June 22, 1938

CCF

James Shaver Woodsworth

Co-operative Commonwealth Federation (C.C.F.)

Mr. WOODSWORTH:

Here is the quotation:

-the law, as defined by our statutes and interpreted in the English court of appeal, has been transgressed.

It is section 413 of the criminal code that is applicable, which reads:

Every one is guilty of an indictable offence and liable to seven years' imprisonment who, being a director, manager, officer or member of any body corporate or company with intent to defraud,

(b) makes, or concurs in making, any false entry, or omits or concurs in omitting to enter any material particular, in any book or account or other document.

Topic:   THE BUDGET
Subtopic:   CONTINUATION OF DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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LIB

James Lorimer Ilsley (Minister of National Revenue)

Liberal

Mr. ILSLEY:

If the hon. gentleman had brought this matter up during the discussion of my estimates, as a Liberal member did, I would have been in a position to go into the matter more fully. The respect in which the income tax division felt that the textile companies were short in the payment of their taxes was in connection with the undervaluation of inventory. Inventories are taken at the beginning and the end of each year, and the difference between the two inventories is material in deciding the profits made by the company during the year. If the inventory at the end of the year does not represent the true value of goods on hand, that is, if it is too low, then the profits of the company for that year would be less than they otherwise would be. The companies took the position that it was within the discretion of the directors to value their inventories at such prices as they thought fit, having regard to the conditions in the business world. They pointed out that there is no provision in either of these acts laying down the basis on which inventories are to be taken, nor is there any regulation for laying down the basis on which inventories should be taken. On the other hand, the income tax division took the position that in the accounting world at least the practice is that inventory be taken at cost or market, whichever is the lower, but that is not a statutory rule or a rule laid down by the regulations. However, we took the position that that is the practice that should have been followed all through the years beginning with 1916 or 1917, and down to the present time. When this dispute arose between the income tax division and the textile companies we thought that we were right, and apparently they thought they were right.

I said a moment ago that under conditions such as that, criminal action was inappropriate. That is, when there appears to be a difference of opinion as to the basis on which profits are made up, it is pretty difficult to expect a conviction if you lay an information and seek to establish your position in the criminal courts. Certainly you should take your proceedings first in the civil courts and find out whether your rule is right, and that

The Budget-Mr. Ilsley

is exactly what we did. We brought actions against eight of the textile companies for amounts totalling a little more than one million dollars, and those actions are now pending in the Exchequer Court of Canada. We are attempting to recover that amount. All these actions are being contested. The textile companies have interposed defences, but we are going to do the best we can to win the actions, and we hope to do so.

So when the hon. gentleman says, as I believe he did, that the government has taken no action, he is not representing the facts as they are. I was asked on my estimates what action had been taken with respect to these alleged underpayments of income tax by the textile companies-it was the hon. member for Halton (Mr. Cleaver) who asked the question-and I gave on the estimates the information I am now giving to the hon. gentleman. If, as my colleagues tell me-for I was not in the chamber myself-the hon. gentleman has accused the government of having taken no action against these companies, he is making a statement that is not warranted by the facts.

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CCF

James Shaver Woodsworth

Co-operative Commonwealth Federation (C.C.F.)

Mr. WOODSWORTH:

No criminal action with regard to the deliberate falsification of accounts and misstatements, not only to the government but to the company shareholders.

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LIB

Walter Edward Foster (Speaker of the Senate)

Liberal

Mr. SPEAKER:

Order. The hon. member cannot make a speech.

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LIB

James Lorimer Ilsley (Minister of National Revenue)

Liberal

Mr. ILSLEY:

The hon. gentleman, if he will forgive my saying so, is getting a little bit out of his depth when he talks of an English case. There is no doubt that if there is a deliberate falsification of accounts it is criminal, but that is a thing that has to be established, and that will be determined in the civil actions we have taken. It would have 'been, I am convinced, absolutely useless and fruitless and futile to lay information against these companies under the conditions I have mentioned, and every lawyer in the house will agree with me.

