July 2, 1940

THE BUDGET

DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISITER OF FINANCE


The house resumed from Friday, June 28, consideration of the motion of Hon. J. L. Ralston (Minister of Finance) that Mr. Speaker do now leave the chair for the house to go into committee of ways and means, and the amendment thereto of Mr. Coldwell.


NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Hon. R. B. HANSON (York-Sunbury):

Mr. Speaker, I am greatly indebted to my colleague, the hon. member for Davenport (Mr. MacNicol), for having given way to me this afternoon. I know he had, as always, a most distinguished contribution to make to this debate, and I trust that an opportunity will be given him at a later stage in these proceedings to deliver the message which he had for us this afternoon. Again I desire to thank him for his courtesy.

When I heard the Minister of Finance (Mr. Ralston) deliver his annual budget statement on June 24 I confess that I did so with very .mixed feelings. I realized then, as I do now, and as I am sure we all do, that this country is really at war. I have from the very beginning of this titanic struggle realized and visualized a war of long duration. I do not

!248 COMMONS

The Budget-Mr. Hanson (York-Sunbury)

claim any superior vision, neither have I any special information, but having read all the relevant material on the subject which I could obtain, and having pondered deeply the whole position, especially since the failure of Munich, I came to the conclusion that this war, like the great war of 1914-18, would be of long duration, and that as a result a longterm point of view with reference to finance was the proper one to take.

In addition I have always held the opinion that Canada, as an integral part of the British empire, as one of the allies and a de jure as well as a de facto belligerent, should mobilize and use her man-power and her material resources in such a way as to give the maximum of effort to the allied cause. In holding this opinion I believe I am in accord with the views of all true loyal British subjects in this dominion, and in that regard I find my views also in accord with those which the minister expressed in his budget statement of the 24th of June.

I am aware, of course, that there are those in this country who do not share these views in their entirety. I am, however, inclined to think that those holding views at variance with my own in this regard have materially altered their own point of view, and this has been brought about by the force and trend of events as they have developed during the past six or seven weeks.

In one respect only do we differ in any substantial degree, and that is with respect to the method of marshalling our man-power for service overseas. Here again the trend of events has intervened and in a degree altered our position. It may well be that because of the cessation of fighting in the continental theatre of war, man-power overseas is not so pressing a problem as at first appeared. But because it may not be so yet, I suggest that our duty to assist with mechanical equipment such as planes, tanks and guns, with munitions and with foodstuffs and material supplies, is all the more pressing. In other words we should be utilizing our every resource to assist the mother country with all those material things of which she is in such dire need at the present critical juncture.

There is, too, the problem of the defence of Canada. On the 21st of June this parliament passed the National Resources Mobilization Act, which in addition to the legislation already on the statute books gives to the government of this country the most dictatorial powers ever conferred by this parliament on any executive, so that there is no longer any excuse on the part of the government for refusal or neglect to do anything and everything humanly possible to defend

this country and to bring the maximum of support and assistance to the mother country. Apart from the question of national leadership, the only consideration remaining to round out the whole orbit of defence and assistance lies in the realm of finance.

It is axiomatic to say that the right arm of a nation in time of war is its man-power and the necessary and essential equipment thereof for war purposes.

It follows without doubt that the next most important element in marshalling the fighting strength of the country for any and every purpose is finance. Our problem at this time is to marshal our financial resources in the wisest and best manner possible so as to achieve the maximum of results, and if possible at the same time preserve our corporate existence, so that after the struggle is over and after victory has crowned our efforts we may proceed not only to bind up the wounds of the nation but also to rebuild what may be a shattered structure.

This problem cannot be achieved in one budget, but the government, and especially the Minister of Finance, should have as long a vision as possible and chart out a course for the nation, looking not only to the immediate necessities for the day and hour but also to the time when we shall, if we continue to exist as a nation, have to prepare for the future or after-war period.

I quite agree with the minister that we must pay for the present peril. It will not matter much what becomes of our national wealth if we lose this war, but I do suggest that we do not approach in any defeatist spirit the consideration of the financial problems now confronting us. Rather should we approach their consideration on the theory that we shall win this war, as we must, and I shall discuss the problem in that spirit and with the hope that I may make some contribution of a constructive character. One thing is certain-the Canadian people will not withhold from the government the money necessary to win this war.

There may be differences of opinion, honest differences, as to how the money shall be raised, but I am as certain as I ever was of anything in my whole life that the Canadian people will give of their treasure as gladly and as wholeheartedly as our gallant fellow-citizens gave their lives in the last great struggle and as I believe the present generation are prepared to give theirs for the defence of their loved ones, their homes, their country, this Canada of ours, and the motherland in this struggle.

I was not privileged to be a member of this house in September last when the Minister of

The Budget-Mr. Hanson (York-Sunbury)

National Revenue (Mr. Usley) at that time delivered his financial proposals, but I read and have re-read his statement with great care. In that speech he indicated that the government proposed:

1. A policy of pay-as-you-go, as far as possible and practicable;

2. A policy of borrowing, preferably on short-term obligations.

3. Inflation was definitely taboo.

Generally speaking, I am in agreement with

the principles enunciated. I am perhaps not so pronounced in my views against inflation as I -was some years ago. I believe that a reasonably limited amount of inflation will, cn a given occasion, help to start the wheels of industry and the interchange of currency. That may sound like heterodoxy to some of my sound-money and more orthodox friends, but the difficulty is to know what is a reasonable limitation. If such a limitation is exceeded, the result may be disastrous. One immediate result of unlimited inflation is a rise in prices. This occurs always before a rise in wages, and as prices increase, wages lag behind. A vicious circle is established and sooner or later deflation, even collapse, may come.

So that I am not chiding the minister for not having utilized a limited degree of inflation. Its exclusion, however, leaves us, according to the tenets of the minister, only two sources from which we may obtain the necessary funds to carry on our war effort, namely, taxation and borrowing. And these are the two methods which the minister has invoked. Let us examine the government's proposals.

It seems to me that with respect to the taxation proposals the minister has proceeded for the most part, and speaking generally, upon lines which heretofore have been generally accepted and have proved useful for the purpose to be accomplished. There is no new radical departure from accepted principles of taxation, with some certain rather unimportant exceptions. This shows caution, and from that standpoint is to be commended. Generally speaking, it seems to me that our taxation proposals at this time should be based upon two principles: (1) Ability to pay; and (2) equality of sacrifice.

Let us deal first with ability to pay. The minister for the most part has utilized this principle as far as is practicable. His whole hypothesis as to quantum appears to me to be based upon the theory that the national income for the calendar year 1939 approximated $3,800,000,000 and for the fiscal year 1940-41 will approximate S4,500,000,000. I

do not know upon what scientific and mathematical data the minister bases his calculation, but I very gravely doubt whether the national income in 1939 approached $3,800,000,000, and if I am correct in that doubt, then I feel very certain that our national income for 1940-41 will fall far short of $4,500,000,000.

I say this for various reasons. While Canada is in a substantial degree an industrial country, and many of us have been striving for years to increase her industrial activities and thus increase the size of her payroll, yet primarily Canada is an agricultural country, and the sum total of the value of her agricultural products exceeds in sum total the value of her mining, fishing and industrial production. It that be so, and with a very large wheat carryover and a large wheat crop in immediate prospect, and no market in sight beyond the domestic requirements of Canada and those of Britain, it would appear, to me at all events, that any large immediate cash return such as could be justifiably included in the category of national income is rather remote, and a substantial allowance on that account will have to be made from this estimate of $4,500,000,000 of national income.

While this wheat situation is the largest of the marketing problems, it is by no means the only one. What about bacon? I understand that a substantial surplus is being piled up each week and that after October first the surplus will grow to enormous proportions. It has even been suggested to me that the price of hogs will fall as low as five cents. I do not wish to be considered an alarmist, but I do at all events believe in being realistic, and I have been obliged all my life to face facts as they are, not as I would wish them to be. This bacon situation sits very securely on the government's own doorstep. The much-vaunted Canada-United States trade agreement and the operations under it on the part of certain importers are directly responsible for the situation now confronting the Canadian hog producer. He is bound to lose money, and next year unless conditions are remedied he will not produce this commodity.

