the present time. This is a matter which comes up periodically, although I have not had any letters on it this particular session. But it has come up in previous years, and those of us who belong to the Protestant persuasion believe that equality of treatment should be given to our ministers.
I should like to ask the minister under what section of the income tax act is the wife of a farmer able to carry on a poultry division of her own and not have her income bulked in with the general income of the farm? Is that done under a section of the income tax act?


James Joseph McCann: There is no particular form for that type of return; it just gets down to a matter of practice and regulation where the law does not see the last nickel or the last drop and takes into consideration the peculiar circumstances of the woman on the farm. I just want to make one observation with reference to the remarks the hon. member made

about the taxation of clergymen. As far as income tax returns are concerned, clergymen of all denominations in Canada are dealt with on exactly the same basis.


Harry Rutherford Jackman: If the minister had
enough experience in his department-


James Joseph McCann: I have had plenty of experience. I do not propose to let the hon. member for Rosedale broadcast any such statement to the people of Canada as he has done. I know his purpose.


Harry Rutherford Jackman: You know my purpose? Apparently the minister is imputing motives, although I do not know just why. If he is imputing motives, I ask him to withdraw.


Mr. MACKENZIE:: There is nothing to withdraw.


Harry Rutherford Jackman: He said, "I know his purpose." What is my'purpose?


Ian Alistair Mackenzie: Something trivial I would say.


Harry Rutherford Jackman: I am asking for equality in this matter.


William Ross Macdonald: There is no implication.


Harry Rutherford Jackman: The minister said that he thought he knew my purpose. I happened to be handling a matter, a religious matter, that requires a certain amount of delicacy. The minister has made an imputation-


William Ross Macdonald: Order. All that the hon. member needs to do is to state that he has no purpose and the minister must accept his statement.


Harry Rutherford Jackman: I will tell the minister what my purpose is. My purpose is to obtain equality. I understand-I may be wrong in this, and I am not suggesting that there is anything wrong with the departmental administration-that there is by reason of circumstances that cannot be changed an inequality in the treatment of housing accommodation which the Protestant clergy have as against that of the Roman Catholic clergy. I do not, from what I know, believe that the Roman Catholic clergy receive stipends in the same way that the Protestant clergy do. Many Roman Catholic clergymen take vows of poverty and therefore cannot have any incomes; yet they must live and have a roof over their heads. There is a disparity there and I ask that consideration be given to it.

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As to the other matter, the minister will find that what I have said after looking into this matter for a long time is a fair statement. I was not trying to raise a difficult issue with him. I think that my statement was quite justified; that the case I put was a reasonable one and that I did not need to be put in my place as the minister tried to do.
I have also asked what particular form the farmer uses in order that his wife may have a separate account for the poultry division of the farm or whatever it may be. The minister says that there is no separate account. I am not suggesting for one moment that the farmer's wife is not entitled' to some return for her services, but in my riding, particularly in one section where there are thousands of small shops, there are many wives who work in the shop during the day in addition to doing all their housework and getting meals for the family, and also work late at night in the shop, particularly at this season of the year. If there is a section of the income tax which allows justice to be done to the farmer's wife who helps her husband I want the same justice to be done to the wives of the -men who live in my riding and who help to swell the total of the storekeepers' earnings, and I ask under what section is this done with regpect to the farmer's wife, or is there some rule or regulation that the ordinary taxpayer does not know about? Let us know what the law of the land is, so that we can tell where we standi. If there is such a section of the act I should like to know about it, and I would feel it incumbent upon me to advise those wives who do work in the store with their husbands that they are entitled to the same treatment as the farmer's wife. I do not want to make it so difficult that it cannot be administered, but I think we must have a certain amount of justice in this matter.
' Mrs. STRUM: I am sorry that I have not heard all this discussion. I should like to ask the minister if a wife who teaches school submits a separate income tax statement from her husband's?


James Lorimer Ilsley: Yes.


Mrs. STRUM:: And does he get an exemption for her as his wife?


James Lorimer Ilsley: Yes.


Gladys Grace Mae Strum: And she gets another
exemption as teacher?


James Lorimer Ilsley: Yes.


Gladys Grace Mae Strum: Which means that if you teach school you get an edge of 1600 on the woman who helps her husband on the farm or in the store.


James Lorimer Ilsley: I do not know that it is correct to say that you get an edge of that much, but undoubtedly the taxation system is just as the hon. member has described it.


Gladys Grace Mae Strum: I would ask the minister to give consideration to the question that the hon. member for Rosedale has just raised, because there is no doubt that the wife on the farm has always had an economic value. I know. You start in the morning and wash the separator. It is not possible for your husband to milk the cows, for instance, or to attend to the family garden, or to the whole business of raising chickens, which provides a valuable addition to the nation's food supply. All this depends upon whether the wife is willing to undertake that work. It is in the interest of the production of cream and butter and cheese and chickens that we should give recognition to the wife and allow an additional exemption for the work she does in assisting her farmer husband, and by the same token an exemption should also be allowed for the woman who helps her husband in the store or post office.


James Lorimer Ilsley: This was fully discussed
before the hon. member came in this afternoon and I do not think it is necessary to repeat what I said then. I see no possibility of making a special exemption. It would amount to fixing in the law an allowance by the husband to his wife for the work she does that contributes to his income, and it would be utterly impossible to draw the line anywhere, as far as "I could see, because nearly all wives do work which contributes to the earning of the income by the husband. I do not think we can do anything like that.
The argument-of equity which was raised by the hon. member for Souris, and which he has raised in previous years, was that the wife who leaves the home and goes out and earns money, perhaps making it necessary for someone else to work in the home, is permitted to submit a separate income tax return and nevertheless the husband does not lose his status as a married person. But as I explained to the hon. member this afternoon the reason why this was done in 1942 was that we had to meet an acute and emergent situation as far as workers in war factories were concerned. One can tell what the value of the services of the wife is in that case; it is what she gets
Income War Tax

in cash. In the other case I do not think it would be possible for the law to go to every farm and into every home and store and assess the value of the wife's services to the husband as far as the earning of his income is concerned. We may as well face this fact, that if we make a special concession for one case, we must do it for all.


Harry Rutherford Jackman: There is one other point I wish to raise. We have done everything on our side of the house to curtail this debate in order to get on with the business of the house, because we 'realize that this is in a sense a temporary budget, eleven months of the year having gone by and that we shall soon be meeting here again. I wish to ask the minister whether the main provision of the budget, whereby a reduction at the rate of sixteen per cent will be put into effect for the last quarter of this year, representing four per cent for that period, may from the point of view of the department preclude any further tax relief for 1946, if we pass the resolution now?


James Lorimer Ilsley: It does not make it impossible.


Harry Rutherford Jackman: No. I know that legally one parliament, or one session of parliament, cannot bind another. We 'do as we want to here. But in the minister's view is this provision of 16 per cent relief from taxation to be the final measure of relief for 1946?


James Lorimer Ilsley: I cannot make predictions about what will be done in the next budget.
I should not be pressed to do that.


Mr. SINNOTT:: I see, according to to-day's paper, that the butter ration may be reduced next year. The little discussion which has taken place here reflects back to the farm wife. I venture to say that a very large proportion of the public do not know how much the farmer's wife contributes ...to the butter production of this country, and in my opinion some way must be found to encourage butter production. Although we have over 100,000 more cattle in Canada than previously, the trend is to lower production, in butter, as well as in hogs, and there is only one reason for it. .When taxation takes away beyond a certain amount of a person's income the taxpayer begins to think that he will not produce any more because the proceeds are going to be taxed away from him. The only way I can see to relieve this condition is to raise the amount of exemption to, say $5,000, and then we shall have a freer flow of goods. But we cannot continue to tax the ability of 
people to produce without having a great curtailment of production all the way down the line.	[DOT]


Gladys Grace Mae Strum: I wish to thank the minister for the detailed explanation he gave of his law. Sometimes I think we tend to regard our own laws as we regard the law of gravity beyond our control; I do not think that is a legitimate basis on which to argue, because here you have a situation where you are asking someone to undertake production, and am I to understand that we have never made concessions to anybody for the production of certain articles? We have made all kinds of grants in the matter of income tax exemptions, through accelerated depreciation and a number of other devices, in order to get certain jobs done and certain articles produced. Is it suggested that in order to give consideration to the economic contribution which the wife makes on her farm that she and her neighbour change places and they pay each others wives for the work? Not only have farm women produced all kinds of food during the war, but they have helped to build up an industry. It is not a matter of whether a man on a farm can afford a wife; a man on a farm cannot afford to be without a wife. She is the most useful general-purpose labour-saving device there is on the farm.


Mr. JAQUES:: Where does the husband
come in?


Gladys Grace Mae Strum: On the basis of the consideration we give to other groups and other industries in order to get certain articles produced, I think it is only just, as an hon. member has suggested, that we raise the exemption, recognizing the need to produce more food and to encourage women to do the thing that they are equipped to do, namely to assist their husbands in producing. I suggest that we review our own law and the basis for it if this is the way it stands at the moment.


Mr. BURTON:: I wish to support the hon. member for Qu'Appelle in her argument. I think she gave a very good argument, and I would support it further because I know what it is to try to farm without a wife on the farm.


Mr. PROBE:: I should like to ask the minister one brief question before six o'clock, and that is with respect to the exemptions to which professional persons are entitled. Is it true that certain professions are given exemptions from income tax to permit them to pursue post-graduate courses or for the purchase of equipment such as medical kit or books needed in their profession? I have in mind teachers, professors, and so on. I should like an answer covering these two

Dominion-Provincial Conference
cases, the case of persons pursuing postgraduate work, and who may be said to be maintaining the capital equipment with which the professional man operates; and in the second case, expendable equipment, such as the books of the teacher or the medical kit of the doctor.


James Lorimer Ilsley: No; the expense of postgraduate work is not allowed. With regard to books and instruments, I do not know. If the outgo is small it is regarded, I think, as an operating expense of carrying on the business rather than a capital expenditure.


John Oliver Probe: The department would rule that this is an expense, of doing the business of the profession, but that the study portion- the sabbatical year study and so on-is not considered an expense?


James Lorimer Ilsley: That is right. In the case of equipment, instruments and books, they would not be allowed in large sums because that would be a capital expenditure; but there is a small running expenditure which is allowed as an expense.


[Stage Direction]
Resolution agreed to.
John Sylvester Aloysius Sinnott: I should like to thank the hon. member for Qu'Appelle for her kind remarks.
Progress reported.



DOMINION PROVINCIAL CONFERENCE


Humphrey Mitchell: Mr. Speaker, may I with the consent of the house, be permitted to make a brief statement.
During the afternoon session of the coordinating committee of the dominion-provincial conference yesterday, I made a statement to the committee on behalf of the government, which I now desire to repeat to the. house. As far as we can now see into the future, it will be necessary to continue for a considerable period certain regulations arising from the war. This period may be a year; it may be less or more than a year.
The war measures relating to collective bargaining and wage control, as part of the price control machinery, are integrated matters. It is government policy to continue these war labour measures until at some future date they can be discontinued without the risk of contributing to inflation. Whatever the date, sufficient notice of the proposed discontinuance of federal administration of measures relating to collective bargaining and wage control will be given to provincial governments
to enable them to take in these fields whatever administrative action they may deem necessary. It was indicated by the representatives of the provinces that they desired to continue to cooperate in the policy as they have during the war.
At six o'clock the house took recess.
After Recess
The house resumed at eight o'clock.