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CON

Alonzo Bowen Hyndman

Conservative (1867-1942)

Mr. A. B. HYNDMAN (Carleton):

Mr. Speaker, before continuing the debate on the budget I should like to express my regret at the temporary illness of the Minister of Einance (Mr. Dunning), and I am sure I voice the feeling not only of my own party but of each and every group in the house when I say that we all hope it will be of a fleeting nature. I say that not because the hon. Minister of Finance is a resident in my constituency, but because I feel that the hon. gentleman is one of the best finance ministers that Canada has had in her whole history as a dominion. I put him in the same

category with the late Right Hon. Mr. Fielding, the Right Hon. Sir Thomas White, and the present right hon. leader of the opposition (Mr. Bennett). I was pleased yesterday when the hon. member for York South (Mr. Lawson) told us that the Minister of Finance was becoming more Conservative. Perhaps the reason for that is that he has been a resident of Carleton county for the last two years, and if he lives there long enough I think he will go the whole way.

Coming now to conditions in this country

I. Mr. Speaker, with the other doctors in this house, well know that we are at times called upon to treat infected wounds. We can treat them in two ways. Either we can scrape them out and clean up the infection, or we can apply soothing and healing ointments which will cover up the wounds but leave the infection buried in the tissues of the body. I feel that the proper course to take is to clean out the wound and remove the infection, and I believe the same treatment should have been applied during the past two or three years by this government to conditions in this country.

We have heard criticism of the budget from all sides; one hon. member has blamed high tariffs for present conditions; another hon. member has said they were due to low tariffs, and another member has placed the blame on high taxation. But in my humble opinion the reason for the distressing times we have in this dominion to-day is that there has been a lack of cooperation and a lack of action on the part of the government-a lack of the very thing which they so urgently advocated in the last election campaign. H we have a lack of mutual understanding or a lack of cooperation in Canada I believe it will deal a death blow to democracy, and in that connection I should like to quote from a speech delivered by Anthony Eden at the beginning of this year, when he said:

We cannot expect to approach the organized production and national equipment of the autocratic states unless we can, by voluntary effort and close cooperation between all sections of the community, realize a measure of national unity comparable with that which they have reached by other methods.

This is a time when every endeavour should be made to promote national unity, for it is only as a united nation that we can give of our best.

I should also like to give this quotation from a speech delivered this year by one of the outstanding clergymen in this dominion!

If we do not stop the drift away from that unity which was born of confederation we are facing national disaster.

The Budget-Mr. Hyndman

Let me give another quotation from an address in Toronto by one whom I consider the outstanding Canadian citizen in this country:

Not since I have lived can I recall such a spirit of disunity and disharmony as we have now between the provinces and the dominion. To-day we find our federation is threatened with disunity. It is openly asserted one section is paying too much and another is getting too much. There is everything to make disharmony, disunion and jealousy.

I should also like to quote from an address delivered by the hon. Minister of Trade and Commerce (Mr. Euler). Speaking at Hamilton he had this to say:

People entertain fear as to what might happen, and as a result enterprise is at a standstill. There is no reason why Canada should not be prosperous.

There was a meeting in this city not long ago of the advisory council of the National Liberal Federation of Canada, which passed a resolution declaring that we must defend national unity in our country. But I feel that we have anything but national unity in this country of ours at the present time. One need only refer to the premiers of two of the larger provinces to bear that out. The premier of Ontario, for example, referring to the relief program of the Minister of Labour (Mr. Rogers) described it as a head-line and a headache. He said: "I must confess I am not in the confidence of the government at Ottawa." And when the royal commission on dominion-provincial relations met in Quebec, what did the premier of that province say? The report was: "Quebec heads fail to reply to commission request."

In my opinion the government has not carried out one of its promises made in the last election. The promise was made that there would be action, but there has been no action in the last three years. In fact, going back to the years 1926, 1927 and 1928, I do not hesitate to say that if ever a government in this country had everything in its favour, it was the Liberal government that was in power in those years. And what did they do? They sat on the soft, cushioned seats of this house and allowed the dominion to drift into the greatest depression that has ever struck us; and although at that time they were warned of the lurking danger by the present leader of the opposition, it made no difference. They simply said that everything was all right. Again, at the beginning of this session this same outstanding Canadian citizen, the leader of the official opposition, warned the government of the danger signals, but still we got no action. But it may be said that these criticisms are from Conservative sources. Well, let me quote some statements made by 51952-202

members of the Liberal party itself. The hon. member for Huron North (Mr. Deachman) said, as reported at page 2439 of Hansard:

I want something done to-day. I want some consideration of these problems in order that something may he accomplished in our own time. This is what I ask the house. This is what I know the country asks of us.