Then there is the apple crop, the situation in regard to which is well known. Just recently we have been told that we cannot find a market for our canned salmon and our canned lobsters. And what about the New Brunswick potato crop! There is a market for seed potatoes in Cuba, but just at present that market is more or less cornered by the activities of the minister of lands and mines of New Brunswick, who, by some means unknown to me, apparently has obtained control of that market for himself. There is opportunity, however, for the government to do something in regard to this matter in Cuba, in Central

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The Budget-Mr. Hanson (York-Sunbury)

America, and in South America, and I urge the Minister of Trade and Commerce (Mr. MacKinnon) to get busy at once with respect to this matter.

All these considerations lead me to conclude that the national income will not approach the figure named by the minister, notwithstanding huge government spending on war effort. That, I submit, is not true national income. It is rather the reverse, and I shall have something to say about it later on. My own view is that it will not exceed four billions, and if so the results from the new taxation proposals will not yield as much in new money for the treasury as the minister anticipates, and we shall not be able to implement the pledge of "pay as you go" to the degree indicated.

I should like to point out to the house and the country certain things with respect to the national income and its effect on the standard of living in Canada. Assuming that our national income is $3,800,000,000 and will go to $4,000,000,000 in 1941, and assuming that the total dominion outlay, including both peace and war expenditures, amounts to $1,200,000,000, provincial and municipal expenditure aggregate about $600,000,000, and we have therefore a great spending programme of $1,800,000,000. Now, on the basis of $4,000,000,000 national income this is 45 per cent of the total national income being spent for public purposes. This leaves us just $2,200,000,000 or about $200 per capita for every man, woman and child in Canada with which to buy food, clothing and household goods, to pay rent, medical and similar services and all the other things human beings require. I suggest to the house and the minister that this represents a very low standard of living. It cannot be helped by further soaking the rich, or by any other unorthodox finance. The only way it can be helped is for the government to cut down its ordinary expenditure and by provincial governments and municipalities all determining to take less money from the taxpayers. This must be done. Raising the national income by governmental expenditure will help, but it will be a long time before it seeps through to business and comes back in some degree in the form of taxation. The only fertile field for immediate income is to be found in the provincial arena and in the municipalities. Certainly there must be no increase in the levy by either authority.

As I view it, there are two difficulties in the government's position. One is that the budget is based, as the government's financial policy has been based for some years, on the assumption that the volume of business can be stimulated by government expenditures and

that this can be very largely covered by the resulting increased taxation. The other difficulty I have already alluded to, namely, the government has not yet by any means been active in reducing non-wrar expenditure.

With respect to the government's first difficulty based on its past financial policy, having regard to its own failure to undertake large war expenditures at an earlier date, it now finds itself faced with the necessity of undertaking a programme of this character just prior to bringing down the budget. The result has been that the budget announcement will have a very serious effect on ordinary business before the stimulating effect of war expenditures is felt, but even their accepted theory of public expenditures to "prime the pump" requires that the expenditures should be made first and the resulting increase of possible taxation obtained later. For all effective purposes, the government has undertaken to obtain the taxation first and make the stimulating expenditures later, but I suggest that it will take months for war expenditures to filter down through the business structure, while the heavy taxation announced in the budget has led a great proportion of the population to take immediate steps for reducing expenditures. This is the only opportunity left to this government to do anything at all effective to relieve the situation. It occurs to me that even political expediency should dictate a revision of policy in this respect. Many new thousands of direct taxpayers created by the budget, as well as all those older taxpayers to whom their income tax was not a matter of vital importance, are now thoroughly alive to the fact, long concealed from or ignored by them, that the people pay for governmental expenditures.

Let me reaffirm that the people will not object to paying for the war, but every one of them who sees a single case of an unnecessary employee, or a wasteful expenditure for non-war purposes, or even an expenditure which could be postponed, is certain to feel vigorous resentment. At the moment I have in mind the failure of the government to halt the work on the Montreal terminal. It did halt construction work on certain public buildings, such as new postal stations in Quebec and Toronto, the supreme court building in Ottawa, and others of a similar kind, but the Montreal terminal seems to be sacrosanct. It will cost this country $12,000,000 in war time and it may even run to $15,000,000, money which can ill be afforded at this time. To me its continuation at this time is a shocking thing.

The Budget

Mr. Hanson (York-Sunbury)

There are four good features in this budget:

1. Pay as you go, so far as possible.

2. Restrictions upon civilian buying, as indicated by the huge taxes on luxury motor cars.

3. Diversion of dollars away from the United States.

4. Avoidance of inflation.

These principles incorporated in the budget indicate, to me at all events, that the minister in these aspects has been soundly advised by the two very able men associated with him. But to say that this budget represents national sacrifice, or that there is equality of sacrifice, I suggest to him is far from the truth. There is not one single new tax which is designed to bear, however lightly, on the entire population. There is nothing comparable to the match tax imposed during the last war-we have returned to that position, of course-or to the sugar tax, which was imposed as a revenue measure but designed to be a national sacrifice paid by everyone in .a time of extreme economic warfare. Per contra, there are no nuisance taxes, for which I think we should all be grateful. However, national sacrifice, as I interpret the term, means sacrifice by all the people of the nation according to their respective abilities to make and sustain sacrifices. In fact all the national sacrifice that is made under this budget is concentrated upon a mere handful of the population, not on the whole population, as it should be.

What is the position? According to a chart prepared and published in the "National Revenue Review" for May, 1940, under the caption "Income Tax and Those Who Pay It," there were for the period 1938-39 individual taxpayers totalling 264,804 who paid a total of 846,937,205. I have tabulated the different classes, as follows:

Number Total

Income paying paidUnder \ 12,000

119,346 $1,269,724$ 2,000 to $ 3,000

63,572 1,324,663$ 3,000 to $ 4,000

34,392 1,462,000S 4,000 to $ 5,000

15,902 1,296,625$ 5,000 to $ 6,000

8,627 1.234,400$ 6,000 to $ 7,000. .. .

5,563 1.260,057$ 7,000 to $ 8.000

3,674 1,144,597$ 8.000 to $ 9,000

2.612 1,107,188$ 9,000 to $10.000 . . . . 1,986 1.059,919$10,000 to $15,000

4,687 4,247,516$15,000 to $20.000 . .. . 1,775 3.210,835$20,000 to $25.000

816 2,551,849$25,000 to $30.000

469 2.132,006$30,000 to $35,000

353 2,156.943$35,000 to $40.000

234 1.732,270$40,000 to $45,000

182 1,656.133$45,000 to $50,000 .... 157 1,662,512

Those in receipt of taxable income of over '$50,000 numbered only 457, or -17 of one per cent of the total number of taxpayers, but contributed $17,289,365, an average of $37,882 each, or 36-17 per cent of the total collected.

On the other hand those in the class under $2,000 represent 45 per cent of the total taxpayers, and they contributed 2-66 per cent of the total amount paid by individuals. I am sorry to have wearied the house with these figures, but I think they ought to be put on record for the purpose of comparison with what these people will pay under this budget. Now under this budget all the sacrificial taxation is being concentrated upon a handful of people in the lower middle bracket. A total of about 22,000 individual taxpayers in the brackets between $6,000 and $50,000 are being asked to contribute next year a total of over $50,000,000 in addition to the sum of $22,254,000 or thereabouts which they are now paying. And this takes no account of their contributions under the national defence tax, which of course will be substantial. Thus these 22,000 odd taxpayers will pay nearly four times what they are now paying. Is there anywhere else in this budget any sacrifice comparable with the tax imposed upon this comparatively small element in our population?

These people will pay; make no mistake about that. They will of course have to adjust themselves to new conditions of life to meet these new burdens laid upon them, while the great mass of the people will be able to pursue their normal manner of living with little or no interruption. These people are not complaining, and I am not complaining on their behalf; I am just pointing out what I believe to be the true position.

I suggest further to the minister that this budget falls hardest upon those already hardest hit by the war. With respect to those who are actually benefiting in their standard of living from the war and war expenditures, the budget makes little demand, except through the corporation tax. I would have wished that the government had placed some imposts which would have had a psychological effect upon our people, making them realize more and more that Canada is at war. That is what I meant when on June 17 and again the next day I asked the Prime Minister to declare a state of national emergency in Canada. A sacrificial tax, which would affect even the humblest in Canada, would have had a tremendous effect in awakening our people. Others realize the necessity for such an awakening. Only two Sundays ago a great ecclesiastical personage in Canada sent out a letter to be read in all the churches under his charge, and it opened with these pregnant words:

At long last Canadians have been awakened to the imminent dangers which threaten our own country no less than Great Britain.

