May 24, 1932

CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

No, this is the income tax bill.

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAR TAX ACT AMENDMENT
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LIB

William Lyon Mackenzie King (Leader of the Official Opposition)

Liberal

Mr. MACKENZIE KING:

I beg your pardon; I had not heard the title.

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAR TAX ACT AMENDMENT
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Motion agreed to, bill read the second time, considered in committee, read the third time and passed.


SPECIAL WAR REVENUE ACT


Lion. E. N. RHODES (Minister of Finance) moved the second reading of Bill No. 102, to amend the Special War Revenue Act. Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. LaVergne in the chair. On section 1-Part III repealed and reenacted.


LIB

Thomas Merritt Cayley

Liberal

Mr. CAYLEY:

Mr. Chairman, I should

like to Tefer again to the matter of the taxation of net insurance premiums. I referred to this matter yesterday and the minister asked me to defer my remarks until the bill was before the committee. It seems to me that there is some injustice in taxing the net premiums of foreign companies doing business in Canada two per cent, while the net premiums of Canadian companies are taxed only one per cent. I can understand that the government may have in mind the fact that these foreign companies do considerable business in Canada, but I remind the minister that the premiums paid to foreign companies are paid by Canadian policyholders. This is actually a tax upon Canadian policyholders. I think the government had in mind the New England mutuals which do business on a small premium, perhaps the smallest of any company operating in that class, but I think these companies are to be commended for the splendid methods they have adopted in the carrying on of business. They endeavour not only to pay fire losses but to prevent fires. They have an organization of inspectors and expert engineers who are continually on the job doing what they can by way of advising factory owners how to improve their premises

and reduce fire hazards. I bring this matter to the attention of the minister because I think my previous remarks, I believe on the resolution, might have been misunderstood. These companies are called foreign companies, yet they are doing Canadian business just the same as the Canadian companies.

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CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

I do not think that this tax in actual practice will prove to be an unfair burden on the foreign companies because it must be borne in mind that these companies carry a select class of risks. In the main their premiums are very small and the yield of the two per cent tax will not be comparable to the yield of the one per cent tax in the case of Canadian companies. I point out to my hon. friend that if Canadian policyholders do not desire to pay the two per cent tax, they can insure in companies where they will have to pay only one per cent. Another argument in favour of this tax, and one which I think demonstrates that there is no discrimination against these companies, is the fact that they have no office staff, they support no taxpayers in the form of employees and pay no income tax whereas, on the other hand, the Canadian companies do all these things. I understand that the foreign companies have not taken any exception to this tax, and I think that is the best evidence that in their judgment they feel they have not been discriminated against. I have no recollection of any complaint coming in on this score so I must assume under these circumstances that there is a reasonable acceptance to the tax on the part of the companies in question.

Topic:   SPECIAL WAR REVENUE ACT
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Section agreed to. Sections 2 to II inclusive agreed to. On section 12-Excise tax of three per cent on duty paid value.


LIB

William Lyon Mackenzie King (Leader of the Official Opposition)

Liberal

Mr. MACKENZIE KING:

Under this

section the special excise tax of one per cent imposed by the act of last year is increased to three per cent. I wish to repeat what has been said frequently, that this tax really is an increase of duty, that there is in reality an increase of three per cent in the customs tariff on everything except a few articles enumerated in the schedule. In delivering his budget speech, the Minister of Finance took no little credit to himself and the government for not having imposed any increased duties *this session. Had he been in the chamber when I was delivering my speech I would have drawn his attention specifically, as in fact I mentioned particularly, that in that statement he was entirely mistaken, that, as a matter of fact, the government this session by increasing the excise tax, which is a