And then the Liberal member for Winnipeg South (Mr. Mutch) made this statement, as reported at page 2224 of Hansard:

I had hoped that for the rest of the session we would be through with fiddling and would perhaps devote more time to the fire protection of our Canadian Rome which many of us think is burning. When responsible members of this or other legislative bodies waste their time in this sort of thing, irreparable damage is done to the institutions of democracy.

Another Liberal member, the hon. member for Springfield (Mr. Turner) said, as reported at page 2068 of Hansard:

There is at present right across the dominion a general feeling of unrest and insecurity, which seems to be growing . . .

And last but not least, we have this statement from the hon. member for Vancouver-Burrard (Mr. McGeer) as reported at page 3109 of Hansard. He hopes that we will-

-do all we can to guide the Department of Finance out of that swamp of financial ignorance in which it seems to be lost.

This proves conclusively that the slogan, "Vote Liberal and get action" meant nothing, because we have had no action since this government has been in power in the last three years. We have had nothing more than a commission form of government. Let me put on Hansard again-it was given yesterday-a list of the commissions appointed by this government since they came into power. We have now a national employment commission; a wheat marketing commission; a textile commission; a commission on lobsters and smelts; a dominion-provincial relations commission; a penitentiaries commission; a war veterans' assistance commission; a radio commission; a transport or railway commission; a tariff commission; a civil service commission; a board of grain commissioners; a national battlefields commission; a federal district commission; an international boundaries commission; an international joint waterways commission; an international fisheries commission and a national harbours commission; and by this evening's press I see that we are to have another commission to administer penitentiaries.

What about the cost of these commissions? First of all, there was the textile commission, which cost the country $180,000. That commission was headed by Mr. Justice Turgeon,

The Budget-Mr. Hyndman

who also conducted another inquiry. Apparently the government ran out of Liberal judges because Mr. Justice Turgeon was placed at the head of two commissions. He was appointed two years ago to investigate the textile industry and only the other day did we receive the report. Then there was the grain marketing commission. That cost the country $114,000, and all they did was to go over to the old country, for the purpose of obtaining a market for grain, and when they came back they found there was no wheat to sell. Then there was the penitentiaries commission, which cost 890,000. They have brought in a report based on the evidence of convicts in the different penitentiaries, and they suggest that we should appoint another commission. The war veterans' assistance commission cost $326,000; the commission on coal, $23,000; the commission on lobster fishing, $4,000; and the national employment commission, $295,000. The dominion-provincial relations commission, from August 14 of last year to February 10 of this year had cost $68,000.

Looking at the answers put on Hansard to certain questions asked, I cannot understand how these commissioners spend the money and why there has not been some control by the government over some of these commissions. I find one commissioner with a living allowance of $233 a month, or $7.50 a day. He must have been starving himself according to some of the payments made to others. I find a lawyer with travelling expenses of $107.60. I suggest that, from the fees the lawyers received, their travelling expenses and living allowances, $107.60 is not very high compared with some of the other figures. I have investigated living expenses at the Chateau Laurier, and I find that I can get a really good room there with private bath for $6 a day. A good breakfast costs $1; a good lunch a la carte, $2; a good dinner, $3; and one can possibly get along, in the way of tips, on $2 a day. That means $14, and yet some of the commissioners are allowed $35 a day for living expenses. In other words, as far as I can see, they are putting $21 into their pockets. Yes; we find a commissioner getting $35 a day, and yet the Minister of Labour can allow these workmen in Vancouver who are on relief only 75 cents a day. We find that one lawyer who is a K.C. is paid at the rate of $200 a day, while his assistant who is not a K.C. gets $50. But what strikes me as very peculiar is the living expenses. One lawyer gets $200 a day, and it costs him just twice as much as his assistant to live, because he gets $20 a day for living expenses

(Mr. Hyndman.]

and his assistant receives $10. Why the difference? Is it on account of the "K.C.?" What does the "K" stand for? Does it stand for "Mackenzie King"?