That is the sort of thing I mean.

1252 COMMONS

The Budget-Mr. Hanson (York-Sunbury)

It is not my specific duty to suggest detailed measures. Rather should I indicate principles which I think should be followed; but I cannot refrain from inquiring why some additional impost was not placed on spirituous liquors. It was done under the last budget in England. If I were consulting my own views and principles alone-and I advance this suggestion with a feeling of temerity-I would do away with the sale and consumption of spirituous liquors for the duration of the war as a purely economic measure. The drink bill of this country is enormous, at least $200,000,000 per annum, if not more. I realize, however, that this may not be feasible, for reasons upon which I shall not enlarge.

Why was not a tax of say one cent a gallon placed on all gasoline sold in Canada? They have such a federal tax in the United States, and, mark you, that tax was imposed in addition to, not in substitution for, a similar state tax theretofore imposed in every state of the union, and as a peace-time measure. I suggest to the minister that such a tax was fully expected in this country. Why should there not have been a further elimination of exemptions under the sales tax, in order to raise more money? When I was at home over the weekend a wholesale grocer called me up and expressed great surprise that there had not been some further elimination of these exemptions. I asked what he had in mind and he mentioned condensed milk, on which not a cent of sales tax is collected, and of which huge quantities are sold in this country. I know the answer will be that this would come out of the farmers, but I do not believe it would. I believe the consumer would pay it just as he pays the tax in every other instance.

I now desire to refer briefly to the excess profits tax, which I think will prove to be an important revenue producer. I think the minister has acted wisely in eliminating option A as provided for in last year's act. At best that was merely a skeleton act. I made some examination of it for a client last October and in fact came to Ottawa for the purpose of interviewing the authorities and obtaining a clarification of certain points in relation thereto. To my surprise I was informed that study subsequent to the enactment had convinced the officers that the tax was inequitable and indeed unworkable, and I came away with the distinct impression that a wholly new act would be evolved this session. It was a classic example of hasty, ill-digested legislation. In effect the minister admitted this in his statement. He said one main feature which appeared to be undesirable was the right of the taxpayer to choose between two IMr. R. B. Hanson.]

options; that it had been found that many old firms would pay little or no tax while new firms in business since the war, or those operating in a depressed industry, or undergoing rapid expansion, would be subject to unwarranted discrimination. I agree with that analysis of the situation. Therefore, I understand, a new measure is to be submitted _ It is agreed that it will be much more drastic-I understand that after I left the house on Friday afternoon my friends to the left moved an amendment expressing want of confidence-in the government because this tax had not been made one hundred per cent. I had not intended to deal with that aspect of the matter; no doubt the minister will reply to that. But I should like to point out to the house and to the country that the situation here is not nearly comparable with the situation in the United Kingdom, because in England they have no corporation income tax; and a large sum of money will be paid under this tax, yoked up with the corporation income tax.

While we accept the principle of conscription of wealth in war time, it must be kept in mind that in times of peace excessive income and profit taxes and excessive succession duty on estates may work great injury to the state; that is if we are to maintain the capitalist system. It is no crime to accumulate a moderate degree of wealth. The accumulation of a large amount of wealth in Canada at least is exceptional, and in no sense proves the rule. I venture to suggest that most of us sitting in this house have striven as hard as we could to accumulate capital; and I venture further to say that most of the accumulated capital in this country has been attained by the exercise of the old-fashioned virtue of thrift, a virtue which all too many people have ceased to practise. Do not, then, in peace time penalize too severely those who practise this virtue. In war time it affords a reservoir from which the government may and will under this budget draw huge sums of money for the country's war effort. In peace time thrifty savings must be put back into business, which in turn will employ labour, utilize materials and supplies and employ more of our people. If not invested directly in industry it must be invested in securities, which largely represent industry.

I had not intended to go into the various ramifications of the new measure, but it is an intricate matter and one which I think hon. members should endeavour to understand, as I should like to understand it myself; therefore I think some reference should be made to the details. Like the September act, which has now passed into

The Budget-Mr. Hanson ( York-Sunbury)

oblivion, the new act takes a base period as a starting point, and this base period is the average of the net profits before deducting regular income tax-am I right there?-for company years ending in the years 1936, 1937, 1938 and 1939. All profits in excess of this four year average are subject to the new excess profits tax.

Taxable income is to be determined under the provisions of the Income War Tax Act. Deduction of the regular rate of corporation income tax, 18 per cent for unconsolidated returns and 20 per cent for consolidated returns, is permitted before calculating the annual tax under the excess profits tax. The amount by which the current year's taxable income, before regular income taxes, exceeds the four year average income tax is subject to excess profits tax at the new rate of 75 cents. I hope I have correctly stated the effect of the proposals.

There is another provision in this new tax bill, however, which in effect makes the minimum corporation income tax rate 30 per cent for unconsolidated returns or 32 per cent for consolidated returns. Under the new income tax act a minimum of 12 per cent is payable, in addition to the regular 18 per cent or 20 per cent rate, in cases where this amount would be larger than the excess profits tax computed at 75 per cent, and the amount by which the year's profits exceed those of the base period. That, of course, is a very heavy impost, as the minister knows better than I do.

No alteration is made in the provision whereby ten per cent of the cost of capital expenditure computed in the year 1940 may be amortized against taxable income over a period of three years, and I congratulate the minister on having left this concession in the law. I note, too, that the excess profits tax will not apply on income received by Canadian companies from subsidiaries or other investments in Canada. This, of course, guards against duplication. I am wondering if it is clear that this provision applies in respect [DOT]of income received by a Canadian company operating a subsidiary in the United States, or does it only apply to subsidiaries in Canada? I am hopeful that the minister will give some consideration to that point, and make it clear.

I am curious as to the reference to a board of referees, which the minister suggested would be appointed, and for which the resolution provides to assist in carrying out the provisions of the proposed measure "fairly and realistically," as he stated. Just what are to be the real functions of this board? Is it to be a court of appeal? If so,

then great care should be exercised in the selection of the personnel. Above all, political consideration must be strictly taboo, and only men of the highest integrity and judicial ability should even be considered. I warn the minister that his selection will be watched with great anxiety, because an arbitrary board could easily make or break any concern coming under its jurisdiction.

Then, in respect to gold mining: The minister made more than a gesture to the gold mining and oil producing industries. It is, of course, wholly desirable that any new ventures should be encouraged, but I would not think it desirable or in the public interest that proven ventures should be given special consideration. I have in mind the type of man who makes a lucky strike, and then because he is being taxed pretty heavily leaves the country. They must, without question, be treated liberally with respect to depletion and depreciation. It is being borne in mind, too, that our gold production is a most important item in our exports and helps mightily to maintain our trade position, and also our exchange position, but it must also be borne in mind that gold as a commodity for sale and export has come into its own to a greater degree than any other Canadian commodity. There is a tremendous unearned increment there, and this industry must, and I have no doubt will, bear its just share of the national burden, especially in war time. The difficulty has been, and I presume now is, to arrive at a wise and just conclusion as to the incidence of the taxes to be imposed. I know some of the difficulties of the past. I know, too, that every ounce of gold taken is just that much exhaustion of our estate, but providence has been reasonably kind to Canada in this regard, and we are indeed fortunate in having this huge reservoir upon which to draw in this hour of peril.

Then, with respect to the national defence tax. in theory this tax is a supplement to the graduated income tax. It will bring in an army of new taxpayers and to that extent it is all to the good, because I have found that any one who has to pay a particular tax for the first time becomes interested in the application of the tax moneys. This new war tax will help to impress upon the new taxpayer that he is in this war. The results from the tax, S20.000.000, for the balance of this fiscal year, and $35,000,000 estimated for 1941, are substantial and will be a welcome addition to our war effort.

