July 25, 1917

LIB

Edward Mortimer Macdonald

Liberal

Mr. MACDONALD:

How about an alien who lives in another country and who has stock or interests in Canada from which he gets an income?

Topic:   WAYS AND MEANS.
Subtopic:   INCOME TAX.
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CON

William Thomas White (Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir THOMAS WHITE:

We do not tax any but residents of Canada.

Topic:   WAYS AND MEANS.
Subtopic:   INCOME TAX.
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LIB
CON

William Thomas White (Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir THOMAS WHITE:

I believe they do but I am of the opinion that it is rather an unwise tax. I do not see how we can hold an alien liable unless we provide to cut off a portion of his income at his source and that would raise questions as to what his real income was and as to whether it was proper to do that. This Bill will not apply to aliens unless they are living in Canada.

Topic:   WAYS AND MEANS.
Subtopic:   INCOME TAX.
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LIB

Edward Mortimer Macdonald

Liberal

Mr. MACDONALD:

What would he the course with regard to a British citizen who lives outside of the boundaries of Canada but who draws an income from Canadian sources?

Topic:   WAYS AND MEANS.
Subtopic:   INCOME TAX.
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CON

William Thomas White (Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir THOMAS WHITE:

That is a very vexed question, a question which has been often raised in England and is before the British Government now; that is to say, the question' of double income taxation. My own view is that there should not be double income taxation within the Empire.

Topic:   WAYS AND MEANS.
Subtopic:   INCOME TAX.
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LIB

Edward Mortimer Macdonald

Liberal

Mr. MACDONALD:

Take the case of a Britisher who lives in the United States; he is not taxed upon income that he derives from Canadian securities.

Topic:   WAYS AND MEANS.
Subtopic:   INCOME TAX.
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CON

William Thomas White (Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir THOMAS WHITE:

I think he is.

Topic:   WAYS AND MEANS.
Subtopic:   INCOME TAX.
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LIB

Edward Mortimer Macdonald

Liberal

Mr. MACDONALD:

I am inclined to think not. I think their taxation is confined to income arising within the country but still there may be some question about

that. Why should not he be liable to taxation in Canada?

Topic:   WAYS AND MEANS.
Subtopic:   INCOME TAX.
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CON

William Thomas White (Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir THOMAS WHITE:

In the first place he is not a resident of Canada, There is another thing. We must bear in mind that we must not be too astute or too eager to tax an alien in respect to the small investments he may have made in Canada. I would fear that too stringent taxation in that regard would deter men from investing in this country-and we want investment.

Topic:   WAYS AND MEANS.
Subtopic:   INCOME TAX.
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LIB

Rodolphe Lemieux

Liberal

Mr. LEMIEUX:

What about the people who transform thejr present holdings into, say, Dominion war loan securities, which are free from any taxation?

Topic:   WAYS AND MEANS.
Subtopic:   INCOME TAX.
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CON

William Thomas White (Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir THOMAS WHITE:

The Government war loans are free from any income taxation, and they must be. It is absolutely impossible for this Government to issue its bonds to the amount which is and will be required for the war expenditure of the Dominion unle'ss those bonds are income tax free, so far as Dominion legislation is concerned. The reason is that mem buy securities to yield a certain interest rate. Sometimes the difference between 5.30 and 5.40 per cent will determine whether a man will or will not buy a bond. My hon. friend knows that the value of securities' is regulated having regard to market conditions and the value of all other securities, and in offering Dominion issues, put out as we must put them out to finance a iwar of this kind, the uncertainty of an income tax so far as the future is concerned, or a heavy income tax so far as the present is concerned, means that people will not buy those bonds to the extent they otherwise would. And there is this further point to he considered. If you should sell your Dominion bonds without that provision that they are income tax free it would only mean that you would have to sell them to yield a higher rate than they yield to-day. So it is as broad as it is long; you would not get as much for your issue of securities as you get for them to-day, free of income tax. That is a question that has perplexed many Chancellors of the Exchequer. In the United States they have issued their loans free of income taxation for the reasons I have mentioned. Even in England, which is the home of income tax, where they struggled to the utmost against issuing securities free of income tax, in connection with the last loan in London they gave an alternative, one free of income tax and another subject to it. There is in the Bill

239i

provision for assessment, appeal and collection. I have placed no time limit upon this taxation measure; but I do suggest, and I should like this suggestion to be on Hansard, that after the war is over this taxation measure should be deliberately reviewed. What I have in mind is this: In the period after this war, as in the past, we will continue to invite people to come to this country. We shall need men of enterprise, men of ability, to bring in capital and develop our immense undeveloped resources. In reviewing this measure after the war, I think consideration should be given to the question whether the taxation is so heavy that it would operate to prevent men of that type from coming to this country and giving us the benefit of their enterprise and their capital and their ability. I have placed, as I stated, no time limit upon the measure. We cannot see very far ahead in these days. We do not know how long this war will last. We do not know what the attitude of the people of this world or of this country will be upon many questions, social, industrial, financial and fiscal. Therefore I have placed no time limit upon this measure, but merely have placed upon Hansard the suggestion that, a year or two after the war is over, the measure should be deliberately reviewed by the Minister of Finance and the Government of the day, with the view of judging whether it is suitable to the conditions which then prevail.