The next commission is an interesting one. It has a chairman and two commissioners. I cannot understand why, if the chairman can live on $25 a day, and one of the commissioners can live on $15 a day, the other commissioner needs $35. Then we come to the two lawyers, two assistants. As I have remarked, the "K.C." must mean a tremendous lot, because each of the lawyers is paid at the rate of $150 a day, with travelling expenses.

I cannot understand these travelling expenses at all. Consider the case of another commission. The commissioner has a bill for travelling expenses of $17 a day: one lawyer receives in fees $27,000 odd; the other lawyer gets S32,000; but the living allowances to the lawyer in receipt of the lesser fee are $30 more than those to the other lawyer, and his travelling expenses are $476.19 more. Can anyone figure that out?

Here is another one. Travelling expenses are getting higher. For the life of me I cannot understand how these men travelled. Here is a commissioner who, according to this report, was travelling for thirty-nine days. For those thirty-nine days he received $2,825.69. That figures out at $72 a day for travelling expenses. If anyone can tell how he has been travelling, I should like to know. I have inquired at the railway station, and I understand that for about $72 to $75 I could go from here to British Columbia. It takes more than one day to go that far. Yet this commissioner is getting $72 a day for travelling expenses. One of the lawyers, a K.C., who got $200 a day, has travelling expenses of $983.69. His assistant was getting only $50 a day. Presumably he said to himself, "I must make it up in travelling expenses." because his travelling expenses amount to $1,231.72. These are things I cannot understand and should like to have explained.

The last commission I want to mention is the national employment commission. Its cost ran very high. In 1937 it cost this country $147,569.72, and in 1938 practically the same amount, namely, $147,925.94.

I wonder what the farmers in western and eastern Canada, the men and women who are out of employment, and the school teachers getting only $700 a year, think of all this.

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An hon. MEMBER:

Seven hundred dollars, where?

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CON

Alonzo Bowen Hyndman

Conservative (1867-1942)

Mr. HYNDMAN:

Out in the west, I

believe. I wonder what the hundreds of college graduates who have graduated this

The Budget-Mr. Hyndman

year, the thousands of people on relief in Saskatchewan, and average honest Canadian citizens, think of all this. And then we talk of democracy and of trying to preserve it. It is this sort of thing which is driving people in this country into communism, socialism or fascism. I would not say I cannot blame them, but I do say we have to prove that democracy is better than communism and fascism, and we as a government are not doing it.

I want to refer to the votes in Saskatchewan in 1934 and in 1938. In 1934 the people of Saskatchewan voted for the Conservative and the Liberal parties to the extent of 75 per cent as against 25 per cent who voted for other parties. What was the vote in this last election? It was 58 per cent for the Liberal and Conservative parties and 42 per cent for the other parties. I leave that fact with the government.

In my opinion the government should be doing something more for agriculture, the basic industry of this country. On other occasions I have spoken in this chamber about the western farmer and I have been criticised. I want to make it absolutely clear that I am speaking as a private member and my observations are my own. Although this government has spent a tremendous amount of money on the provinces of the west-Saskatchewan, Manitoba and Alberta-I do not criticise them for that. I criticise them for not helping the farmers in the rest of Canada. When I pick up the supplementary estimates and look at the amount of money this government is voting and expecting to spend on agriculture within this year, I find that, of the total sum of $6,742,059.71, $6,093,511 go to Manitoba, Saskatchewan and Alberta and only $648,548.71 to the rest of Canada. I am not saying that the grant to the western provinces is not fair, but I contend that this government is not doing enough for farmers in other parts of the dominion. I suggest to the government that if there is a reshuffle in cabinet portfolios, let eastern Canada have a minister of agriculture, for -a change. For the last three or four parliaments the ministers of agriculture have come from western Canada. Give us one for a change. Let western Canada have the Minister of National Defence instead.

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?

An hon. MEMBER:

The west has him.

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CON

Alonzo Bowen Hyndman

Conservative (1867-1942)

Mr. HYNDMAN:

Remember also that this amount of $648,000 includes marketing service, production service, experimental farms, and science services.

