It is my conviction that resolution 12 will still have very serious-consequences to cooperative enterprises as it now stands. It seems to me that cooperative-enterprise is so far-reaching in its effect upon the economic life of the Canadian people that anything that is done to limit cooperative activity is most undesirable and will because of its ramifications affect the lives of thousands of people. In the past, cooperatives have received reasonably good treatment at the hands of government. As a matter of fact most provinces have encouraged cooperative enterprise, and that of course is in keeping with the recommendation of the united nations conference on food and agriculture which in 1943 made certain recommendations which appear in the "Canada Year Book". While in convention in the United States, the conference recommended that all countries study the possibilities of further establishing producer and consumer cooperative societies in order to provide necessary production, marketing, purchasing, finance and other services.
Over the years cooperative development has been on a vast scale in this country. According to the "Canada Year Book" in 1942 member-
Income War Tax
ship in the organizations from coast to coast was in the neighbourhood of 561,000 persons, and besides this there were over 600,000 patrons. In that year cooperative associations conducted business on a large scale, totalling in all over a quarter of a billion dollars. These associations embraced consumer cooperatives for the sale of petroleum, food and clothing in some 1,722 different organizations.
In the case of fruit cooperatives, largely located at the Pacific coast, stores were operated which provided fertilizer, barrels, boxes and spray materials for the growers, while on the western plains cooperatives handled fuel for tractors, feed and household needs.
In Saskatchewan a great producer cooperative operates for the marketing of grain, namely, the Saskatchewan wheat pool, which has a membership exceeding 125,000 persons. Other producer cooperatives include poultry, live stock and dairy products marketing. Indeed, cooperatives of this type are found in almost every province of Canada. To meet the needs of farmers for low-cost fuel, a [DOT]cooperative oil refinery operates in the city of Regina and its record to date has been most [DOT]encouraging.
On the coasts of Canada, both west and east, 'fishermen have banded together in some 67 associations. I believe that figure is up considerably now, because my figures are taken from the Canada Year Book for 1942. In these 67 associations there were some 5,000 members banded together for the purpose of processing and marketing their fish.
In the province of Quebec cooperative enterprise takes on a somewhat different form. There the credit unions have been most enterprising and on the whole most successful. Loans have been provided by these unions at interest rates considerably lower than those provided by the small loan companies, and profits are distributed to members in the form of patronage dividends.
Throughout Canada, in 1942, 1137,000,000 in loans was provided by these cooperatives to the people, who in many cases would not have been able to obtain these loans elsewhere. That is the point which I wish to make most emphatically.
In order to provide fire insurance to farmers at low cost, some 150 farmers' mutual fire cooperatives are now functioning. In 1942 these organizations had risks valued at more than a billion dollars.
Finally I should like to refer to cooperative enterprise in the province of Nova Scotia. The hon. member for Cape Breton South is occupied this morning in the industrial relations committee and is unable to participate in
this discussion. In Nova Scotia the British Canadian Cooperative Society of Sydney Mines was born because of the great need of the folk of that area during the depression years. It has been an outstanding success. The people have remained loyal to the principles of cooperation. Several stores now handle groceries, dry goods, meats, and men's wear, things the people who work with their *hands must have. The society operates a bakery, a dairy and a tailoring department. Legislation which interferes with such development strikes deep into the lives of these [DOT]people. There are many other hundreds of cooperatives, including group life insurance, which were born during the depression when thousands of people had to relinquish high-priced line company insurance policies. Cooperatives dealing with hospitalization operate in most of our larger cities. Rural people have set up cooperative telephone systems in places where private enterprise failed to provide them with that much needed communication service.
The scope of cooperative enterprise is vast. People in low income brackets were not only forced to group themselves together to sell their products most advantageously, but also to enable them to purchase consumer goods to the very best advantage. And now this resolution is presented to the house. In spite of what the minister says, cooperatives are of the opinion that the adoption of this proposal will restrict their activities and the general effect may well damage the whole cooperative movement.
There is a fundamental difference between a cooperative and a non-cooperative enterprise. Obviously the government does not recognize this difference in the resolution now before this committee. Differences were recognized in section 4p of the Income War Tax Act, and unless they are recognized now it will have a serious effect upon the cooperative development generally. Section 4p has been repealed, and so far as I can determine there is nothing specific to replace it. I am pleased to note, however, that the government is prepared to accept the representations which have been made by cooperatives and members of the house that there should be some differential between the treatment of members and non-members. The extension of the time for the payment of patronage dividends from six to twelve months is also an alteration in the resolution which commends itself to all cooperatives. However, I believe a longer period than twelve months will be much more acceptable. It has been suggested to me that twenty-four months would meet with the approval of all cooperatives.
Income War Tax
If I understand the minister correctly, the revolving fund will be permitted to revolve even though set up subsequent to 1941. But the legislation before us will make it almost impossible for cooperatives to outlive a depression of any length of time. The cooperatives should have power to limit the amount paid out to ten per cent of the total in any one year, and in times of crisis to be able to suspend payments of patronage dividends entirely. If this resolution is adopted, members of cooperatives will not be permitted to use their own money in operating the business unless interest of at least three per cent is paid on the capital, or an alternative tax is paid on an equivalent amount. This, in effect, forces the cooperative into the position of a profit enterprise, and is contrary to the non-profit principle set up by the Rochdale pioneers. If individuals wish to place their money in the cooperative, interest free, they should have that privilege. Interest free loans were not uncommon during the war when the government was in grave need of money. After all it is the people's money, and this restriction on their use of it in cooperative enterprise without expecting interest should be removed.
I wish to place on the record a letter and two telegrams protesting against this proposed legislation. These telegrams and letters were received from cooperatives. One comes from the Saskatchewan Credit Society Limited of Regina. I shall read the resolution which was passed on July 26:
That this board urge most strongly that parliament adopt the recommendations of the royal commission on cooperatives with respect to' the taxation of credit unions, including federations of credit unions whose membership may comprise other credit unions, cooperative associations, parishes, school districts and other similar bodies.
The first telegram comes from the Cooperative Union of Saskatchewan, and reads as follows:
Cooperative Union of Saskatchewan strongly urges first cooperatives be exempt three years from commencement of operations. Hardship to many new cooperatives if three year tax exemption confined to those organized after 1946. Second, exemption of retained patronage dividends if withdrawals subject to discretion of directors to protect cooperative; third, exemption of medical housing rural telephone electricity cooperative desired.
The second telegram comes from the cooperative association of Riceton, Saskatchewan, and reads as follows:
Our cooperative association and credit union urge that all new cooperatives be allowed three year tax exemption; that allocated dividends be exempt if stated reasonable term
for payment announced; that federations of credit unions be included in same category as unions; that hospital, housing and electricity cooperatives be included.
In conclusion may I draw the attention of the committee to resolution 17 on eodpera-tive movements which was passed by the united nations conference on food and agriculture, held in the United States in 1943, and attended by forty-five different nations. Section 3 of resolution 17 reads as follows:
The democratic control and educational programmes, which are features of the cooperative movement, can play a vital part in the training of good democratic citizens, and assist in inducing a sound conception of economic matters.
It is my hope, and I am sure it is the hope of every cooperative, that nothing will be done by this parliament to destroy the movement which plays such an important part in developing sound democratic citizenship, and which has done so much to create a better understanding of the economic life of our nation.