August 13, 1946

PASSPORTS

REFERENCE TO ARTICLES IN MONTREAL "GAZETTE" OF AUGUST 12 AND 13


On the orders of the day:


PC

John George Diefenbaker

Progressive Conservative

Mr. J. G. DIEFENBAKER (Lake Centre):

I have before me the morning Gazette. In view of the fact that chapter, verse and line are given respecting the alleged application for passport and naturalization, possibly the minister is now in a position, with that information, to make a statement.

Topic:   PASSPORTS
Subtopic:   REFERENCE TO ARTICLES IN MONTREAL "GAZETTE" OF AUGUST 12 AND 13
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LIB

Ernest Bertrand (Postmaster General)

Liberal

Hon. ERNEST BERTRAND (Postmaster General):

I intended making a statement about this affair to-day, but I have not yet the latest word regarding it. I shall have it in a few minutes, and with the permission of the house I will then make a statement.

Topic:   PASSPORTS
Subtopic:   REFERENCE TO ARTICLES IN MONTREAL "GAZETTE" OF AUGUST 12 AND 13
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PRIVILEGE-MR. BERTRAND (LAURIER)

LIB

Ernest Bertrand (Postmaster General)

Liberal

Hon. ERNEST BERTRAND (Postmaster General):

Mr. Speaker, I should like to make a short statement on a question of privilege.

Yesterday morning in the Montreal Gazette, page 13, and in this morning's, page 9, appeared reports signed by Lawrence W. Conroy and entitled respectively "Suspicion in false passport ring points to federal cabinet member," and "Spy aided by false credentials was known as William Brandis".

In February, 1938, Corporal Noel of the R.C.M.P. came to my office and asked me if I did remember recommending one Willy Brandes, who had asked for his naturalization in September, 1936. At first I did not remember, but after the officer had described the applicant I said that I did remember a man, corresponding to the description, who had come to me accompanied by two persons, one of whom I knew well. On was Aaron Marco-vitch, and the other was a gentleman whose name I gave to the police, but I do not need to give it here because he had nothing to do with what happened after that. At the time I was not sure which one of the two had been in my office with Brandes to whom I had given the letter shown to me by the R.C.M.P.

Why did I give this letter? During the election period of 1935 Aaron Marcovitch had presented himself to me as a brother of one Marcovitch whom I knew as a perfect gentleman, and who was in charge of Sam Jacobs' central committee in Cartier division. Aaron told me that he knew the Hebrew element of

[Mr. Graydon.l

my district very well, that he was agent for the Hebrew Sick Benefit Association, which I found to be correct. He succeeded in convincing me of his usefulness. He worked in my committee all through the elections under the supervision of my campaign manager.

The R.C.M.P. officers went to Aaron Marcovitch's house and the latter admitted that the photo of Brandes ivas somewhat familiar but that he could not place the man. He denied having had anything to do with the naturalization papers, and to convince the officers he offered them to go through his records with them. They accepted immediately, and found out the name of Brandes, his certificate number 22970 and the certificate number of one Schulem Brandes, number 10164, a man who had been naturalized in 1913 and who had been given as Willy Brandes' father in the papers showm to me and later presented to the authorities.

Later on Marcovitch admitted that Mrs. Schulem Brandes was an aunt of his own wife, Mrs. Marcovitch.

Willy Brandes' profession was given as Hebrew teacher in the Montreal Hebrew school. I remember that he was a gentleman who was well dressed, spoke very good English and very good French.

The officers found that a marriage appeared to have been celebrated between Willy Brandes and Mary Stern by a certain rabbi- I do not need to give his name-before two witnesses whose names appeared but both of them denied having ever witnessed such a marriage.

When I was told of the details of the R.C.M.P.'s inquiry it helped my memory to reconstruct this affair.

The application forms for naturalization were signed as of the 10th of September, and explained the terms of my letter of the 15th, which is as follows:

Officer in charge of naturalization.

Parliament building,

Ottawa, Ontario.

