July 20, 1942

SC

Victor Quelch

Social Credit

Mr. QUELCH:

It is reassuring to hear the words of the hon. member for Rosedale (Mr. Jackman). The practice of selling bonds to the chartered banks and war savings certificates to the government will probably increase, and I think the minister should do everything possible to stop this. One way for him to do it would be to make a broadcast emphasizing the importance, as he has done in this house, of these bonds and war certificates and emphasizing the fact that their sale is for the purpose of curtailing the spending money of the people. He should point out that when bonds or savings certificates are sold to the banks or the government that purpose is defeated and that if the people persist in the practice, the government will be forced to increase taxation. If the government could make that statement, it would go a long way toward preventing that practice, and at the same time it would not hurt the sale of bonds or certificates.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Perhaps we could do more along that line than we have, and I shall be glad to consider the suggestion. Two or three suggestions have been made to-night that we should appeal to the people not to dispose of their government securities. I never know just how effective appeals to the people are. Some of them are successful and some are not, but certainly I am in accord with these sentiments. I do not like to see those who buy our war savings certificates redeem them, and 1 do not like to see those who buy our bonds sell them to the banks. I think the people should understand that it

Income War Tax Act

is their duty in so far as they possibly can to keep the certificates that they have bought from the government until after the war.

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NAT

Howard Charles Green

National Government

Mr. GREEN:

A few moments ago the minister said that he was not declaring any objective in the sale of war savings certificates. Is he preparing to do away with objectives in the sale of victory bonds as well?

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

No.

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NAT

Howard Charles Green

National Government

Mr. GREEN:

Will objectives be set for each province and each community?

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Our plans are somewhat unsettled at the moment and have been since the budget. I do not know just what our programme will be, and I cannot say when the next victory loan campaign will take place.

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NAT

Howard Charles Green

National Government

Mr. GREEN:

It is a continuing campaign now, is it not?

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Yes, but there may be special campaigns superimposed upon the continuing campaign. If there are, undoubtedly there will be objectives. When the hon. gentleman says that I said-

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NAT

Howard Charles Green

National Government

Mr. GREEN:

I thought the minister said that; I do not want to put words in his mouth.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I said that at the moment I could not say what the objective would be for any particular period of months. We have to get this budget working, get squared away. It would be idle to deny that the institution of a system of compulsory savings and the fitting into that of a voluntary plan of savings is one of the biggest tasks that this or any other government has ever undertaken. I thought the institution of price control in Canada was the most difficult thing that we had undertaken up to the moment, and I think it was. I think that programme presented problems which seemed more impossible of accomplishment than anything we had ever undertaken. But this is almost as difficult. We are reaching the position where it will require intensive work by thousands and thousands of people in order to obtain a right frame of mind on the part of the men and women of the Dominion of Canada. If they think they cannot do these things; if they say they cannot do them often enough and spread that sort of thing, it will have a damaging effect upon morale. That can be counteracted by enthusiastic workers who are in the national war finance committee organization by the thousands. As I said before, my ambition is to have these people who have access to all factories, who are in all country districts, who are everywhere, explain [Mr. Ilsley.l

what the government has to do and to show the people why these heavy taxes have been imposed, to demonstrate that they are not as heavy as might be thought in a great many cases. I want them to sit down whenever possible with people and try to get them to lend their money to the government to the extent of their ability. If that is done in a thorough and enthusiastic way, in the spirit of a crusade across the country, we can get very large sums of money, and we can make a success of the tremendous job of financing that is ahead. That is what I have in mind, but it is going to be difficult and will require the cooperation of every person.

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NAT

Douglas King Hazen

National Government

Mr. HAZEN:

Reference has been made to the war savings certificates which the government has asked people with small incomes to buy, by means of extensive advertising, loan campaigns and, in other cases, I am sorry to say, by high pressure methods which I do not think can be justified. On the back of these certificates it is printed in small type that they are not transferable and that the government reserves the right to require ninety days' written'notice of any application for redemption before maturity.

It seems to me that these regulations should be modified. They discriminate, perhaps unintentionally, between the rich and the poor; they result in hardships, and in certain circumstances they open the door to abuses that should not be permitted. In addition, to my way of looking at the matter, they discourage the sale of these certificates.

I know of no better way of bringing this matter to the attention of the committee than to relate a personal incident. A young man, a labourer, came to my office when I was home some time ago and produced six of these war savings certificates and asked me if I would lend him some money on them. I told him that I was not a banker and that the best thing he could do would be to go to the bank and get a loan, depositing the certificates with the bank as security. He said that he had already gone to the bank and had been told that the bank was not in a position to lend him money on them, that the regulations printed on the back of the certificate prevented the banks from making such advances. He told me that he had to have the money, that he was in desperate circumstances. His baby had died; the funeral was to be that day, and he had to have funds. That was his position.

