May 2, 1934

CON

Robert Weir (Minister of Agriculture)

Conservative (1867-1942)

Mr. WEIR (Melfort):

My understanding

is that the procedure is to read in the amendments as we come to them clause by clause. I have stated their general effect; it is clarification of the principle. For example, I have an amendment to make clearer-at least there are people who feel this is done by the amendment-the relation that exists between the local board and any power it may have to use funds from the consolidated revenue fund. We also make clearer the fact that pooling is covered in the bill. I had thought that was included under the scheme submitted because no limitation was put on that scheme, that is that representative growers may submit a plan in their scheme asking that a poll be held. That I naturally thought would have been one of the first things under certain conditions that the minister, whether provincial or federal, would be asked for, to decide whether it was sufficiently representative. Another matter that is cleared up is that the organized producers can market their products where they decide, when they decide, in what manner they decide, through what agency they decide and also the means by which the

Marketing Act

marketing of their products will be done, that is whether it will be on a pooling basis and whether there will be an initial payment or otherwise.

Topic:   MARKETING ACT
Subtopic:   ORGANIZATION TO IMPROVE METHODS AND PRACTICES IN MARKETING NATURAL PRODUCTS
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LIB

William Henry Moore

Liberal

Mr. MOORE (Ontario):

I am very sorry

if the minister thought in what I said on this matter I had carefully selected instances of failure.

Topic:   MARKETING ACT
Subtopic:   ORGANIZATION TO IMPROVE METHODS AND PRACTICES IN MARKETING NATURAL PRODUCTS
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CON

Robert Weir (Minister of Agriculture)

Conservative (1867-1942)

Mr. WEIR (Melfort):

I did not mean to

infer that.

Topic:   MARKETING ACT
Subtopic:   ORGANIZATION TO IMPROVE METHODS AND PRACTICES IN MARKETING NATURAL PRODUCTS
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LIB

William Henry Moore

Liberal

Mr. MOORE (Ontario):

May I ask

whether the minister would like me just to outline briefly some of the measures of this sort that have failed so that we may have the evidence before the committee and the committee or members of it may make inquiries if they care to do so? In Australia the minister knows there are two commodities referred to marketing boards that are federal. One is an export control board for dried vine fruit or raisins. Windett, in Producer and Trader, at page 123, writing of the results, said:

From the various forms of assistance -which it receives, it must be concluded that the dried fruit export trade cannot stand on its own feet, and is in a less sound competitive position than is the fresh fruit trade.

And fresh fruit is not marketed in the same way.

The other matter is canned fruits. On canned fruits the state government of Victoria has already guaranteed 750,000 Australian pounds and the commonwealth government has expended some 890,000 Australian pounds. During the eight years ending 1932, production of tinned peaches, pears and apricots has on the whole been satisfactory, but the increase in the export trade has taken place at the cost of decline in the domestic consumption.

The other day I referred to legislation of this sort in Queensland and I shall not refer to it again.

I should like to take New South Wales and the experience in that state. I might say that the original marketing act was introduced in 1927; that is some years ago. They have had experience. Originally a majority of two-thirds of the producers was required. Votes were taken and the majorities were not secured. Provision was then made for reduction of fifty per cent. They excepted wool and wheat and dried fruits. They included eggs, rice and honey. Rut in August, 1932, a plebiscite of the honey-producers was taken and by a majority of 527 to 147 they voted in favour of abolishing the honey marketing board. Ballots have been taken to include wheat, butter, millet and stone

fruits, and have been rejected. Since 1928, four plebiscites of the wheat growers have been taken to bring wheat under a compulsory pool, and in each instance the producers voted against the compulsory pool.

I wonder if I may briefly and rapidly run over some European experiences. In Bulgaria a price fixing and tax relief scheme was brought in in 1931. Prices were fixed above world parity, with the consequence that you had an increase, naturally, I presume, in the production of grain in Bulgaria. The government found it awkward to pay the compensations that were required, and that are referred to in this bill, so it issued certificates instead of money. Then the certificates lost their value, and in July, 1932, the monopoly bureau was abolished. Now I have not the information to go into these matters thoroughly. I am honestly desirous of having the government furnish us with fuller information than any individual member can secure. I have already made reference to coffee. You will recall that Brazil since 1905 has been trying through state intervention to bring about a stabilization of prices. Action was taken in the first instance by the state of Sao Paolo. What was the result? Other states in Brazil began to grow coffee, because it was profitable. Then other countries throughout the world were attracted to the industry, by reason of the artificial price. Finally the federal government had to intervene to abolish the state monopoly, and then as we know they had revolution in Sao Paolo.