I therefore beg to lay upon the Table the following resolution:

Resolved, that it is expedient:

1. To levy an income tax of four per centum upon income exceeding two thousand dollars per annum in the case of unmarried men and widowers without children, and exceeding three thousand dollars in the case of other persons, and, in addition thereto, a supertax of two per centum upon the amount by which the income exceeds six thousand dollars and does not exceed ten thousand dollars, and five per centum upon the amount by which the income exceeds fifty thousand dollars and not exceed twenty thousand dollars, and eight per centum of the amount by which the income exceeds twenty thousand dollars and does not exceed thirty thousand dollars, and ten per centum of the amount by which the income exceeds thirty thousand dollars and does not exceed fifty thousand dollars, and fifteen per centum of the amount by which the income Exceeds tflfty thousand dollars (ind does not exceed one hundred thousand dollars, and twenty-five per centum of the amount by which the income exceeds one hundred thousand dollars.

2. To levy an income tax of four per centum upon income exceeding three thousand dollars in the case of corporations and joint stock companies.

Topic:   WAYS AND MEANS.
Subtopic:   INCOME TAX.
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LIB

Alexander Kenneth Maclean

Liberal

Mr. A. K. MACLEAN:

Mr. Chairman, I do not propose to detain the committee for more than a moment at the present time, as it is quite clear that the proposal which is submitted by the Minister of Finance (Sir Thomas White), can be more properly and profitably discussed when we are considering the bill founded upon the resolution. I have no doubt that the principle contained in the taxation proposals just submitted to the committee will be approved of by the country. The advantages of the proposal are quite obvious. It will augment our revenues, which is very desirable and very necessary indeed; but, better than that, it will equalize taxation in this country, and that is obviously desirable. I think the House will approve also of the suggestion, of the declaration of the Minister of Finance-

The House having resumed.

Topic:   WAYS AND MEANS.
Subtopic:   INCOME TAX.
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THE ROYAL ASSENT.


