June 11, 1924

CON

Henry Lumley Drayton

Conservative (1867-1942)

Sir HENRY DRAYTON:

Both sides were represented. The memorandum proceeds:

After the order was issued automobile dealers applied for refund of taxes paid on automobiles which were still in stock. The Retail Merchants' Association took the matter up and made very strenuous representations. No refund was granted but at the suggestion of the then Minister of Finance representatives were appointed to go into the matter directly in behalf of the automobile industry, such representation to include not only

Ways and Means-Sales Tax

the manufacturers but also the dealers. The dealers and manufacturers shortly afterwards met the minister who pointed out that the government had no funds whatever from which to make this drawback and that when changes are made in fiscal matters rebates are not given-then when customs duties are reduced on merchandise on which the merchant has paid duty, while his competitor's goods are still in transit to the country, no refund of duties on the lower or free scale is ever made, notwithstanding the resulting hardship.

Topic:   QUESTIONS
Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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PRO

Thomas Wakem Caldwell

Progressive

Mr. CALDWELL:

There is this fact to

be noted, that when a duty is imposed it is not made retroactive to cover goods which the merchant had on hand four or five months previously, as in this case.

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Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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CON

Henry Lumley Drayton

Conservative (1867-1942)

Sir HENRY DRAYTON:

We shall come

to that. Under that legislation, the tax was payable when the sale was made.

Topic:   QUESTIONS
Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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PRO

Thomas Wakem Caldwell

Progressive

Mr. CALDWELL:

Not on automobiles.

Topic:   QUESTIONS
Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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CON

Henry Lumley Drayton

Conservative (1867-1942)

Sir HENRY DRAYTON:

Yes. It was

payable on sale by the manufacturer; as soon as the manufacturer made a sale of a car the tax was due. That tax was collected at the source; it immediately became due as soon as the manufacturer disposed of the car. And that is where the resulting hardship came in.

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Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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PRO

Thomas Wakem Caldwell

Progressive

Mr. CALDWELL:

It is a fact then that the dealers did pay a luxury tax on all cars they had on hand when the tax was imposed.

Topic:   QUESTIONS
Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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CON

Henry Lumley Drayton

Conservative (1867-1942)

Sir HENRY DRAYTON:

Yes.

Topic:   QUESTIONS
Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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PRO

Thomas Wakem Caldwell

Progressive

Mr. CALDWELL:

Although in the case

of some cars they may have had the stock on hand four or five months previous to the imposition of the tax.

Topic:   QUESTIONS
Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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CON

Henry Lumley Drayton

Conservative (1867-1942)

Sir HENRY DRAYTON:

Yes.

Topic:   QUESTIONS
Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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PRO

Thomas Wakem Caldwell

Progressive

Mr. CALDWELL:

Is it not a fact that

the dealers had to pay the tax on all cars they had on hand in the warehouse?

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Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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?

Stir HENRY DRAYTON:

My hon. friend is referring to the original tax of Sir Thomas White. I dare say he is right in that regard; I will not contradict him. But all those cars were out of the way long before this legislation was effective.

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Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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PRO

Thomas Wakem Caldwell

Progressive

Mr. CALDWELL:

But in 1920 they still had this stock on hand. They paid the tax on those cars which they had not been able to dispose of.

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Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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CON

Henry Lumley Drayton

Conservative (1867-1942)

Sir HENRY DRAYTON:

They did have on hand cars on which they had paid the tax; there is no question about that, because the tax was payable as soon as the sale was made.

The minister also pointed out that the action taken by the government was directly for the purpose of

assisting the industry and that if the opinion of the trade was that more harm than good was done by the withdrawal of the tax, another order in council would be passed restoring the taxes and placing everybody where they were. Both dealers and manufacturers insisted that this ought not to be done.

The minister then asked that a small committee be appointed for the purpose of arriving at an adjustment, pointing out that it was in the immediate interest of the manufacturers themselves to see that distributors were not unfairly treated in a matter that was for the good of the whole trade and that they were vitally interested in seeing that existing channels of distribution were maintained.

That is, looking after their dealers.

A committee of four was nominated, two representing the manufacturers and two the dealers. The committee met and reported to the minister that no arrangement could be made and insisted on a refund of the tax. This was refused. The committee again went into deliberation and came back and reported that the claim for refund would be withdrawn provided the tax be not reimposed, and that satisfactory arrangements had been agreed to by the representatives of the dealers.

I forget the names of the gentlemen who were on that committee, but I think Mr. Fortier of Quebec and another dealer who handled Cadillac cars were the dealers' representatives.

Topic:   QUESTIONS
Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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UFO

Robert Henry Halbert

United Farmers of Ontario

Mr. HALBERT:

Were the dealers willing

to forego the rebate if the tax was removed?

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Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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CON

Henry Lumley Drayton

Conservative (1867-1942)

Sir HENRY DRAYTON:

Certainly they

were willing to do that rather than have the tax reimposed. Then they came and said that a satisfactory arrangement had been made between the manufacturers and the dealers. I was inclined to get the manufacturers to help out the dealers; that was my whole object in asking them to db this. I pointed out that it was very much in their interests to look after their distributors. The memorandum goes on:

Apparently some manufacturers have not carried out the arrangement. Bulletin No. 1792, issued by the McLaughlin Motor Car Company Limited, dated January 21, 1921, is attached hereto and speaks for itself.

