February 6, 1935

IND

Alan Webster Neill

Independent

Mr. NEILL:

No.

Topic:   INCOME TAX
Subtopic:   PROPOSED RESTRICTION OF CERTAIN EXEMPTIONS TO CANADIANS OR BRITISH SUBJECTS
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CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

If as the hon. member apparently assumes it would involve an increase in revenue there might be some virtue in the suggestion, because if I mistake not the hon. member's idea is to assist in increasing the revenues, as he had advocated at previous sessions. If the resolution were carried in its literal terms and taxation were imposed as provided by it, all the income of foreign residents in Canada would be involved; because he specifically states that the income tax exemption shall not apply. I take that to mean that he would tax the wages and small salaries of those who would be affected by the application of the tax. Information I have received from the income tax branch is to the effect that the machinery which would be required to deal with the collection of incomes now exempt, namely incomes in the smaller brackets, would involve an expenditure which would be greater than the amount returned to the treasury. In the lowest bracket of those who pay income tax in Canada there were in the year 1932-33 631276 persons who paid income tax amounting to $416,776.46. That sum is exactly 1-5 per cent of the total amount collected from individuals. These figures would indicate that from the large number of persons in the lower brackets we received only a small per-

centage of the total tax collected. One could only hazard a guess as to how many thousands might be included among those who would be called upon to pay income tax if the government were to accept this resolution and to bring down legislation based upon it. But I submit that even if it meant many thousands, their income in the main would be in the lower brackets, because my hon. friend would remove the exemptions; and the amount of money therefore which we would receive into the treasury would be only a fraction of the total income tax collected. As I have said, the officials of the income tax branch advise me that the probabilities are that the costs of collection and the machinery of collection which it would be necessary to set up in order to deal witfi it would involve a greater outlay than the treasury would receive in income as a result, of its application.

I might point out further that with respect to the number I have given, those who are in the lower brackets represent forty per cent of the total number of income taxpayers in Canada, and yet, as I have indicated, the amount collected from them represents but 1'5 per cent of the total income tax collected. I do not stress that angle, although I think it is fair that we should respect the advice given to us by those whose business it is to deal with the collection of income tax.

Should the resolution be adopted and the principle it asserts be put into operation, not only would we be certain, as I have indicated, to invite reprisals on the part of our friendly neighbour to the south, to the detriment, on balance, of Canada and Canadian citizens because of the reasons I have given, but I would point out that at the moment we are in negotiation with our friends to the south in matters of trade, and it would strike me as being a very inopportune time to take a step of this kind while those negotiations are in progress. I do not know that I would stress that phase of the argument, but I do submit that it certainly is not good neighbourliness and it would not be good tactics, bearing particularly in mind the fact that a similar attempt has not been made by the United States to deal similarly with Canadian residents in that country.

Topic:   INCOME TAX
Subtopic:   PROPOSED RESTRICTION OF CERTAIN EXEMPTIONS TO CANADIANS OR BRITISH SUBJECTS
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LIB

Albert Edward Munn

Liberal

Mr. MUNN:

In other words, be very careful you do not offend them at the present time.

Topic:   INCOME TAX
Subtopic:   PROPOSED RESTRICTION OF CERTAIN EXEMPTIONS TO CANADIANS OR BRITISH SUBJECTS
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CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

No, that is not the argument at all, Mr. Speaker. I just leave it to the common sense judgment of the house whether, when you are in the midst of negotia-

Topic:   INCOME TAX
Subtopic:   PROPOSED RESTRICTION OF CERTAIN EXEMPTIONS TO CANADIANS OR BRITISH SUBJECTS
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C, 1935


Income Tax Exemptions tions, it would be good judgment to take legislative action by parliament directed against practically only one country in the world, namely, the United States. If it were a matter of general application applying to all the world, and arguments could be made in support of the resolution, that would be one thing; but in fact it applies, and it might as well say so in terms, to one country so far as any value to the treasury is concerned, and to one country only, namely our neighbour to the south. I should be the last to subscribe to the doctrine that Canada should not legislate for itself, but I do say that if we expect to conduct negotiations in a friendly manner with a view to a successful issue between Canada and the United States we would be very ill-advised at this time to take a step such as is suggested, which could be open to only one construction. I do not stress that point. 1 mention it incidentally, but I do think that on the merits, on balance Canada would be the loser if we were to attempt to pass this resolution and to base upon it legislation bringing it into effect. I should have dealt more completely with the subject and given more facts and figures, as I have indicated, had I had the slightest idea that this resolution was coming up to-day. But I trust that I have given to the house sufficient indications that we would be very unwise to accept this resolution or the principle which it embodies, if not at any time, certainly at this moment, and I trust therefore that in the judgment of the house the resolution will not be accepted.