I advocate, on behalf of the farmers in eastern Canada, a minimum price for all farm products. Why should we not have a 61952-2621

minimum price for our farm products just as the western farmers are guaranteed a minimum price for wheat? Give our farmers something to work on. I agree with the hon. member for Kootenay East (Mr. Stevens) in his attack upon the packers of this country. In my opinion they have the farmers of eastern Canada right by the throat and they are controlling the price of farm products in the east. All one has to do is to stop and think for one moment of what happened to the prices of beef cattle and pork between last August and last November. Why was there a drop of $3 per 100 pounds in the price of beef? It was that the packers knew that the farmers had to sell their products because they required money to pay their taxes. The price of pork went down last fall, when the farmers had pork to sell; they could get only 7i cents a pound. What is the price of pork to-day? It is nearly lOf cents, now that the farmers have no pork to sell. The packers are controlling prices, and unless the government does something in this regard I am afraid the country is not going to get very far.

As I said before, Mr. Speaker, I do not want to criticise the help that has been given the west, but there is one point I think I should mention in which I feel the Minister of Agriculture (Mr. Gardiner) and the government are to blame. We all know that for the last two years the western provinces have been going through terrible times, and we in the east gathered together carload after carload of vegetables which we shipped for the relief of the west. But what happened to those vegetables when they reached there? The Liberal government and the Minister of Agriculture appointed a man to distribute them, and what did they pay him? He was paid at the rate of $6,000 a year, or $500 a month, to distribute those vegetables. He was not satisfied to do the work himself; he said he wanted some assistance, and the government turned around and appointed forty-five men to help him, at $125 a month and expenses.

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An hon. MEMBER:

Terrible.

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CON

Alonzo Bowen Hyndman

Conservative (1867-1942)

Mr. HYNDMAN:

Terrible is right, and if their expenses are anything like the expenses of the commissions I mentioned a moment ago, I guarantee that they are getting more than $125 a month.

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LIB

Charles Robert Evans

Liberal

Mr. EVANS:

If I might ask the hon. member a question, was that all the work which was done by the gentlemen referred to by my hon. friend, the distribution of the fruit and vegetables?

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CON

Robert Henry McGregor

Conservative (1867-1942)

Mr. McGREGOR:

And even that was not done right.

413S

The Budget-Mr. Hyndman

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CON

Alonzo Bowen Hyndman

Conservative (1867-1942)

Mr. HYNDMAN:

Another burning question in Canada is the burden of taxation. I believe I am voicing the sentiment of every taxpayer of this country when I say that the cost of government is entirely too high. I should like to place on Hansard a record of the increase in the cost of government during a ten year period:

Agriculture Percentage of increase for year 1936-37 over year 1926-27 (10 years) 28-61

Debt service 46-15

Development of natural resources 31-20

Education 2-34

General government. .. 12-08

Protection of persons and property 36-00

Public welfare 365-25

Recreation 18-31

Soldiers' pensions and care 22-17

Miscellaneous 119-08

Immigration and colonization Percentage of decrease 45-33

Post office 1-50

Transportation 4-28

Of course it must be remembered that the cost of public welfare includes the cost of direct relief. In the post office there is a decrease of 1-50 per cent, due, I maintain, to the poor salaries paid to the rural mail carriers. They could very well be paid a little more, in order to make up that difference of 1-50 per cent In 1926-27 the cost of government was $745,528,086. In 1936-37 the cost of government rose to $1,104,434,576, or an increase of 46-37 per cent, and a per capita increase of 27-24 per cent. During the same period, however, our increase in population was only 16-68 per cent. In 1927 we paid $137,410,345 in interest on our dominion debt, which took 30-30 per cent of our total revenue, whereas in 1912 the interest on our debt amounted to only $12,605,882, or 7-47 per cent of our revenue. I submit to this house, Mr. Speaker, that this cannot go on.

In discussing this matter of debt I am reminded very much of the battle of Waterloo, which was fought nearly a hundred years ago, I think in 1870-

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?

Some hon. MEMBERS:

Oh, oh.

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Thomas Miller Bell

Mr. COLD WELL:

1815.

