July 25, 1946

LIB

Douglas Charles Abbott (Minister of National Defence; Minister of National Defence for Naval Services)

Liberal

Mr. ABBOTT:

They are all listed in the resolution. The class is clearly designated. The expenditure must be in connection with maintenance or repairs by a taxpayer carrying on a business, or on underground development by a taxpayer operating a mine; and they must be companies which-speaking as I did colloquially-were in the 100 per cent excess profits tax bracket in the years 1943. 1944, or 1945, or the 60 per cent excess profits tax in 1946. I have explained once or twice why it is restricted to that class. It is restrictive. If it were extended to other companies, say. which paid only at the 40 per cent rate, it would be a benefit extended to those companies which it was never intended they should have. But there is no discretion in the minister as to who will get the benefit and who will not.

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CCF

Frederick Samuel Zaplitny

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

Mr. ZAPLITNY:

But it is restricted to companies or businesses as designated in this resolution?

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LIB

Douglas Charles Abbott (Minister of National Defence; Minister of National Defence for Naval Services)

Liberal

Mr. ABBOTT:

Yes.

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CCF

Frederick Samuel Zaplitny

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

Mr. ZAPLITNY:

What I should like to know is why it was restricted to that? For instance, farmers are in the same position as some of these companies.

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LIB

Douglas Charles Abbott (Minister of National Defence; Minister of National Defence for Naval Services)

Liberal

Mr. ABBOTT:

It is not restricted to an industrial enterprise. It extends to agriculture, too. If an agriculturist was in the 100 per cent excess profits tax bracket, and paid excess profits tax and was not able to make the normal maintenance and repairs-or even if he did-he could take benefit of the section. I am glad the hon. member brought that up, because it is not restricted. It is the taxpayers who are subject to the provisions of the Excess Profits Tax Act. I understand there were some farmers who came within that act.

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Resolution agreed to.


LIB

Douglas Charles Abbott (Minister of National Defence; Minister of National Defence for Naval Services)

Liberal

Mr. ABBOTT:

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LIB

Douglas Charles Abbott (Minister of National Defence; Minister of National Defence for Naval Services)

Liberal

Mr. ABBOTT:

The effect of this resolution is to provide that where no assessment has been made in respect of a taxation year at the end of a period of twenty months following the date for filing returns for that year interest on any unpaid taxes will cease to accumulate after the end of the twentieth month and will not commence to accrue until one month after an assessment has been made.

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CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

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

Mr. KNOWLES:

I gather that this change is being proposed in view of protests which have accumulated during the last few years. As hon. members will know, the department has had so much work to dio that the time taken to assess returns has extended considerably. A taxpayer who inadvertently may not have made out his return correctly has not liked having to pay interest for a long period of time because of the time taken by the department to assess the return. It seems to me that the department has admitted the validity of the protests that have been made by fixing an arbitrary period beyond which such interest would not be paid. In other words, the government is saying that the department should make assessments within at least a year and eight months after the filing date. It seems to me that, that admission having been made, it strengthens our case for suggesting that the period should be shorter.

I know the other argument presented by the Minister of Finance, namely, that people should make out their returns correctly and that it should not be possible to save interest at the expense of the government. Surely a

Income War Tax

period of something less than twenty months should be sufficient penalty for a taxpayer who is doing this sort of thing deliberately, and in the interest of the average taxpayer who tries to make out his return correctly 1 suggest that the period should be shorter than twenty months.

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Resolution agreed to. 37. That the provision for payment of interest by corporations on the amount of taxes unpaid after payment of instalments of estimated tax commencing six months after the end of the taxation year be amended to require payment of interest on the said unpaid amount from the end of the taxation year. Resolution agreed to.


EXCESS PROFITS TAX ACT


Resolved, that it is expedient to amend the Excess Profits Tax Act, 1940, and to provide: 1. That the provision for taxation of excess profits of every person residing or ordinarily resident in Canada be amended to exclude tnere-irom in respect of excess profits earned after December 31. 1946, persons other than corporations nr joint stock companies and to reduce the rate of tax on excess profits earned after December 31, 1946. from 20 per cent to 15 per cent. 2. That with respect to profits earned after December 31, 1946, the provision for taxation of profits of every corporation or joint stock company be repealed. 3. That for the 1947 and subsequent taxation years investment corporations that have outstanding bonds, debentures or other securities evidencing funded indebtedness be exempt from excess profits tax.