IND

Alan Webster Neill

Independent

Mr. A. W. NEILL (Comox-Alberni):

Mr. Speaker, the Minister of Finance (Mr. Rhodes) said thait he had not been able to give that attention to this motion that he would have liked, and apparently someone in his department furnished the information on which he largely rests in his remarks. Whoever drew up the brief or prepared the data appears to have gone upon the idea that, if he could not produce one good argument against the proposition, the next best thing to do would be to produce a lot of poor argument hoping that the cumulative effect of six poor arguments would be as great as one sufficient argument. The Minister of Finance himself said from time to time as he brought forward the various arguments that had been placed in his hands, evidently feeling compelled by his sense of fairness and his sense of logic: "I would not stress that point." The idea seemed to be that by giving a number of poor arguments it would result in the same force as one substantial argument, which is not I think logical.

The minister asks someone to produce a reason for this resolution, to advance some argument in favour of it. I would suggest this, that it would encourage people to naturalize, a very good thing indeed in this country. We have only to think back to the war, when I saw men who had been in the country far beyond five years and who were deliberately not naturalizing because they could draw eight or nine or ten dollars a day while Canadians at the front were getting $1.10 a day. The old age pension law requires people to be twenty years in Canada before they can get a pension, and I know of people who had lived many years in Canada and became naturalized only a few weeks before they applied for a pension. Some had lived in Canada for twenty years without thinking Canada good enough to become a citizen of it in that time, but when it was a question of getting an old age pension then they rallied around and sought to be citizens of this country.

This resolution would encourage people to become naturalized. Some people deliberately do not naturalize in order to evade their responsibilities, and it is not desirable to have in any nation a large body of aliens standing aloof from the interests of the country which has supported them for ten or fifteen years.

If they were encouraged to naturalize they would probably come, as men will, to take more interest in the country and more interest in its government. On the other hand, if they do not naturalize, then this resolution if adopted and carried into effect would produce some revenue for the Minister of Finance.

I suppose we are in the habit of thinking of immigrants as poor people, ithe man with the sheepskin coat, and so on, who would be drawing only a few dollars in wages, and as the minister says, the cost of collecting the small amount would not pay. But rich aliens also come to this country and stay in it for many years, people with large incomes who do not bother to become naturalized. The trouble that the minister suggests in regard to the cost of collecting from men drawing a small wage could easily be got rid of by having an exemption of, say, $500. But I think that the proposition which the hon. member for Vancouver North (Mr. Munn) had in mind was rather to take the exemption off the man who had a good income. If a man had $5,000 or $6,000 and you took the exemption of $2,000 off, the last $2,000 of his income would be dealt with much more lightly than if that exemption remained, and it is in such cases that the crown would benefit from increased revenue. Of course, as the '

Income Tax Exemptions

hon. member said, it would be necessary to put in a provision that it would not apply to aliens for the first five years, because that would not be fair. But after they had completed the period within which they could qualify for naturalization, then I ask the minister or anyone else, why should they not naturalize? If the country is good enough for them to make a livelihood in, if they get the protection of our laws, why should they not naturalize? There is no reason that I know of which can stand investigation. The minister spoke about retaliation and said that we had a working agreement, so to speak, that the foreigners in each country should not be taxed on their incomes. I think that applies particularly to Britain.

Topic:   C, 1935
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CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

Surely my hon. friend

must be aware of the fact that I made no such statement. I did not say that they were exempt from taxation but that they were given credit in one country for the tax paid in the other. The hon. member likes to be accurate, according to his own assertion. He is assuming that foreigners are not to be taxed. They are taxed. But this resolution calls upon those to pay taxes who otherwise would be exempt because of the exemption clauses.

Topic:   C, 1935
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IND

Alan Webster Neill

Independent

Mr. NEILL:

Yes, but there is an exemption of one or two thousand dollars, and for their children four or five hundred, and the motion proposes to take these exemptions off so that they will pay more seeing that they choose to live in the country without becoming citizens of it. The minister says it would apply almost entirely to the United States and would be regarded as an unfriendly action. That is not so. It would apply to every nation, and whether in its working out there might be more Americans here than nationals of other countries, that is a matter of detail. But no nation takes umbrage at such action unless it is deliberately directed against itself.

