June 2, 1921

CON

Henry Lumley Drayton (Secretary of State of Canada; Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir HENRY DRAYTON:

It is far more than a question of system. It is a question of economical administration. If you have to have enough men to make out all the bills of this country at one time, your cost of collection will go up to such a point that it would be very questionable what the results would be. As it is now, everybody is treated on the same basis.

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L LIB
L LIB

Daniel Duncan McKenzie

Laurier Liberal

Mr. McKENZIE :

I want to support what has been said by my hon. friend from Maisonneuve and my hon. friend from Shelburne and Queen's. If the public thought that this tax was going to continue for only two or three years until we have got out of our war difficulties, they would possibly put up with it, but if it is going to last as long as most of us here will live, the minister should certainly change the method, because I can assure him that the Canadian public will not stand for it. There is no reason why the Crown should be in a different position from any corporation which has to collect bills. I am willing that the Crown should have some advantage that the ordinary creditor does not have, but I think we should set the example of being humane and lenient in the collection of our bills. If any other concern on earth came to this Parliament and asked: Give me power to make the man who has been dealing with me for a year or two, and who knows what he has bought on credit, send in an account of what he owes me, and pay the bill by a certain date; and if he does not do so, give me power to impose a fine, or if he makes an incorrect statement to impose double the fine-everybody in this House would laugh at any person who thought for one moment that he would be given such power. We would say to him: Send out your bill and make your demand decently, and if your debtor does not pay, the courts of the country are open to you to collect your bill. Why should not the same rule apply to the Government in

the collection of the income tax? Surely, the sane and sensible thing is for the department to make out their accounts and send them out to the different individuals, to myself, for instance, telling me that if I do not pay the account by such and such a date I shall be subject to a certain penalty. I could not complain very much about that. But as it is now, the department does not even send out a form. I have to hunt around the country myself until I get a form, and a busy man often forgets about it. Then when he gets the form, he has to make the return, and if he makes a mistake in assessing himself, one way or the other, particularly if he does not send in enough money with the return, he is subject to a fine. I submit that that system does not commend itself to the Canadian people, and I say-and I am a somewhat old parliamentarian by this time and have had a great deal to do with the public in one way and another-that the Canadian people if they felt that this system was going to be followed in perpetuity would not stand for it one minute. They are standing for it now because of the war necessities, and only because this is a sort of war measure. The minister may not be able to change the system right away, but I hope that at the very earliest possible opportunity he will modify it in such a way that the department in collecting the money will be as nearly as possible on the same basis as other creditors who have to collect money from the public.

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UNION

James Robert Wilson

Unionist

Mr. WILSON (Saskatoon) :

I think it is going a little too far to expect the average man to make his own assessment. It is all right to ask him to make a return, because there is no one else who can make it but himself, but I think it is going too far to expect him to make his assessment, when possibly he does not know enough about the taxes and super-taxes and exemptions to make an accurate assessment. We must not forget that the average man with a taxable income is not an expert book-keeper, and it takes almost an expert accountant to make the assessment on his own income, for the first time, at least.

There has been considerable dissatisfaction in my constituency over this system, not so much because people object to pay the tax, but mainly on the part of people who are not liable to the tax. Two of my constituents were brought before the courts in Saskatoon last winter, and were fined $100 for failing to make a return, notwithstanding the fact that they claimed they

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did make a return. Apparently there is no regulation in the income tax offices compelling an acknowledgment of returns when sent in. When I learned this fact I adopted the practice, when making my returns, of registering them, so that I might have something to show that I had sent them in. I have a letter written by a gentleman in Saskatoon, named Mr. T. J. Peacock. I desire to read this letter:

As I seem to be one of the parties picked out for the goat on this income tax returns for 1918, I am writing you to see if anything can be done regarding this, and I suppose that it is only fair that you understand the facts of the case. About the 17th or 18th December I was summoned to appear at the Police Court at Saskatoon for neglecting to make return and pay inoome tax for the year 1918. Mr. D. Maclean appeared with me on the 2i7th December before Magistrate Brown and was fined $100 and costs. My sworn evidence showed I was not liable for tax and that there were at least two sets of forms mailed to me, one to my house address, and one to my office. I filled in the latter set, but did not fill in the former ones, as they were both the same, these were personally mailed, that was my defence, which was not contradicted. The argument put up by the prosecution was that they had mailed me a registered notice, asking for return, which I had heard nothing of although I found out later that this had been signed by one of my children when I was away from home, and also that they had called me by telephone at my house which was then rented by another party and no member of my family lived there. The Magistrate claimed the only case he had to go by was a decision handed down by some judge in Ontario who sa-id that the penalty was $100, and he admitted he was not clear about this himself, seeming to think that this amount should be imposed in every case not taking the circumstances into consideration whatever. The department would not swear that notices had not been received; the chief clerk went so far as to state to Mr. Maclean and myself after the case was over, that they had searched the office and were unable to locate them. Since that time I have known of different parties who have registered their returns to the office, and who have been asked to supply another set tvhich when traced through the Post Office to the Tax Office were found to have been delivered. I asked the girl in the office if it was customary to mail receipts after having received the returns, and her answer was No; also told me that because I did not receive a receipt would be no evidence that my returns had not been received at the office, neither would this be evidence that they were not in the office at the present time. I think that this covers the whole oase.