While this is all true, yet may I remind the country that this sacrificial taxation is in a degree coming from the same source as that from which the increased income taxes

1254 COMMONS

The Budget-Mr. Hanson (York-Sunbury)

are coming-in this case salaried or the wageearning classes, many of whom will be already found in the lowest income brackets. These will be obliged to pay both taxes. I am not objecting. I now desire to call attention to the situation with respect to the method of collection-at the source. I agree that the minister has taken the most practicable course; any other procedure would have resulted in great expense to the treasury and there would have been some loss. At the same time this has shown that he appreciates the fact that this tax will add another burden to executives and business generally. To offset this he proposes to make provision toward reimbursing employers for expenses so incurred.

So far, so good; but may I be permitted to make a suggestion to the minister. For years I have heard complaints-sometimes bitter complaints-that business enterprises have to make altogether too many returns to governmental departments. All this costs time and money and is frequently a source of irritation. Some people, you know, thrive on statistics. Is it not possible that with this new duty cast upon the accounting departments of firms and corporations some attempt can be made to reduce the volume of statistics and returns which they are now obliged to make? I know that statistics are important, but they never fed any one, and we are apt to allow bureaucrats to demand much more than is requisite and necessary. Some amelioration in this regard may be reasonably expected in war time.

I think, Mr. Speaker, I should make some reference to the new war exchange tax. Its primary importance is to conserve exchange. I have no means of judging as to whether it will be a revenue producer or not. I am prepared to accept the minister's estimate of $65,000,000 in the first full year, of which $50,000,000 will be collected in the present fiscal year. It does not apply to empire countries and will be subject to drawback for export, as in the case of customs duties. Cases of hardship will arise because of its imposition. I hope the minister has given full consideration to this aspect, and that he will see, if he has the necessary power, that such injustices as may arise and be properly established are corrected. Here again great care will have to be exercised.

I have in mind persons, firms, or corporations which sell United States made heavy goods, such as caterpillar tractors or other such equipment, of a class or kind not made in Canada, ordered for contractors having contracts with this government for the clearing of airport sites under a firm contract on a laid down duty paid price in the maritime provinces. It is quite clear from the

fMr. R. B. Hanson.]

new section 88-A (1) of the Special War Revenue Act, read in conjunction with section 13 of the resolution, that all such goods must pay this extra tax and that it will apply on all goods imported or taken out of warehouse for consumption on or after June 25, 1940, and on all goods previously imported for which no entry for consumption was made before that day.

Now, the case I want to put to the minister is this: What about goods in transit,

ordered in good faith, on a firm contract on a duty free basis laid down in Canada prior to the budget? It seems to me that some consideration at least should be given to importers who find themselves in this position. These machines cost a lot of money, they are usually sold at a laid down price at the point where the contractor takes delivery, that is to say, duty paid in Canada. Are these dealers to be penalized?

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

James Layton Ralston (Minister of Finance and Receiver General)

Liberal

Mr. RALSTON:

Is my hon. friend referring to the same class of article?

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISITER OF FINANCE
Permalink
NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

Yes. I

suggest the minister give very serious and sympathetic consideration to their position. But I am bound to say that balancing the disadvantages that may arise against the advantages which will accrue in respect to conservation of exchange, I am of opinion that the tax is justified. In fact, I would have gone somewhat farther.

In order to conserve our exchange position, that is, if it is deemed desirable and in the public interest to preserve the pegged rate at its present position, and having regard to the large adverse balance of trade which is steadliy mounting against us in respect to non-empire countries, principally the United States, we must either restrict our imports or impose new imposts as suggested. I would think that consideration might be given to taking even more drastic action looking toward the total exclusion of certain luxury imports, that is if our hands are free to do so. It is one of the things they have had to do in England and we might well follow their example. We could save a lot of exchange if such a course were adopted, and at the same time do no violence to a decent standard of living. I commend this suggestion to the minister. He has, however, elected to adopt a middle course, I assume on the theory of revenue requirements.

But while he has done that, do not imagine that this tax will not operate as an additional protective duty. It is bound to have that effect no matter what the minister may say as to measures which he may take under the war-time prices and trade board. Increased prices will follow because, under the theory

The Budget-Mr. Hanson (York-Sunbury)

of a protective tariff, the consumer in the final analysis pays the duty. All the minister can do is to see that there is no unjustified increase in prices. I commend this matter to the attention of my free trade friends in this house, if there are any left after following this government for five years.

I am in agreement with the principle of taxing high-priced motor cars. With respect to these luxury taxes on automobiles there is a proviso which will be found on page 8 of the ways and means resolutions to the effect that if a new and unused automobile is in the hands of a dealer on June 25 and not delivered to another purchaser, the tax shall be paid by such dealer when such automobile is delivered. This means that any new and unsold car in the hands of a dealer must bear these increased taxes. I suggest that that is neither fair nor equitable, and that the tax contemplated by this proviso should not be imposed. I have no special information, but I feel certain that as the public anticipated this new taxation on automobiles the situation has been discounted largely and that not many new cars were in the hands of dealers when the budget speech was delivered. The loss of revenue which would be sustained if this item were dropped would not be large.

May I remind the minister that years ago when Sir Henry Drayton was minister of finance a similar tax was placed on automobiles left in the hands of dealers when the budget of that time was introduced. The tax collected amounted to several hundred thousand dollars, and after the change of government in 1021 a campaign was carried on here in Ottawa and a lobby established in this house, as vigorous and intense as any I have ever known, with the result that years afterwards the government of the day, then led by the present Prime Minister, succumbed to the importunities of an organization here in Ottawa and rebated the tax with interest. I suggest to the minister that he does not, even in war time, want to get into a similar position. If he does, I have no doubt that no matter what the political stripe of the administration may be, the result will be a repetition of the experience we had years ago when the government of the day succumbed to the importunities of a powerful lobby.

Finally, there is a matter to which I desire to draw the attention of the house and the country; I refer to retrenchment in the ordinary public services of the country as distinguished from war services. I have already expressed the view on more than one occasion during this session that with this country at war the Canadian people will gladly yield all

the money the government may require to defend Canada successfully and to aid our mother country. Of that there is no doubt. The measure of their contribution will be the measure of their ability to pay. They will even expect wasteful expenditure-all war is wasteful-but they will frown upon any and every expenditure not absolutely necessary in the ordinary operations of the country. The estimates before the house indicate that the government has made a substantial move in that direction. In the September 1939 budget, total expenditures aggregated approximately $651 million, not including two items of capitalized defence expenditures and further losses of $27 million on wheat. The total expenditures for last year are now estimated at $681 million. I would assume that with the close of the fiscal year now three months past this figure is reasonably correct. This figure is broken down in the minister's statement. It should be noted that due to increased taxation during the year the revenues were $46 million greater, but we had an actual deficit of $118 million and our net debt rose accordingly. This was without reference to war expenditures.

For 1940-41 the estimated expenditure is $448 million as compared with $525 million estimated for the past fiscal year, an apparent reduction of $77 million. But I am afraid that this is not a true picture. The saving is more apparent than real. Because of war activity a certain amount of expenditure, which in peace time would be charged to ordinary expenditures, is now being paid out of war appropriations. In his press interview in May last, when bringing down the estimates for 1940-41, the minister did not even pretend that the entire $77 million would be net saving. This was because of the necessity of switching certain peace-time services and administrative charges to war account, both in personnel and services; but the minister did make it clear that there would be a holiday in ordinary public works. That is to date the most important indication of the government's intention to save something in the ordinary expenditure.

The minister indicated that the expenditures under the main estimates last year amounted roughly to $400 million. Of this $260 million represented what was regarded as absolutely uncontrollable expenditure. By that is meant war pensions, old age pensions, subsidies to the provinces, interest and what I would term statutory obligations. This left only $140 million, out of which savings might be made, and of this amount $80 million was for salaries and wages, leaving $60 million covered by the main estimates which might be subjected to reductions. Then the minister stated

1256 COMMONS

The Budget

Mr. Hanson (York-Sunbury)

in effect that nothing could be saved out of the $80 million reserved for salaries and wages, apart from discharging government employees. I am not recommending wholesale dismissal of salaried government employees. There have been dismissals of wage earners and temporary employees, but I would recommend limited reductions in personnel without the public service being imperilled. What I do earnestly recommend, however, is that when vacancies occur by death, resignation and superannuation, such vacancies be not filled unless it is absolutely imperative in the public interest. This can and should be done, and all and sundry should be given notice to govern themselves accordingly. It has been done before. It was done between 1930 and 1935 when literally thousands of positions were left vacant with a resulting saving of hundreds of thousands of dollars. It can be done again, and it should be done again.