Topic:   C, 1935
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CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

I did not say it was an unfriendly act; I did not use such a word or such an expression

Topic:   C, 1935
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IND

Alan Webster Neill

Independent

Mr. NEILL:

I think I am justified in putting such an implication on it, when he said that it was an undesirable time to take such action because there might be retaliation.

Topic:   C, 1935
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CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

That is a different matter.

Topic:   C, 1935
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IND

Alan Webster Neill

Independent

Mr. NEILL:

Well, something that provokes retaliation would naturally be unfriendly. My point is that a nation would naturally take offence at a resolution such as this if we made it apply to that nation exclusively. If we made it apply only to the United States they

would certainly take offence, but when we say that it applies to everyone in the whole world they cannot take umbrage. And the actual details would not concern them. The suggestion was made that it might provoke retaliation against Canadians living in the United States, and it was pointed out that there are-more Canadians living in the United States-than there are Americans living in Canada. I do not know that it would be a dreadful thing if Canadians in the United States did pay more income tax. At any rate we are legislating for Canadians in Canada and not for Canadians in the United States, and I do not think it would do any harm particularly. I would also point out to the minister that after all the resolution only proposes that the-government should consider the advisability of the matter, and if he allowed the resolution to pass it would be open to him after thorough consideration of it to decide against it if he came to that conclusion. But seeing that it has not had full consideration, seeing that he himself states that he would like to have given it more consideration, I suggest that he might let it go through and it would be left to his own judgment to deal with it as he saw fit after thorough consideration.

Topic:   C, 1935
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LIB

Albert Edward Munn

Liberal

Mr. MUNN:

I did not intend this to be personal in any way, and I do not think the Americans will stand the heavy end of the penalty. I was not after the fellow in the lower brackets in particular. A good many people in Canada who are not Canadians or British subjects are earning from five to ten thousand dollars a year and are subject to these exemptions, and they are the fellows I am after. I have not in mind those receiving - six or seven or eight hundred dollars a year. But that is a detail that could be taken care of.

The minister says that his officials tell him that if this were put into effect the results would not meet the extra expense. I doubt that statement very much; I do not think it has been carefully considered. I discussed the matter with one of the best tax auditors in Canada, one of the very best, and he calculated that if it were put into effect by the federal and provincial authorities it would bring in at least another million dollars in taxation throughout Canada.

I do not want to antagonize anyone. The minister says that he does not wish to adopt the motion at the present time, and I shall be pleased to withdraw it and let it stand at that. But it is something which the tax officials might keep in mind. There is a leakage, because there are taxes which we should get and

Questions

are not getting. With the consent of the seconder I beg to withdraw the resolution and let the matter stand.

Motion (Mr. Munn) withdrawn.

Topic:   C, 1935
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BRITISH IMPORTS OF RUSSIAN TIMBER


On the orders of the day:


LIB

Thomas Franklin Ahearn

Liberal

Mr. T. F. AHEARN (Ottawa):

I wish to ask the government a question based upon a dispatch appearing in the Montreal Gazette, of to-day's issue, February 6:

Canada To Lose Lumber Trade Deal Concluded Between Great Britain and Soviet

50 Per Cent of Canadian Export to Britain in 1935 Threatened (By The Canadian Press)

Vancouver, February 6.-Contract between British Timber Distributors Ltd., and Soviet Russia has been signed, including the "fall clause," H. R. MacMillan, president of the H. R. MacMillan Export Company, Ltd., reported to-day upon receipt of a cable from London to that effect.

^Closing of the deal between British Timber Distributors Ltd., and the Soviet Union means that eastern Canada and British Columbia will lose 50 per cent of their market for lumber in Great Britain, according to an estimate made by H. R. MacMillan in Montreal on January 11, in discussing the British-Soviet negotiations which were then in progress. Canada exported nearly one billion feet to Great Britain in 1934.

My question is: Has the government been

informed that such an agreement has been concluded?

Topic:   BRITISH IMPORTS OF RUSSIAN TIMBER
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CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Hon. E. N. RHODES (Minister of Finance):

I have not seen the dispatch in question but I will bring the matter to the attention of the Prime Minister (Mr. Bennett) as Minister of External Affairs, or of the Minister of Trade and Commerce, and it will be taken as notice of a question.

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

Thursday, February 7, 1935

Topic:   BRITISH IMPORTS OF RUSSIAN TIMBER
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February 6, 1935