July 30, 1946

PC

Alfred Johnson Brooks

Progressive Conservative

Mr. BROOKS:

The Votes and Proceedings are out now.

Mr. ST. LAURENT: I have not yet had an opportunity to see them, so if hon. members will allow that to stand until three o'clock we will proceed now with the budget resolutions.

Topic:   BUSINESS OF THE HOUSE
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PC

Thomas Langton Church

Progressive Conservative

Mr. T. L. CHURCH (Broadview):

Mr. Speaker, there is one matter on which I will not take more than two or three minutes, and which has been raised several times in this chamber, about soldiers not being able to get into a house they have purchased. They spend their means and use up their credit and gratuities in buying a house, and then are unable to occupy it. A man's house is his castle; he wants to live in his own house. Will the minister look into it?

Topic:   BUSINESS OF THE HOUSE
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LIB

James Horace King (Speaker of the Senate)

Liberal

Mr. SPEAKER:

Order. I must remind

the hon. member that the bill to which he refers has been given third reading.

Topic:   BUSINESS OF THE HOUSE
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PC
LIB

James Horace King (Speaker of the Senate)

Liberal

Mr. SPEAKER:

We are no longer on that order of business.

Topic:   BUSINESS OF THE HOUSE
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PC

Thomas Langton Church

Progressive Conservative

Mr. CHURCH:

Mr. Speaker, I claim the right to ask a question. No member has a copy of the bill, and if I have not got it I am going to appeal. I was on my feet when the motion was made for third reading.

Topic:   BUSINESS OF THE HOUSE
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LIB

James Horace King (Speaker of the Senate)

Liberal

Mr. SPEAKER:

I must remind the hon. member that the third reading of the bill was adopted by the house; moreover that I put the motion to the house "that the said bill do now pass", and that motion also was adopted. Unfortunately for the hon. member, there can be no debate on a bill which has been passed. The house has proceeded to other business.

Topic:   BUSINESS OF THE HOUSE
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PC

Thomas Langton Church

Progressive Conservative

Mr. CHURCH:

With all due deference,

Mr. Speaker, I was on my feet when the motion was called. I wish to appeal from your ruling, because I wished to put my question on the third reading of the bill.

Topic:   BUSINESS OF THE HOUSE
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LIB

James Horace King (Speaker of the Senate)

Liberal

Mr. SPEAKER:

No point of order is raised by the hon. gentleman.

Topic:   BUSINESS OF THE HOUSE
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PC

Thomas Langton Church

Progressive Conservative

Mr. CHURCH:

I am a member of the House of Commons and I am going to do my duty. I do not intend to be interfered with on any technical interpretation of the rules.

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LIB

James Horace King (Speaker of the Senate)

Liberal

Mr. SPEAKER:

Order. I would say to

the hon. member that on many occasions such as this I have been very polite and

Income War Tax

generous to him and I did not want to tell him that it is sometimes hard for him to hear what is going on in the house; and this is why he does not rise at the proper time.

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PC

Thomas Langton Church

Progressive Conservative

Mr. CHURCH:

The bill was not passed when I rose; the assistant clerk had the bill in his hand, and no copies of it were available.

Topic:   BUSINESS OF THE HOUSE
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WAYS AND MEANS


The house in committee of ways and means, Mr. Macdonald (Brantford City) in the chair.


INCOME WAR TAX ACT


12. That for the 1947 and subsequent taxation years, the provision exempting the income of certain cooperative companies and associations be repealed and that for the 1946 and subsequent taxation years provision be made that there may be deducted from a taxpayer's income the aggregate of the payments made, (a) in the taxation year or within six months thereafter to his customers of the taxation year; and (b) in the taxation year to his customers of a previous taxation year after the 1941 taxation year and not previously deducted under paragraph (a) in respect of specified allocations in proportion to patronage for the said years the prospect of which was held forth; (c) by the statute or by-laws under which the taxpayer carries on business or by his contracts with his customers; or (d) by the taxpayer in a specified manner prior to the commencement of the taxation year except that portion of such payments as woidd if deducted leave the taxpayer with an income less than an amount determined by deducting from three per cent of the capital employed in the business, including therein borowed moneys, the interest paid by the taxpayer on borrowed moneys and deductible as an expense in computing his income.


CCF

Thomas John Bentley

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

Mr. BENTLEY:

When the house adjourned on Friday night I had given the minister an example in which I regret I made an error in arithjnetic of half a dollar. However, the illustration I gave him is on the record, and I should be glad if he would reply now to the question.

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LIB

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

Liberal

Hon. DOUGLAS ABBOTT (Acting Minister of Finance):

When we rose on Friday night the hon. member had given an example with respect to the operation of the revolving fund, and he asked me this question: "At what stage does the government's plan say the fund has reached a level from which an increase in the revolving fund is considered to have taken place for taxation purposes?"

I think I can answer the question best in this way. A cooperative, like the one described by my hon. friend, will be permitted to deduct from its income for tax purposes patronage dividends paid to members or customers whether in respect of the current year or

some earlier year. If it can be established that the patronage dividends have been paid, actually or constructively-and I explained what I meant by "constructively"-they are deductible, subject of course to the 3 per cent rule. The balance is the income of the cooperative and taxable in its hands. A cooperative is therefore taxable on any increase in its undistributed earned surplus. That is a simple statement of the proposed law.

One of the reasons for this rule is of course the difficulty of taxing as income in the hands of the recipient a patronage dividend declared by a producers' cooperative but not paid. To be specific, what is the value for tax purposes of a patronage dividend declared by a producers' cooperative but not paid? Is it the discounted value of a payment to be received several years hence? If so, what rate of interest is to be used, and what would happen if the patronage dividend were not paid when intended or were never paid?

I am adding this because I would not want any hon. member to think that the government is being arbitrary in its proposals on this point. There are strong practical reasons for insisting on actual or constructive payment- and, as I say, I explained the other night what is meant- by constructive.

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CCF

Thomas John Bentley

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

Mr. BENTLEY:

We can take it. that actual or constructive payment is the key to the whole thing.

Topic:   INCOME WAR TAX ACT
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LIB

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

Liberal

Mr. ABBOTT:

I think that is correct,

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July 30, 1946