September 12, 1939

CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

Frankly I believe that the sales tax method should be reviewed and studied. I am not authorized by my leader or my colleagues to say what I am about to say; I am just throwing it out as a hint or suggestion of my own. For many years I have studied the sales tax with great care, and from time to time I have sought to find in my own mind and to my own satisfaction some substitute for it, because it is a very valuable tax.

I think at the present time it is producing about $120,000,000 or $130,000,000 a year.

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LIB
CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

It is a valuable tax, which could not be discarded without substituting something for it. Admitting that it is inequitable, as I think will be admitted by anyone who has studied its application, I believe a turnover tax right across the board, say of two per cent in war-time and one per cent in peace-time, would be more equitable and less burdensome, would produce much more revenue and would injure no business. I realize what is said about the pyramiding, but you have pyramiding under the sales tax; the pyramiding is there. I have taken my pencil and worked it out many times; I have studied it very carefully. I think the pyramiding of the low tax of say one per cent would be so minute that it would be hardly worth bothering about, whereas the pyramiding of the eight per cent tax is quite substantial. The real point of it, however, is this: the industry which is the foundation of your productive activity suffers under the sales tax, whereas if you had a turnover tax that went clean across the board, with everyone paying a small tax, it would not bear down to the point of bankruptcy, as has sometimes happened under the sales tax. I know industries which in these last few years of distressed times have gone bankrupt under the sales tax. A tax of two per cent or one per cent could not vitally affect any industry or business. I know there are those who say that the cost of collection would be too great, but that is not so at all. You have your sales tax organization to-day, together with other media of collection that could be easily invoked. Furthermore, with, the class of individuals who might seek to escape it, the individuals carrying on small cash business, to the extent that it might be evaded, in the first place, the revenue would not be affected very much; and in the second place, with a

severe penalty attached and the ease with which you could discover such evasion-it is quite simply done by checking the invoices from their sources-an example could be made of a few of them and there would be very little evasion. In addition, the amount of the evasion would not be worth the risk.

I merely make that suggestion because these are parlous times and we need revenue.

I believe that in these days-and I am speaking solely for myself, and may be treading on the toes of some of my colleagues, since I have not discussed the matter with them

we might well try some of these things which perhaps in normal times we would not care to risk. I will admit that politically at first it might have some repercussions, and that might be a reason for not trying it. I do not refer only to this government but to any other government. Even so, I think it is well worth consideration.

I have spoken at greater length than I had intended, Mr. Speaker, and I shall not further prolong the discussion. I simply repeat that in the limited time I have had to consider them I am not inclined to offer any very severe criticism of the minister's suggestions. We know perfectly well that the government must bear down very heavily in taxation at this time, and I see no reason at the moment to criticize the government's policy of establishing, as far as possible, a pay-as-you-go basis, with limited borrowings. In that connection I was glad the minister confirmed what I said yesterday with regard to the possibility of borrowing money at reasonably low interest rates. I think he agrees with the opinion which I believe is held by many that there is no sanction for the rapid increase of interest rates on government security, and I was glad to hear him make that statement. In closing, however, I suggest that he carefully review the possibility of using the gold resources of Canada to a somewhat greater extent.

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CCF

Major James William Coldwell

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

Mr. M. J. COLDWELL (Rosetown-Biggar):

Probably those of us who listened to the introduction of the war-time budget by the minister were impressed by the fact that the government is making at least some attempt to inaugurate the policy which I believe was generally hoped for on all sides of the house, that as nearly as possible we should pay as we go. From that point of view I think both the minister and the government for which he speaks may be congratulated.

The minister, of course, took note of some of the factors which enter into the difficulties of war-time financing in this country, particularly the tremendous difference between now

The Budget

Mr. Coldwell

and 1914 in regard to the extent of the national debt. As we said on a previous occasion, we must not increase this debt to a greater extent than we can possibly avoid, because in spite of what the minister said in the carefully outlined philosophy contained in the first part of his address, in effect we are placing a burden upon a future generation. It is true, of course, that most of the goods produced in our generation are consumed in our generation. That is true in peace as it is in war. Nevertheless, if money is borrowed, somebody, at some time in the future, has to repay in goods and services the value of that money and the interest that will accrue. The unfortunate part is that it is no longer a question of rewarding a certain person or group of persons for foregoing pleasure at the moment. To-day we have large accumulators who are denying themselves nothing but who are yet able to impose upon future generations a toll of labour and resources.

