April 12, 1943

SC

James Alexander Marshall

Social Credit

Mr. MARSHALL:

One subject I do know something about is seed grain and seed grain loans. Am I correct in assuming that if a farmer pays, say $100 on a seed: grain note, he would get that much taken off his income tax, for the simple reason that the greater part of that amount would be a payment of interest?

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

The current year's interest

would be a deduction,

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SC
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I am always a little worried about these rulings given on the floor of the house on short notice, but the commissioner is of opinion that all the interest paid in the year, even though it were not confined to that year's interest, could be claimed as a deduction from his income if he were on a cash basis, which normally he would be.

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SC

James Alexander Marshall

Social Credit

Mr. MARSHALL:

My understanding is that if money is paid in interest in any one year, that amount is deducted from the income tax.

I have seen it. done in many instances; as a matter of fact I have had it passed by the income tax inspector in the city of Edmonton.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

That is exactly what I have said, if the taxpayer is on a cash basis. Did the hon. member say that the amount was deducted from the tax? It would be deducted from the income for tax purposes.

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?

Robert Weir

Mi. HEIR:

Just in case a wrong impression should get abroad following the remarks of the hon. member for Parry Sound as to the amounts of money that have been contributed to western agriculture, I might point out that the cheese bonus goes largely to Ontario; that the freight assistance on feed grain, the assistance in regard to fertilizer, the ceiling price on coarse grains as a means of assisting live stock producers, are all of particular importance to this part of the country and not of the same ad\ antage to us in the west. I mention these points as having some bearing on the remarks of the hon. member in regard to the contributions that have been made by the federal treasury to the farmers of western Canada.

I suppose under this section of the act we should be grateful for small mercies. I say to the minister without hesitation that the carrying forward of the income tax of the farmer over a period of two years is the

Income War Tax

recognition of a principle that is important. At the same time I submit that it does not go far enough, considering the industry as a whole and the hazards that are involved in it. I am not unmindful of the difficulties with respect to the principle of taxing agricultural incomes, from the point of view of the industry itself. The industry is hazardous; there are many things beyond the control of the farmer which influence his income in one year as against another, to a much greater degree than is the case in connection with ordinary business. Here under resolution 8 we are dealing particularly with the income of 1942 as a base, which represents a substantially higher income in the case of most farmers than they have enjoyed for some time. With the base so high this year there will be more farmers paying income tax than in any other period, certainly within the last ten or twelve years. Therefore I submit that this matter is of such importance as to deserve added consideration; I do not mean this item alone but the whole basis of taxing agricultural incomes. I will not urge the point, but I will go so far as to suggest that this is a matter which might be given to a committee of members of the House of Commons for particular study outside the house, where they might call in experts and review the whole question in minute detail.

I realize that there are different conditions in different parts of Canada. I submit that if the farmers are taxable they are willing to pay their tax, but there is so very much involved in the principle. I agree with the hon. member for Yorkton, and I believe there is plenty of argument in support of the suggestion, that it would be much fairer if the farmer's income could be spread over a base of about five years. I do not think that is unreasonable. I quite appreciate the argument put forward by the minister a few moments ago as to the difficulties involved, but I am told that in the old country they have a means of equalizing the income tax as between one year and another. If we could devise a scheme whereby the income tax could be spread over a period of, say five years, dropping off the fifth year and adding fhe new year and taking an average, it would provide a much more equitable basis.

I wish to go one step further, because in my opinion the business of the farmer is entirely different from any other business. I think we must recognize the principle that the farm is not only the business of the farmer; it is also his home, and when you consider the two together you have a situation very different from that of any other business.

There is, however, another feature with respect to this matter which I believe is of

some importance. During the period from 1930 onward the western farmer went heavily into debt, either through unsecured liabilities which he created or by placing heavy mortgages on his farm. Certainly at this time his income tax provision will not permit him to pay very much off his accumulated indebtedness. Perhaps he is not entitled to any more consideration in that regard than anyone else, but having regard to the difficulties the industry has experienced and the desire to see it on a reasonably satisfactory basis when this war is over, I submit that this point has particular significance at this time. Moreover, as an added thought-and with this I shall close -we have gone out and asked industry to expand their plants. We have assisted industry to do so, financially, by writing off taxation, and in other ways. Now we have come along and asked the farmer greatly to expand his production, which in turn means that he has been obliged to incur additional expense, perhaps by way of extra fencing or new buildings or a new well to provide for more live stock; but we are not giving him any consideration either financially or from the point of view of his income tax. Therefore I submit that he has a pretty good case in this matter and that we should not say he is merely comparable with other forms of industry.