Furthermore, the minister should see to it that no new personnel is taken on. The other night I referred to the position of Mr. Brockington, the very talented lawyer who was brought down here recently from Winnipeg under an arrangement by which, as I am informed, he was to become the historian of Canada's war effort. He was to be paid $9,000 annual salary and $12 per day living allowance. Now it would no doubt be a splendid thing to have Canada's war effort recorded from day to day provided it was done impartially, truthfully and accurately. But history is not usually written up from day to day. It is recorded in the immortal pages of time; a true history is never written until time has rendered a true perspective. This expenditure is wholly unnecessary at this time, especially at the expense of a tax-ridden people. I believe that Mr. Brockington's services are not being utilized in any degree for the purpose indicated, and I hear he is most unhappy about it. Be that as it may, I allege that the creation of the position was unnecessary and at this time is a waste of public money. Furthermore, Mr. Brockington's brilliant and talented services are being utilized in writing propaganda purely and solely to bolster up the shattered prestige of this government. I do not say he is the Prime Minister's ghost writer, but his services approach that description, and I do protest against this type of wasteful public expenditure.

I could refer to instances of the creation of jobs to take care of defeated candidates.

I protest against this sort of thing. Let us have an end of it. I mention no names, but ;he names are well known.

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LIB

Paul Joseph James Martin

Liberal

Mr. MARTIN:

They are not all Liberals.

! Mr. It. B. Hanson.]

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

That does not help it any. It is the principle I am contending for, and the hon. gentleman should sustain me. In fact, the action of the government in this regard seems to be naked and unashamed. If the government will not stop this sort of thing, a rapidly awakened public opinion will make itself heard.

The minister closed his lengthy remarks by paying a well-deserved tribute to the Canadian people. I have already done so on more than one occasion. I know, as he knows, the stock from which they sprang. Comprising in the main the offspring of two great races, cognizant of the gravity of the occasion, they will rise to the challenge and, like our kindred in Britain, they will give their blood, their treasure, their all; but they will impose this condition, that this government give the highest type of leadership, and if this government will not give the necessary and vital leadership required, then the people of Canada will demand a new government, a really national government.

In conclusion, Mr. Speaker, I desire to make this statement. In ordinary peace times this debate would go on perhaps for weeks. But these are not peace times. The Minister of Finance has become, if he has not already taken over the duties of the office, the Minister of National Defence, and I have asked myself this question: Why should the Minister of Finance, who is to become the Minister of National Defence, be compelled to stay in this chamber and listen to a large number of speeches, some of them relevant and some of them irrelevant? And so, Mr. Speaker, to expedite the business of the country, to expedite particularly our war effort, to expedite the minister's plans with respect to the defence of Canada and especially of our Atlantic shore line, I suggest to the house, I suggest to the government and their followers, and I make a special appeal to my friends in the far corner, that we let this budget pass and release the minister to administer his new office of Minister of National Defence. Let the new Minister of Finance, whoever he is to be, or the very competent, shall I say, Minister of National Revenue (Mr. Ilsley) pilot the financial resolutions through committee and let us get along with the war. I am prepared to help him, but I want to make just one proviso, and that is that when we are in committee on the resolutions hon. members who have prepared speeches and who want to make themselves heard or who want through this medium to talk to their constituents, should be given the opportunity and very wide

The Budget-Mr. Abbott

latitude to make their statements in the committee. I make this offer, I make this appeal in the interests of Canada's war effort, which I am prepared to back up and help support with all the power at my command. Whatever little ability I have I want to place it at the disposal of the government, not to help this government survive as a party government, but to help Canada win this war.

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LIB

Douglas Charles Abbott

Liberal

Mr. ABBOTT:

Mr. Speaker-

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

Is the minister prepared to make a statement before the hon. member proceeds?

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LIB

James Layton Ralston (Minister of Finance and Receiver General)

Liberal

Mr. RALSTON:

If the hon. member for St. Antoine-Westmount will permit me, I want to say to my hon. friend the leader of the opposition (Mr. Hanson) and to the house that in regard to opportunity being given for discussion in committee of any matters which ordinarily would be discussed on the budget itself, the government is perfectly satisfied to give the undertaking that such opportunity will be given. It is a matter, of course, for the house to decide, but hon. members may be assured that if it is desired to make their statements on the budget in committee they will not be precluded by the budget itself being disposed of without prolonged debate.

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CCF

Angus MacInnis

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

Mr. MacINNIS:

We are all involved in this, Mr. Speaker, and you cannot deal with the matter unless we have the opportunity-

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LIB

Georges Parent (Speaker of the Senate)

Liberal

Mr. SPEAKER:

I understood that the

Minister of Finance was making a statement in reply to the question asked by the hon. leader of the opposition with regard to an opportunity being given to hon. members to make their statements in committee. The hon. member for St. Antoine-Westmount (Mr. Abbott) now has the floor.

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LIB

Douglas Charles Abbott

Liberal

Mr. D. C. ABBOTT (St. Antoine-Westmount) :

Mr. Speaker, this is almost the first occasion on which I have had the honour of addressing this house. That it is not the first is due to the fact that my hon. friend the leader of the opposition (Mr. Hanson) asked for an explanation of one or two private bills standing in my name. In view of his concluding remarks I am almost discouraged from rising now; nevertheless having steeled myself to do so, I shall proceed notwithstanding what he has said.

I have observed that it is customary for a new member, speaking for the first time, to make some reference to the constituency which he represents, and I propose very briefly to discharge that pleasant duty.

The constituency of St. Antoine-Westmount is one of the larger Montreal constituencies.

Predominantly residential, it includes all the city of Westmount, part of St. Antoine ward, part of the old St. Andrews ward and a little bit of St. George's ward. Such outstanding landmarks as the Forum and Bonaventure station are included within its limits.

The leader of the opposition has mentioned that the increase in the graduated personal income tax bears very heavily on the lower and medium brackets. I think it is fair to say, Mr. Speaker, that there are perhaps as many people in my constituency, who will be directly affected by these increases, as in any other constituency in Canada. The Minister of Finance (Mr. Ralston) made his budget speech a week ago to-day. The country has had notice of these increases, and I am glad to say that since that time I have not heard of a single objection to the increases on the part of my constituents. Their attitude is best expressed in the words of one of them, the Minister of Finance himself, when he said that these increased burdens would be loyally accepted and paid as a small price to pay for the preservation of our liberties.

On this question of my constituency, Mr. Speaker, perhaps I can give hon. members some idea of the intellectual qualities of its residents when I say that I have five electors who are members of this house, two of them ministers of the crown. I have not compiled any statistics on the senatorial representation, but I think it is fair to say that St. Antoine-Westmount has contributed its fair share, in numbers at any rate, to the public life of Canada.

I propose to-day to discuss some features of the excess profits tax, with particular reference to the criticism of that tax voiced in the house the other day by the hon. member for Rosetown-Biggar (Mr. Coldwell). I am sorry that he is not here this afternoon. I spoke to him this morning and he told me he had to attend a meeting of the special committee on the defence of Canada regulations. In the course of his remarks the other day he stated that some corporations were paying no excess profits tax. That, of course, Mr. Speaker, is clearly incorrect, since under the resolution every corporation, whether it makes excess profits or not, will pay a minimum excess profits tax of 12 per cent on its total earnings.

After he had given a considerable number of figures and percentages, with which I propose to deal in a few minutes, the hon. member went on to say, as reported at page 1232 of Hansard:

Of course we consider that such profits ought not to be permitted during the course of the war, and that we should take all profits above a fair return on the capita] invested and the

The Budget-Mr. Abbott

risk taken. That would vary in various industries. The hon. member for Davenport (Mr. MacNicol) asked me a few minutes ago if I would take all profits. I believe that these industries can be classified according to risk experienced, and so on, and after having so classified them we would take all profits above the amount which we consider to be a fair return for the risk taken.