A message w>as delivered by Lieut.jColonel Ernest J. Chambers, Gentleman- Usher of the Black Rod, as follows: Mr. Speaker, the Deputy of His Excellency the Governor General desires the Immediate attendance of this honourable House in the Chamber of the honourable the Senate. Accordingly, the House went up to the Senate. And having returned, The Speaker informed the House that the Deputy of His Excellency the 'Governor General had been pleased to give, in Bis Majesty's name, the Royal Assent to the following Bills: An Act respecting- The Guardian Accident and Guarantee Company, and to change its name to "The Guardian Insurance Company of Canada." An Act respecting The Grain Growers' Grain Company, Limited, and to authorize it to change its name to "United Grain Growers, Limited." An Act respecting the Saint John Board of Trade. An Act to amend the Act incorporating The Canadian Surety Company. An Act respecting The Canadian Order of the Woodmen of the World. An Act to incorporate Alliance Nationaie. An Act to incorporate La Socidtd des Artisans Canadiens Frangais. An Act respecting the Athahaska Northern Railway Company. An Act respecting The Lachine, Jacques-Cartier and Maisonneuve Railway Company. An Act to confirm certain agreements made between The Vancouver, Victoria and Eastern Railway and Navigation Company and The Canadian Northern Pacific Railway Company. An Act respecting The Western Dominion Railway Company. fSir Thomas White.] An Act respecting The Calgary and Fernie Railway Company. An Act respecting The Canadian Northern Quebec Railway Company. An Act respecting The Canadian Western Railway Company. An Act respecting the Kaslo and Slocan Railway Company. An Act respecting The Mount Royal Tunnel and Terminal Company, Limited. An Act to incorporate The Eastern Telephone and Telegraph Company. An Act respecting the Grand Trunk Pacific ilra.-ich Lines Company. An Act to incorporate The Bishop of Mackenzie River. An Act to amend the Act to incorporate The Canadian General Council of the Boy Scouts Association. An Act respecting The Interprovincial and James Bay Railway Company. An Act respecting La Compagnie du Chemin de Fer de Colonisation du Nord. An Act respecting The Continental Heat and Light Company. An Act respecting certain patents of George C. Breidert and Burton W. Mudge. An Act for the relief of Delbert Ralph O'Neil. An Act for the relief of Edward Austin Barnwell. An Act for the relief of Charles Frederick Reuben Jones. An Act for the relief of John Basnett Parker. An Act for the relief of Amy Beatrice Mathews Hilton. An Act for the relief of Colin Darrach Poole. An Act for the relief of Thomas Edwin Jory. An Act for the relief of Florence Evaline Snyder Lockwood. An Act to incorporate The Grand Lodge of the Canadian Association of Stationary Engineers of the Dominion of Canada. An Act to facilitate certain financial arrangements between the Government of the United Kingdom of Great Britain and Ireland and the Canadian Pacific Railway Company, and for other purposes. An Act to amend the Penny Bank Act. An Act to repeal The Ocean Telegraph Act. An Act to amend the Chinese Immigration Act. An Act to amend the Civil Service Act. An Act to amend The Business Profits War Tax Act, 1916. An Act respecting The British Columbia and White River Railway Company. An Act respecting The Western Life Assurance Company. An Act for the relief of George Walter Sherald Garrett. An Act for the relief of Gertrude Ellen Beal. An Act for the relief of Donald George Whibley. An Act respecting a patent of Ernest Mead Baker. An Act respecting a patent of James B. King and others. An Act for the relief of George Maisey. An Act for the relief of Herbert Featherstone Conover. An Aot respecting The Empire Life Insurance Company of Canada. An Act respecting the Security Life Insurance Company of Canada. An Act respecting The Essex Terminal Railway Company. An Act to incorporate The Kenora and English River Railway Company. An Act for the relief of Florence Amelia Kennedy. An Act to authorize the issue of a patent to James Wallace Tygard. An Act respecting a certain patent of the Sharp Rotary Ash Receiver Company, Incorporated. An Act to incorporate The Canadian Council of The Girl Guides Association. An Act respecting The Canada Preferred Insurance Company An Act respecting The Western Canada Accident and Guarantee Insurance Company. An Act for granting to His Majesty certain sums of money for the public service of the financial year ending the 31st March, 1918.


WAYS AND MEANS.

INCOME TAX PROPOSAL.


The House resumed in Committee of Ways and Means, Mr. Blain in the Chair.


LIB

Alexander Kenneth Maclean

Liberal

Mr. A. K. MACLEAN:

When the attendance of this House was required in the upper chamber, I had observed that the country would at least approve the principle involved in the taxation proposal submitted to the committee this afternoon by the Minister of Finance, and that if there was any criticism of the same, it would relate entirely to the details of the proposals. The details of the resolution can be more profitably discussed when the Bill founded on the resolution is printed and distributed amongst the members. The taxation of income is as the minister has stated, a new form of taxation in this country except in so far as it is employed in the several provinces. My experience is that while there is an income tax in several of the provinces, still it is not enforced very rigidly and in the strictest sense I would think that there is still in Canada hardly any such thing as an income tax. One great value of this form of taxation will be that the taxpayer will take a greater interest in the expenditure of any money which he contributes directly to the public treasury. One of the evil effects of indirect taxation is that the taxpayer is apparently never fully seized of the fact that he is contributing anything in taxation to the public treasury. Consequently, he is as unreasonable in his demands upon the public treasury as are people who never contribute one cent either directly or indirectly. It is in the interest of sound national finance that we should have in this country some form of income taxation, and I have no doubt that once we have embarked upon it, the judgment of the country will be that it should be continued for many years to come.

The minister is a little alarmed that the imposition of taxation of this kind may, in the future, impede immigration. He left the impression upon me, at least, that in

[DOT]his mind there was a fear that the intending immigrant would consider an income tax as unfair and oppressive. I hardly look at the matter in that light. Our taxation in this country is by no means light to-day; it is very high; indeed, it is excessive. The fact that it is paid indirectly in the form of customs taxation makes the average taxpayer blind to the fact that it is from him we obtain all our revenue. The average rate of customs duty to-day is, I suppose, 35 or 40 per cent, and nobody could say that that was a light rate of taxation. The minister, therefore, need not be apprehensive that in the future immigrants might be deterred from coming to Canada by reason of the imposition of the income tax. If the country is in fear that our taxation would impede immigration in the years to come after the cessation of the war, such fear can easily be removed by a lower rate of customs taxation, which is now very excessive.