LIB

Douglas Charles Abbott (Minister of National Defence; Minister of National Defence for Naval Services)

Liberal

Mr. ABBOTT:

The first resolution proposes two things, first, that the rate of tax on excess profits earned after December 31, 1946 be reduced from 20 per cent to 15 per cent and, second, it exempts completely from the excess profits tax the profits of partnerships and sole proprietors as from January 1. 1947.

The second resolution repeals the flat rate tax on total profits as distinct from the rate of tax on excess profits with respect to earnings of 1947. At present the tax on total profits under the Excess Profits Tax Act is 22 per cent which, together with the IS per cent under the Income War Tax Act, makes the 40 per cent fiat rate. Concurrent with the repeal of this 22 per cent rate, the 18 per cent rate is being increased to 30 per cent. These two amendments taken together give effect to the undertaking under the provincial wartime agreements that the dominion would reduce the tax on corporate incomes by ten per cent of such income.

The third resolution provides for a minor amendment dealing with investment trusts and is in line with the amendments in connection with the Income War Tax Act. It

giants exemption from excess profits tax to all investment trusts, regardless of whether or not they have bonds outstanding. At present the exemption is limited to those who do not have bonds outstanding, and this is to give comparable treatment to the two classes of trust.

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PC

James MacKerras Macdonnell

Progressive Conservative

Mr. MACDOXXELL (Muskoka-Ontario):

My understanding is that it remains indefinite; in other words, it continues from the end of 1946, the only difference being that it is 15 per cent instead of 20 per cent?

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LIB

Douglas Charles Abbott (Minister of National Defence; Minister of National Defence for Naval Services)

Liberal

Mr. ABBOTT:

That is correct.

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PC

James MacKerras Macdonnell

Progressive Conservative

Mr. MACDOXXELL (Muskoka-Ontario):

I should like to draw attention to one or two things.

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LIB

Douglas Charles Abbott (Minister of National Defence; Minister of National Defence for Naval Services)

Liberal

Mr. ABBOTT:

Sole proprietors and partnerships are out.

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?

Mr. M A CD O XN ELL@Muskoka-Ontario

I want to refei to just one or two things said by the minister last October and again this year. I am referring to this matter purely as an employment measure. The Minister of Finance said that we should not rely too much on employment remaining as it is now, that we should think of everything that would possibly stimulate employment. I think that is generally recognized, and I wish to quote the minister on the point that the great objection to the 100 per cent excess was that it put no premium on efficiency. In fact, it almost put a premium on inefficiency. The Minister of Finance is reported on page 1004 of Hansard of October 12, 1945, as follows:

The Excess Profits Tax Act is a war measure which has commanded overwhelming support as an important and necesary instrument of war finance. Unmodified, it seriously weakens the stimulus toward the investment of capital and the efficient operation of enterprises. In this period of reconstruction it is becoming a barrier to expanding employment.

As reported later on the same page, the minister said:

There is widespread evidence that incentive is being stifled and that ordinary prudence in the making of business expenditures has been seriously weakened.

Speaking on June 17 of this year, as reported on page 2919 of Hansard, the minister said this:

I had hoped to be able to announce in this budget the repeal of the Excess Profits Tax Act in its entirety, effective as of January 1, 1947. As I explained last year, this tax was designed as a war measure and has received overwhelming support as a necessary instrument of war finance, but it has distinct weaknesses and limitations in normal times and is not to be accepted as a permanent part of our tax structure.

Excess Profits Tax

Then the minister went on to give as his reason for not dealing with it, which to me is one of the most unconvincing statements I have ever heard from the Minister of Finance:

Experience, however, has shown that we are still living in highly abnormal times, the shadow of the war is stfll upon us, and as I have shown the financial burdens on the dominion budget arising out of the war are still of huge proportions. After careful consideration the government has reached the conclusion that the act should stay on the statute books for another year unless provision is made at the next session of parliament for its earlier repeal.

I want to emphasize that I am talking about this as an employment measure. I know I am running the risk of some saying, "Oh, you are thinking of the corporations." I am just using the minister's words which, I think, are wise and sound1. I contend that the conclusion which the government has arrived at is entirely contrary to all the argument made by the minister, and I think it is a great mistake.

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LIB

Douglas Charles Abbott (Minister of National Defence; Minister of National Defence for Naval Services)

Liberal

Mr. ABBOTT:

I am glad my hon.

friend very properly emphasized the word "unmodified" when he quoted the minister's speech.

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CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

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

Mr. KNOWLES:

There are two comments I should like to make. First, despite what the hon. member for Muskoka-Ontario has just said. I cannot but recall how rapidly the Excess Profits Tax Act has been modified since the end of the war as compared with the deaf ear we get when we try to plead the cause of personal income taxpayers in the lower brackets.

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July 25, 1946