August 2, 1946

PC

Douglas Scott Harkness

Progressive Conservative

Mr. HARKNESS:

While it may come under a different item, the point is that it is actually oil taxation, and it is so closely related to this item that it seemed to me this was the proper time to say something about it. However, that is the situation. It is a form of hidden taxation on the oil industry, and having made the point I shall leave it at that.

As far as section 31 itself is concerned, I wonder if the minister could state in simple words what the thing means, because as I read it, it appears that the oil industry is going to be worse off than before. My understanding having been in touch with the officials of the department, is that the industry is going to be in exactly the same position as in previous years. I should like a little clarification as to exactly what this section means and how it will work out in a specific case.

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LIB

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

Liberal

Mr. ABBOTT:

I shall do the best I can, Mr. Chairman. The only change from the law as it exists at present and as it has existed for several years is that the percentage rate is reduced from 26J per cent to 20 per cent and from 40 per cent to 30 per cent; and those changes are merely consequential upon the reduction in the rate of corporation income tax which is being made and which has to be made by reason of the undertaking to the provinces under the tax agreements. I am

advised the effect is a one hundred per cent write-off. I do not know whether that is clear to my hon. friend.

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PC

Douglas Scott Harkness

Progressive Conservative

Mr. HARKNESS:

No; what the minister means by a one hundred per cent write-off is not clear at all. My understanding from what he has said and the information I obtained before is that the oil industry has had no tax relief, that it is in exactly the same position as before the budget was brought down. An ordinary corporation has had a reduction in the corporation tax.

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LIB

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

Liberal

Mr. ABBOTT:

It shares in the general tax reduction, along with everybody else.

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PC
LIB

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

Liberal

Mr. ABBOTT:

They are reduced in the same proportion; he gets the same reduction he had before. As expressed in terms of percentages it is lower, but that is because the tax rates are lower; and, as I said a moment ago, this is equivalent to a one hundred per cent write-off. If my hon. friend will take my assurance on that point, I am relying upon the assurance of my officials, who I know are thoroughly familiar with the circumstances. The hon. member might care to study this when we have the bill before us. When he sees the specific terms of the amendment, if he is still in doubt I shall be glad to elaborate what I am saying now, but I do give him the assurance that the position is exactly the same, that the percentage rate of tax reduction is merely consequential upon the reduction in the tax rate, and that the effect is a one hundred per cent write-off.

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PC

Douglas Scott Harkness

Progressive Conservative

Mr. HARKNESS:

Could I .put the thing in this way, then? Take an oil company which paid taxes of $50,000 last year. What tax are they going to pay this year, if their business is the same? What reduction is there, if any?

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LIB

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

Liberal

Mr. ABBOTT:

Well, from my hon. friend's hypothetical question I assume that the $50,000 represented 40 per cent of a certain taxable income. This year they will pay 30 per cent of that taxable income. I cannot make the calculation at once, but it is merely an arithmetical problem. They will pay 30 per cent of that same taxable income.

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Mr. M A CD ON N ELL@Muskoka-Ontario

I confess I am not quite clear yet as to what the minister meant by saying it was equivalent to a one hundred per cent write-off; and while

Income War Tax

I am on my feet I want to ask another question. The minister said plainly and categorically that this was incentive legislation. By that I understand that it is an inducement, that it is to induce people to take certain action, in this case to produce oil. Then I want to ask the minister if he accepts the statement made by the hon. member for Calgary East that the majority of the rigs are idle. If that is so, and the statement was not questioned, does it not make it appear that the incentive is not working, and does not that raise the question whether or not the government do in fact want these rigs to be operating? If they do, should they not consider whether, as I say, in fact the incentive is sufficient?

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LIB

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

Liberal

Mr. ABBOTT:

If I have understood my hon. friend's question correctly, he puts it on this basis, that because there are idle rigs the incentive perhaps is not adequate.

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Mr. M A CD ON N ELL@Muskoka-Ontario

The statement made by my hon. friend was that a majority of the rigs are idle. I speak in ignorance of the facts.

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LIB

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

Liberal

Mr. ABBOTT:

So do I; I do not know whether they are or not.

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Mr. M A CD ON N ELL@Muskoka-Ontario

Nevertheless we have here a witness who I submit for this purpose is an expert, whose evidence has not been challenged; and he says-

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LIB

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

Liberal

Mr. ABBOTT:

Let us call him an advocate as well as a witness.

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Mr. M A CD ON N ELL@Muskoka-Ontario

All right; I will not quarrel with that. At any rate this statement has not been questioned ; I accept it, and I imagine the minister accepts it also. If that is correct, and the majority of the rigs are idle, is it not fair to ask the minister whether his incentive is working, whether some explanation is not required to make this clause appear reasonable?

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LIB

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

Liberal

Mr. ABBOTT:

All I can say is that the government has no desire to go into the oil business. The rigs may be idle from a variety of causes. I do not know whether my hon. friend's statement is a complete picture or not, but I repeat what I have said previously. This is incentive legislation. These special concessions to the oil industry are matters which have been threshed out, worked out and discussed in this house year after year. There has been no change for the last two or three years. It may be that there should be greater incentive given, I do not know; that is a matter of opinion, but the government has come to the conclusion that this is not the

year to do so. My own view is that further incentive is not needed; that is my personal opinion.

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Mr. M A CD ON N ELL@Muskoka-Ontario

The reason we are taking up your time this morning is that we hope to convince you that you are wrong, however faint that hope may be. The minister said the government did not want to get into the oil business. I did not understand that remark at all, because it did not seem to me to be relevant to the very strong statement the minister made before, that this was incentive legislation. I still submit the minister -has left the question entirely unanswered, because if this is incentive legislation, I understand that to mean the government has decided that it does want oil produced in Alberta.

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LIB

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

Liberal

Mr. ABBOTT:

By the other fellow, and not at too great a price.

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Mr. M A CD ON N ELL@Muskoka-Ontario

Wait a moment. If I understand incentive legislation it is intended to produce certain results, and again I submit that we have the minister's statement that this legislation is intended to produce results; we have the statement of the hon. member for Calgary East that it is not producing results, so I submit with deference -that it is up to the government to reconsider the discussions which have taken place in the last few years, because after all some very important people were not present here during those discussions.

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LIB

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

Liberal

Mr. ABBOTT:

That is quite true.

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August 2, 1946