PRIVATE BILLS


[Stage Direction]
Bill No. 24, to incorporate The Canadian Jewellers Institute.-Mr. Jackman.
Bill No. 31, to incorporate The Arctic Institute of North America.-Mr. Benidickson.
Bill No. 34, for the relief of Martha Louise Manful Hatch.-Mr. Maybank.
Bill No. 35, for the relief of Nora Jean Cunningham Brisbane.-Mr. Maybank.
Bill No. 36, for the relief of Therese Bon-enfant Fusco.-Mr. Boucher.
Bill No. 37, for the relief of Mildred Euretta Mackay Disher.-Mr. Emmerson.
Bill No. 38, for the relief of Mary Emersor Wittemore Schlemm.-Mr. MacLean.
Bill No. 39, for the relief of Andrew Law rence Card.-Mr. Maybank.
Bill No. 40, for the relief of Annie Mor rison Wisely Pitblado.-Mr. McGregor.
Bill No. 41, for the relief of Joe Eisen-Mr. Maybank.
Bill No. 42, for the relief of Ellen Therese Cramer Watson.-Mr. Maybank.
Bill No. 43, for the relief of Rita Gendron Reid.-Mr. Brown.
Bill No. 44, for the relief of Evelyine Pearl Edwards Aird.-Mr. Emmerson.
Bill No. 45, for the relief of Helen Turner Luke.-Mr. Hazen.
Bill No. 46, for the relief of Lois Elizabeth Allworth Pierce.-Mr. Emmerson.
Bill No. 47, for the relief of Armandine Cecile LeBrun Lachance.-Mr. Emmerson.
Bill No. 48, for the relief of Grace Irene Paquet Hopkins.-Mr. MacLean.
Bill No. 49, for the relief of Alma Joan Begin Oswald.-Mr. Hazen.
Bill No. 50, for the relief of George Ernest Reed.-Mr. Maybank.
Bill No. 51, for the relief of Sylvia Heather McCulloch Peck.-Mr. Maybank.
Bill No. 52, for the relief of Frederick Keith Beattie.-Mr. Emmerson.
Bill No. 53, for the relief of Robert Coull. -Mr. Homuth.
Private Bills
[Stage Direction]
Bill No. 54, for the relief of Violet Beach Meredith.-Mr. Croll.
Bill No. 55, for the relief of Max Engelberg. -Mr. Casselman.
Bill No. 56, for the relief of Bertha Harris Fineberg.-Mr. Maybank.
Bill No. 57, for the relief of Nils Jens Pettersen.-Mr. Hazen.
Bill No. 58, for the relief of Benjamin Charles Stafford.-Mr. MacLean.
Bill No. 59, for the relief of Florence Mary Daniel Nightingale-Mr. Benidickson.
Bill No. 60, for the relief of Edward Stephen Vasselin.-Mr. Homuth.
Bill No. 61, for the relief of Robert Marshall Miller.-Mr. Merritt.
Bill No. 62, for the relief of Dorina Laurin Wallis.-Mr. Casselman.
Bill No. 63, for the relief of Helen Louise Clark Leet.-Mr. Maybank.	.
Bill No. 64, for the relief of Dorothy Anita Duffy Gregson.-Mr. Casselman.
Bill No. 65, for the relief of Irene Grace Harman Smith,-Mr. Casselman.
Bill No. 66, for the relief of Lorna Maud Clerk Kingsland.-Mr. Casselman.
Bill No. 67, for the relief of Edgar Jean.- Mr. Maybank.
Bill No. 68, for the relief of Ethel Maybird Wright Latremouille.-Mr. Croll.
Bill No. 69, for the relief of Marie Rose-Alba Germaine Belair	Blanchard.-Mr. Cleaver.
Bill No. 70, for the relief of William Bernard McCarrick.-Mr. Croll.
Bill No. 71, for the relief of Lome Edward Souva.-Mr. Casselman.
Bill No. 72, for the relief of Edith Gertrude Jackson Holloway.-Mr. Maybank.
Bill No. 73, for the relief of George Allenby Bradshaw.-Mr. Maybank.
Bill No. 74, for the relief of Phyllis Fitch Farber.-Mr. Maybank.
Bill No. 75, for the relief of Vencel Humenay.-Mr. Rose.
Bill No. 76, for the relief of Waldo James Cousins.-Mr. Maybank.	-
Bill No. 77, for the relief of Albert Wilson Harvey.-Mr. Maybank.
Bill No. 78, for the relief of Iris Ester Westerberg Duffy- Mr. Smith (York North).
Bill No. 79, for the relief of Della Frances Gardner Hudson.-Mr. Maybank.
Bill No. 80, for the relief of Joseph Fernand Arthur Groleau.-Mr. Croll.
Bill No. 81, for the relief of Audrey Nathaniel Smith MacNair.-Mr. Croll.
Bill No. 82, for the relief of Ovila Bernard. -Mr. Emmerson.

Bill No. 83, for the relief of Albert Edward Spray.-Mr. Emmerson.
Bill No. 84, for the relief of Helen Isabel Dibblee Brown.-Mr. Maybank.
Bill No. 85, for the relief of Robert Hiscock. -Mr. Homuth.
Bill No. 86, for the relief of Jacques Noel Cerminara.-Mr. MacLean.
Bill No. 87, for the relief of Joseph William Hemy Beausoleil.-Mr. MacLean.
Bill No. 88, for the relief of Rita Beryl Gwendolyn Scott Luun.-Mr. MacLean.
Bill No. 89, for the relief of Neil Sinclair MeKechnie.-Mr. Maybank.
Bill No. 90, for the relief of Albert Evariste Gelinas.-Mr. Maybank.
Bill No. 94, for the relief of Royal Tessier.- Mr. Brdwn.
Bill No. 95, for the relief of Aurore Leblanc Proulx.-Mr. Brown.
Bill No. 96, for the relief of Margaret Susan Bradshaw Hodgkinson.-Mr. Emmerson.
Bill No. 97, for the relief of Lydia Donalda MacDonald Fletcher.-Mr. Brown.
Bill No. 98, for the relief of Charles Edward Varney.-Mr. Brown.
Bill No. 99, for the relief of George Louis Bush.-Mr. MacLean.
Bill No. 100, for the relief of John Hall Jones.-Mr. Maybank.
Bill No. 101, for the relief of Madeline Daisy Harvey Bell.-Mr. Emmerson.
Bill No. 102, for the relief of Georges Moshonas.-Mr. Brown.
Bill No. 103, for the relief of Ann Agnes Hyson Kellogg.-Mr. Merritt.
Bill No. 104, for the relief of Anna Ostronoff Smilestone.-Mr. Casselman.
Bill No. 105, for the relief of Doris Alice Davis Stackhouse.-Mr. Casselman.
Bill No. 106, for the relief of Olive Maud Prouse Palmer.-Mr. Maybank.
Bill No. 107, for the relief of Mary Mueller Pierotte.-Mr. Maybank.
Bill No. 108, for the relief of Anthony Malt. -Mr. Maybank.
Bill No. 109, for the relief of Roderick John Elder.-Mr. Maybank.
Bill 110, for the relief of Francis George Dennis.-Mr. Maybank.
Bill No. Ill, for the relief of Zenon Alary.- Mr. Maybank.
Bill No. 112, for the relief of Gladys Muriel Watson Hooper.-Mr. Maybank.
Bill No. 113, for the relief of Pearl Woodward McGregor.-Mr. Maybank.
Bill No. 114, for the relief of Lily Bromberg Seidlitz.-Mr. Merritt.
Bill No. 115, for the relief of Clarence David Cowan.-Mr. Black (Chateauguay-Huntingdon).

Bill No. 117, for the relief of William John Mitchell.-Mr. MacLean.
Bill No. 118, for the relief of Nathan Labo-vitch, otherwise known as Nathan Labow.-[DOT] Mr. Emmerson.	-
Bill No. 119, for the relief of Fannie Bly Blanshay.-Mr. Cleaver.
Bill No. 120, for the relief of Annette Lea Marion Macna'b.-Mr. Rose.
Bill No. 121. for the relief of Gerald Franklin.-Mr. Casselman.
Bill No. 122, for the relief of Ivor Edna Nancy Mosher Clarke.

Mr. Cleaver.
Bill No. 123, for the relief of Mary Mac-Rury Tait.-Mr. Casselman.
Bill No. 124, for the relief of Ernest Stanley Powell.-Mr. Boucher.
Bill No. 125, for the relief of Anastasia Stack Kormvlo.-Mr. Croll.
Bill No. 126, for the relief of James Christie Miller-Mr. Croll.
Bill	No.	127,	for	the	relief	of Francis
Needan Quirk.-Mr. Merritt.
Bill	No.	128,	for	the	relief	of Virginia
Wallace Knowlton Tousaw.-Mr. Maybank.
Bill No. 129, for the relief of Elsie Pearl Craig Maclnnis.-Mr. Maybank.
Bill No. 130, for the relief of Celia Calp Hecht.-Mr. Merritt.
Bill No. 131, for the relief of Joseph Marcel Rouleau.-Mr. Merritt.
Bill	No.	132,	for	the	relief	of William
Arthur Smythe.-Mr. Casselman.
Bill No. 134, for the relief of John Guerin Bowles.-Mr. Cleaver.
Bill No. 135, for the relief of Molly Margaret Evelyn McCuaig Stead.-Mr. Boucher.
Bill No. 136, for the relief of Robert Kirkpatrick Scott.-Mr. Brown.
Bill No. 137, for the relief of Emma Hull Mack.-Mr. Brown.
Bill	No.	138,	for	the	relief	of Kathleen
Annette Rolfe McLaughlan.-Mr. Benidickson.
Bill	No.	139,	for	the	relief	of Catherine
Winfred Howard Bailey.-Mr. Casselman.
Bill	No.	140,	for	the	relief	of	Evelo
Browning Couch Harvey.-Mr. Maybank.
Bill	No.	141,	for	the	relief	of	Hazel
Margaret Robertson McLarnon.-Mr. Nixon.
Bill No. 142, for the relief of Marie Azilda Yvette Rowley.-Mr. Croll.
Bill No. 143, for the relief of Joseph Adelard Emilien Lemay.-Mr. Boucher.
Bill No. 144, for the relief of Edward Arthur Robinson.-Mr. Maybank.
Bill No. 145, for the relief of Marie Marthe Fabiola Germaine Trempe	Barlow.-Mr. Maybank.
Private Bills
Bill No. 146, for the relief of Thelma Ann Tongue Grant.-Mr. Maybank.
Bill No. 147, for the relief of Jean-Jacques Lahiere.-Mr. Maybank.
Bill No. 148, for the relief of Edgar Thomas Lucas Graham-Mr. Maybank.
Bill No. 149, for the relief of Edith Pearl Roe Gardner.-Mr. Maybank.
Bill No. 150, for the relief of Dorothy Marie Christensen Homing.-Mr. Stuart (Charlotte).
Bill No. 151, for the relief of Frank Edward Quartz.-Mr. Benidickson.
Bill No. 152, for the relief of Eileen Campbell Burfind Morris.-Mr. Maybank.
Bill No. 153, for the relief of Elma Eva Inch Evans.-Mr. MacLean.
Bill No. 154, for the relief of Gertrude Rheaume Marchildon.-Mr. Brown.
Bill No. 155, for the relief of Godfrey John Kool.-Mr. Maybank.
Bill No. 156, for the relief of Eric John Hollingsworth.-Mr. Maybank.
Bill No. 157, for the relief of Pamela Sarah Atkins Berends.-Mr. Maybank.
Bill No. 159, to amend an Act to incorporate The Royal College of Physicians and Surgeons of Canada.-Mr. McQarry.
Bill No. 160, to consolidate and amend the *Acts relating to Alliance Nationale.-Mr. Marier.
Bill No. 25, to incorporate Dominion General Benefit Association.-Mr. Ross (Souris).
Bill No. 26. to incorporate Ottawa Valley Trust Company.-Mr. Mcllraith.
Bill No. 174, to incorporate Canadian Slovak Benefit Society.-Mr. Maybank.
Mr. MAYBANK:: While as yet I have not been able to find upon the list a bill in which I have been asked to interest myself, I was under the impression that there was one relating to the Lake Erie-Detroit Railway Company, standing in the name of Mr. Croll. The hon. member is indisposed and I have been asked to sponsor the bill. It may not be on the order paper, but I should not like to overlook it if it is.


Ian Alistair Mackenzie: Steps will be taken to see that all private bills which have not been considered will be dealt with on Monday evening.


Ralph Maybank: I have had an opportunity of looking over this list more carefully, and I have not yet found the bill; but, as the minister has said, it will be on the order paper for Monday evening.
Income War Tax



WAYS AND MEANS


[Stage Direction]
The house in committee of ways and means, Mr. ^Macdonald (Brantford City) in the chair.
.22. To provide for an appropriate additional tax dependent on the income of the taxpayer in cases where family allowance payments are received in order to adjust the benefits in respect of dependent children.
Mr. FLEMING:: I think this resolution
is in a class by itself, because it frankly proposes an increase in a tax. As the proposal stands I think it requires considerable clarification if the committee is to understand it, and I would ask the minister to be good enough to give us an explanation. On reference to the statement the minister made on October 12, as reported at page 1006 of Hansard, as closely as I can follow his remarks on that occasion there is some indication that the amendment proposed is to give effect to the changes in family allowances made by order in council last spring at the time the remainder of the 1944 income tax became payable. However, if one follows the remarks of the minister as they are found at the conclusion of the long paragraph in the second column on page 1007 it is apparent that the new scale of adjustments to be proposed is for 1946, and not for 1945 at all.
In the face of this situation, would the minister be good enough to make a statement to clarify what is proposed here? It seems to me that most people understood that when they received family allowances it was not to cost them something in terms of taxation. But the statement of the minister on October 12 indicates that there is to be a considerable recapture of the amount of the allowances. Would the minister be good enough to clarify this proposal?


James Lorimer Ilsley: Yes. This resolution will
give effect to the principle approved by the house when the Family Allowances Act was passed, that double benefits should not be given by way of family allowance and income tax credits for the same child. The schedule of rates designed to eliminate this duplication as far as possible has been in use for purposes of tax deductions since the payment of allowances commenced in July, 1945.
The amendment to the law will authorize the payment of final liability under these rates for 1945, and will authorize tables of rates appropriate for use in 1946. The scale for 1946 will be slightly different from that of 1945, because we have tried so far as possible to give effect to the reduction in income tax which will obtain in 1946.