In Chile, an act very similar to this bill was brought in in 1930. Bounties were to be raised by taxes on wheat and oats processed there, and on malt used by brewers, and by import duties on sheep and cattle. Then deficiency payments were to be made to the producers. It is interesting to note that apples were included; when exported they were subsidized, to the extent of four pesos per box. Then Chile ran out of money and the producers could not be paid. There was dissatisfaction, and finally revolution.

Mr. Chairman, I was not in favour of referring this bill to the agriculture committee. I quite agree with the Prime Minister and the government that this bill should be considered by committee of the whole house, because it involves not merely a marketing measure, it involves principles that affect the stability and the political life of the country.

Then I wish to refer to sugar. The minister knows that since the year 1925 and even before that attempts were made in a very vigorous way, to set up market monopolies

Marketing Act

in sugar. He knows also that in 1931 at Brussels the brightest and best minds in the sugar industry of the world got together. I tell the minister there could have been no failure in the Brussels convention if the principle were right. They had had years and years of experience in trying to evade what the Minister of Trade and Commerce the other day called the shibboleth of demand and supply. These countries, Cuba, Java, Germany, Czechoslovakia, Poland, Hungary and Belgium were parties to the agreement, representing ninety per cent of the world's export trade in sugar, and before the end of the year Peru and Jugoslavia joined. The countries lived up to their agreement. There were grievous reductions in acreage, and vast armies of men thrown out of work, because that is a consequence of reduction in acreage. Then you had revolution in Cuba, a decline in the consumption of sugar, and no increase in price. I would have the minister remember that. There is an explanation, which I shall give in a short time. In June, 1932, the price of sugar declined to an all time low of 0-57 cent a pound duty free in New York. You had reduced acreage, reduced consumption and reduced price.

I shall not go extensively into the condition in Germany. There are many parallels. In connection with cheese the marketing board or the government provided that a fixed percentage of domestic cheese should be used in certain products, that butter should be mixed with margarine, that alcohol distilled from home grown vegetable and cereal products should be mixed with gasoline. They had a very rigorous marketing law and production law in regard to the growth of tobacco.

Then you have to face the working out of this measure. Only landowners who were given licences could market, and you had charges of favouritism in the issue of these licences. It was alleged that the bigger landowners got licences and the men with small holdings received no licences and were left with their crops on their hands. This is not a new measure, Mr. Chairman, it is a very old one. There is nothing new about it. Greece has been attempting to regulate the marketing of currants since the beginning of the century. She did it first through a currant bank; in 1904 the currant bank failed. Then they established a privileged company. That privileged company I take it was something of the sort that it is proposed to establish here, because it tried to be cooperative. And when the chanter of the privileged company expired in 1925 the [Mr. W. H. Moore.l

government refused to renew its monopoly, on the ground that the company had not improved the economic position of the domestic currant industry during the twenty years of its activity. I should like to have the minister bring us up to date with regard to that matter, because I want to do a workmanlike job in reference to this bill or none at all. I know this, that recently the government of Greece issued an order providing that every time a man buys two loaves of white bread he must buy one of currant bread.

May I ask the minister to give us information also with regard to a similar proposition in Latvia, in regard to the flax industry, in 1919. Provision was made for the licensing of flax growers and mills, for the collection of funds from domestic users and distribution on the export trade. At first it was very profitable; I understand that the government received a considerable Tevenue, but then the turn came; the government had to borrow funds from the bank, and later the government became somewhat embarrassed. I should like further information on that subject. Surely we are entitled to know something more than the wishes of our constituents in this matter; we are entitled to know how far measures of this sort have been tried and particularly to what extent they have succeeded or failed.

In the Netherlands-and I must say that I have a very great respect for legislation in the Netherlands, where they have, perhaps as clearly as any country in the world, respected what my hon. friend the Minister of Trade and Commerce apparently fails to respect, that is the law of supply and demand-they were driven in 1932, as apparently this government has been driven with the best intentions in the world, to devise marketing acts. Among others there was an act called the hog central control act, which contained the usual provision for stabilization and everything that was to be done to increase prices, but what happened? When that board took over the marketing of bacon the hog population of the Netherlands was 2,735,000. Within a few months they ordered a reduction to 2,000,000 and the last information I have is that the Dutch government has ordered a further reduction to 1,800,000, and there has been no increase in price.

We ought to study these matters, Mr. Chairman, for another reason. We can get some details as to how these things work out.

Topic:   MARKETING ACT
Subtopic:   ORGANIZATION TO IMPROVE METHODS AND PRACTICES IN MARKETING NATURAL PRODUCTS
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CON

Robert Weir (Minister of Agriculture)

Conservative (1867-1942)

Mr. WEIR (Melfort):

May I make a suggestion? I have listened with great interest to what the hon. member has said-

Tax on Gold-Mr. Bennett

Topic:   MARKETING ACT
Subtopic:   ORGANIZATION TO IMPROVE METHODS AND PRACTICES IN MARKETING NATURAL PRODUCTS
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LIB

William Henry Moore

Liberal

Mr. MOORE (Ontario):

I have not finished.