Sir,

I hereby recommend to you Mr. William Brandes, who is filing his papers to obtain Canadian naturalization. Mr. Brandes has been living in Montreal since he entered Canada at the age of eight years old. He is employed as professor by the Hebrew school of Montreal and is absolutely reeommendable from all angles.

Yours very truly,

(Signed) E.B.

These details of my letter, relating to Brandes' stay in Montreal and his profession of school teacher, had been furnished to me by Marcovitch and Brandes himself who accom-

Income War Tax

panied his supposed cousin to my office. These forms showed the number of Brandes' father's naturalization paper obtained in 1913. I had no reason to doubt Marcovitch's words, as he had always acted properly during the time I had known him.

Marcovitch was a very sick man in 1938, when the mounted police made the inquiry, and was restricted in his movements by the said police orders. He died on November 11, 1944.

I never signed anything else but the letter just quoted. Fred Rose's name does not appear in the file. I did not know him until long after September 1936, and to say "that the first signature was that of Rose", which it was necessary to cover by "another signature who would be like Caesar's wife, above suspicion" with all the implications that follow, is malicious and untrue.

I am sorry to have been deceived by Marcovitch and Brandes, whose story was plausible, but there was nothing but absolute good faith in my behaviour. I say again that I have never heard of Fred Rose in this affair.

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INCOME WAR TAX ACT


Hon. DOUGLAS ABBOTT (Acting Minister of Finance! moved the second reading of bill No. 368, to amend the Income War Tax Act.


PC

Agar Rodney Adamson

Progressive Conservative

Mr. RODNEY ADAMSON (York West):

I am making this speech at the present time because I consider the income tax bill the most appropriate of the measures going through the house in relation to which to make the present submissions. Part of what I have to say would probably have been more appropriate under the foreign exchange control bill; possibly part of it would come appropriately under justice estimates, and part of it under the department of mines. However, in order to save the time of the house I have endeavoured to condense in one speech what I have to say at the moment and to make that speech at this point. I trust, Mr. Speaker, you will allow me a certain latitude in my remarks if in part the material I give to the house is not strictly relevant to the Income War Tax Act. As I have said, I am endeavouring, for the purpose of saving time, to make three speeches in one.

The first part of my remarks deals with the effect on the Canadian economy; of parity of the Canadian dollar; the second deals with the measures taken by the government to overcome the loss sustained by the

mining industry, while the third offers some recommendations concerning the gold mining industry and the free gold market generally.

When this government, in the wisdom of the experts of the Department of Finance, decided to put the Canadian dollar at parity, certain definite things happened. The first, and probably from the long-time point of view the most serious, was the restriction placed upon our exports. We have recently heard at great length the comparison of Canadian costs with costs elsewhere, particularly in the United States, and it has been strongly impressed upon this country and upon this parliament that Canada must export to live. Canadian manufacturing costs are higher than those in the United States, despite the fact that wages are lower in Canada. The selling price of the finished product is higher in Canada. Therefore Canadian sales aoroad will have to overcome two very serious handicaps imposed upon them by the economy of the country.

The ten per cent discount on Canadian currency was a help to Canadian producers, and to remove it at this critical time was a blow to all industry. I mention in particular at this time the Canadian lumber industry, and I should like to quote one paragraph from United States News of July 26 with reference to that industry. The article deals with what is called currency tinkering. I quote:

A hazard is involved in currency tinkering. Widespread upward valuations of currencies mav promise a temporary buying advantage in the* United States markets, but eventually when foreign business men must sell in United States markets those countries might be left high and dry. Right now, by raising currency values, foreign countries can buy more cheaply and sell more dearly in United States markets; but the time may come when they would like to reverse the situation. Canada can now sell lumber to this country at almost any price, but ivhen the present abnormal demand subsides Canadian timber may cost too much for United States buyers simply because United States dollars cost too much.

That, Mr. Speaker, is the condition of one of our primary industries and I suggest that it is not uncommon in many other primary industries. Certain industries have been able to raise their selling prices in the United States but many of them find it difficult to do so for reasons of our internal economy and for reasons that are basic because of our higher unit costs.