This is a most difficult matter, of course, because it was clearly understood at the time the family allowances bill was introduced by the Prime Minister that persons who are getting a deduction from their income tax in respect of children would not get an additional or duplicate benefit through receipt of family allowances.
But. there are so many different tax values for children, depending upon the income, the number of children above sixteen years of age, and the number of dependents other than children, that it is impossible to make a scientific elimination of duplications. So that after putting an enormous amount of work on the problem of elimination of duplication last spring, we finally decided that the only way we could do it would be to pay family allowances to everybody who applied for them and who had children under sixteen years of age, and then to make an approximate elimination of the duplication.
The way we did it then was to provide that anyone with an income over S3,000 would be obliged, in effect, to pay back family allowances. In other words, it would be of no benefit whatsoever for persons who were in receipt of incomes over $3,000 to apply for family allowances, because the duplication there would be complete. We decided that for those who had incomes of up to $1,200 there would be no attempt to make any recapture at all, and that between $1,200 and $3,000 there would be a graded recapture. Perhaps "recapture" is not the best word in the world to use, but it is an attempt to eliminate the duplication. It is not a tax on family allowances. Rather, it is an adjustment by this method of the. income tax credits, in consideration of the fact that the taxpayer has received family allowances, and it was understood that he was not to get both. It was also understood that he would get the larger of the two in all cases. Approximately speaking, the table we put into effect for the period from July 1, 1945, on, which will be confirmed exactly as it is in the legislation we shall propose for the year 1945, does this.


Gladys Grace Mae Strum: Mr. Chairman, I feel
slighted. I am the only person eligible to collect, and the minister is not even looking this way.


James Lorimer Ilsley: The table for 1946 will be slightly more generous, in view of the fact that the income tax is reduced. Therefore it may be argued fhat the tax value per child will be reduced for the year 1946. So that the two tables will be placed before the house for its approval. It will not be exact. In

Income War Tax
man}r cases we will not eliminate duplication. The taxpayer will get some benefit. In most *cases he will get more than the larger of the two benefits, but in some cases he may get slightly less. However, it is a pretty close approximation.


Gordon Knapman Fraser: Could the table be put on Hansard, so that we may have it when the bill is before us?


James Lorimer Ilsley: It will be with the bill.
After the bill gets first reading an opportunity will be given hon. members to study it. This is not the only thing they will want to study, because the bill will be fairly complicated, and there will have to be a few days given hon. members for the purpose of studying it.


Mr. MacNICOL:: I hope I am not too late to discuss a matter which possibly should have been discussed earlier. However, I was not in the house this afternoon, having arrived only this evening. Since this is the last resolution under the Income War Tax Act, I should like to place before the -minister the case of a Toronto gentleman-and I know the minister is familiar with it. This is a man who had been in the United States for some years, and had worked to a point where he was receiving a very good income. Later, however, he decided to return to Canada, and made his return when the year was half over. He received, first, his United States income, and then came back to Canada and earned income here.
' He was taxed in Canada on the income which he made in the United States, and on which he had already paid United States income tax, and then of course he was taxed on the income he made here in Canada. Is the minister familiar with the case?


James Lorimer Ilsley: No.


John Ritchie MacNicol: I have forgotten the name.


James Lorimer Ilsley: The name does not make any difference. I am not familiar with the case, but that is the practice which is followed. The gentleman would be taxed on his entire income, but he would be entitled to a credit against his Canadian tax of the United States tax that he had to pay.


John Ritchie MacNicol: I am glad to know that. I shall send him the Hansard for to-day, because the information and figures he sent me' showed that he had to pay in Canada on the whole of his income, and also a second time on the part he got in the United States. He paid two income taxes.


James Lorimer Ilsley: In the net result he does not pay two income taxes. He is liable for a Canadian tax because he was resident in Canada part of the year. He may also be liable for a United States tax.


John Ritchie MacNicol: He paid that.


James Lorimer Ilsley: If he paid it, then he is entitled to a credit against the Canadian tax of the amount of the United States tax, provided that the United -States is not higher, and I do not think it would be.


William Alexander McMaster: Is it not a waste of time to send out cheques to men whose salaries are more than $2,400? Ia the case of a man with a salary from $2,400 to $2,600, under the present system of deductions he will have to repay seventy per cent of the money he receives.


James Lorimer Ilsley: Correct.


William Alexander McMaster: In the case of a salary between $2,600 and $2,800 it will be eighty per cent, and from $2,800 to $3,000 it will be ninety per cent.


James Lorimer Ilsley: Yes.


William Alexander McMaster: If a man is employed and his employer is deducting the tax, he is all right, but where a man is not employed it seems to me that there is a good chance of this money not being recovered. Actually you are only lending the man some money because you are going to get practically all of it back. I noticed with some consternation that the cost in postage alone for sending these cheques out for the nine months of the current fiscal year was $500,000, and I suppose there are other expenses. I suppose as far as the government is concerned it is simply taking it out of the one pocket and putting it into the other; I suppose the Post Office Department would benefit from that $500,000, or it might be only a bookkeeping entry, but there is a certain amount of work involved on the part of the postmen and those sending out the cheques. It is not particularly beneficial to the recipient to give him 'money which he will have to pay back when- he might be less able to pay it. As he gets it he is likely to spend it, being human. There are few people who are able to save money. It seems to me that in the case of those in the higher income brackets, where the greater part of the money will be recovered, it is unwise to send out the cheques.


James Lorimer Ilsley: This is an administrative problem. The Department of National Health and Welfare are of the opinion that they cannot possibly make deductions from the regular family allowance monthly payments, de-
Income War Tax

pending on the income of the recipient. They do not know what the income is or what it will turn out to be at the end of the year. The only way it can be adjusted is to have it done by the taxing department. As the hon. gentleman has quite properly pointed out, we may lose some of the money. There will be some from whom an amount will not be recovered, but I do not think the loss will be very great, particularly as most people in the country are paying their income taxes currently, either by having them deducted from their pay cheques or by paying in instalments as they go along. An overwhelm^ ing majority of the taxpayers in the country are paying their taxes in that way. The officials all say that this is by far the cheapest and simplest administrative method of eliminating duplication. They say that we should have one simple rule in the Department of National Health and Welfare; that is, to pay family allowances in full to everybody who applies for them and who can qualify. They advise that that be done irrespective of what the income is and then have adjustments made in the taxation.


John Thomas Hackett: Does the act provide any means whereby the allowance may be stopped before a child has passed out of the age limit or died?


James Lorimer Ilsley: My recollection is that it provides for the payment to the proper person, to the mother as it is administered, in respect of all children under sixteen years. There is a section, perhaps unnecessary, included to make it clear beyond peradventure that nothing in the act shall prevent an adjustment in tax deduction in respect of the children so as to eliminate duplication,


John Thomas Hackett: If a man is earning more than $3,000 a year, could he inform the department and stop the payment of the allowance to his children?


James Lorimer Ilsley: He can withdraw his application for children's allowances; he may refrain from applying.


John Thomas Hackett: I know he can refrain from applying, but once the flow has started, is there any way to stop it before the child dies or reaches the age of sixteen?


James Lorimer Ilsley: I do not think we have infringed on personal liberty to such an extent that we can compel a man to take money that he refuses to take. He has a statutory right to the money which he can waive.


John Thomas Hackett: I thought the right was vested in the child with the money being administered by the parents.


James Lorimer Ilsley: It is not vested in the child. The person entitled to the money is the mother, not the child.


George Russell Boucher: I think the minister could give more publicity to that point, because there are many people who do not realize that if their income is over $3,000 they gain nothing by applying for family allowances. As I understand the matter, a person with an income of $2,500 does not gain anything, and I think there would be fewer applications and a great deal of duplication, effort and cost would be avoided if greater publicity were given to this matter.


James Lorimer Ilsley: We published it in every newspaper in Canada, by way of advertisements and in the news columns, and we advertised it over the radio. We did everything we possibly could to inform -the people of Canada last May or June.


George Russell Boucher: Does the minister mean to say that he has publicized the fact that those with incomes of $3,000 or more would not gain by i-t?


James Lorimer Ilsley: We certainly did.


Wilfrid Garfield Case: Many of these family allowance cheques are made payable to the mother. Some three or four years ago I had some correspondence with the minister by which I tried to promote the thought that either the wife or the husband should be recognized as the head of the household. I can remember when the income tax exemption was $2,000 for a married man and $1,000 for a single man. Now the exemption is reduced to $660, which puts both the husband and the wife into the single category. Even at this late day I -think the government should- give consideration to -this problem, because there is a tendency to attempt to lower the income of the wife below $660 in order that the husband may again enjoy the benefit of a married man's income tax exemption. This leads to a certain amount of fraud. Trust agreements are entered into whereby certain assets belonging to the wife are turned over to the husband in order to reduce her income below $660. They should be given the right' to decide between themselves who is to be the head of the family. We know that in some houses the wife is the head of the household, but whoever is the head should be entitled to the exemption. I suppose that as a general rule it would be -the ordinary breadwinner of the home, the husband, but he should have the exemption that a married man would enjoy. Then the wife could be taxed as a single person. What happens now is that these allowances are paid to the mother.

Excess Profits Tax
How are you going to account for that? A woman may -have two or three children, but the amount paid to her in the form of family allowances will not be enough to make her income taxable and1 the government will lose, even though the husband may be earning a taxable income. I should like the minister to explain how they propose to offset the cheques that are payable to the mother, who, we will assume, has no earned income. Therefore she will receive the family allowance while her husband has an income that will be taxed. What becomes of the income in a case of that kind?


James Lorimer Ilsley: The family' allowance is not taxable. It. is exempt from taxation by statute. The husband is taxed on his income, and in the higher income categories he is taxed more than he otherwise would be by virtue of the fact that the wife gets the family allowance income. That is proper, because the receipt of the family allowance reduces the dependency of the child on the father, and therefore he should not have the same tax deduction with respect to that child that he otherwise would have. That is what is meant by the elimination of duplication of benefits.


Wilfrid Garfield Case: If the cheque goes to the home, do I understand that the husband when making his return has to state whether or not the family allowance was received on account of the child?


James Lorimer Ilsley: That is right,


William Alexander McMaster: I would like the minister to believe that I am helping him because the minister of health goes around spreading happiness by issuing these cheques and then another minister spreads gloom by taking the money back.


James Lorimer Ilsley: I hardly agree.


William Alexander McMaster: That, is why I want the minister to understand that I am working hard for him. I think it is possible on the part of the government to avoid this trouble as they have a formula whereby they can prevent the sending out of the cheques, because a statement has been sent out to employers showing how much they must deduct from the wages of their workmen. The same statement could be used by the Department of Health in reducing the amount of the cheque. It is simple enough when you go at it in the right way. The employer gets it back, but unfortunately the Minister of Health does not know and does not want to know and does not want to hold it back. I should like to prevent the sending of the cheque and then the enforced recovery, and
I suggest that the Minister of Finance take the matter up with the Minister of Health and make a more equitable distribution of the joys and sorrows of office.


[Stage Direction]
Resolution agreed to.

[Stage Direction]
Resolved that it is expedient to amend the Excess Profits Tax Act, 1940, and to provide:
1.	That individuals and partnerships he exempt from the 15 per cent tax on total profits of 1946.
Mr. CASTLEDEN:: In his budget address the Minister of Finance said that he would make no statement on the taxation of cooperatives until after the commission's report had been tabled. Since the report has now been tabled, would the minister state whether the government has reached a decision as to the taxation of. cooperatives this year?


James Lorimer Ilsley: The government has not yet made a decision. It will be impossible to do it in this budget, and whether we do it by separate legislation or not I doubt whether we shall be able to do it this session.


George Hugh Castleden: You will not be using the emergency powers act to do it?


James Lorimer Ilsley: No.


George Hugh Castleden: It is not likely to be done this session?


James Lorimer Ilsley: It is not likely to be. It may be; there is nq decision by the government. If there is a decision to do something it will have to be made very soon. But present probabilities are that that question will not 'be tackled this session.


[Stage Direction]
Resolution agreed to.
2.	That the tax on excess profits of indirfiduals and partnerships in 1946 be reduced from 100 per cent of the excess profits to 60 per cent of that portion of the excess profits which are in excess of 117-647 per cent of the standard profits, and that the provision for refund of a portion of the tax be repealed.
Donald Methuen Fleming: A statement might be made" here by the Minister of Finance by way of correction of an impression that has gone abroad as a result of some emphasis that was put in the budget speech and in press comments on the proposed reduction in the excess profits tax. The thought that went abroad was that there was to be in place of the 100 per cent less twenty per cent excess profits tax a straight sixty per cent. But actually what is proposed is sixty per cent, plus a formula based on a breaking point. I suggest that to the average taxpayer "breaking point" is represented by the present scale of
Excess Profits Tax

taxation, but for the purposes of this resolution the breaking point has to do with these figures with reference to standard profits; namely, in the case of individuals and partnerships 117-647 per cent of the standard profits; in the case of corporations and joint stock companies which have filed consolidated returns, 117-241 per cent of the standard profits; and in the case of other corporations and joint stock companies 116-667 per cent of the standard profits. When you come to apply this formula to the-calculation of the excess profits tax that will be payable, the minister will agree that you do not get a uniform excess profits tax of sixty per cent based on the present rate. I have some calculations before me which show that it would result as follows:
If the reduction were calculated on the present- tax structure and the sixty per cent tax were applied without the introduction of this new formula with the breaking point, there would be a lower tax than the resolution proposes on companies having profits between 116-66 per cent and 155-55 per cent of standard profits.' Similarly, where there are excess profits of 155-55 per cent of standard profits, the present proposals would work out the same as sixty per cent on the old basis without the new formula. Similarly, corporations with excess profits of more than 155-55 per cent of standard profits will actually pay less than the sixty per cent would amount to apart from the application of the formula. In view of the impression that has gone abroad that the new proposals call for a straight sixty per cent excess profits tax calculated, on the old basis, it is desirable that the minister make a statement clarifying the position because that is not the way it is going to work out. There will be variations depending upon the application of the formula to the amount of excess profits.