Topic:   MARKETING ACT
Subtopic:   ORGANIZATION TO IMPROVE METHODS AND PRACTICES IN MARKETING NATURAL PRODUCTS
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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

Will the hon. gentleman continue his observations later and let the committee rise? I desire to make a short statement before six o'clock.

Topic:   MARKETING ACT
Subtopic:   ORGANIZATION TO IMPROVE METHODS AND PRACTICES IN MARKETING NATURAL PRODUCTS
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LIB

William Henry Moore

Liberal

Mr. MOORE (Ontario):

I shall be delighted to comply with the request of the Prime Minister.

Topic:   MARKETING ACT
Subtopic:   ORGANIZATION TO IMPROVE METHODS AND PRACTICES IN MARKETING NATURAL PRODUCTS
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CON

Robert Weir (Minister of Agriculture)

Conservative (1867-1942)

Mr. WEIR (Melfort):

That is what I was about to say. I move that the committee rise, report progress and ask leave to sit again.

Topic:   MARKETING ACT
Subtopic:   ORGANIZATION TO IMPROVE METHODS AND PRACTICES IN MARKETING NATURAL PRODUCTS
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IND

Alan Webster Neill

Independent

Mr. NEILL:

Might I suggest to the minister that the amendments be published in the votes and proceedings so that we may be able to consider them intelligently? When they are read by a chairman whom we cannot half hear it means a great deal of unnecessary debate, and members talk about something they do not understand. If we could see the amendments in print I am sure it would shorten the discussion.

Progress reported.

Topic:   MARKETING ACT
Subtopic:   ORGANIZATION TO IMPROVE METHODS AND PRACTICES IN MARKETING NATURAL PRODUCTS
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TAX ON GOLD

STATEMENT OF PRIME MINISTER AS TO CHANGE IN BUDGET PROPOSALS

CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Right Hon. R. B. BENNETT (Prime Minister):

Mr. Speaker, with the permission

of the house I should like to make a short statement before we adjourn. In view of the general misunderstanding that apparently has arisen regarding the tax imposed on gold by the budget delivered by the Minister of Finance (Mr. Rhodes) a few days ago I think it desirable to make a statement which will clarify the situation.

The minister indicated that it was essential for him to raise by taxation approximately the amount of revenue lost by reducing the tax on sugar to one cent per pound, and he stated that he proposed to obtain from the gold producing companies that sum, which would be imposed in the budget for the current year.

The government of the province of Ontario protested against the imposition of the tax; Hon. Charles McCrea, Minister of Mines, has been in Ottawa for several days. In some quarters it was asserted that such a tax was an infringement upon the taxing powers of the provinces. I think that view may be disregarded, inasmuch as clause 3 of section 91 of the British North America Act provides that the exclusive legislative authority of the parliament of Canada extends to the raising of money by any mode or system of taxation. The Ontario government further suggested

that the tax imposed in the manner indicated was in the nature of a royalty, which it was submitted could be imposed only by the province. For the reasons stated this contention could not be accepted. Mr. McCrea, as the Minister of Mines for Ontario, arranged that representatives of the gold mining interests of that province and others should meet the Minister of Finance and myself. The representatives of the gold producing companies expressed their willingness to assist in any reasonable way the government of Canada in balancing its budget, but pointed out that they were already subjected to very heavy taxation. We then pointed out that the price of gold for the year 1932 had averaged over $23 per ounce while the statutory price was only $20.67 per ounce, the added price being attributable, mainly or wholly, during that year to the premium on American money in Canada. In 1933 the average price received by the gold producers was $28.72 per ounce, which represented an average of $8.05 per ounce more than the statutory price of $20.67 per ounce. During the early months of the year the price received was less than $28, but when the president of the United States announced that the republic would buy all new gold at a price of $35 per ounce the result was that since that date the price of gold has approximated $35 per ounce.

The present premium on the price of gold is an unearned increment arising out of economic conditions and the monetary action taken by the United States of America as well as by the Dominion of Canada. We therefore indicated that, rather than have any question of provincial rights or royalties at issue between the dominion and the provinces, or any foundation being afforded for the suggestion that the dominion was interfering in the field of provincial taxation, we would substitute for the proposals of the minister a tax on the unearned increment of 25 cents out of every dollar received from the sale of gold by dividend paying companies in excess of the statutory price of $20.67 per ounce until May 31, 1935, and, in view of the high tax thus imposed, permit the corporation income tax paid by the dividend producing companies in 1934 to be credited against the tax on the unearned increment and thus avoid the charge that the government was imposing double taxation on the gold industry. The second question alluded to the low grade ore found in large quantities throughout Canada and the development of which the present high price of gold had greatly stimulated, resulting in great activity in prospecting the employment of large

Tax on Gold-Mr. Bennett

numbers of people, and expenditures of large sums of money. With respect to low grade properties no special tax will be imposed until they become dividend producing properties, nor will the tax be imposed upon any company that was not paying dividends prior to the first of January, 1933, and which is now paying dividends. In no event is it proposed to tax unearned increment arising from the sale of gold when the price is $30 or less, as stated by the minister.