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CON

Alonzo Bowen Hyndman

Conservative (1867-1942)

Mr. HYNDMAN:

Very well, 1715.

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?

Some hon. MEMBERS:

Oh, oh.

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CON

Alonzo Bowen Hyndman

Conservative (1867-1942)

Mr. HYNDMAN:

Well, it was fought, anyway. What I want to point out is that Great Britain, which won that war, is still paying interest on the cost of it; and I want to point out also that France, the loser, is

[Mr. McGregor J

still paying interest on the money she borrowed to conduct that war. Is that not wonderful finance, so sound and so sacred?

This year we are given a little relief in regard to the sales tax, and I commend the government for the action it has taken in that regard. I think the removal of the sales tax on building materials in particular will be of some help, but the government must see to it that there is not an increase in the prices of those materials from which the sales tax has been removed. They should see that what occurred when the housing scheme was brought in by this government two or three years ago does not occur again. What happened at that time? When that housing scheme was inaugurated, the price of materials went up 50 per cent. That is no good. Control must be exercised.

And, O my! Mr. Speaker, how the farmers of this country must appreciate the removal of this eight per cent sales tax from harness and gopher poison. I looked up the price of a set of heavy duty team harness complete, and find that it costs $59.38. Therefore the farmer is going to save eight per cent of $59.38, which amounts to $4.74. Since a set of harness usually lasts about seven years, he is going to be in pocket eighty cents a year. Is that not a wonderful thing that the Liberal government has done for the farmers of this country? But the sales tax is taken off gopher poison! Just think of it! The average farmer in western Canada, I understand, buys about $3 worth of gopher poison a year. Eight per cent of $3 is twenty-four cents, so under this wonderful budget he is going to save twenty-four cents a year. What wisdom the farmer showed a short time ago when he voted for the Liberal party!

Why did the government not take off the tax on medical supplies? , For a number of years we have been paying the sales tax on those supplies, and the removal of it would have been more to the point. There is plenty of revenue from taxation, and yet the government talks about deficits. There should be no deficit. The federal deficit, so far as I can make out, is something like the surplus of the Hepburn government. When I look into the matter I find that in the past five years the revenues to this government have aggregated the stupendous sum of $1,748,811,000.

When we compare the revenues in the last two years of Conservative administration, at a time when conditions in this country were very bad, and when relief expenditures were high, with the revenues in the last two years of the Liberal administration, in a time when we are told conditions are so much improved, we have to stop and think. In the last two

The Budget-Mr. Kennedy

years the Liberal government have taken $835,203,000 in taxation from the people of Canada, while in the last two years of the Conservative administration that government received only $576,296,000 in revenues. In other words, the difference in revenues amounted to $258,907,000, and still the Liberal government have a deficit of $13,000,000. Can you, Mr. Speaker, figure that out? Why should they have a deficit? They should have no deficit at all. Why has there not been a greater reduction in the sales tax? I maintain the sales tax should be repealed at once, and .though it is possible the government might not be able to balance its budget, there is no need for a substitute; for the rebound in business would be much greater and more permanent than any effect resulting from the proposed expenditure of millions on relief work, or any other form of government aid.

The important point is that this invasion of the fundamental right and duty of the people to make and exchange products and services with one another should be removed at once. To penalize people by taxation is to fine them for doing their duty. When the sales tax is removed, trade will recover sharply; and then, with the increased revenue from other and more legitimate sources, the sales tax can be relegated to the limbo of discarded expedients, where it belongs.

Let us consider the tax sales of farms in Carleton county; and when I refer to Carle-ton county I am not referring to any mean county. I indicated earlier in the session the financial position of Carleton county. They are running their finances and looking after their affairs very well. I have before me a notification of the latest tax sale. We find that farms in Carleton county are being sold for taxes.

I shall speak only briefly about Canadian trade. Trade is of course a subject of great importance. I would particularly draw the attention of the government to the importance of the Ottawa trade agreements. I would point out to the government the importance of our trade agreement with the United Kingdom and the commonwealth of nations. Our exports to the United Kingdom and the commonwealth in 1937 amounted to $924,318,073, while to the United States they amounted to only $343,250,669.

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June 22, 1938