James Lorimer Ilsley: Under the present law sole proprietors and partnerships are required to pay an excess profits tax equal to the greater of either fifteen per cent of total profits or 100 per cent of excess profits. The practical effect, of this provision is that when total profits are less than 117-647 per cent of standard profits the fifteen per cent rate on total profits applies, but when total profits exceed 117-647 per cent of standard profits the 100 per cent rate on excess profits applies, since this gives a tax greater than fifteen per cent of total profits above this point.
It is proposed by these two resolutions that the fifteen per cent rate be repealed and that a rate of sixty per cent be 'levied on profits in excess of 117-647 per cent of standard profits

in place of the present rate of 100 per cent. It will be recalled that twenty per cent of the 100,per cent rate now payable on profits in excess of 117-647 per cent of standard is refundable to the taxpayer after the war. In reducing the rate to sixty per cent the requirement of paying this refundable portion has been dropped and, in addition, another twenty per cent of the 100 per cent rate has been removed, leaving a net rate of sixty per cent.
In consequence of this change no sole proprietor or partnership will pay any excess profits tax on 1946 income if such income falls below 117-647 per cent of its standard profits, and will pay a rate of sixty per cent of its profits in excess of 117-647 per cent of its standard profits if its total profits come above this point.
Is that the explanation the hon. gentleman
desires?


Donald Methuen Fleming: My point goes beyond that. It is the effect of the application of this formula in regard to the breaking point on corporations. Take the various classes, those whose excess profits happen to be on the breaking point, those below, and those above, because it does not work out at a uniform basis of sixty per cent on the present tax basis. I am speaking now of the impression which has gone abroad about the effect of the proposed reductions. It is not simply a reduction to sixty per cent based on the present calculation; there has been introduced a new formula with a breaking point which has to be taken into account. That is my point.


James Lorimer Ilsley: I think that nearly all business men, certainly all chartered accountants in the country, and a great many lawyers, understand this breaking point. The provisions regarding excess profits tax-I am speaking now about excess profits tax on corporations, because that is the case which ordinarily occurs-


Donald Methuen Fleming: That is what I was speaking of, too.


James Lorimer Ilsley: After you go all through the complicated provisions of the excess profits tax the method of computation is fairly simple. A company is taxed forty per cent on its profits up to 116 2/3 per cent of its standard profits and it is taxed 100 per cent on its profits in excess of 116-2/3 of its standard profits. That is the breaking point. That leaves a company seventy per cent of its standard profits; because forty per cent of 116 2/3 per cent is 46 2/3, which, subtracted from 116 2/3, leaves 70. So that the formulae and alternatives and options and cross-refer-

Excess Profits Tax
encea and so forth all come to this: you just tell me what the profits of a company are in terms of its standard profits; that is, if you tell me that the profits of this company were 150 per cent of its standard profits, I can reckon the income and excess profits tax for you in ten minutes.


An hon. MEMBER:: Liberally speaking!


James Lorimer Ilsley: I take forty per cent of 116 2/3 of its standard profits and set that down there, and then 100 per cent of the difference between 116 2/3 and 150 per cent. It is that 100 per cent which has been reduced to sixty per cent by this budget; there is a variation for companies submitting consolidated returns, and there is a variation for partnerships and sole proprietors; but the breaking point in the case of partnerships and sole proprietors is 116-666, and 117-647 is the breaking point for companies submitting consolidated returns-not 116-666 but 117-241. But the principle is clear that what was 100, the 100 per cent above the breaking point, has been reduced to sixty. When I say "100," it is fair to say "80" of course, because twenty per cent of the 100 per cent is returnable.


Wilfrid Garfield Case: I think I should say at the outset that the government is to be commended for having made an effort, to provide something which should lend considerable incentive to our recovery in the post-war period. I personally would have been very glad if the time had arrived when we could do away with the excess profits tax, because I believe that private enterprise, given the green light, will play a greater part in the solution of our post-war problems than we can ever hope to do by direction in this chamber. The minister has said that many lawyers understand the breaking point. I am informed that there is no excess profits tax on lawyers, so that they probably would be the first to recognize the breaking point since it does not involve any of their profits-if they could be determined. I hear someone nearby say that they have no profits.


John Ritchie MacNicol: It is all profit.


Wilfrid Garfield Case: The lawyers whom it is my privilege-I use that word so that I shall be understood-to know, look to be fairly well fed. Therefore I think they are doing fairly well in seeking to intrepret the statutes and the laws which this government has put upon the statute books. The only thing which keeps lawyers in business is trying to interpret the law. I read from this section that there will be a tax of 60 per cent on that portion of the excess profits which are in excess of 117-647 per cent of the standard
profits, and that the provision for refund of a portion of the tax is repealed. My question is, will there be no longer any refund to corporations, even though they are subject to a certain portion of the tax as explained by the minister; if they go above this amount they are subject to the 100 per cent tax?


James Lorimer Ilsley: No.


Wilfrid Garfield Case: That is, if they go above a ,certain amount?


James Lorimer Ilsley: That is right; they are subject to 60 per cent of the excess above the breaking point, with no refund.


Wilfrid Garfield Case: There will be no refund?


James Lorimer Ilsley: No.


Mr. FERGUSON:: I think the barristers and solicitors of Canada are remiss in not tendering a hearty vote of thanks to the Minister of Finance for the stupendous continuous income he has been providing for them. The public cannot understand the income tax law. The lawyers cannot either, but they are privileged to charge for interpreting it, and I think the lawyers should have tendered the minister and his department a hearty vote of thanks.	,	.


An hon. MEMBER:: Let us give it to
them now.


Mr. STEWART (Winnipeg North):: Up to March 31 of this year the government had collected $184,500,000 of refundable excess profits tax. That is to be given back to the corporations in the next two or three years. I should like to know if any policy has been formulated as to what the corporations will be allowed to do with this refund tax. Will they be allowed to use it for dividends or for capital purposes?


James Lorimer Ilsley: It is their money; they can do as they like with it.


Alistair McLeod Stewart: They can use it for dividends?


James Lorimer Ilsley: Yes, for any purpose they wish. That was clearly understood from the beginning. That question was faced and settled in 1941 or 1942. The question was, whether this would be tied up and restrictions placed upon its use or whether it would be regarded as the money of the taxpayer, and I decided that the proper policy was to regard it as the money of the taxpayer. It must be borne in mind that when you have a 100 per cent tax, even if it is refundable, you have put into operation forces which make for extravagance, for inefficiency, for lack of effort, and so on, and you must be careful not to go
Excess Profits Tax

too far, otherwise you will hurt your national efficiency considerably. I felt that the point to stop was where we did stop. That is, we take the 20 per cent and keep it, we have not paid any interest on it, and have retained it for quite a long time. When the time comes for them to get it back, it i3 theirs.


[Stage Direction]
Resolution agreed to.
3.	That for 1946 the following rates of tax apply to corporations:
(a)	Twenty-two per cent of the profits of corporations and joint stock companies before deduction therefrom of any tax paid thereon under the Income War Tax Act;
(b)	In the case of corporations and joint stock companies which have filed consolidated returns, 20 per cent, of the profits which are in excess of 117-241 per cent of the standard profits of such consolidated companies;
(c)	In the case of other corporations and joint stock companies 20 per cent of the profits which are in excess of 116-66 per cent of the standard profits.
and that the provision for refund of a portion of the tax be repealed.	.
Resolution agreed to.
4.	That on the profits of 1946 and subsequent years the minimum standard profits of taxpayers be increased from $5,000 to $15,000, and that where a taxpayer's standard profits are oh January 1. 1946, in excess of $5,000 but less than $25,-000 they be increased by one-half the difference between their present amount and $25,000.
Resolution agreed to.
5.	That the special rate of tax applicable to businesses commencing after June 24, 1944, not apply to cases where in the opinion of the minister there has been no bona fide commencement of a new or substantially different business.
Howard Charles Green: Will the minister explain this resolution?


James Lorimer Ilsley: To provide greater certainty for new businesses in their first year of operation, the Excess Profits Tax Act was amended in 1944 to limit the tax payable under that act on income of the first year to the minimum rate of twenty-two per cent, because of the danger that existing businesses might take on the guise of a new business by simply reorganizing and acquiring a new legal identity without any real change in either the ownership or the type of business conducted. It is proposed that the Minister of National Revenue must be satisfied that the business is either an entirely new business or a substantially different business before allowing a claim to be taxed under the minimum rate on these grounds.


Howard Charles Green: I suggest to the minister that that is a drastic provision and one which should be given further consideration.
Take the case of a man who is carrying on business in his own name without being incor-
porated. In good faith he forms a company, and lias been carrying on for the last eighteen months as an incorporated company. I believe in many, many cases that was done without the slightest sign of bad faith; that the men who did it were advised by responsible advisers, and even by income tax officers, that they were eligible for this lower tax. They have conducted' their business for eighteen months on that understanding, and now they are faced with the possibility of an amendment under which other officials of the department can step in and say this was not a change made in good faith; that it was made to cut down the rate of taxation, and that therefore they are liable for the heavier tax. That would be done^ after these men have made their plans in perfectly good faith. I should like to put that before the minister. I know of cases of that kind, and I do not think it is wise for the government to step in now and say that they must show that the change was not made in bad faith.


James Lorimer Ilsley: I have not looked the matter up, but I think all the explanations of the changes that were mkde were on this basis, that when people want to go into new businesses they have no experience of earnings and it is impossible to get a standard profit fixed; they do not know what their rate of taxation is to be, or they do not know what their standard profit is because they are starting something new. That was the; reason for the change in the law; it was not that some person might change the form of his business. Take, for example, a business that was paying heavily under the excess profits tax; it was incorporated and called a new business. The tax was pulled down to forty per cent. That was not the intention or the real meaning of the law, and it was never put forward on those grounds; it was put forward to meet a particular situation. I do not think they ought to be allowed to get away with it.


Howard Charles Green: An officer of the Department of National Revenue has interpreted the provision that was passed last year as meaning in some cases that if a person incorporated his business, changed his business in the normal way to meet business growth, he would be entitled to the benefit of that section. It would not be so bad if the provision applied to those where bad faith could be shown, that they made the alteration to benefit by the tax, but that is not the way it is worded. It makes every person who has benefited, by the provision show that there has been good faith; in other words, it puts everybody under suspicion who has made a change of that kind

Excess Profits Tax
I think very serious damage will be done, particularly to younger men who in the normal course have built up a business and reached the stage where they had to incorporate; and have done so believing that they were entitled to the benefits of this act. In the long run the government would benefit from that change to a corporation because the company will be liable to tax bn its profits and shareholders to tax on their dividends. I know there are cases where "there has not been the slightest bit of bad faith where they will be absolutely crippled by this new provision.


James Lorimer Ilsley: I shall give consideration to the hon. gentleman's representations before the bill is prepared ; but in saying that I do not know whether I shall do what he has requested, because I must say that when we bring in a bill to meet a specific need and everybody understands it, I do not like to see people, just because they are clever and the law will permit it, reduce their taxes as a result of that. Perhaps this retroactive legislation is not good on general principles, but I have sponsored some of it once in a while in order to prevent people from getting away with too much. I do not know whether that is the case here or not, but perhaps there has been some taking advantage of what is the letter of the law without any regard for the spirit of it.


Howard Charles Green: This is retroactive legislation not for a period of six months but for a period of eighteen months. I think the minister will agree with me 'that the great majority of Canadian business men are not dishonest; they want to pay their just .debts. This excess profits taxation and income taxation are now so complicated that the ordinary business man has to depend on his accountant, his auditor or the income tax officers themselves for advice. I know of cases where they received advice on that basis, are entirely innocent, and now are caught by this amendment.


Gordon Benjamin Isnor: The hon. member for Vancouver South mentioned corporations under this resolution. Does this resolution apply equally to partnerships and* sole ownerships?


James Lorimer Ilsley: Is the hon, gentleman asking if it applies to a partnership which converts itself into a company?


Gordon Benjamin Isnor: A simple partnership, not incorporated, or to come down to a more simple case, a sole ownership.


James Lorimer Ilsley: It must be a new business.


Gordon Benjamin Isnor: Yes, it would be.


James Lorimer Ilsley: Yes, it applies not only to corporations but to any person-and "person" would include a corporation'-who has commenced business after the 26th day of June, 1944, or carries on a substantially different business to which subsection 4 of section 5 of the act is applicable, and uses therein physical assets substantially different from those he used in the business previously carried on.


Gordon Benjamin Isnor: Take a sole ownership business. During the course of the last four, five or six years a certain amount has been set up as a reserve as a result of the twenty per cent refundable portion. A bank or lending institution, knowing that at some time or another this amount will be refunded to the owner of this business, lends the owner perhaps $30,000 or $40,000 with which he puts up a new building as an addition to his present 'business. Will he come under this special provision?


James Lorimer Ilsley: If he carries on a substantially different business.