The memorandum issued by the McLaughlin Company is addressed to their dealers, and is as follows:

Gentlemen:

Enclosed please find Bulletin No. 1799, in connection with a refund of part of the luxury tax paid to the government by you.

You doubtless have been advised, through the representatives of the dealers who appeared before the government at Ottawa, and through the press, that the government has decided that it will not refund any of the luxury tax paid by the dealers on cars on hand, unsold, when the tax was abolished.

When the tax was originally imposed, and later when it was increased to 15 per cent and 20 per cent,

Ways and Means-Sales Tax

it was thought that the automotive industry was being placed at a serious disadvantage, and was being subjected to a more severe rate of taxation than other industries. Representations to this effect were made to the gvernment but without avail.

Owing to the general depression this fall and winter the Automotive Association again took up the matter with the government, and made very strong representations as to the unsatisfactory conditions of the trade, attributing this condition in part to the excessive taxes imposed. The case was ably presented to the government, and after investigation of the circumstances, they abolished the luxury tax completely. We are all agreed that this was a courageous stand, and we are much pleased at the government's action.

Inasmuch as the Department of Finance had collected the tax from the dealers upon cars which they had on hand when it was originally imposed, it was naturally assumed that in doing away with the tax, the dealers would be reimbursed on a similar basis, but this was not done.

That is the point made by the hon. member for Victoria and Carleton (Mr. Caldwell). The dealers insisted that when the original tax was put on by Sir Thomas White in 1918 everything in their hands was taxed. There was a difference in the two bases of taxation.

Topic:   QUESTIONS
Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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PRO

Alan Webster Neill

Progressive

Mr. NEILL:

Although the cars had been

sold by the manufacturer to the dealers at that time?

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Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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CON

Henry Lumley Drayton

Conservative (1867-1942)

Sir HENRY DRAYTON:

Yes, the difference being this: In one instance you had

a tax at the base, the distributor; and in the other you had it at the source, the manufacturer. My proposition was to tax at the source. I am quite free to admit that I had forgotten what Sir Thomas White did a few years ago.

No doubt you are acquainted with the steps taken by the various dealer organizations throughout the Dominion, and through the Retail Merchants Association, to bring this matter clearly before the government. After the dealers' deputation left Ottawa, the government asked the dealers to appoint a smaller committee to meet with the manufacturers at Ottawa for further discussion. This meeting was held at Ottawa recently, but after presenting the case from all angles to the government, and using every available argument, the combined efforts of the dealers and manufacturers were unavailing. The department has given its decision-that taxes once collected cannot be refunded, and had declined to reimburse the dealers.

The suggestion was made that the list and wholesale prices of cars should be increased for a period of several months in order to assist the dealers to get back from the customer their investment in these taxes, but we feel that this would be equivalent to re-imiposing the luxury tax in a modified form, would present a definite sales resistance which would prevent accomplishing the desired results, and would certainly lengthen the time necessary to get back to normal conditions, and prevent the dealer from reaping the full benefit of volume business brought about by the complete elimination of the tax.

On looking at the whole matter it is well to remember, that had the government not taken the unusual and almost unprecedented stand of eliminating the entire luxury tax, by order in council on December

20th, and had they, as is usual and customary, allowed matters of taxation to stand and be dealt with in the budget speech, and had deferred any action looking to the relief of this taxation until the budget was brought before parliament in the usual way (last year this was not until May 19th) the whole trade would have been in a very serious and undesirable position. We, therefore, feel that the industry as a whole has much to be thankful for by the prompt action of the government.

Under all the circumstances, and having regard to the government's refusing to make any reimbursement of taxes collected, we propose to assist the dealers in their difficulty by absorbing (under certain conditions), without raising our price for this purpose, 50 per cent of the taxes paid on new, unused McLaughlin cars in dealers hands at the opening of business Monday morning, December 20th, 1920, thereby assisting the trade to return to normal basis with the least possible delay. We are at present absorbing two per cent sales tax and will continue to do so until further notice.

While some dealers may be inclined to regard the balance of the tax which they absorb as a loss it must not be forgotten that all merchants, manufacturers, traders, etc. have had to assume their share in the general reconstruction (and in some cases excessively heavy and severe losses), through the writing down of inventories, the fall in raw materials and commodities, and the contingent liability for goods contracted for at high prices in advance.

It was hoped that all manufacturers would adopt a uniform basis of handling this situation, but this could not be arranged.

So they sent out their bulletin. At the time I understood that it was entirely arranged between the manufacturers and the dealers, on the basis of fifty fifty, as shown by this circular.

Topic:   QUESTIONS
Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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PRO

Thomas Wakem Caldwell

Progressive

Mr. CALDWELL:

Do you know how

many manufacturers adopted that attitude, and what was done?

Topic:   QUESTIONS
Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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CON

Henry Lumley Drayton

Conservative (1867-1942)

Sir HENRY DRAYTON:

I could not say.

Topic:   QUESTIONS
Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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PRO

Thomas Wakem Caldwell

Progressive

Mr. CALDWELL:

Is it not a fact that the government did refund to those manufacturers who were conducting retail establishments the tax on the cars which they had in their retail warehouses? I know a statement was made that refunds were granted amounting to over $170,000.

Topic:   QUESTIONS
Subtopic:   SPECIAL WAR REVENUE ACT, 1915, AMENDMENT
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June 11, 1924