It will be a matter of satisfaction to the house and to the country to know that when we met the representatives of the gold producing mines and indicated to them clearly why the tax was imposed they expressed a most sympathetic appreciation of the financial situation, and although the large dividend paying mines, few in number, must pay the tax, they accepted the proposed method of paying twenty-five cents on the dollar of the premium payable on gold as not unfair. The tax does not in any event contemplate the taxation of the production of placer mines.

Topic:   TAX ON GOLD
Subtopic:   STATEMENT OF PRIME MINISTER AS TO CHANGE IN BUDGET PROPOSALS
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LIB

William Lyon Mackenzie King (Leader of the Official Opposition)

Liberal

Mr. MACKENZIE KING:

May I ask the Prime Minister a question which arises out of the statement he has just read? He has referred to the representations made by the Minister of Mines for Ontario. I observe in the press that representations were made to the government by the provinces of British Columbia, Nova Scotia and Quebec. Were those representations not considered? May I ask him further whether any representations were made by his own Minister of Mines?

Topic:   TAX ON GOLD
Subtopic:   STATEMENT OF PRIME MINISTER AS TO CHANGE IN BUDGET PROPOSALS
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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

With respect to the questions the right hon. gentleman has asked, may I say that the only formal presentation of the case for the provinces was made by the Hon. Charles McCrea. There were statements appearing in the press, but they were directed to the populace and not to the government, and it cannot be said therefore that we received any forma! representations, except as indicated. The federal Minister of Mines expressed his opinion, as did all other members of the council, with respect to the matters affected. May I thank the hon. member for Ontario (Mr. Moore) for affording me the opportunity to make this statement before six o'clock.

Topic:   TAX ON GOLD
Subtopic:   STATEMENT OF PRIME MINISTER AS TO CHANGE IN BUDGET PROPOSALS
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LAB

James Shaver Woodsworth

Labour

Mr. WOODSWORTH:

Would the Prime Minister indicate how the revenue raised under the proposed tax would compare with that under the first arrangement?

Topic:   TAX ON GOLD
Subtopic:   STATEMENT OF PRIME MINISTER AS TO CHANGE IN BUDGET PROPOSALS
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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

The difference would be very small, depending entirely upon two factors. One would be the price at which gold

[Mr. Bennett.1

was sold, as I have indicated, which would determine of course the extent of the unearned increment, and secondly the extent to which gold was produced. If the gold is produced to the extent it was last year, or thereabouts, it is only a matter of arithmetic to point out to the hon. member that if the price was $35 the difference between $20.67 and $35 is $14.33. One-fourth of that is about, as will be observed, $3.58, whereas ten per cent of $35 is $3.50, which is less. The difficulty is that with respect to the lower grade properties it might be the taxation of a deficit, and therefore they are eliminated, which may mean some loss to revenue, but to that extent only.

Topic:   TAX ON GOLD
Subtopic:   STATEMENT OF PRIME MINISTER AS TO CHANGE IN BUDGET PROPOSALS
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LIB

Wilfred Hanbury

Liberal

Mr. HANBURY:

Before the Prime Minister takes his seat may I say that I did not understand thoroughly the statement he made. Is it possible that the taxation on unearned increment will be greater than the income tax in all cases, or whether the tax will be a larger amount, whichever it may be.

Topic:   TAX ON GOLD
Subtopic:   STATEMENT OF PRIME MINISTER AS TO CHANGE IN BUDGET PROPOSALS
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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

I need hardly say that that question cannot arise1, but that in no event can the income tax-12^ per cent of 50 per cent of the profits, which is the income tax against gold companies-amount to anything of that sort. A computation by the manager of one of the largest mines indicates payments under this plan of about $1,600,000 as against a slightly lesser sum under the other plan. But it will be observed that as this applies only to dividend paying properties it is obvious there may be a diminution of the revenue because there is no tax to be taken unless and until they are dividend paying properties, and if the price of gold falls to $30 an ounce there will be no revenue at all.

On motion of Mr. Bennett the house adjourned at 5.55 p.m.

Thursday, May 3, 1934

Topic:   TAX ON GOLD
Subtopic:   STATEMENT OF PRIME MINISTER AS TO CHANGE IN BUDGET PROPOSALS
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May 2, 1934