If the pattern of the industrial market is at all similar to the pattern of the previous cycles, we are approaching the end of a boom market. There is a distinct possibility that we may be going into a period of declining markets and production, with the usual dis-

Income War Tax

location of employment and the troubles that it always brings. I ray this because of the study I have recently made of the world markets, and particularly the markets on this continent. The graph shows an unmistakably similar pattern to that of both the 1920 crash and the one subsequent to that, just prior to the war. Therefore I say to the government that it is vitally important that they should not throw away at this time any possibility of strengthening our trading position.

There is one thing more I should like to say on parity of the Canadian dollar with the United States dollar. It is but a dream; it is not in fact in existence. There may be an official quotation of the foreign exchange control board, but in actual fact Canadian funds are selling at anywhere from 3^ per cent to per cent discount at this hour. That is not in a small way; it is not in the small banks. I wish to quote the middle of the market as quoted to me by the Chase National bank, the National City bank and the Bankers Trust, three of the largest banks certainly in New York, and probably in the .entire United States, if not in the world. These are the quotations of the middle market in recent United States dollar terms: August 5, T619-that is what they would pay for a Canadian dollar; August 6, T637; August 7, -9662; August 8, -9650; August 9, -9656. and August 11, yesterday, the quoting is the other way. Our currency was selling at a discount of over 3J per cent.

Furthermore, Mr. Speaker, I received a letter from Chicago the other day which showed that a man whom I knew slightly was able to buy a very large sum of Canadian currency from one of the Canadian banks at over a three per cent discount rate. Therefore parity does not in fact exist, and the government will have to take recognition of it, because from time to time the pressure on the Canadian dollar will be greater and greater owing to the fact that normal trade between the countries is no longer in existence. I mention this particularly because, except in the tourist season, our normal trade with United States, which is largely agricultural, has been considerably curtailed since the period of the war. That has been brought about because we are sending most of our agricultural produce to the countries of Europe and. the United Kingdom. Therefore it is reasonable to expect that even after the 3| per cent discount the Canadian currency will only be-

Topic:   INCOME WAR TAX ACT
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LIB

James Horace King (Speaker of the Senate)

Liberal

Mr. SPEAKER:

Order. I regret to interrupt the hon. member, but I have given him some latitude, thinking that he was about to close TMr. Adamson.]

his remarks. I should like to remind him that the remarks he is making are not relevant to the bill before the house. If I give this latitude to the hon. member I shall be obliged to do the same for other hon. members. Therefore I would ask him to be kind enough to confine his remarks to the bill under discussion.

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PC

Agar Rodney Adamson

Progressive Conservative

Mr. ADAMSON:

Thank you, Mr. Speaker. I am endeavouring to do that. I want to point out why I consider that the taxation proposed by this measure is a severe blow on the mining companies, and that the relief suggested by this government is in fact of little value. I want to show the house, and I hope the country, that the blow suffered not only by mining but by the whole Canadian economy is brought about by the move which the government has taken and that parity is in itself a taxation of Canadian production.

At the beginning of my remarks I said that I was doing this in order to save the time of the house. I could have made this speech on the Foreign Exchange Control Act, but I refrained from doing it because I spoke to the minister about it and he suggested that I make one speech at this time. However, 1 shall endeavour to obey your ruling.

I have just one more word on this business of parity. Canadian currency is selling at widely separated ooints in the United States to-day at as much as seventeen and twenty per cent discount. I understand that even the Trans-Canada Air Lines agents are charging as much as six per cent discount. I refer to the agents to whom Trans-Canada Air Lines sends people in New York.

So much for parity; now let us see what this has meant to the rest of the Canadian economy, particularly mining. In Canada we were the first to boost our currency. Several other countries followed suit, Sweden and Brazil being the last. We did that along with Sweden, Brazil and other countries because we wished to buy in the only market-where goods were plentiful and at as cheap a rate as possible. In other words we tried to put our buying position high and paid little attention to our selling position; but we shall have to take recognition of that, and very soon.