Gordon Benjamin Isnor: What is meant by "substantially different"?


James Lorimer Ilsley: If he carries on a substantially different business to which subsection 4 of section 5 of this act is applicable, and uses therein physical assets substantially different from those he used in the business he previously carried on, then his standard profits are limited. It is a forty per cent rate he pays if it is a corporation, and fifteen per cent if it is an individual or sole proprietorship. There is no difficulty about that provision in regard to carrying on a substantially different business and using'therein physical assets. That is not a difficult thing to determine; there is no trouble about it. The difficulty is in regard to the first part of it, a taxpayer who has commenced business after the 26th day of June, 1944.


Gordon Benjamin Isnor: That is a new business?


James Lorimer Ilsley: Yes.


Gordon Benjamin Isnor: Then let me place before the minister what might be a definite case. Take a boot and shoe man on Bank street here in Ottawa. He has accumulated a fairly large reserve. Just around the corner a shoe repair establishment has made considerable progress, and he feels that he would like to enter into the business of repairing shoes and manufacturing special types of shoes. He uses his reserve. Does he come under section 5, since he is using part of the capital of his business; or will it be considered a new establishment?
Excess Profits Tax


James Lorimer Ilsley: I hesitate to give a ruling on a set of facts. A ruling on the exact facts of the case would have to be obtained from the Department of National Revenue.


Gordon Benjamin Isnor: That is what you want those in retail business to do; you want them to reinvest their money with a view to providing greater employment. I think it is definitely understood and agreed that during the last four or five years the retail business man has been kept down to a certain limit as far as profits are concerned. He has not been permitted to make more than a certain standard profit. His 100 per cent excess has been taken away from him. notwithstanding the fact that ' his bills receivable have grown, his stocks have grown, and he has not had the necessary capital to work with. He has accumulated a certain amount which is refundable, and he wishes to invest that money in an establishment such as I have mentioned. The funds have been earned by his established business. Will you charge him under this new section 5?


James Lorimer Ilsley: If the new investment and the acquisition of different assets are of sufficient importance and extent, so that, a reasonable man would say he is embarking upon a substantially different business, then he would be entitled to the advantages of this section.


Gordon Benjamin Isnor: Take the case I mentioned, which is closely identified with the established business.


James Lorimer Ilsley: With the same old business?


Gordon Benjamin Isnor: 
James Lorimer Ilsley: In the national revenue department I understand they have a committee which has precedents and some principles upon which they work, but I do not see how I can rule on that. I do not see how I can go any farther than I have gone. There are the principles.


Wilfrid Garfield Case: Hire a lawyer.


Gordon Benjamin Isnor: We should not have to hire lawyers. I do not wish to pursue this further, but I would point out that if you expect business men to reinvest funds in new business which will give added employment, then I believe that within the very near future you should settle that question and say yes or no; or give them the green light and
lMr. Isnor.]
say they may carry on and they will be taxed no more than the regular business is taxed.


James Lorimer Ilsley: Any person interested in such a venture can get a yes or no from the Department of National Revenue on submitting all the facts to them, but I cannot go any farther than to state the principles that apply.	,


Wilfrid Garfield Case: I was pleased to hear the minister say in reply to the hon. member for Vancouver South that he would give some further consideration to this resolution. He did say that he hesitated to change that which was already written, and I can understand that because I believe there were some repercussions from certain proposed changes in the tariff schedules which were introduced in the budget speech. Yesterday we heard the Minister of Public Works say that his figures and estimates were prepared before the war was ended, and that they did not include post-war plans. I should like the minister to say whether the figures in these various resolutions have been revised since the conclusion of the war. For instance, I cannot imagine resolution 5 being included in the budget if the war were still in progress. This is a partial post-war budget; is that right? The minister is the man who takes all the abuse for the government, and I believe he has done a very fine job. The other ministers say they have not made any post-war plans, but apparently the Minister of Finance has been alive to the situation and has made certain definite proposals to encourage post-war business. So that he recognizes, whether or not the other ministers do, that the war is over and this is partly a post-war budget. [DOT]


Howard Charles Green: Would it not be fair to make this provision apply from the date of the budget? There was legislation passed last year, and under that legislation people had certain rights. As I said before, I believe that in some cases they were actually told by the department that they could do this or could do that. Why should their rights not be based entirely upon the legislation of last year? Why should it be necessary now to bring in a provision which not only will cover the future, but contains a punitive quality, and gives the minister power to go back eighteen months and assess taxes against somebody who has been acting on the basis of last year's legislation? What objection would there be to making this provision apply from the date of the budget on, rather than carrying it back to last year?

Excess Profits Tax


James Lorimer Ilsley: Well, you just permit situations like this to go unremedied. Men are in partnership and perhaps are paying excess profits taxes, because they are making very high war profits. They come along and read the budget. They read the Excess Profits Tax Act as amended in 1944, and they find out that if they commence business, or if anyone commences business after June 26, 1944, he can obtain a decided advantage, because he does not have to pay any excess profits tax, in the ordinarily accepted sense of the term. He is limited to the regular profits, forty per cent.
So they say, "That is fine. I will incorporate myself, and automatically in the eyes of the law I can be commencing business. In the eyes of the law I shall not have been in business before, because the company was not born. It was not in existence. The life of the company will date from this date." So that in this way he obtains a big tax advantage.
Then, perhaps two partners who are in the same class, as far as excess profits taxes are concerned, will take in an employee, or some other person, with the result that we have a new partnership and the commencement of a new business. Even though the physical assets are the same, even though there is no difference in the type of business, and even though the customers are the same and the operations are the same, and although they should have known or in fact did know, from explanations given, that that was never intended to apply to such a case at all, they form the new company. This was intended for people who were really starting something new, who were commencing a new business, from the ground up. And because you do not have any experience, you have to have a statutory fixation of standard profits. That is the reason this was put in.
It is just a question how far we should go in avoiding retroactive legislation. It looks very much to me like taking advantage of legislation by persons who know that the whole spirit and intent of the legislation was different.
It will be said, "Oh, well, that is your fault. If you bungled your phraseology, if your lawyers were not good enough, and if there was a hole there that people rushed through, you have to let them go through." That is what will be said. But what inequity is there in saying that they must have really commenced a new business on June 26?


Howard Charles Green: The inequity is this, that
while there may have been, a few people who took advantage of that situation, and rushed through the hole, I suggest to the minister that for everyone who did so there were fifty whcwere advised that this was the proper thing to do, who went ahead and laid their plans and made their expenditures on that basis. And they were strictly within their legal rights in doing so. Now the crown comes along and upsets all those legal rights. It goes back eighteen months and says, "We are going to take more tax."
I will point out to the minister the amendment which was put through last year, as it appears in chapter 38 of the statutes:
Provided further that where a person, other than a controlled company described by section fifteen A of this act, in the opinion of the minister	_
(i)	has commenced business after the twentysixth day of June, nineteen hundred and forty-four or	.	.	.
(ii)	carries on a substantially different business to which subsection four of section five of this act is applicable and uses therein physical assets substantially different from those he used in the business he previously carried on.
There the power is entirely "in the opinion of the minister." Somebody in the Department of National Revenue headquarters in Ottawa has made the decision for the minister; somebody decides what the opinion of the minister is in each of these cases. These people have been told that they come under this section.
Now the crown wishes to have new legislation passed which means that the _minister's officials will be allowed to change their minds again, and go back to collect the difference in the tax. I suggest that this is entirely out of line with the whole principle of British justice.


Harry Rutherford Jackman: Hear, hear.


Howard Charles Green: It is contrary to British justice, to say nothing of the disastrous effect it may have on business, and just at a time when we are trying to encourage business to go ahead and open up, so that they can hire more people. Here we are, with unemployment becoming a terrible scourge again in my own city of Vancouver. Something drastic must be done or there will be thousands of Canadians unemployed. This government is depending upon private business to furnish most of the employment-and I think quite rightly so. But when you bring in a punitive measure such as this resolution, which is intended to have a retroactive effect, you undermine the confidence of businessmen in the government. I suggest to the minister that further consideration should be given to this resolution before such a drastic step is taken.


James Lorimer Ilsley: If the resolution carries we can back away from it in the act. That is, it is not a case where you are going beydnd anything. I think the resolution ought to be
Excess Profits Tax

allowed t<? pass, and I will give consideration in the act. That is, if the act is more lenient, it does not violate any constitutional principle; if it is more harsh, it would.
We could go on arguing about this for some time. Of course if these firms had taken on more men and had -done a substantially different business there would be no trouble about it at all. But if by just putting on a new shell they seek to get a tax advantage, I do not know that we we under any obligation to help' them out.


Howard Charles Green: I do not think that would apply to the majority of cases. But even if that were so, even if they took advantage of a statute which was poorly drawn last year, there is no reason why the crown should come here to-night and try to go back eighteen months to change that statute. It is purely punitive, and I repeat that such procedure is entirely out of line with the principles of British justice.


James Lorimer Ilsley: But it does eliminate discrimination between these and other companies. Here is a company which has not been as smart; they have not consulted as good a lawyer, and have not found out about this thing. This company goes on in the same way, and pays its heavy excess profits tax. Surely there is some equity as between that company and another of the kind I described before.
I am willing to consider any safeguard to see that real cases of new businesses get full benefit of the section. But I think it is quite all right retroactively to take that benefit away from people who simply took advantage of the section, who did not commence any new business at all, who did not change their business at all, but who just changed the form of their business for the sake of getting rid of taxation, at a time when other people who did not have the advantage of that type of legal advice and who did not do it kept on paying their higher taxes.


Howard Charles Green: The minister is talking about equities.


James Lorimer Ilsley: Yes.


Howard Charles Green: The minister has no right to interpret legislation once it has been passed; when legislation has been passed, it should be interpreted by the courts. No minister of the crown has the right to come back next year and in order to correct legislation of the year before bring in a new provision that enables him to go back and take money away from people. ' This house laid down the law last year and under that law people did certain 
things which they were entitled to do. If the law was wrong, that was not their fault. The minister has no right to come along now and, in effect, pass a law in November, 1945, to have effect in June, 1944, which alters completely the law that was passed in June, 1944. I think the minister as a very able lawyer will realize the strength of that argument. I suggest to him that this new provision be made applicable from the date of the budget.


James Lorimer Ilsley: I will give consideration to that. I do not want any one to think I am trying to interpret the law.


Howard Charles Green: That is what it amounts to.


James Lorimer Ilsley: I have no more authority than any other citizen of this country to put an authoritative interpretation on any statute. The courts are the only authority having the right to do that. I have no authority whatever to change a law and I am not proposing to change this law.


Howard Charles Green: You are, in effect.


James Lorimer Ilsley: I am placing it before
parliament; parliament is the only authority that can change this law.


Julian Harcourt Ferguson: One minute ago you said only the courts could do it.


James Lorimer Ilsley: It is no use arguing-


Julian Harcourt Ferguson: It is no use arguing when you have no argument.


James Lorimer Ilsley: I said that the courts were the only ones that could place an authoritative interpretation on a' statute, and I said that parliament is the only body that can change the law. I do not know what the hon. member for Vancouver South is intimating when he says that I am claiming to have the right to interpret a statute or to change the law.


Howard Charles Green: The minister did not put that quite correctly. In effect that is what he is doing.


James Lorimer Ilsley: I am not. ,


Howard Charles Green: This house passed a law last year and people have acted under that law. They have not been held to be without the law. Actually their position is stronger because it is based on the opinion of the minister under the section that was passed last year. Now the minister says this evening, "Oh, well, this did not turn out the way we thought it was going to; there are equities this way and equities that way, and it is only justice that if this man gets caught, this other man should not be allowed a lower tax.

Excess Profits Tax
because the other man did not know anything about it; therefore we are going to start all over again; we are going to remedy this whole thing; we are going to go back to last June with a new law by passing at the present session a law that enables us to review all these cases." I say in effect that puts the minister in the position of interpreting the law rather than leaving it to the courts. I consider it unsound legislation, because it offends against the principle that once a person's rights are determined and he has acted on those rights, there shall be no going back; there shall be no changing the law to upset his position. I would ask the minister to review this carefully and give consideration to the suggestion I have made this evening.


James Lorimer Ilsley: I certainly will do that. If my hon. friend has in mind, any specific cases I should like to examine those bona fide cases he is talking about and see what they look like. I do not know whether they are good or bad'. If they are good, we have no right to touch them. If they are bad, I think we have., However, I will give consideration to the matter.


Howard Charles Green: That simply proves that the minister is interpreting the law. He wants to see these cases and, if he decides that they are good, then he will do something about them.


James Lorimer Ilsley: I cannot do anything about them.


Howard Charles Green: That should not be the minister's position at all; he should stand or fall on the law that was passed last year. If the law needs to be amended, let us amend it now by all means but do not make the new law retroactive. Let us start out from now with the new law.