I know of a similar case, in regard to a man named S. Watson, of Saskatoon, and in neither instance was the man liable for income tax, although, of course, that did not excuse them from making out the returns. Both of these men, according to the sworn evidence, declared that they had made out their returns. I have laid the matter before Mr. Breadner, the Com-

missioner of Taxation, asking for a remission of the fine in the cases I have cited. I do not think it is at all fair that this man should have been fined, and I thought I would not let this opportunity pass without laying the matter before the Minister of Finance.

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L LIB

Francis N. McCrea

Laurier Liberal

Mr. McCREA:

I find myself at variance with some hon. gentlemen on this question. I do not think that the regulations are very unreasonable. It is true that the penalties are somewhat stringent, but if you do, not make your regulations strong enough, you would have very much difficulty, in my opinion, in making your collections, for very many people, if there were no regulations, would not make any returns at all. As it is, even with the penalty, there are some people who do not bother to send in returns.

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L LIB
L LIB

Francis N. McCrea

Laurier Liberal

Mr. McCREA:

Well, I agree with you in that; I do not think you should have to pay such interest. I do not agree, however, with the suggestion that the regulations are too severe, or that there should be no regulations such as exist, because the Government cannot make their collections successfully unless they enforce strictly the regulations in regard to the non-rendering of accounts.

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L LIB

Rodolphe Lemieux

Laurier Liberal

Mr. LEMIEUX:

As a business man,

does my hon. friend not think that it would be better for the officers of the department to prepare these accounts than to leave it to the taxpayers?

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L LIB

Francis N. McCrea

Laurier Liberal

Mr. McCREA:

No, I do not. We ate complaining just now that the Civil Service is over-manned, and over-burdened with employees, and if the department is to make up every man's returns, it will have to have double its force, and it is complained that it has already too many. It is true that there are some men who unfortunately are not scholars, and who therefore cannot make up these returns; but you will find in every community, in every village, many men who are willing to do this at a slight charge for those who are not themselves able to make up the returns. If I were not able to make up my returns, I could get a man close to me to do it, and, because he is on the spot, the work would be done more expeditiously than if one's books were all sent to Ottawa. I could call 3 p.m. in a competent accountant in whom I have confidence, and get him to make the returns.

[MV. J. R. Wilson ]

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L LIB
L LIB

Francis N. McCrea

Laurier Liberal

Mr. McCREA:

If I had confidence ir. a man, I would trust him just as much as I would the department. I do not think there is any serious objection to leaving it to the taxpayer to make up his returns; you can always find somebody who can do this for you if you are not able to do it yourself. Now, can the minister tell me what percentage of taxpayers in Canada have made returns and paid the income tax, and what measures the department is taking to bring to time those who have not made any returns, and who apparently do not intend to?

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CON

Henry Lumley Drayton (Secretary of State of Canada; Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir HENRY DRAYTON:

I quite agree with my hon. friend that the really important thing is to compel absolute conformity with the law, and to see that everyone pays who ought to pay. We are constantly enlarging the field of ratepayers, and finding out all those who ought to pay. We are exhausting all competent sources of income in Canada. For example, we have exhausted the lists of all the shareholders in companies, the bondholders, and people of that sort, and we are getting information as to mortgagees. We are getting information as to the assessments, locally and municipally of everybody through the assessment roll, although you very often find that the income a man gets is actually a good deal in excess of the amount he pays on under the municipal income collection. Besides that, we follow up the inquiry by having regard to the manner in which the man is living, the size of the house in which he dwells, the club or clubs he may be a member of, and whether he has an automobile-in other words we inquire into everything that discloses any outward signs not only of wealth but of relative prosperity.

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UNI L

William Stevens Fielding

Unionist (Liberal)

Mr. FIELDING:

In this country the income tax is comparatively a new thing, but it is not new elsewhere throughout the world. Can my hon. friend tell me whether he has any precedent for the present method of collection in any country except the United States?

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CON

Henry Lumley Drayton (Secretary of State of Canada; Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir HENRY DRAYTON:

Speaking offhand I do not think so.