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LIB

Duncan Graham Ross

Liberal

Mr. ROSS (Middlesex):

Is it not fair enough that the future generation should pay?

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CCF

Major James William Coldwell

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

Mr. COLDWELL:

The question is asked as to whether or not it is fair that the future generation should pay. I think not. As a matter of fact, in my opinion this generation has made a deplorable mess of both our economic and social affairs, and we should not expect succeeding generations to pay the penalty for the mess we have made.

I agree with the hon. member for Kootenay East (Mr. Stevens) in this regard, that the issue of currency at this particular time may not be considered an inflationary measure. As he has said, we have the backing which would enable us to make such an issue. Since we are expecting to trade very largely with Great Britain and her allies, may I add that there may be some immediate advantage in depreciating our dollar in terms of the United States dollar, and bringing it more nearly to a parity with the pound sterling. Of course our dollar in the past week or ten days has fallen. Nevertheless it is still appreciably higher in value than the pound sterling.

The budget before the house to some considerable degree represents an attempt to finance by taxation

that is, making the present generation pay to a degree for the war that is upon us. I would point out, however, that many of these taxes fall very heavily upon those who are least able to pay. It is true that some compensation is to be found in the fact that corporation and income taxes have been increased. On the other hand, the taxes upon tea and coffee and on the cheaper grades of tobacco which, on a poundage basis, will pay as high a tax as the (Mr. Coldwell.]

dearer types, and the taxes on gas, electricity and certain kinds of meats and fish fall heavily upon the people who as yet-I do not know what the war may bring about- are not able to bear increased taxation.

Then we come to the excess profits tax. I have done a little pencilling as I have sat listening to the budget speech, and I have made a comparison of what the tax will mean in the two forms. If the investment is, we will say S100, and the net return is 10 per cent, the new tax will impose a dollar of taxation. This means that the amount of the profit allowed may be 9 per cent. * If the profit is $15 on the $100, then the deduction by the tax, I take it, would be $3, and the profit allowable would be 12 per cent. On twenty dollars-

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LIB

James Lorimer Ilsley (Minister of National Revenue)

Liberal

Mr. ILSLEY:

I do not think that is

correct.

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CCF

Major James William Coldwell

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

Mr. COLDWELL:

I have just figured it

out hurriedly. If the minister disagrees, I hope he will correct me, because I think when we go away from this session, whether it be to-night or at some later time, we should know exactly what the tax is, in dollars and cents.

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LIB

James Lorimer Ilsley (Minister of National Revenue)

Liberal

Mr. ILSLEY:

The computation of the hon. member is not correct.

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CCF

Major James William Coldwell

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

Mr. COLDWELL:

Then I should be glad to have the minister correct my calculation, if it is wrong. I have taken the minister's figures.

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LIB

James Lorimer Ilsley (Minister of National Revenue)

Liberal

Mr. ILSLEY:

I do not think the hon.

member is right, in the first place. He is leaving out the corporation income tax entirely. That must come first, before the business profits tax is chargeable. I suggest that is a very important omission. And, apart from that, I think the hon. member's figures are inaccurate.

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CCF

Major James William Coldwell

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

Mr. COLDWELL:

I should be glad to have them corrected, because it is important that we know exactly what these taxes mean. Would the minister give the house a table which would give an accurate picture of exactly how , the taxes would apply, on a basis of $100 or $1,000, as the case may be?

3n my opinion the election of the corporation as between two methods of paying the excess profits tax may react in favour of businesses which have been able to show a very substantial profit in the past few years.

I think the businesses which in some instances have been able to show a fair profit have been those which to some extent have been connected with preparations for war. For example I would mention the metal mining industry. If any group of industries should be

The Budget-Mr. Jagues

expected to bear a very substantial portion of the tax, certainly it would be that group connected with preparation for war. I should have liked to see the minister or the government-and perhaps at some later date they may consider the point-consider the limiting of profits in various types of industry to a certain percentage, and then taxing the total amount above that percentage for the revenue of the country.

After all, when we speak of equality of sacrifice we must bear in mind that in war there is no equality of sacrifice. No matter how much taxation individuals may pay in dollars and cents, their contribution is not in any degree equivalent to the sacrifice of human life. Consequently there can be no equality of sacrifice in a war condition. I do not think anyone can have any objection to what may be described as luxury taxes, namely taxes on intoxicating liquors, beer, tobacco and cigarettes, except in so far as the poor man's tobacco is taxed at the same rate per pound as that of the man who can afford a more expensive brand.