That, Mr. Speaker, is indefinite. Speaking in the debate on the National Resources Mobilization Act on June 18, the hon. member for Rosetown-Biggar spoke of the British excess profits tax. On page 873 of Hansard he is reported as having said:

... we have a right to ask that the government at the same time assure these young people that the excess profits tax will be instituted as iu Great Britain, and will be one hundred per cent. And we ask that prior to giving our support to this bill.

May I say that, as has been pointed out by my hon. friend the leader of the opposition, the proposed excess profits tax, taken in conjunction with the corporation income tax, is more onerous than the tax under the English act. As many hon. members know, and as the leader of the opposition has already indicated, there is no corporation income tax as such in England. There, a corporation deducts tax at the standard rate, but the individual shareholder is entitled to take credit for that deduction in his own return, so that in effect there is no double tax, as there is in Canada, on corporation earnings.

' I propose this afternoon to compare briefly the provisions of the two taxing acts, in Great Britain and under the proposed act which is now being discussed.

Under both these acts, as has already been indicated, excess profits are treated as being profits in excess of an average or standard rate. Under the English act, for the purpose of establishing that average rate the taxpayer has one of four options. He can take his earnings for 1935, or he can take his earnings for 1936, or he can take the average of his earnings for 1935 and 1937, or the average of his earnings for 1936 and 1937. That applies of course to companies which have been operating during that period. I may say in passing that similar provisions exist under both acts for a board of referees to establish the standard or average profit for new companies and companies which have been operating under depressed conditions.

Under the Canadian act the taxpayer has no such option. His average or standard profit is established by taking the average profit of the four years 1936, 1937, 1938 and 1939, and all companies pay a minimum corporation tax of 18 per cent in the case of a straight return and 20 per cent in the case

of a consolidated return, plus a minimum excess profits tax of 12 per cent on all earnings whether they are over and above that average or standard rate or not.

Perhaps I could illustrate that position best by one or two examples. Take a company for instance with earnings in 1940 of $100,000. If that amount is equal to or less than the average or standard earnings of that company for the four preceding years, in Canada, such a company would pay a tax of $30,000, that is to say, 18 per cent income tax and 12 per cent excess profits tax, assuming it did not file its return on a consolidated basis. In England a company making the same profit of $100,000 with an average or standard profit, on one of those options I mentioned, of $100,000, would pay no tax at all.

Take a second case of the same company earning $100,000 in 1940, whose average earnings during the relevant period were $75,000. In that case, under the definition in both the English act and the Canadian act the excess profit would be $25,000. That company in Canada would pay a tax of $33,375. In England it would pay a tax of only $25,000; in other words, 100 per cent of the excess profit of $25,000.

As will be seen, it all depends on where you start paying your tax, and obviously a company which pays no excess profits tax on, say three-fourths of its income, and in the case of England, pays no tax at all, on three-fourths of its income, is better off than a company which pays 18 per cent on all its income and an excess profits tax of 75 per cent on the remaining quarter.

It seems to me that if the hon. member for Rosetown-Biggar is satisfied with the provisions of the British act, he should be more than satisfied with the provisions of the proposed Canadian act taken in conjunction with the corporation income tax under the Income War Tax Act.

In his speech last Friday the hon. member for Rosetown-Biggar referred to a list of thirty-three Canadian companies which, he said, had been prepared by himself and someone to whom he referred as an able statistician. He gave the house a great many figures, percentages, estimates of earnings and so on of these thirty-three companies, including an estimate of what those companies would pay on their 1940 income assuming that that income were the same as it was in 1939. My hon. friend was good enough to furnish me with a copy of the statement to which he referred, and I was able to see how he had arrived at those calculations.

The Budget-Mr. Abbott

May I say, Mr. Speaker, that the figures which the hon. member for Rosetown-Biggar gave to this house on Friday as being the estimated tax which those companies would pay in 1940 based on their 1939 income, were incorrect, and the estimate of the tax which he made is substantially lower than the tax that those companies would pay on the basis referred to. They are incorrect for two reasons. First, that my hon. friend computed his tax on the basis of net earnings available for dividends, which of course was the amount after deducting provision for income tax. Obviously that is wrong, because in the case of a percentage tax you do not deduct the amount of your tax before you calculate how much you have to pay. They were wrong for a second reason, that in .the case of twenty-eight of the thirty-three companies he computed his minimum excess profits tax at 10 per cent and not 12 per cent as provided under the resolution. I am going to deal briefly with the five specific cases to which the hon. member referred.

With regard to Consolidated Smelters, he estimated his tax on $9,339.586, which was the net amount shown by that company as available for dividends. It had made provision of $2,280,000 for tax, which must be added to that figure of $9,339,586, so that the correct figure should be $11,619,586. If we use that figure, the total corporation income tax plus excess profits tax at the minimum rate amounts to $3,718,267 instead of $2,801,876 as given by my hon. friend, or a [DOT]difference of $916,391.

The second company with which the hon. member dealt specifically was Canadian Industries Limited. Again by the same process he underestimated the tax by $579,457.

The third was International Nickel, the big one of the five. International Nickel had included in its accounts $7,296,986 for income tax. Figuring again on the same basis, my hon. friend underestimated the tax payable by International Nickel by the amount of $3,071,984.

The fourth was Asbestos Corporation; this is the small one as far as earnings are concerned. Figuring that on the same basis, we find the underestimate is $101,796.

Aluminium Limited is the only one of those which my hon. friend selected which would in all probability be taxed on the higher basis, that is 75 per cent of excess profits. His statement did not enable me to see exactly what four years he used as a basis for his average, but I think they must have been 1936, 1937, 1938 and 1939." On that basis he underestimated the amount of tax payable by that company by $878,162.

I did not attempt to calculate the amount of the underestimate with respect to the other twenty-eight companies, but on these five my friend underestimated the tax which would be payable by them by $5,547,590, or in other words an average of something over a million dollars per company. If the same ratio continued with respect to the other twenty-eight, he would have underestimated by about $33,000,000, or pretty close to the amount which the Minister of Finance estimated will be produced by the national defence levy.

It is a considerable time since I had lectures in logic, but as I remember, the soundness of the conclusions reached depends on the soundness of the premises on which those conclusions are based; if the premises are false, the conclusions are false. I suggest that that reasoning might be applied to the conclusions reached by the hon. member for Rosetown-Biggar with respect to the excess profits tax.

One last point. My hon. friend mentioned that he had not overlooked the fact that these corporation profits, or what was left of them after the deduction of the corporation income tax and the excess profits tax, would be subject to taxation in the hands of the shareholders who received them. I am glad he did not entirely overlook that point, because, as hon. members know, that income, or rather what is left of it, is subject to tax a second time in the hands of the shareholder who receives it, a third time by the different provinces, with the exception of New Brunswick and Nova Scotia, and a fourth time in the case of a shareholder residing in my own city of Montreal, by that city. And for good measure those same corporation profits are subject to corporation profits tax in many of the provinces with respect to the profits earned in those provinces. In the case of Ontario and Quebec the rate is five per cent.

In the course of his address the other day the Minister of Finance used the word " fantastic " as applied to a possible combination of federal, provincial and municipal taxes on the same income. That seems to me a very apt word. I have little sympathy with the view expressed by hon. members in the other corner that the taxes to be imposed on industry and on corporation earnings under this budget are inadequate.

I have already taken rather more time than I had intended-

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?

Some hon. MEMBERS:

Go on.

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LIB

Douglas Charles Abbott

Liberal

Mr. ABBOTT:

I had some comments or rather suggestions to make in connection with the administration sections, but in view of what the leader of the opposition said I have no doubt an opportunity will be accorded to

The Budget-Mrs. Nielsen

put these forward in the committee stage, so I conclude by thanking you, Mr. Speaker, and hon. members for the patient and courteous attention which has been given to my remarks.

Mrs. DORISE W. NIELSEN (North Battle-ford) : As a new member of this house I have during these last weeks listened with a great deal of interest, and I may also say patience, to the debates which have taken place. As a new member I have of course very much to learn. As the representative of an agricultural riding where not only the farmers who have been long established but also those who have newly attempted to carve homes for themselves out of the wilderness of the north all find themselves in great distress, it has been my primary duty to attempt to place before this house a fair picture of conditions in my constituency. I have had a great deal of consideration from the Minister of Labour (Mr. McLarty), and he has promised an investigation into the particular conditions which I have outlined. During the weeks since I came here I have learned a great deal, not only in this house. I have visited some of the great cities of the east, and I have come to the conclusion that the problems which face our western farmers are more or less the same problems which face the working people in the cities of the east.