Harry Rutherford Jackman: This section 5 is just another example of what we find shot all through the present Income War Tax Act and the Excess Profits Tax Act-more discretion to the minister. I do not think we could have a clearer case than what is set out in the minister's own words. Every businessman must 'bring his tax problem to Ottawa in order to have it decided. This parliament is not passing laws which are capable of decisions so that a business man knows where he stands. No matter how perfect the minister seeks to be in his legislation, I do not think he is ever going to get every person who seeks, by means of a smart lawyer or otherwise, to slip through the net occasionally. If he tightens his taxation net so that not even a sardine can get through the meshes,
he will so hamstring business and create uncertainty that businessmen will not be able to go ahead and provide the goods and services to create employment that they must do if we are to have continued prosperity in this country. *
Let us look at this resolution. First of all, it offends against the sound principle^ of British justice and sound taxation policy in that it is retroactive. It is true there may be a few cases, but the minister has not told the committee how flagrant the violations haye been. Perhaps there are half a dozen cases, but I have no means of knowing or guessing what the element of tax evasion is or how extensive it may be. He might at least tell the committee that there have been scores of cases or hundreds of cases whereby the treasury is going to be out hundreds of thousands or millions of dollars. Let us have some conception of what this is about. Does the minister happen to know of five or six cases across the whole of Canada during the past year and a half where clever lawyers have been able to get around this section and do the treasury out of a few thousand dollars?
In order to collect those few thousand dollars he wants to tighten this section and make it retroactive. He is going to cause uncertainty so that businessmen will not know where they stand. A businessman may have thought he was doing a nice job in building up a new business and creating employment, and now he finds he has another five or ten thousand dollars of taxation to pay which he did not know about. He has to provide for that, and therefore he cannot open up the addition to his business he was planning on opening, or carry out other plans he had1 in mind. He just cannot do that with this uncertain taxation measure hanging over him. A% I say, the retroactive feature is the first offence.
The second dereliction in the resolution is to be found in the phrase "in the opinion of the minister." I do not know how many times that phrase is to be found in the Income War Tax Act and the Excess Profits Tax Act, but it has been estimated that the number is from fifty to 150 times or more. You must come to Ottawa and more often than not make a deal with the tax department because ther^ is no absolute ruling on the subject. They look at your case through their own glasses and no one else can decide for the businessman. No one in Vancouver, for example, can give a decision, much less the businessman himself. Is it any wonder that in the other place they have set up a committee to look into the working and the application of these tax laws? There is no
Excess Profits Tax

greater or more crying need for the good of the business community of this country than a sound revision of the whole income tax law and its administration. People do not know where they stand. I had a case in connection with annuities which I shall certainly refer to later because I have further evidence. No one knows where he stands to-day. We must have some certainty. We cannot go on and create new industry and create jobs unless businessmen know where they stand. I would appeal to the minister not to try to make these laws quite so perfect but to try to realize that business and the creation of jobs constitute the main thing in this country to-day and not to make our tax laws so tight that the shrewdest Al. Capone could not find his way through them, for the businessman is fundamentally honest and is willing to pay taxes, but he must have certainty if he is to go ahead.
This resolution applies particularly to new ' business. If we need anything in this country it is to have new businesses and new industries created. The present economic outlook, to my humble way of thinking, is fraught with just as many uncertainties and just as much hope, hope based on a sounder foundation I trust, than was the expectation in 1929 when we thought we were in a new era and companies were capitalized not on the basis of 1929 earnings but on the basis of what they would be in 1932. We have just come through a great period of progress and industrial expansion in this country in which the national income has doubled and trebled. We have passed laws in this house such as the family allowance, in favour of which we were unanimous to a man, involving an outlay of $250,000,000 a year as compared with a prewar annual budget of $500,000,000. Where ape we to get the money? We are expecting to have a volume of business similar to that pertaining to the war years. That is the hope, and we can put every ounce of strength we have into the realization of that hope because, if we do not do so, the country-I can use very strong words-certainly has a very sorry outlook. We must have a great national income to get the revenue required to carry all the new social measures and to service the debt which we have to-day. We are bound to do so if we possibly can, and we shall have to resort to unusual measures in our endeavour.
This government has a mandate from the people of this country, as was so well put by the hon. member for Cariboo the other night when he said that this government had a mandate from the people to carry on under the banner of private enterprise. If we are to

give private enterprise it's head we must give businessmen some certainty where they stand in the matter of taxation. New business must also be created in order that we may develop our export markets, and that leads me to the whole matter of excess profits taxes.
In the present budget the minister has reduced the effective rate from eighty to sixty per cent. What do we find is being done by our cousins across the line? There, with a much stronger economy than we have, one that is based on domestic business to a far greater extent than Canada's can ever be because we are to a large extent an export country, they have made their excess profits tax nothing at all-no rate-they have abandoned the whole thing as of next January. We in this country must face competition with industries in the United States, particularly in the export field, and while this reduction from an eighty per cent effective rate to sixty per cent is undoubtedly a help, and, I trust, a straw in the wind, I hope that the Minister of Finance will undertake at the earliest opportunity to make further reductions and do away with the excess profits tax which he himself has said leads to the stifling of business, gross carelessness and lack of efficient management.	*
Furthermore, may I say in connection with the effect of this taxation on new business, if we in this country are ever going to meet the challenge which this government has firmly saddled upon it to keep our people in jobs and prosperity, we must have more business. Where it is all going to come from, I do not know. But I know that all check-reins and stifling measures must be taken off our people if we are to begin to have a national income corresponding in any degree with that which we have had in the last three or four years. If we are to attract capital to this country from outside, and we need it badly, not the actual dollars but venturesome money, because there are very few wealthy Canadians among us who can take the chances necessary for the development of our natural resources or the setting up of new businesses, because so many fall by the wayside that very few can really afford to put up any substantial amounts for they must be careful and look after their old age- if we are to attract capital to this country we must have some certainty about our taxation laws.
Furthermore, in regard to this excess profits tax and the results that we now have under immediate discussion, if a company is to extend its business the most likely place where it will find its capital is out of its tax-paid earnings which it ploughs back into the industry. If the rate of taxation is so high

Excess Profits Tax
that there is nothing left, if it is sixty per cent as now on any company with earnings above the 1936-1939 level, it is not going to be able to find earnings with which to expand and create more employment. Therefore I would suggest that this resolution be either dropped entirely or taken back for redrafting, particularly two features, namely, the retroactive feature and the discretionary power given to the minister, which is something we are trying to get away from. Surely we in this house can take adequate time to frame taxation provisions which will become the law' of the land and will not necessitate for their interpretation, as my colleague said a little while ago, everybody flying down or coming down to Ottawa on the trains, and making Ottawa the centre of all their -activities because they do not know where they stand until they get a ruling from the minister. Surely there should be some person in this country other than the minister who can interpret the taxation laws under which business must operate, and under which new businesses coming in must find their roots.


James Joseph McCann: Did the hon. member ever hear of the courts?


Arthur Leroy Smith: The minister has not apparently.


Harry Rutherford Jackman: I wish I had heard that ten times as often as I have heard it here. People must come here to Otttawa to see the Minister of National Revenue and his department to find out where they stand under the taxation laws of this country, and if an appeal is taken from a ruling the appeal once ag^in goes back to the minister and his assistants. We do not expect the minister to know all about the peculiar workings of every business in Canada. He must of necessity rely a great deal on his full-time veteran assistants, so that there is virtually no appeal from a ruling on taxation as there is in Great Britain and in the United States. The tax law is made by one set of officials, and the only appeal is to the same set of officials. There is no certainty about the law. It is in the discretion of the minister. Surely we should from this date forward never again pass any section of an income tax or excess profits tax law which cannot be interpreted and the rights under it determined bj' any of the divisional staffs throughout Canada, without having to go to one man and leave it to his discretion as to whether or not one is within or without the terms of the statute.


John Thomas Hackett: I should like to give such approval as I may to the argument made by the hon. member for Vancouver South. He 47696-175
might have added to his reasons the importance of maintaining the good reputation of the department.
If a taxpayer has taken a position which was tenable under the statute, it behooves the department to see that the taxpayer's position is maintained. I suggest to the minister that nothing will tend more to shatter the confidence of business in his department and its administration than a changing departmental position and a going back on what the taxpayer thought was the department's plighted word. Questions have to be determined by somebody. Somebody's discretion must settle disputes between people, be they between taxpayers and tax gatherers, or be they in an -unhappy menage. But I am not certain that it is wise to leave an unbounded discretion to an administrative officer, I will attempt to point out what I mean, by reading- resolution 5. Incidentally there appears to be a word or two left out of it. I do not know whether in the minister's text the word "shall" or "does" is left out before the words "not apply". I would be glad of that information.


James Lorimer Ilsley: If I may answer that, the general scheme of the phraseology does not seem to call for a verb there. For instance, in resolution 3 the resolution is "That for 1946 the following rates of tax apply to corporations"; and this is, "That the special rate . . . not apply."


John Thomas Hackett: It reads:
5. That the special rate of tax applicable to businesses commencing after June 24, 1944, not apply to cases where in the opinion of the minister there has been no bona nde commencement of a new or substantially different business.


Gordon Knapman Fraser: This is "bureaucrese" in English.


John Thomas Hackett: Is the text complete?


James Lorimer Ilsley: I think it would be better to have "do" in there, or "shall". But apparently the scheme is-


John Thomas Hackett: What I 'wanted to come to is this. The minister has this resolution before him; it gives him wide powers of discretion; in a given case he will determine whether or not there has been a "bona fide commencement of a new. or substantially new business." What are the elements of novelty and where are , they located? Are they restricted to the enterprise itself, or may an old enterprise become a new business if new people become engaged in it? That is one question I should like to have answered.


James Lorimer Ilsley: There are two kinds of situations envisaged by the resolution One is the

Excess Profits Tax

case of the person who has commenced business after the 24th day of June, 1944, and the other is that of the person who carries on a substantially different business to which subsection 4 of section 5 of this act is applicable, and uses therein physical assets substantially different from those he used in the business he previously carried on. It is difficult, of course, to say when it is "substantially different business", and I suppose that after these situations are worked with for a while they can be decided. If the changes are small it would not be a substantially different business, but if the changes are. great it is a substantially different business. It is a hard section to apply, I will admit.


John Thomas Hackett: Yes, but what I am trying to find out is whether the novelty resides only in the business or whether a new owner may bring about a new business.


James Lorimer Ilsley: What does the hon. gentleman mean? Does he mean a company instead of a partnership?


John Thomas Hackett: Yes, or take this example: a man is advanced in years; he finds a purchaser for his business; the purchaser is a young man, who has not quite enough money to pay the full purchase price; he incorporates a company which becomes the owner of the business. He sells some of the securities which , he has received, with the proceeds he pays the price. He manages the company that owns the business. Is that a new business? The owner is entirely new.


James Lorimer Ilsley: The hon. gentleman is talking about the words of the resolution, but I am thinking all the time about the words of the act. In the case where there has been a new owner, that is a commencement of a business. I have read a few times the provisions of the act:
Provided further that where a person, other than a controlled company described by section fifteen A of this act, in the opinion of the minister,
(i) has commenced business after the twenty-sixth day of June, nineteen hundred and forty-four, . . .
In the case of a new owner that person would be commencing business.


John Thomas Hackett: Yes.


James Lorimer Ilsley: After that date.


John Thomas Hackett: Then, if I have correctly understood the minister, that would be a new business.


James Lorimer Ilsley: I would think that, under the law as it stands, if a person goes into business for the first time be certainly is commencing business.


John Thomas Hackett: There is no doubt about that, but is he commencing a new business within the discretion of the minister, who will be the final arbiter in this matter?


Arthur Leroy Smith: That is the problem.


James Lorimer Ilsley: I do not think he is commencing a new business.


John Thomas Hackett: Well, "a new business" or "substantially different business".
Frankly, Mr. Chairman, this is what I have in mind. Some years ago there was a case with which the gentlemen administering the income tax are familiar. It was the Pioneer Laundry case; it had to do with depreciation. A company went into bankruptcy; a new company acquired the assets and sought in the ordinary course of business to depreciate, if my memory serves me well, the assets which it had acquired. The court denied that right. Ultimately the privy council held that the company which owned the assets was entitled to depreciation. It held that the discretion of the minister in that case was a judicial discretion and had to be exercised according to judicial principles. I believe that the income tax act was subsequently amended in such a way that depreciation was denied to a company if its shareholders, in the opinion of the minister, had been owners to a substantial degree, possibly to the extent of a majority, of the shares of. the company which had owned the business previously. I have felt that the amendment incorporates a dangerous principle into the law, because it leaves the imposition of a tax subject to the whim of the taxing agent. It seem^ to me that this resolution 5 is an attempt to incorporate into this power to tax the same, as I consider it, pernicious principle that has been incorporated into the sections dealing with depreciation.
I fear that it will get the department into difficulty because it enables the minister to exercise a power which conflicts with the whole scheme of our legislation and jurisprudence. It is going to make a corporation subject to tax or free from tax because of the incident of shareholding in that corporation. It will mean that to-day the corporation is taxable because A and B own shares; tomorrow it w'ill not be taxable because A and B have sold their shares to C and D. That is a hazardous anad unsound principle on which to rest a tax law. For that reason I ask the minister to reconsider this resolution. It makes it possible to overtake somebody who may have escaped taxation last year, but the minister is not only jeopardizing the

Excess Profits Tax
respect which I think everybody has for the department, but incorporating into the legislation a dangerous principle.


James Lorimer Ilsley: I can take one of two
courses. Serious objections have been taken to this resolution. If the committee will let it go through I will promise to consider both of those principles. If they prefer to have it stand I shall let it stand. However, I should like to get at the bill; I should like to decide on some of the sections, and have the bill printed and distributed.