As I said at the outset, I believe that taxes on tea, coffee, gas and electricity are those which will fall heavily upon the people least able to bear them.

As I said the other day, we still have a very valuable source of revenue which this budget does not tap, and which I would have wished to see tapped. I refer to what I described as a capital gains tax. I know there are some people who will say that in the past few years certain individuals have taken losses on the stock market, and that assertion is perfectly true. But to my mind it is no reason in the world why, under conditions of stress and strain, with stocks rapidly increasing in value, we should not expect a return to the state from a condition which has been brought about by action of the state. I say that because, after all, a declaration of war is indeed action taken by the government of this country. I say, therefore, that a capital gains tax is something that might well be instituted, and a source from which large revenues would be derived.

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LIB

James Lorimer Ilsley (Minister of National Revenue)

Liberal

Mr. ILSLEY:

Would the hon. member

tax gains without allowing losses as deductions, in years when there were losses?

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CCF

Major James William Coldwell

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

Mr. COLDWELL:

My answer would be that all our taxes are based upon gains, not losses.

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LIB
CCF

Major James William Coldwell

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

Mr. COLDWELL:

If we pay an income tax on this year's income and have no income next year, we are not permitted to average

the two years. Consequently I say that it is a legitimate tax. Moreover, in all probability you may not be taxing the same persons who sustained losses, because under our economy there is a constant shift in the ownership of stocks, of bonds and even of real property. In gains from such transactions we have a possible source of revenue.

The other afternoon I mentioned the situation in regard to wheat, and I was glad to hear the Minister of Trade and Commerce (Mr. Euler) correct me this afternoon. But I notice that the minister said that the board still controlled that wheat, and I do not know just what that actually means. As I said, I have a distinct recollection of seeing a statement early in the month of August to the effect that the board was waiting for new wheat to be delivered before it could resume its marketing operations in relation to that commodity. I do not know if that implies that the board has control of wheat through options, but I took it for granted that is not the case because of what I understand to be the attitude of the party supporting the government now in power.

These are the main criticisms I would offer at this time. Hon. members realize that no one has had an opportunity of studying these taxes and their implications. We are in the war, and all of us, no matter what our opinions may be regarding it, should be ready to do everything we can to support the government in financing the activities that we have undertaken as a nation. I am anxious to see that in the financing of our activities the burden shall be placed upon those who can most easily bear it, rather than upon those who cannot. Before I sit down I will again emphasize the fact that no matter what taxes we may inflict upon those who profit from the industrial activity of this nation during the war or upon those who by fortuitous circumstances have control over great masses of wealth, we are not in any way approaching an equality of sacrifice. We are asking large numbers of our young men to lay down their lives, and to sacrifice the most precious possession a young man has.

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SC

Norman Jaques

Social Credit

Mr. NORMAN JAQUES (Wetaskiwin):

Mr. Speaker, we have been accused of using this opportunity for advancing ideas which we hold, but I cannot help that and I intend to take no notice of such an accusation. During the present session I have heard nothing which would cause me to alter my opinion that this war can be financed without increasing the debt of the country. By using the services of the Bank of Canada and by adopting suitable methods of taxation we can fight and win this war without leaving an overwhelming

The Budget-Mr. Jaques

burden of debt upon the succeeding generation. I cannot remember his exact words, but this afternoon the minister said that the real cost of a war is paid during the war. That is right. A war is paid for by blood, by sweat and by tears. When that payment has been made, the bill is paid. That was true of the last war, but why are we still paying for it? If the real cost of the last war was paid during the war, then all that has been paid since is unreal. That is what we believe.

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LIB

Joseph James Duffus

Liberal

Mr. DUFFUS:

Does the hon. member mean to say that it was all paid for during the time of the war?

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SC

Norman Jaques

Social Credit

Mr. JAQUES:

Yes. The cost of a war is the cost of human life, human suffering and material losses. Anything else is purely artificial. Why should people as yet unborn be asked to pay for the cost of this war into which we are entering? It has been said that we should borrow now while the borrowing is good because interest rates are likely to rise. Is that a promise or a threat?

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LIB

James Lorimer Ilsley (Minister of National Revenue)

Liberal

Mr. ILSLEY:

I did not say that interest rates would likely rise.

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September 12, 1939