I have watched the legislation introduced in this house. I must confess that when I came here I had hopes that the great crisis facing the nation would force this government to bring in constructive and progressive legislation really in the best interests of, and to the benefit of the people of Canada. The budget debate follows very closely on the heels of the bill to conscript man-power and property. In my opinion, Mr. Speaker, it proves that bill false. We were led to understand that the bill conscripting man-power and property would conscript the great reserves of wealth within the borders of this country, to be used in the prosecution of the war. Now that the budget has been brought down, we realize that the great masses of the working people of Canada, out of their scanty earnings and low wages, will have to provide the enormous amount of money for our war effort.

I can no longer remain silent and support this government. My hon. friends to my right have opposed some legislation which has been introduced in this house; yet they have constantly affirmed their support of this government. I cannot do that. I do not,

I will not support this government. After a careful appraisal of the policy of this government I find that if I am to remain loyal to the people who sent me here, it is impossible

for me to support either this budget or the legislation which has been introduced by the government, and I am prepared to tell the people why that is so. I know that anyone who dares to disagree with the policy of the government is accused of being disloyal and an enemy of Canada; but, as time goes on, I become more convinced that in the days to come those who support this government will be judged to be the real enemies of the Canadian people. As I see it, if I remained silent I should be disloyal to those whom I represent.

During this session this government has passed legislation to subjugate the Canadian people and force them into both political and economic bondage. To a large extent we have lost our political liberty through the defence of Canada regulations, and now in the proposed budget we face social and economic disaster. The worst of it is that all this is proposed under the guise of patriotism. As everyone knows, our press is more or less controlled by the same powers that control the great financial institutions, the corporations and the monopolies of this country. The press has led the people to-believe that this budget calls for national sacrifice. They say it is an emergency budget to save Canada, to save the world, and that it will bring about equality of sacrifice. We are told that we need some $700,000,000 for the war and further sums for other expenses, making a grand total of about a billion and a half dollars. If the conscription bill had been what it purported to be, there would have been no necessity for this increased taxation, which will so greatly harass and burden those in the lower income brackets. There is wealth in this country, sufficient not only for the prosecution of this war to even a greater extent than we are now prosecuting it, but also to rehabilitate our people.

To-day, Mr. Speaker, we are facing two great crises. We have a war crisis and we have a domestic crisis. If anyone says that a domestic crisis does not exist, I can only say it is because they do not wish to see it. There are none so blind as those who will not see. When we say that the war crisis is the only crisis which matters, we are absolutely failing the Canadian people. Provision could have been made to meet both these crises if the government had not been the mouthpiece of the great financial interests of this country, as it always has been. Government spokesmen have told the people that the incomes of the wealthy are to be taxed so that they wll help bear the cost of the war. That hides the real truth from the people. It is possible for the great monopolies, the great

The Budget-Mrs. Nielsen

industrial corporations, to increase their [DOT]capital by millions of dollars without paying any tax except on a very small portion which they may set aside for certain purposes. They can increase their capital and set aside enormous amounts for reinvestment without ever coming under the taxation laws of this dominion. They have certain surpluses of capital which, under our laws, may be exempt from immediate taxation. That is where any government, working in the true interests of the Canadian people, should have looked for reserves with which to finance not only this war but also a rehabilitation scheme for the people still in distress in this country.

The minister has acknowledged that even with the increased taxation proposed he will not have sufficient money to prosecute the war, and he says that we must meet the rest *of our obligations by borrowing. Where will he turn? Of course he will go to these vast reserves of capital which, instead of being loaned to the government, should be conscripted. It amounts to this: During the last great economic crisis these reserves of capital were already in existence, but at that time it was not profitable to lend them for the rehabilitation of our people. In this war crisis to-day, however, it is profitable not to have this great wealth conscripted but rather to loan it to the people of Canada for the prosecution of the war. That is so because the people who loan this money are the same people who will have the advantage of possessing huge sums of money with which to go ahead with new industries for the production of munitions and so on. Now it is profitable for them to show their patriotism and loan their money. But it is not the kind of patriotism that is being demanded of them by means of conscription, as it should be. The working people are asked to give their sons. *Our working men will go into the factories. As time goes on they will find that their wages will become more meagre and the real value of their money will be decreased.

The situation to-day is the same as it was in 1914. Then the people thought the greater part of the war burden was to be borne by the wealthy, but in 1918 the people found that they themselves had borne the brunt of the sacrifice, not only through the giving up of their sons but also through the piling up of debt. The farmers of our country will go on with their unremitting toil, and what guarantee have they that in the years to come they will be able to establish for themselves even a decent standard of living? These things are all part of the domestic crisis which we as a responsible body cannot and must not neglect. The Canadian

people are going to be told what is their patriotic duty. During the last war we made sixty new millionaires in Canada, and we sacrificed 60,000 men. That meant roughly the lives of a thousand men for every new millionaire created; and during that period the debt of the people increased. In 1914 our per capita debt amounted to $42.64, while at the end of the war period, after we had created sixty new millionaires, the per capita debt had increased to $266.37.

As far as I can see, the same sort of thing will go on during this war. No one can say at the present time how many new millionaires we are going to create, but from the legislation which has been passed by this house already, I feel sure that we shall continue to increase the number of wealthy people in this dominion and add a further burden of debt to the shoulders of the working people during the years to come. That is not what we understood by the conscription bill which has just been passed. It is not the kind of legislation which we, as representatives of the people, should allow to pass through this House of Commons. The borrowing of vast sums of money will create unadulterated inflation at the expense of the Canadian people. The great interests will not suffer enormously through these coming years. Roughly $700,000,000 will be taken out of the purchasing power of the people, and at the same time the shackles of debt will be tied round the Canadian people, like millstones round their necks, to make of them slaves into the future. And children who are not yet bom will be among them. Not only will it affect the people who are to-day destitute and barely managing to live, but it will affect hundreds, yes, thousands of the middle-class people who will lose their scanty savings, and be forced down to a degree of poverty unnecessary and unneedful in a country of great wealth such as this.

After all, for what reason are the youth of Canada being conscripted? The government says it is for home service. That is true enough. What are they to protect at home? Besides the homes of their own people it is their duty to protect the great corporations, the banks and the factories-all those organizations which in the past have cared so little for the youth of Canada that during the late crisis they refused to lend their money, let alone have their money conscripted, for the rehabilitation of our people.

The most patriotic procedure for the government to take would be to go to these vast reserves of capital which, if unmolested, will be used for reinvestment, and from this money finance not only the prosecution of this war but a rehabilitation scheme for our people.

The Budget-Mrs. Nielsen

many, there has been a decrease of $17,016,794. Everything which would encourage our people and give them an opportunity to become selfsupporting and perhaps be in a position to make a further contribution to this war effort is being cut down by the government.

I cannot find words strong enough to condemn this budget. As I said before, I hope the people of this country, realizing that there is no necessity for this added burden which is being placed upon them, will raise their voices unitedly in protest.

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

Daniel (Dan) McIvor

Liberal

Mr. DANIEL McIVOR (Fort William):

Mr. Speaker, I count it a great honour to be allowed to follow the lone, yet happy and brilliant lady member of this house. I think you will agree with me when I say that there should be more of her kind in this house, provided that increase in numbers would not cause some of us to lose our seats. We each look upon this budget from our own background. We consider it from our own educational point of view and the course that we follow in our everyday life. We heard the farmer refer to the budget as giving him the needed protection he required for his home and loved ones; he saw in it an opportunity for a stable market. The business man looks upon this budget as having a steadying influence; behind the scenes he sees a government which stands for the maintenance of traditions and the payment of just debts. A mother considers this budget in the light of the protection it provides for her home and loved ones. A lawyer looks at it from the point of view of the law; he is thinking of the sacred trust to which he obligated himself before he received his gown. Your Honour knows perfectly well what I mean. The doctor looks at this budget through the eyes of a man hungry for a really healthy nation; he knows that there is disease in the body politic and he hopes to find a way of killing that disease. Those clerical gentlemen who are members of this house, those men who have studied the queen of sciences, look at this budget from another point of view; they want to know upon what foundation it rests. As we gave an attentive hearing to the Minister of Finance (Mr. Ralston) when he proclaimed his budget, we realized that it rested upon the foundation of truth.