John Thomas Hackett: I am quite willing to accept the suggestion of the minister that he will do what he can to meet the objections which he admits are serious. I again say, do iot let the minister undermine the good repute of his own department by going back on legislation which was passed a year or two ago.


Mr. GILLIS:: There are a couple of things I should like to get clear in my own mind. I realize that this is quite a technical legal argument; I make no pretence of knowing boo much about the law; the only thing I know about it is that any time you find it necessary to have lawyers you pay plenty for them. If you do not have the money you do not get any action.


Arthur Leroy Smith: I am sorry; that is not true.


Clarence Gillis: It is true. That is based on forty years' experience-


Arthur Leroy Smith: I do not care what it is based on; it is not true.


Clarence Gillis: -on the wrong side of the tracks.


William Henry Golding: Order.


Arthur Leroy Smith: I am sorry; it is not true.


Clarence Gillis: I do not blame those who make a living at it for protesting so loudly.


John Thomas Hackett: You come to me and I shall give you some cheap law. It may be worth just what it will cost 'you.


Clarence Gillis: It will be dear at any price.


Arthur Leroy Smith: Now you are getting nasty.


Clarence Gillis: This is a very nice-looking little resolution. There is so much protest from my right that it makes me suspicious that the minister is right.


Howard Charles Green: Now he knows he is wrong.


Clarence Gillis: I should like to ask my hon. friends this question: What constitutes new business in Canada to-day? Perhaps seventy-47696-175J
five per cent of the_ industrial set-up of this country, on the arguments I have listened to, can be classified as new business. The Canada Car and Foundry company have been in war production; they are reconverting their plant to peace-time production; it is a new business.


Some hon. MEMBERS:: Oh, no.


Clarence Gillis: Oh, yes. According to the arguments I have listened to, every war plant in this country which is transforming its plant. from the war machine to its ordinary-business of peace-time production can be-classified as starting a new business.


George Russell Boucher: Ask the minister.


Ian Alistair Mackenzie: What about making boxes in Saskatchewan without lumber?


Clarence Gillis: The same thing, new business under new management, the same old business operating for forty years though. I am a little sceptical on that point. With regard' to throwing the responsibility back into the-hands of lawyers again, who interpret the lawr that is their job, and it is fine, but I should like to ask anyone in this committee this; question: Who is better qualified to interpret what the income tax laws or the excess profits tax laws mean than the people who write them?


Alan Cockeram: If they knew what it was it would be all right,


Clarence Gillis: Absolutely:	On the other
hand, if I am living in Vancouver or in Nova Scotia and I have a dispute with the income-tax department I can wend my way over to-a lawyer's office, pay him $100 and get some advice, and six months later I will get ai decision which he gets from the income tax department. That is where he gets it.' On the other hand, if I want to sit down and write the deputy minister of taxation, to whom I often write, any time I write to him I get a fair and reasonable explanation of any tax problem that may be bothering anyone and it costs me nothing but a four-cent stamp.


An hon. MEMBER:: Sometimes a month later.


Ian Alistair Mackenzie: That is a new industry


Clarence Gillis: That is the decision the
lawyer would get. And, mind you, a great many of them write asking me to get in touch with the finance department to obtain decisions in certain matters, and I do so. You know .lawyers are smart, for themselves. I should like to ask the hon. member for Rosedale, is he prepared to recommend to
Excess Profits Tax

the Minister of Labour when he comes back to the house that we immediately remove the wage controls?


Alan Cockeram: Yes.


Clarence Gillis: That we lift the ceiling? Is he prepared to recommend to the Minister of Finance that we remove price controls and abandon the Donald Gordon set-up?


Arthur Leroy Smith: On a point of order, Mr. Chairman, is this relevant to this discussion? I will give the hon. gentleman my answers to those questions, if he wants them.


Clarence Gillis: I am not asking the hon. member. I am speaking to you, Mr. Chairman, and through you to the Minister of Finance.


Harry Rutherford Jackman: I have been asked a
question-


Arthur Leroy Smith: May I have a ruling on my point of order?


Clarence Gillis: They just can't take it.


William Henry Golding: The hon. member should not be interrupted without his permission.


Arthur Leroy Smith: I rose to a point of order.


William Henry Golding: I would point out to the hon. member for Cape Breton South that in discussing this resolution his argument must be relevant to it.


Clarence Gillis: That is what I was trying to do.


Ian Alistair Mackenzie: Without success.


Clarence Gillis: We have been sitting here since some time yesterday while hon. gentlemen to my right have had possession of the floor. I listened to the discussion of private enterprise, the right to jobs, the danger of this legislation-


Harry Rutherford Jackman: Hear, hear.


Clarence Gillis: -and all that kind of stuff. JIf this is relevant, certainly I .think *the remarks I have been making are -relevant. As to private enterprise, there is no such animal in this country any more. They * only think there is. The Minister of Munitions . and Supply is handing over big plants to ;private individuals who are taking them; and [DOT]now they want exemption from taxation .because they are new businesses, but they .still come to the Minister of Munitions and :Supply and say, "We want contracts from you. We want you to underwrite the profits, ;and we want the Minister of Finance to see that we are not taxed any more." I will take a plant over to-morrow on that basis. You
iMr. Gillis.]
are not going to create any jobs by quibbling with this kind of taxation. My advice to the Minister of Finance is to stick to his guns and analyze this matter very carefully, because I think he is on the right track.


Arthur Leroy Smith: I shall confine my remarks to only one point; and may I just tell my hon. friend from the coal mining area of Cape Breton how much I appreciated what he said about my profession. At least he proved himself one of those persons who have not benefited by the advice that has been given; and I am sure the branch down there of the union to which I belong will prosecute him for engaging in the practice of law without being a registered person.
I should like to address myself to one point in connection with resolution 5. My point is this. All legislatures, all parliaments are opposed to retroactive legislation, broadly speaking, and it is only used to correct an obvious and notorious situation. Some English judge whose name I do not recall, although I know he was of the same nationality as the hon. member for Cape Breton South, once made a very wise statement which has never been challenged. He said it was better that ten guilty men should go free than that one innocent man should be convicted. That statement has never been disputed by anyone in the courts of our country or by any of our thinking people.
Obviously resolution 5 means this. The minister at least implied-I was going to say "said"-.that certain smart people' who engaged smart lawyers-apparently I do not belong to that class because I was not so engaged-avoided the intent of the legislation, of 1944. I aim quite sure the gentleman who sits in front of the minister discovered that, and hence we are now met with new legislation. I am in favour of the idea; I am in favour of that broad principle, but I still have enough confidence in the efficacy and soundness of the rule of law to say that even if a few morally dishonest people did escape, it ill becomes this parliament at this time to say to all other persons, "You, too, will be examined. You, too, will be punished."
There is not much difference between criminal legislation and punitive legislation. The municipal councils, the provincial legislatures in our country have power to establish certain penalties for infractions of bytlaws and provincial enactments. The distinction is not very great between a person guilty of a breach of the criminal code and a person guilty of a bregch of a provincial statute, say a liquor act, if you like, since I know something about those, largely on the side of the prosecution. Punitive statutes and criminal statutes have

Excess' Profits Tax
2779"
come very close together. This cannot be interpreted otherwise than as a punitive statute or we would not have it here. There can be no other reason for it except to say, "You smarty-pants beat us in our intention. You lived up to the law but you beat us in our intention. Now we are going back, and we are going to catch you." There can be no other reason for the retroactive feature in this legislation. So that I say to the minister, for whose ability I have great respect-in fact I think he might have advised the hon. member for Cape Breton South at some time or another, for the hon. gentleman certainly got excellent training somewhere-that we should not leave the broad principle. This country, this civilization is founded on law. We live by law, not by an incident of the moment, not by a happy thought we get; and law will always have difficulties in it. It must be of general application. Up there someone will gain a little; down here someone will lose a little, but inasmuch as the law is of general application, let it continue to speak as of the day of its enactment which, in this case, with great respect I submit was the date of the, presentation of the budget. I do not want people to escape, but if they have done so we have a long time to go with those people and we may catch up to them in some-other way. But let law speak as from its date of enactment.


[Stage Direction]
Resolution agreed to.
6. That the exemption of the profits of corporations derived from the operation of any base metal or strategic mineral mines be extended to the profits of corporations derived from the operation of gold mines and industrial mineral mines, and that such exemption be extended to the profits of such mines which come into production after January 1, 1946.
Mr. BRADETTE:: Excess Profits Tax Act amendment, which states:
That the exemption of the profits of corporations derived from the operation of any base metal or strategic mineral mines be extended to the profits of corporations derived from the operation of gold mines and industrial mineral mines, and that such exemption be extended to the profits of such mines which come into production after January 1, 1946.
This states that exemption under the Excess Profits Tax Act, under certain restrictions, is to be given for a limited period of time. We have already explained to the minister that when the Department of National Revenue apply their ruling this proposal is advantageous only to the high-grade producers. I believe I made that clear in the brief I presented to the Department of Finance. I believe, too, that they have listened to that argument. I have no doubt; in fact I think no one has a doubt that so far as the Department of Finance is concerned in this matter, it has applied the provisions to the gold mining industry, generally speaking. But when it comes to be applied to the Department of National Revenue, the so-called benefits the producers are supposed to get from the legislation is lost.
To low-grade or medium grade gold mines this exemption is absolutely useless. I say this sincerely. Perhaps I should address that statement to the Minister of National Revenue, who possesses good practical knowledge of mining, but I do not wish to repeat myself, and I do not wish to get to my feet again before the session is over, as I realize and understand the mood of the committee at this time of the session.
It looks as though the government is proffering something to the ordinary new producer which is worthless and is not costing the government anything. I say that deliberately, and I wish to make my point clear. Our gold mining industry showed prior to the war, and particularly during the war, that it was willing and ready to pay all the taxes that the government thought fit to impose upon it. It did that in the past, and it is doing so at the present time. No doubt it will continue to do so in the future.
But I repeat that there are certain features in connection with depletion allowance which to some extent are absolutely nullified by the Department of National Revenue. So far as my information goes, the future of mining in our north country is largely dependent upon the willingness of our taxing authorities to provide a fair depletion allowance which will permit an investor, when he makes good, to get his original capital back without us being taxed.
Everyone realizes that mining is highly speculative, and gold mining particularly. I believe that only one man out of ten makes any profit out of the business, and that is a

fair average. I know whereof I speak. I know, too, that many hon. members have in the past invested in some new ventures in gold mining, or even base metals,, and I will leave it to them just how great a return th,ey have received after making, in some instances, a heavy investment.
This provision gives discretionary powers to the Minister of National Revenue, and requires no change in the legislation.
That is all I wish to state at the present time. I am appreciative that hon. members have listened to me. I wish also to make a further statement respecting the Minister of Finance, regardless of what I may have said during the debate on the speech from the throne. Every hon. member on this and on the opposition side of the house knows the fine and gigantic job the Minister of Finance has done in his department during war time. Everyone who has seen him function must realize that the job was a difficult one, but his accomplishments have been admired and appreciated by all those that know of them. It was far from easy. No doubt great credit must be given to him personally for the wonderful things which we have done in our Canadian scheme of financing, and which are the cause of the great confidence that his-actions have inspired.
The workers, the muckers and those in an administrative capacity in my section of the country realize that the Minister of Finance is absolutely open-minded when we bring to his attention something that is .logical. Again I thank the minister and the premiers of the different provinces who attended: the dominion-provincial conference for having found it possible to discuss -this matter. This is one place in which the Department of Finance could give a lead. It can ask what was done in the big mining convention when the ministers of mines of the nine different provinces of the Canadian federation spoke along the same lines as I speak to-night, and also with unanimity.
They realized, and every citizen must realize what will be accomplished by mining. In my own section of Ontario, Quebec and in northern Manitoba and other parts of northern Canada one can see some of the greatest developments, not only in connection with gold mining but in connection with the mining of all kinds of minerals that the world has ever seen.
One has only to look at the map of Canada and know of the regions involved to see that within a few short years many more new mines will be opened and developed fruitfully in those parts of the country. This will be a very great factor in our development. It will be a wonderful factor in the life of every Canadian because, as was stated just

Excess Profits Tax
a few days ago in the committee on external affairs, time after time one person who is employed in mining will give employment to twelve other persons. This has been said by witnesses who knew mining in general. I know the government, and particularly the Minister of Finance are heart and soul behind our means of employment. He has seen for himself, personally, some of our mines. He has seen new sections of the population, such as are found at Timmins, Schumacher, South Porcupine, Kirkland Lake and many other new fine centres in northern Ontario and Quebec. He knows that section, in the same way as it was known by Mr. Crerar, who formerly was Minister of Mines and Resources. I know, too, that in the rehabilitation period gold mining in particular, and mining in general will perform a great national duty, and we hope that all possible attention may be given to the survival and 'extension of this industry. It will prove such a wonderful cure for employment that problems and grivances should be fully'understood, and dealt with in a practical way by the federal government.