To my way of thinking that was a shocking situation brought about either by government cupidity or by lack of regard for the everyday men and women of this country to whom

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these certificates have been sold. The govern-fnent had taken this man's money and given him certificates which he thought were a gilt-edged security but which he found were absolutely useless-to him when he was in dire need. Had he been a rich man and bought a bond or two, he could have taken the bonds to the bank and deposited them, and would have received a loan immediately. But he was a poor man and had only war savings certificates. Consequently, when badly in need of money he was unable to get it.

This means that we have one law for the rich and another for the poor. It is class distinction by order in council and should not be permitted to go unchallenged. I protest against it. I wrote to the Minister of Finance about the harshness of this regulation and suggested to him that the regulation should be- amended to enable the banks to advance money on these certificates in case of necessity. I must confess that I was disappointed at his answer. He appeared to be perfectly satisfied with the regulation as it stood. In consequence, I am obliged to bring this matter to the attention of the committee this evening.

Not only is the regulation harsh; not only does it discriminate unfairly against the smaller investor, but it offers an opportunity to monejr-lenders and avaricious persons to take advantage of those in dire need, and I am informed that they are being taken advantage of. The man who brought these certificates to my office would have been glad to take half their value for them if the money were handed to him immediately. There are many holders of these war savings certificates who must find themselves in somewhat similar circumstances, desperately in need of money for some special purpose.

The regulation provides that these certificates are not transferable, but there are ways and means of getting round the regulation. I know of nothing to prevent the holder from selling these certificates at less than their value, signing his name in the space provided for that purpose on the back of the certificate in order to obtain payment at or prior to maturity, giving as his address the address of the purchaser, and then giving the purchaser a power of attorney to enable him to endorse his name to the cheque when received. The regulation should be amended so as to enable the holder of these certificates to obtain an advance on them at a chartered bank in case of necessity, and I hope that other members of this committee will support me in having this change made.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Mr. Chairman, I think the hon. gentleman has allowed one incident which has appealed to his sympathy to colour his

whole judgment of the matter. He has not shown any appreciation of the underlying principle here. He should remember that war savings certificates are the one form of security that I know of which is free from income tax, and therefore it is very important that there be no accumulation of those certificates in the hands of anyone, banks or otherwise, because they then would hold them free of income tax, and we would have the very evil against which members of this house have inveighed time after time, and properly so. It is for that reason that the purchase of war savings certificates by any one person is limited in any one year to $600 in face value, $480 cash value. If they were transferable, of course they would just be picked up and held in large blocks by persons in the higher-income groups, and then we would have the scandal of wealthy people evading income tax.

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NAT
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

The interest from bonds is subject to income tax.

Another reason why these war savings certificates are not transferable is that the government is most anxious that when persons buy these certificates they hold on to them. In fact, a member of this house who has a good understanding of these matters was speaking to me just a few nights ago and suggested that we issue bonds that could not be transferred until after the war. Otherwise he said the bonds would drift into the hands of the chartered banks, and that would be a bad thing because it -would be inflationary. I pointed out to him that the bond dealers and others selling the bonds always insisted that their transferability was one of the selling points and that if we wanted our victory loan campaigns to be successful those who were selling the bonds would have to be in a position to say to the prospective buyer, "If you get into a difficult situation you will be able to sell your bond and get your money." But that has never applied to war savings certificates for the reasons I have given, and I do not think it should apply to them. If they were transferable the result would be that they would be transferred. You would sell a lot of war savings certificates to workmen in the plants, and in many instances they would hold them for less than six months, sometimes for only a week, and then they would go out and sell them to somebody else and spend the money, which would be directly contrary to what we are trying to teach the people of Canada to do.

The hon. gentleman wrote me about this. I did not explain these considerations fully to him in reply because they had been fully

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explained publicly time and again. I would have thought that instead of raising issues between rich and poor here to-night and saying, "if you were a rich man you could have held a bond," he would have appreciated the fundamental principles underlying this matter.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

Does the minister not think, having regard to the fact that this is going to be a long war-I do not think we need disguise that from ourselves-that we have now arrived at the peak of what we can take in taxation from the people of this country? I saw a chart prepared by his department the other day, and it would be illuminating to the membership of this house if that chart could be reproduced on a small scale, showing as it does in a graphic way what the taxation is, how the curve goes up from nothing. I hold the view that we have gone about as far as we can in the personal income tax field.

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CCF

Alexander Malcolm Nicholson

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

Mr. NICHOLSON:

The hon. gentleman

said that a year ago.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

No. I did not say that a year ago. I challenge the hon. member to find any words of mine that we had gone to the peak.

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CCF

Alexander Malcolm Nicholson

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

Mr. NICHOLSON:

"About" as far.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

No, I did not say even that. I knew we would have to go further. I said there was inequality in the tax a year ago. That is what I laid stress upon. I think some of the inequalities have been ironed out. That chart rather convinced me of that somewhat against my preconceived ideas. Yet a number of inequalities still exist. But that is not the point I want to make now. I think we have reached the peak of personal income tax in this country. I do not know how I am going to pay mine if I have to pay one-quarter on the 15th day of September.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

We are going to change that date.

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July 20, 1942