I want to congratulate the government-

I have no doubt the former Minister of National Defence had a hand in it-upon the action they took to increase the pay cheques of our soldiers from $1.10 to $1.30 a day. He entered the trenches during the last war as a private, and I have no doubt he was able to recall the smell of the gas which sent him

home a weaker man. No matter who may disagree with me, I contend that the poorest paid men in the British empire are those who risk their lives for $1.30 a day to protect the welfare of their country. Those who served in the last war were able to save very little. When they came home, some of us had to do our best to find them jobs at twenty-five cents an hour. I must say that in many instances I failed to find even a job of that sort. That was one of the things which constrained me to permit my name to be submitted to the electorate of the finest constituency in the Dominion of Canada.

As I listened to the minister introducing his budget, he looked to me a real minister, as he is, but just now I mean a minister in the sense of a clergyman. He stood up in his place in the house and obviously was convinced that he had something to say. He was not ashamed of it. He felt that it was the truth which the vast audience that filled this house and the galleries needed to know. And he delivered his message in such a way that we all realized he was in earnest and spoke with conviction.

As I heard his opening remarks, which we call the introduction, there arose a spirit of expectancy. He rises and tells the house why he stands in his place and delivers his message. Here are his own words: "The Hun is hammering at the gate."

Could we not almost hear the big hammer as the minister's words echoed through the house? We were almost within sound of the Hun with his mechanized warfare, with his record of cruelty and cussedness all along the line, leaving a trail of broken hearts, broken homes and broken souls. The minister certainly introduced his subject in splendid style, and we were all ready to listen.

Then he makes his plea. He asks for money.

1 know some ministers who hate to ask their people for money, but I have never stood in any pulpit yet and felt ashamed to ask for money for a worthy cause-and no one has a right to be ashamed or to come before the public with an apologetic air when he is asking for money for a worthy cause. I think the minister showed his real sincerity as he asked for money.

Then he went on to present his subject in splendid form, and as he proceeded with arguments that were logical we were convinced that he would get what he was asking for, and that when the collection plates came in they would be loaded. When he was making his plea for a collection he used concrete examples, which are a splendid argument. He told us of one war veteran who gave him the best

The Budget-Mr. Mclvor

he had, which was a collection of old coins, and I suppose that war veteran had handled them over and over again, and loved them and talked about them often. Then he told us of another soldier who was a caretaker in an armoury and gave freely twenty dollars a month. Then the minister said:

With such examples to challenge and inspire us, I cannot believe that any man in Canada will complain about his burden, or by greed, panic or selfish fear, betray his Canadian citizenship in the hour of Canada's need.

Britain is giving her blood, her treasure, her all.

We too will give our best to help make up this budget.

As the minister sat down, I noticed that very few members were reading newspapers, which would have struck me as an act of sacrilege at such a time. I noticed, too, that very few members were sleeping-and it is a mark of a great preacher to keep his congregation awake.

There are some things which the budget suggests to me, Mr. Speaker. Of course, one sees through the eyes of one's constituents. I can see an opportunity for developing at the head of the lakes a great iron ore industry. It is standing there inviting those who have the ability and the cash to come along and develop it. I think the government should pay a bounty of one or two dollars a ton on iron ore in the same manner that subventions on coal were granted to help Saskatchewan and Alberta. I will also mention now, as there are to be no supplementary estimates, that there is a dire need to keep our harbour open at the head of the lakes. Dredging that should have been done two years ago and last year was not done because the government wanted to cut down expenditures. The channel must be kept open for shipping, and if there are any accidents to ships coming in or going out, the government will be liable to some extent.

At the head of the lakes we have also a splendid shipbuilding yard, with two ships almost ready to launch and another with her keel laid. We have grain elevators, the largest and best filled that one can find anywhere. We have pulp and paper industries, and a great shipping centre. We have there the Canadian Car and Foundry company, which built the first Hurricane fighter that was built in Canada, and it stood the tests all the way through.

The minister in making his budget proposals certainly showed himself to be no respecter of persons because he made everybody pay who was earning anything worth 95826-80

while. We admit that the budget is hard on the bachelors; but this is leap year, Mr. Speaker, and notable bachelors will always be able to find somebody to help them out with their exemption, even if it costs something more.

I can see a sign of the times in this budget because it brings a leveling down. I have no trouble in convincing myself that when this war is fought and won, there will have to be a considerable change in our economic system so that every able-bodied man in Canada will have something worth while to do to earn his bread and keep a cosy corner of his own. i

I ask myself, what is the cause of all this war? The lawyer would say, broken laws and broken treaties. The business man would say, hunger for trade. The doctor would say, disease and sickness in the life of the nation. But a minister of the gospel accustomed to call a spade a spade would say that the cause was disobedience of the laws of God and disregard of the brotherhood of man. The old law emphasizes "thou shalt not". "Thou shalt not kill." "Thou shalt not steal." Another commandment is: "Remember the Sabbath day to keep it holy." Perhaps the cause of the war is that we have been leaving God out of our plans and out of our thinking. We need to examine the fundamentals again, and times like these certainly cause us to think. The other day I was reading the old book of Ezekiel, and I was convinced that when men and women place their trust in God and go out and keep their powder dry, they will win, and win in the right way.

Not long ago our great king, not only the king of Great Britain but the king of Canada, called in all the churches of the commonwealth for a day of prayer, and I do not think since Easter have our churches been as well filled as they were on that day. I wonder how many men and women and how many ministers looked for an answer to their prayers that day. But when the British army was hemmed in at Dunkerque there came the announcement across the seas that it was nothing short of a miracle that the British army got out so well.

When I consider the purpose of our custom of observing the Sabbath day, that is, for worship and rest and the upbuilding of body and mind, and then when I reflect how too frequently that day is spent, I suggest that we need to rethink along another line the matter of Sabbath observance. We in Canada have a habit which has cost us about $180,000,000 this past year. I have yet to hear an hon. member in any quarter of this

The Budget-Mr. Mclvor

chamber lift his voice in protest against the wasting of that money. Admittedly I would rather see a man take a drink than have him sit on one side of the fence and act on the other. I know that once I took a little drop of cognac, real brandy. I had a bad throat once and the doctor said, "You should have a good gargle." All the other gargles failed, so I resorted to the cognac and gargled it, and I nearly choked.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISITER OF FINANCE
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NAT

John Ritchie MacNicol

National Government

Mr. MacNICOL:

Did the hon. member

spit it out?

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

Daniel (Dan) McIvor

Liberal

Mr. McIVOR:

The doctor said, "You

allowed a little drop of it to trickle down, and that did the trick." In that traffic we spend $180,000,000 a year. Why do hon. members not dare to protest against the drink traffic? I can tell you, Mr. Speaker. We are scared of losing the votes of the supporters of beer parlours. I am scared too, but not into silence.

Let me close upon a more hopeful note, a note of confidence in the morale of our country and the courage of our soldiers. I may be pardoned for reading an extract from a letter which I received from a young lad, an acquaintance of mine who is now in the air force. The men of that force may or may not be better than others, but I know them to be great lads. This is the extract:

The war news looks bad, but it looks as if it is up to the air force and the navy now, and that is where we shine. As long as our leaders stand up and show real common sense I am not a bit afraid of what the air force will do. There is nothing here but the will to fight, and I know that the boys will do their part.

That indicates the character and calibre of our air force; they will give a good account of themselves and chase the Hun and his leader back again ere long into that railway coach.

As I think of these youths, of Canada and its educational institutions, of our citizens who strive for the benefit of mankind, of the welcome extended by the press to news of the churches and reports of all good movements; as I see the Christian home and the old Bible restored to their honoured place, with the Bible used as a guide to life, not for superstitious reading; as I think of our Christian manhood and womanhood more steadfast than before in its trust in God, I cherish the hope of a glorious commonwealth greater than anything this world has ever known, in which God will be first and every good thing will have its rightful place.

At six o'clock the house took recess.

After Recess

The house resumed at eight o'clock.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISITER OF FINANCE
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PRIVATE BILLS

July 2, 1940