I wish to refer very briefly to the statement made by the Minister of Finance in justification of his taxation proposals. He stated that he was urged to do this by reason of the fresh burdens which this country was about to assume owing to the passage of the Military Service Bill. That is hardly a good ground upon which to justify the resolution. It may be that the introduction of the Military Service Bill has accentuated in the minds of the people of this country the fact that from the beginning of he war up to the present time the Government has not imposed a sufficient burden of taxation upon the people in order to meet in proper proportions our unusual obligations due to the waT. The Minister of Finance, in discussing his Budget proposals on the 24th of April last, took very strong ground against the imposition of an income tax, and argued very carefully and seriously the undesirability of imposing such form of taxation. I am not inclined to agree with him when he says that the justification of the income tax is due to the fact that we are about to engage in larger military operations by reason of the passage of the Military Service Bill. The truth is that almost since the beginning of the war we should have had in this country some form of income taxation. I do not say that it should have been imposed immediately at the commencement of the war, but I do say during the past two years we should have had some form of income taxation. Hon. gentlemen on this side of the House, and, I think, some hon. gentlemen opposite impressed this upon the minister on various occasions, in particular

*when we were discussing the annual Budget speech of the Minister of Finance. I am, however, sure the country will welcome the proposal submitted to the committee this afternoon. 1*116 only criticism which hon. gentlemen, or the country generally, will make to the proposal will have relation to the details and not to the principle.

I wish to say just a word or two in reference to the details of the resolution, although it might be proper to reserve discussion of such details until the Bill is printed. The exemption in respect to unmarried men is +oo high. We must realize -and if we do not it will be unfortunate for the country in the future-that we are rapidly piling up a tremendous national debt, which will tax to the limit the resources of this country and its people in the future.

We are enjoying commercial prosperity notwithstanding the war, and it seems to me that now is the time to impose upon the people of this country the utmost of taxation. According to the statement read by the Minister of Finance an unmarried man with an income of $4,000 will pay a tax of $80; with an income of $5,000, a tax of $120; with an income of $7,000, $220; with an income of $10,000, $400; with an income of $12,000, $580; with an income of $15,000, $850. I submit that this is certainly not an oppressive tax to impose upon an unmarried man or widower without dependent children. I think it is a very, very moderate tax, in fact, too moderate. I think an unmarried man with an income of $4,000 should be obliged to pay more than $80 taxation under this measure. I believe that the young men of this country enjoying a salary of that amount wrould be glad to pay a higher tax, at least during the war, and until there is a reconsideration of this taxation Bill. I do not intend to occupy the time of the hon. members now in discussing further this particular detail; I merely say that in my judgment the proposed rate of taxation in this respect is not sufficiently high. I also think that the exemption limit in the case of an unmarried man might be lower than $2,000. I make this statement believing of course that after the war the question of income taxation will be reconsidered and modifications made to .meet then existing conditions. It seems to me that an exemption of $2,000 is quite substantial in the case of an unmarried man, and I think it could very well be reduced. I do not know exactly what are the provisions of the income taxation IMr. A. K. Maclean.]

measure now before the United States Congress, but as the Bill was introduced and as it stood on July 7th it provided for an exemption of $1,000 in the case of single persons, and $2,000 in the case of married persons and the heads of families. Those provisions were still in the Bill when it was reported to the Senate. The Bill, however, was re-committed to the Senate Finance Committee, this being necessitated by the addition of certain clauses providing for the prohibition of the manufacture of spirits which reduced the estimated revenues, and I do not know now how the legislation now stands.

There are many other features of the resolution which require consideration by the committee, but until they are before us in the form of a Bill I shall reserve discussion upon them. I should .like to know what amount of revenue the Minister o.f Finance expects to receive from this income taxation.

Sir THOMAS WHITE; That is a very difficult question to answer. In fact, it is almost impossible to do more .than guess at the amount, because we have never had a tax of this kind in Canada; but roughly speaking, we hope to get $15,000,000 or $20,000,000 a year at least.

Topic:   WAYS AND MEANS.
Subtopic:   INCOME TAX PROPOSAL.
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LIB

Alexander Kenneth Maclean

Liberal

Air. A. K. MACLEAN:

If the minister anticipates that amount of revenue, it justifies the statement I made a few moments ago that we should long ago have had federal income taxation in this country. My hon. friend always resisted the introduction of income taxation on the ground that it would bring in very little revenue. In fact, I think that on one occasion he said it would not bring in more than $3,000,000 or $4,000,000 a year at most. However, I am very glad indeed to learn that he anticipates a revenue of $15,000,000 or $20,000,000.

Topic:   WAYS AND MEANS.
Subtopic:   INCOME TAX PROPOSAL.
Permalink

July 25, 1917