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UNI L

William Stevens Fielding

Unionist (Liberal)

Mr. FIELDING:

I do not mean to say we should adopt a thing merely because it is English, although even that fact is of some importance, because generally the thing that is English is probably right. Not for that reason, however, but because

of long years of experience on the part of the nation which has had most to do with income tax, I think my hon. friend should have more regard for the English example. Over there the income tax has been in vogue for many years and we may be sure that they have made all the efforts possible to discover what is the best course to pursue. If as the result of their great experience, running over a great many years, they have adopted a certain method, which is not in accordance with the course pursued by my hon. friend, I think he ought to have more consideration for the English example. I can acquit the hon. gentleman, from all I hear, of any negligence on the part of his collectors. I said at an earlier stage of the session that when this tax was first brought into operation perhaps there was some ground for complaint of neglect. Now, however, I have reason to believe, the officials of the department are most energetic and are trying to make everybody pay up. I think the public have made up their minds that they have got to pay-I will not say with enthusiasm, but practically with cheerfulness-and that is one great reason why the minister should try to use convenient methods of collection. He said a moment ago when I gave him the illustration of the municipal assessment-where when they levy taxes they will grant a discount if you make payment within a certain time-my hon. friend said it makes no difference whether you take it off or put it on. But if my hon. friend will study psychology a little closer he will realize that it does make a difference. Although as a matter of economics there may be no real difference as to which course you pursue, there is no question but that when a man pays an account promptly and receives a discount he feels that he has received something and made a good bargain. I think my hon. friend should adapt his methods to the convenience of the public to a larger extent than he is doing now. As to the question involved in the keeping of accounts, while we do not want to unduly increase the number of public servants, I would far rather increase the staff of the Finance Department than worry the whole of the people of Canada unduly. I am sure that many of the hon. gentlemen sitting around the Finance Minister will say that the present method is most inconvenient and most unsatisfactory. Men are willing to pay the income tax. They have come to the point where they do so cheerfully. Every

good Canadian should be willing to pay it. But it is only fair and right that my hon. friend the Minister of Finance in any methods which he employs should make that payment as easy as possible.

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L LIB

Francis N. McCrea

Laurier Liberal

Mr. McCREA:

While we are dealing

with this matter I wish to draw the attention of the Finance Minister and the House to a feature, in connection with the income tax, which I think is an injustice. In my opinion a tax upon a tax should not be imposed, and yet that is the system which is followed. The predecessor of the present Minister of Finance, Sir Thomas White, when he was putting through income tax legislation declared that it was his intention to avoid this in every case. Now, what are the facts? Take the income tax due for 1920. It is not rendered until 1921 and a man pays his income tax out of his earnings or income for 1921. But when it comes to making his statement for the year 1921 he is not allowed to deduct the payment he made for the taxes for 1920 although I claim that would be a legitimate deduction. Consequently, I say, it is a case of imposing a tax upon a tax, and in many cases it is a heavy burden.

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UNION

Samuel Francis Glass

Unionist

Mr. GLASS:

There are a couple of

points I would like to have cleared up at this stage. The hon. member for Saskatoon (Mr. Wilson) brought up the cases of constituents of his who had no taxable income and did not render a statement but who, nevertheless, were fined because they had not made any returns. I had occasion, just before April 1, to inquire at the Taxation Department with respect to a firm who had been carrying on business and not only had no income but had incurred considerable loss this year. It was their first year in business and I asked what the duty of these men was in reference to making a return. The official to whom I spoke told me that it was not necessary for them to make a return if they had no income, and accordingly they did not send any in. Now, what I want to understand clearly is this: in cases

where there is no taxable income at all, to say nothing of a positive loss, what is the responsibility of the individual as to making a return? That is one question. The second has reference to my own case. I omitted to include in my return the travelling expenses that were allowed to me to travel to Ottawa to discharge my parliamentary duties. It is only a small matter but there is really a principle involved. To my mind a commercial traveller might just as reasonably be called upon

to include in his income the travelling expenses allowed him by his firm, as for a member of Parliament to include in his income return the money which he disburses while on his way to discharge his public duties. I should like that cleared up.

SIR HENRY DRAYTON: In connection with the first question, the Act calls for returns only from people who have taxable incomes generally. Then, of course, there are people who have taxable incomes and do not make returns, and the only way you can find that out is by asking that returns should be made. In doing that it very often turns out that people whom you think have taxable incomes as a matter of fact have not. So it is merely providing that just so s6on as a man, no matter what his income may be, gets a demand from the department by registered letter requiring him to make a return he becomes liable to make that return.

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UNION
CON

Henry Lumley Drayton (Secretary of State of Canada; Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir HENRY DRAYTON:

Only when

the demand is made. In connection with the second question as to travelling expenses, the hon. gentleman says it is a very serious matter. Well, it is something that'has not come to me yet. The question of living expenses was discussed once last session, and some hon. members thought that such expenses should be deducted, but after a little discussion I think the whole idea was dropped as the indemnity was increased.

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UNION

Samuel Francis Glass

Unionist

Mr. GLASS:

The accountant of the

House makes a return to the taxation officers in every district of each member's indemnity plus travelling expenses. It is too small to worry about, but a principle is involved. I did not include my travelling expenses, about $28, and when I got notice from the taxation officer that I had made an incorrect return I was annoyed, for I did not think I was in error, nor do I think so now.

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June 2, 1921