Special War Revenue Act

British Empire has a foundation that is impregnable so long as we firmly maintain, in connection with the affairs of each of the self-governing parts of the empire, the conception of fiscal autonomy, along with all other forms of autonomy which we now so completely enjoy. But to surrender something, however small, which will in the least restrict the freedom of the self-governing dominions in their trade negotiations with other countries, or which will occasion a sense of restraint as to the obligations which in a fiscal way are binding as between the different parts of the empire would, I fear, have the opposite effect from that desired by those who wish to see the British Empire continue to grow in unity and strength as the years go by. I will quote in connection with the opinion I have here expressed the words of one whose name in these matters should carry a good deal in the way of authority with hon. gentlemen opposite. I have here a quotation from Sir John Willison's Life of Sir Wilfrid Laurier. Referring to a statement which the late Mr. Joseph Chamberlain had made as to the only form of zollverein Mr. Chamberlain thought would be of any real service to the British Empire, the author gives his opinion, which may be regarded as expert opinion, of the effect of any zollverein upon the development of the British Empire. The statement of Mr. Joseph Chamberlain, to which Sir John Willison refers, is as follows:

I believe the only form thait would meet with the slightest favour would be an imperial zollverein, in which there would be free trade between the portions of the empire and duties as against strangers.

Sir John Willison at page 307 of his Life of Laurier says:

It is necessary to add, at the risk of misunderstanding, that it is not easy to conceive a zollverein arrangement that will not restrict the freedom of the colonies

Colonies they were called at that time, now dominions:

-and tend with changing circumstances to produce irritation and unrest; and that the trade relations between Great Britain and the colonies will probably be better controlled by concurrent legislation than by a joint tariff.

I submit that that paragraph is one deserving of very careful consideration by members of the ministry who will be representing Canada at the forthcoming Imperial economic conference. The conception of a zollverein that Joseph Chamberlain had was a tax that would operate as against foreign countries, but to be of any value it would have to be accompanied by complete free trade within the British Empire itself. I do not assume that the present ministry will consider at the forth-

coming conference any development of trade on the basis of free trade within the empire. They have said over and over again that they would not. On the other hand, I do think from the statements made by the Prime Minister in England, and made in this house since, that it is quite conceivable that what the government is not prepared to consider on a free trade basis they may have in mind seeking to bring about on a "Canada first" basis, on a protectionist basis instead of on a free trade basis. In other words, it is conceivable that they will seek to have the British Empire develop on the basis of each of its self-governing parts having protective tariffs so high as to make impossible the importation of goods that are produced or manufactured by itself, and that they will seek to exclude foreign goods by raising still higher the existing tariff against foreign countries. That would be an imperial zollverein on the basis of high protection. A policy of that kind I believe would be fatal not only to trade within the empire but fatal to the future development of the empire in other respects, and I think this is the best moment at which to give expression to that view.

I repeat again, I hope my hon. friend will to-day, on Empire day, make at least a gesture of an attitude which really means that the government desires to see trade within the British Empire furthered through the reduction of duties in a way which will permit of the flow of commodities into this country, to be accompanied by a similar flow from this country into all other parts of the empire. I hope the minister will give us some assurance that at least something of the kind is in the minds of the ministry, or, better still, that at the approaching conference they may have something of the kind to propose.

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CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

I am quite sure that the right hon. leader of the opposition will not misunderstand me if I do not at this stage of the session attempt to reply to him at length, or that on the other hand he will not take exception if my reply is quite brief.

I am at one with my right hon. friend when he expresses a desire for trade within the empire. I do not think he need have any misapprehension thait it is in the mind of the government to erect a wall, as it were, around the empire, for the exclusion of trade with the rest of the world. While I have always been a strong advocate personally of empire trade, and I believe much can be accomplished for the benefit of the different dominions through the stimulus of empire trade, I have never understood that that meant that we were to

Special War Revenue Act

trade exclusively within the empire and that it was to prevent us from trading with the world at large.

I have read the article by Sir Robert Had-field in the Dalhousie Review to which my right hon. friend referred, and I hasten to assure him that whatever merits or demerits may attach to the three per cent tax, it has no reference whatever to a revolving fund which is designed to be an adjunct to an empire zollverein. As a matter of fact, I think my right hon. friend has some misgiving upon the point. I beg to assure him there is nothing in the minds of the government with respect to the three per cent excise tax upon imports other than a desire to raise revenue. My right hon. friend has said the three per cent excise tax is a tax upon the people of this country; in great part, that is so. It does not always follow however, that the importer pays the tax. It is true that the importer goes to the customs house and takes out the goods; he goes through the physical act of paying money into the customs for the goods he takes out. It happens in many instances however that the tax is actually borne by the exporter. The mere fact that we have to apply the dump in certain instances is evidence of that fact.