I just advance these observations with the suggestion that the minister might be well * advised to make provision at some stage whereby this whole matter might be reviewed in minute detail, utilizing the expert advice of his departmental officials as well as of others who pay particular attention to matters of this kind.

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CCF

Major James William Coldwell

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

Mr. COLDWELL:

I am very glad the hon. member for Macdonald has spoken in this way, because he has emphasized the needs of this industry. A short time ago the hon. member for Parry Sound spoke with a great deal of heat and compared the east and the west, which I think is always a dangerous thing to do. I know there are people on the farms of eastern Canada who have suffered losses, but may I just point out to the hon. member that the situation in western Canada was quite unprecedented. We are speaking not for any particular corner of a province but for a whole area which is subject to hazards worse than those existing in most agricultural communities throughout the world. We are subject to periods of prolonged drought and prolonged crop failure, and I wish to point out to the hon. members that this was not the result oi a war or of anything over which we had control. It was an act of nature. I thoroughly

Income War Tax

agree with the hon. member for Macdonald that careful inquiry should be made into thia matter of agricultural taxation. It covers a much wider field than income tax. And may I say that if one looks at the census figures for the prairie area he will realize that something must have driven not only thousands but several hundred thousand people away from that prairie region. What was it? It was a prolonged period of depressed, conditions when men and women could not find the wherewithal to make a decent living. That was the reason, and it should be kept clearly in mind.

None of us wants to set one section of the country against another. Indeed, agriculture all across Canada has suffered from depressed conditions. It is an industry which requires perhaps different treatment from other types of industry. As I have said, during the war we have been very good to certain types of industry. Agriculture happened to be caught at a time when its price levels were not high; in fact they were low. Many of us believe that in the main the prices then set were below average costs of production on the average farms of the country. Let us keep that clearly in mind.

We are not asking for discrimination against any industry or in favour of any other industry. But we do want to try to place before the committee our ideas of a certain measure of justice; that is all.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

The hon. member for Rose-town-Biggar and also the hon. member for Yorkton said that 1942 was a better year for agriculture than any other year for some time past. I think someone went so far as to say that it had been better than "any" year. That is what I fail to understand. I just fail to understand. that- inconsistency,

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CCF

Major James William Coldwell

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

Mr. COLDWELL:

As a matter of fact I do not think I said that.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Perhaps it was the hon. member for Macdonald.

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CCF

Major James William Coldwell

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

Mr. COLDWELL:

I did not say that; but I am prepared to admit there is a considerable amount of truth in the statement, if it has been made. But the minister is singling out one year from the last fifteen years, a time during which a very large area received practically no income at all. Even if last year were a good year, it was good because we had unusual weather conditions, conditions which we may not have again for a good many years. I do not think we can take 1942 as a basis for agricultural taxation. We may not see another year like that for a long time.

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LIB-PRO

William Gilbert Weir

Liberal Progressive

Mr. WEIR:

The minister has drawn attention to the statement I made regarding the greater buoyancy of farm income in 1942.

That is correct. That leads me again to draw attention to the provision in resolution 8 wherein that year is taken as the base from which one is to write off a loss, for income tax purposes, into two future years. That is the point I make. ,

But the other feature I would point out to the minister, one which also is part and parcel of the principle of applying this tax to agriculture, is that in 1941 we were under a system of delivering quotas. Much of that year's crop was marketed in the succeeding year. Likewise, we are still involved in the position of not being able to take advantage of marketing conditions, due to circumstances outside the control of the farmer.

There is another feature which is of some importance, and of which I saw some evidence last year. On account of this added buoyancy of income there were a few shrewd farmers who were attempting to take advantage of the situation by holding up live stock shipments, and particularly those of hogs, until after the calendar year, in order to keep the receipts out of their income tax returns for the previous year.

All these things are involved in the picture. They are of particular significance in showing the difficulty of arriving at a policy which can be made applicable throughout. That is the reason why I suggested in the first place that a study should be made, in support of the principle of attempting to devise some means whereby the tax could be spread over a period of several years.