Agar Rodney Adamson: I wish to congratulate the hon. member for Cochrane on what he has just said. I can agree with him on everything with the exception of his sanguine thought that the Minister of Finance really appreciates what the mining industry has done, is doing and is capable of doing for the economy of this country. Resolution 6 brings gold mines under the same agreement as the base metal, or what were known during the war as the strategic metal mines, and gives a three-year income tax exemption to new gold mines. I should like to refer for a moment to the original Excess Profits Tax Act and quote a submission which was given to me with regard to section 6, which is as follows:
The exemption as proposed by item 6 of the excess profits tax resolutions will be for the period that the excess profits tax remains in force.	.
The only tax administered by this division which will be payable will be the income tax which at present is 18 per cent of net profits.
Under the procedure adopted in administering the original section 7 (g) of the Excess Profits Tax Act, no set period was allowed for "tuning up" hut you will note that the exemption commences from the time that the property commences production of ore in reasonable commercial quantities. A "tuning up" period of six months was allowed for the purposes of section 89 of the Income War Tax Act in respect of base and precious metal mines but in view of the inclusion of industrial mineral mines under the present proposed legislation, it is not felt that a definite period can be set at this time. -
The "tuning up" provision is purely _ an administrative ruling designed to allow time for the property to come into commercial production.	.
A reasonable enough submission in itself, but I wish to go one step farther. While the announced intention of the act was to provide encouragement or assistance to all mines entering production in the period concerned, the subsequent regulations-these are the words I wish to bring out to the Minister of Finance-issued under the authority of the minister, as provided for in section 4 of the Income War Tax Act, which reads:
The minister may make any regulations deemed necessary for carrying this section into effect.
These have the effect of denying those benefits to any mine, except such as would have been successful in any event. These regulations made it obligatory for all new mines coming under the pro-visions to charge up to production expenses a maximum of fifteen per cent depreciation per annum on their total plant expenses and additionally to charge off annually during the same period a minimum of fifteen per cent of the total predevelopment expenditures made in preparing the mine for production. This is what I brought to the attention of the minister this afternoon when I said I was going to discuss this part of the act.
A low-grade mine may find itself in the position of having to spend as much or even more money in developing its ore body prior to production than it will spend on its whole treatment plant. It is not uncommon to find that when the treatment plant, which may be depreciated at fifteen per cent per annum, costs half a million dollars, a similar sum has been expended on pre-development and must be written off at the same rate. The write-offs that are required to be made in such a case, whether the mine has a profit or not, amount to fifteen per cent of SI million per annum, or $150,000 a year, giving a total of $450,000 in three years. In other words, before any benefits accrue from the release from taxation, such a mine must first make sufficient operating profits to meet these enforced write-offs, a situation that exists only in the larger higher grade mines.
If insufficient profits-this is the case of a loss-to take care of these write-offs are made in the period, then the mine finds itself forced to set up a loss which cannot be applied to reduced future profits. If, therefore, it is really the intention of the government to provide by this means some real assistance and encouragement to new mines to go into production, the present limitation by regulation of depreciation and pre-development write-offs should be entirely removed. If that action is not taken, the effect of the act itself is simply to give to the mines that already have and take from those that need help.
Excess Profits Tax


Alan Cockeram: I congratulate the hon. member for Cochrane, who represents a good mining constituency, upon his support of the industry to-night, as I believe that the mining industry in this country is much misunderstood. The general opinion is that anybody connected with mining becomes a millionaire overnight. The mining industry has a definite place in the economic life of this country, and in support of that assertion I should like to read a statement which was made by the former minister of mines, Hon. J. A. Crerar, in April, 1936. He said:
I must emphasize this factor of capital. Few laymen are aware of the vast sums of money required to develop mines. The great deposits of the Flin Flon, in Manitoba, required an expenditure of $30 million before there was any return on this large investment. The mine at Noranda in Quebec required $25 million to enable it 'to produce the refined metals in the large quantity it now does.
I ask the committee to bear this in mind:
The average gold mine takes from $1,000,000 to $5,000,000 to develop and equip to the state of production. Much money must be risked in the early stages of development, for there is no certainty of success. Courageous capital is thus an essential to new mining enterprise.
I would point out to the minister that in a brief which he received from the Mining Institute of Mining and Metallurgy, I think last year, the following statistics were given: that, of Canada's 1942 metal production value, 56 per cent was derived from mineral areas discovered prior to 1910, 28 per cent was derived from mineral areas discovered between 1910 and 1920, 11 per cent was derived from mineral areas discovered between 1920 and 1930, and only 5 per cent was derived from mineral areas 'discovered subsequent to 1930.
I gave some figures this afternoon regarding the industry; and with your permission, Mr. Chairman, I wish to stay fairly close to my 47696-176
notes, because I have a lot of statistics to give. I would point out that, according to the Royal Ontario Mining commission's report, the establishment of new communities directly due to mining was as follows:
The Ontario metal mining industry has been responsible for the establishment of new, prosperous communities, non-existent a few years ago, which, according to the 1941 dominion census, had a combined population of 138,110. Of this total it is estimated that at least 125,000, or 90 per cent, are directly dependent upon metal mining.
I was surprised to find, in reading the budget resolution, that the Minister of Finance gave very little consideration to the metal mining industry of this country. It is estimated, and it appears in the brief of the Canadian Institute of Mining and Metallurgy, that for every one person actually engaged in the mining industry in this dominion, twelve other Canadians depend upon the prosperity of that industry for their livelihood. In 1941, the annual report on mineral production issued by the dominion bureau of statistics shows that 113,227 persons were employed in the Canadian mining industry. Taking an average of twelve people employed directly or supported indirectly by the mining industry, we arrive at the figure of 1,358,724 Canadians who owe their livelihood or their living to the success of the mining industry. This figure represents approximately eleven per cent of the population of'the dominion. South Africa is still the leading gold-producing country of the world, but I can see where Canada, with a little encouragement from the Department of Finance-and after all it is only his department that can encourage the industry-can be put in the position of leading the world in gold production. If we reach that position we shall be creating new wealth, and new wealth in connection with mining means jobs for very many people in this country.
Gold mines in this country produce new wealth and create markets for foodstuffs, labour, lumber, electricity, transportation and services of all kinds, and I would remind the minister that gold mines pay very heavy taxes to the dominion treasury. I would also remind the minister and his officials, however, that gold mines cannot reproduce themselves. Once a level in a mine is mined out it is gone for good. Neither the minister nor anyone else can put gold back in the ground. The life of the average Canadian gold mine is only about eight years. We are very fortunate in that, for many miles across our country we have the pre-Cambrian shield which statistics show has been prospected only to about ten per cent.
I would again ask the minister to show consideration for this industry, which means so much not only to Ontario but to every prov-

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ince in the dominion. I could go to many hon. members representing industrial centres, including centres in British Columbia, and ask them to investigate from the industrialists in their communities and find out what the gold mining industry has meant to their districts.
Over the last few years Canada benefited from an increase in the price of gold. What does that increase in the pric^ of gold mean in terms of employment in this country? The average life of a gold mine in Canada is 8'12 years. The increase in the price of gold which took place some years ago meant an additional one year of life to those mines. The ore which, prior to the increase in the price of gold, was just rock became productive and thus the mining industry was able to produce it, and give employment and pay taxes.
In this connection I should like to give some figures.


Some hon. MEMBERS:: Carried.


Alan Cockeram: You fellows over there, wait a minute; you do not know anything about this. Let me take Ontario figures for illustration purposes. Every year of extra life added to a gold mine by the rise in the price of gold resulted in these figures. Hon. members on my left are not interested in employment, or anything like that, but this is what the increase in the price of gold meant: one more full year's work for 21,000 men in this country drawing a payroll of $42,000,000. From this point, mainly employment, as well as purchases of supplies, the creation of new dollars for Canada, and the continuance of steady jobs for Canadians, the life length of every individual gold mine is of prime importance. Anybody who knows anything about the mining industry realizes that for the last twenty years jobs have been steady and well paid in the gold mining industry, and for that reason we have had very little unrest in our gold mining area.


George Hugh Castleden: What about Kirkland Lake?


Alan Cockeram: That was fomented by people like yourself. During the years 1931 to 1941 Ontario gold mines increased production by $11,000,000; but total costs increased by $15,000,000. In that connection I have some figures that I should like to place on the record with the unanimous consent of the committee. I should like to do that so that the committee might have some idea of the costs of operating a gold mine. These figures are dealt with under the following headings: price of gold, tons milled, gold recovery, operating costs per ounce, total taxes per ounce, operating costs per ton, total taxes paid per ton and the recovery per ton of seven of the leading producers in the province of Ontario from the year 1930 to 1943.


William Henry Golding: Has the hon. member the consent of the committee?


James Lorimer Ilsley: Who compiled the figures?


Alan Cockeram: The Ontario mining
association which, I think the minister will agree, is a reputable association.


James Lorimer Ilsley: All right.


Alan Cockeram: The table is as follows:


PRODUCTION STATISTICS OF 7 ONTARIO GOLD MINES
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(From 1930-1945)
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[DOT]
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1930
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1931
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1932
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1933
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1934
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1935
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1936
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Price of Gold (Can. Currency)
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Tons Milled
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Gold-Recovery (oz)
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Operating cost per ounce excluding taxes
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Total taxes paid per ounce
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Operating cost per ton excluding taxes
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Total Taxes paid per ton
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Recovery-! per ton
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Grade-Ounces per ton
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S 20.67 3,363,370 1,495,187 11.73 0.87 5.22 0.39 9.21 0.45
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21.55 4,293,787 1,789,534 11.57 1.04 4.82 0.43 9.10 0.42
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23.47 4,729,412 2,059,490 11.05 1.36 4.81 0.59 10.00 0.43
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28.80 4,614,572 1,782,492 12.76 1.92 4.93 0.74 11.41 0.38
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34.50 5,077,578 1,780,598 13.93 2.70 4.89 0.95 12.05 0.35
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35.19 4,970,740 1,734,088 14.30 3.54 4.99 1.23 12.18 0.35
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35.03 4,983,702 1,715,641 15.94 3.11 5.49 1.07 12.10 0.34
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-
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1937
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1938
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1939
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1940
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1941
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1942
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1943
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Price of Gold (Can. Currency)
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Tons Milica
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Gold-Recovery (oz.)
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Operating cost per ounce excluding taxes
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Total taxes paid per ounce
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Operating cost per ton excluding taxes
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Total Taxes paid per ton
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'
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Recovery-t per ton
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Grade-Ounces per ton
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% 34.99 5,071,969 1,709,738 16.87 3.04 5.69 1.05 11.83 0.34
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35.17 5,136,505 1,702,713 17.26 2.98 5.72 0.99 11.66 0.33
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36.14 5,127,168 1,670,349 17.76 3.18 5.79 1.04 11.77 0.33
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38.50 4,983,710 1,584,473 17.81 5.76 5.66 1.83 12.24 0.32
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38.50 4,852,352 1,516,832 19.24 6.45 6.02 2.02 12.03 0.32
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38.50 3,923,059 1,188,610 20.88 5.50 6.32 1.66 11.64 0.30
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38.50 3,177,852 992,054 20.88 5.92 6.52 1.85 12.02 0.31
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[Mr Cockeram.]

Silver Prices
Canada has been fortunate over the past fifteen years, in that the price of gold has shown a substantial increase; and I wish to show what that increase has meant to this country. In terms of new jobs, new payrolls, new wealth and the actual amount of gold mined, this is what happens with a rise in gold prices. Between 1930 and 1939 the price received by Canadian mines for their gold rose as a result of currency exchange fluctuations from 820.67 per ounce, to 836.14 per ounce. Compiled from the records of seven Ontario mines which were in steady production during the period from 1930 to 1939 the price of gold went up seventy-four per cent. The tons of ore milled went up fifty-two per cent; the ounces of gold recovered went up'thirteen per cent; the proportion of recovery in ounces of gold per ton milled went down twenty-six per cent, and the total number of our employed increased by 161 per cent. That meant, Mr. Chairman, that because of the increase in the price of gold the mining industry were able to treat many more tons of lower grade ore than they were able to treat in the years gone by. This lower grade ore gave much employment directly and indirectly in this country. I wish to tell the committee what this increase in the price of gold meant. With the higher price of gold the mining industry produced thirteen per cent more ounces of gold from fifty-two per cent more tons of ore, and the seven mines that are referred to in the statement mined and milled 1,489,052 more tons of ore than they did in 1930. Because of the increase in the price of gold the mining industry was able to treat many more tons of ore, and the lumbering, transportation, electricity and every other kind of industries throughout Canada benefited.
Those of us who are connected with the mining industry believe that we have a very sound case, and we ask the minister to go back to the point where the industry was many years ago when it was allowed a fifty peT cent depletion allowance, and the shareholders received a similar allowance when the dividends came into their hands. If we are to develop our gold mining industry the minister must realize that the people who put their money into the industry take great risks. If it is a gold mining company it is using the shareholder's money to develop further prospecting. I would again ask the minister to consider this whole question of mining taxation. If I can be of any assistance to the officials of the department I shall be only too 47696-1764
glad to do anything I can. I believe that the-future of this country in good times and in bad depends on the success of that industry which has done so much to carry us through , depression years and war years.
Resolution stands.
Progress reported.
fAt eleven o'clock the house adjourned, without question put, pursuant to standing order..
Saturday, December 1, 1945.