May I point out to my right hon. friend, that whether this is a good or a bad tax the fact remains that the treasury of this country is in need of funds. We must raise revenue from some source, and if we do not raise it in this way we will raise it in some other way. In the last analysis the only money which comes into the treasury comes through taxation. That point therefore I do not think has any very marked bearing upon t'he argument. I can add very little, probably nothing, to what I said last night in reply to my right hon. friend with respect to the three per cent tax. Certainly I do not think it can be properly regarded as an added impost by way of customs when it is applicable to those commodities which are duty free. No one would suggest for a moment that a three per cent customs tariff would be any barrier worthy of consideration.

Topic:   SPECIAL WAR REVENUE ACT
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LIB
CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

Yes; upon all goods in connection with which there exists an impost, and to which is added the excise tax, my right hon. friend's argument would have bearing. I would add, however, that it is applied to duty free goods. Furthermore I can add only what I said yesterday, namely that I do not think the other dominions within the empire

have regarded this impost other than as a revenue tax.

Arising from the remarks of my right hon. friend, only one other thought occurs to me, and that is to assure him that if we enter the Imperial economic conference, as I think we all ought to enter it, with a desire in our hearts not to drive a bargain but to enter into undertakings which will be mutually advantageous-

Topic:   SPECIAL WAR REVENUE ACT
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LIB
CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

-we will be serving this country best. I think that is the attitude in which we are prepared to enter the conference. After conversations, if it is found that the three per cent tax requires further consideration I have not the slightest hesitation in saying to my right hon. friend that the government is not wedded to it, other than as a necessity of the moment, as a means of taxation.

Topic:   SPECIAL WAR REVENUE ACT
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LIB-PRO

John Livingstone Brown

Liberal Progressive

Mr. BROWN:

I should like to have an explanation so that hon. members may know the meaning of the section. It says that there will be an excise tax of three per cent on the duty paid value. I presume that means that in the case of an article valued at S100 already bearing a tariff of 35 per cent the tax will be levied upon the $100 plus the $35, making it an equivalent to a four per cent tax on the invoice price of the goods. That seems to be the only construction which could be placed upon the wording. Does "duty paid value" mean the duty set forth in the Customs Act, and not dumping duties which may be added. I think we may very readily conceive that if the policy which has been put into force by this government is followed-that of raising duties by order in council, and levying dumping duties to such an extent that they exclude trade altogether-and the tax is paid on such goods, a very high tax may be the result.

Topic:   SPECIAL WAR REVENUE ACT
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CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

The hon. member for Lisgar will find a definition of "duty paid value" if he will turn to section 85 of the Special War Revenue Act. At that place the definition is as follows:

"Duty paid value" shall mean the value of the article as it would be determined for the purpose of calculating an ad valorem duty upon the importation of such articles into Canada under the law's relating to the customs and the customs tariff w'hether such article be in fact subject to ad valorem or other duty or not, and in addition the amount of the custom duties, if any, payable thereon: Provided that in computing the "duty paid value" of tea purchased in bond in Great Britain-

And so on. I think that paragraph clearly defines the term about which the hon. member

Special War Revenue Act

has asked. I would say to him however that the three per cent excise tax upon imports is not applied to the valuation created by the dump.

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LIB

John Campbell Elliott

Liberal

Mr. ELLIOTT:

I wish to direct a question to the minister with regard to the tax on telephone calls. As I understand it there is a general tax of six per cent. Does that apply to all calls, whether or not they are under twenty-five cents?

Topic:   SPECIAL WAR REVENUE ACT
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CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

Yes.

Topic:   SPECIAL WAR REVENUE ACT
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LIB

John Campbell Elliott

Liberal

Mr. ELLIOTT:

Does that mean that on a twenty cent call there would be a tax of six per cent?

Topic:   SPECIAL WAR REVENUE ACT
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CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

Yes.

Topic:   SPECIAL WAR REVENUE ACT
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May 24, 1932