I wish to make only one further observation concerning a point which has arisen in the debate. This is another instance where people attempt to make comparisons between different classes in the community. Reference is made to the produce the farmer gets from his own farm. I believe it will be found that the la.'mer uses the small or the cracked egg, or those of low value. It is true that he has a garden; but the commercial value of that garden is low, compared with those who carry on market gardening as a business, or compared with prices people without gardens would have to pay. It will be noted that in small towns throughout most of the country large numbers of business people have gardens behind their houses, sufficient to provide for their needs. Those gardens are worked after business hours. So that we find this contrast entering into the picture again.

I am only advancing the idea that there is merit in the suggestion that income tax on agriculture should have a more widespread application.

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CCF

Clarence Gillis

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

Mr. GILLIS:

I wish to make just a few remarks. My farmer friend from Parry Sound saw fit to do so, and I think I am just as reliable an authority on agriculture as he is.

As I understand the situation, the government lent to the farmers of Saskatchewan a considerable sum of money in 1938 for seeding purposes. The main point at issue now is the pressure being put on those farmers for the purpose of having them pay back the money lent at that time. I believe it amounted to something like $600 per farmer.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

That was only incidental, and I do not know whether it was in order. I did not take exception to it at the time; but that is not the point under consideration.

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CCF

Clarence Gillis

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

Mr. GILLIS:

That point was raised. It should either have been ruled out of order, or permitted to remain for discussion, because it is a legitimate grievance. In his observations the hon. member for Parry Sound was unfair. I have sat in the house long enough to hear many discussions with regard to agriculture in Saskatchewan, and I do not think in any section of the country there is any other industry in a similar position. The farmers of the maritime provinces do not receive incomes which would warrant the payment of income taxes, because I believe the average income is only around $300 a year.

It would seem that as a result of conditions which developed in the west and over which the farmer had no control the government was compelled to lend money so that the farmers might get back into production. That being so, I say that those farmers should be given the same consideration as is now being given to those industries to which moneys are being lent for purposes of plant extensions. Those industries are permitted to write off those loans in periods of four or five years, and my submission is that the farmers should be allowed to do the same. They are overcoming the effects of the days when Saskatchewan was taken out of production in- that particular field. If a precedent like that is set for one section of society, it is only fair to make a declaration to the farmers to the effect that debts contracted for seed in 1938 should be wiped out.

I should like to ask the hon. member for Parry Sound a question. When the explosion in Halifax occurred people from coast to coast contributed most generously to the rehabilitation of that city. Does he think it would be fair to ask the people of Halifax to pay back by way of taxation to the Canadian people the money which had been expended

in reestablishing that city? I think the situation is absolutely analogous. In this con- s-tion the farmers of Saskatchewan were merely bringing that province back into production, and they should not be taxed at a time like this. They are entitled to the same consideration as is given to industry. The Dominion Iron and Steel company has been given a certain number of millions of dollars to extend their plant for war purposes, and they are being allowed to write off this sum over a period of years. The same thing is being done with International Nickel. I do not think these companies were broke. Perhaps they did not need all the assistance they were given. It is a gift more or less from the taxpayers of Canada. The farmer has been producing at a low cost. He and his family are slaves. He is not working; he is slaving. There is nothing in it for the farmer; yet agriculture is a necessary industry at this time. It will be more necessary in the future if the forecasts about the need for food are correct.

It is necessary to build up the morale of the farmer in view of the contribution he is making to the war. After listening to the argument on this point-and I think it is the only point at issue-I say to the minister that serious consideration should be given to it. A moratorium should be declared on this particular debt, or it should be wiped out altogether.

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LIB

Arthur Graeme Slaght

Liberal

Mr. SLAGHT:

The hon. member for Cape Breton South said that my observations were unfair, and then he propounded the suggestion that I was endeavouring to dun the hard-pressed people of the west to pay their debts incurred five years ago for the purchase of seed grain. If he had followed what has been done in the west, he would know that any pressing that is being done is by the municipalities, not by this government.

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CCF
LIB

Arthur Graeme Slaght

Liberal

Mr. SLAGHT:

No, not under pressure. They have not been obliged to pay anything for five years. That does not look very much like pressure.

My hon. friend asked me about the Halifax explosion. I am most sympathetic with the suffering caused by the Halifax explosion, but it was nothing like the explosion he created a few weeks ago in a theatre in Hamilton. I do not think that sort of thing will do my hon. friend any good.

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Resolution agreed to. 9. That in the case of a single person or person with equivalent status whose taxable Income War Tax


April 12, 1943