Now I come to the question of taxation. Putting the currency at par has meant a loss to the Canadian gold producer and the Canadian producer of base metals with a large gold content, of ten per cent of the gross value of his product. In other words he did not lose ten per cent of his profit; he lost far more than that. He lost ten per cent of the gross value, and in some cases

Income War Tax

that means the entire profit. That should be very clearly understood by this house. It was a percentage of the gross value that was taken away, not the net value. The government has brought in some small measure of relief, and in a moment or two I am going to give figures to show how extremely negligible that relief is, but first I want to speak briefly about the situation in South Africa and Australia.

In South Africa the Union government under the minister of finance, Mr. Hofmeyr, realized the importance of producing every ounce of gold they could. So they arranged a method of differential taxation for low grade ore. In other words, if 1 can explain it to you, Mr. Speaker, and to the house, this is what they do. There is a rate of taxation on the mine; but for the low grade ore the depletion allowance is increased as the grade decreases. In other words the depletion allowance goes up in inverse ratio 'to the grade of the ore. That means that as your grade goes down, so does your taxation go down, so eventually on ore which is definitely marginal and where the cost of milling and mining is very little less than the gold recovered is worth, the depletion allowance approaches one hundred per cent. I have not seen the most recent figures, but I understand that the rate goes very high, and I have heard that in some cases there is actually a bonus on the production of low-grade ore.

What does this do? It assists a mine with a large body of low grade ore to take out that ore body almost without taxation, and that is a tremendous gain to the economy of any country; for it means that instead of so many thousand tons of rock lying under the ground you have so many hundred ounces of gold. For years the mining industry have pledged with this government and with the Department of Finance to increase the depletion allowance to fifty per cent for both shareholder and mining corporation, but nothing has been done. I want to suggest to you, Mr. Speaker, that careful study should be given by this government, if they are sincere in wanting to help the mines, to the South African method of taxation as I have endeavoured to explain it.

In Australia a situation existed similar to that which exists in Canada to-day. A government not particularly helpful to the mines was in power-I think it was during the Lang regime-and a heavy taxation was put on Australian gold mining. This effectively killed all the mines in eastern Australia, that is in New South Wales and Victoria, and those mines have never reopened. They were small producers, but they were very helpful in the development of the country in that agriculture followed the mines into the hinterland of those two states, where now a thriving agricultural economy exists. We have a close parallel to that right here in Quebec, where we have low grade mines just getting by, making profits of a few cents a ton. For 1944 the average profit of all western Quebec gold producers was 62 cents a ton. Those mines will do everything they can'to keep in production, but if they are forced to close it will be found impossible to continue agricultural development along that northern Quebec clay belt, because the mines provide the market in that area. If that market is taken away from agriculture it will find itself badly off, because other markets are too far away. So to have the mines close would be a definite hindrance to colonization in that part of Quebec. Just the other day, in connection with a railway bill, we saw the difficulties that exist in connection with colonization and the important part played by the mines.

Now, Mr. Speaker, I come to what the government's proposals mean to a group of individual mines. Putting the Canadian dollar at parity reduced the gross value of the product of our gold mines by ten per cent. Now let us see what the proposals of the Department of Finance mean to a group of low grade mines; and I have the figures here for twelve low grade mines in Ontario. With the consent of the house, Mr. Speaker, I should like to put this table on the record. If I have that permission I need only read the name of the mine, the grade in ounces per ton, the net profit per ton and what the new proposals of the Department of Finance mean per ton to each of these producers

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:

Who prepared the table?

Topic:   INCOME WAR TAX ACT
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PC

Agar Rodney Adamson

Progressive Conservative

Mr. ADAMSON:

The Ontario Department o'f Mines. If I could have the permission of the house I should like to place the entire table on record;

Topic:   INCOME WAR TAX ACT
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LIB

James Horace King (Speaker of the Senate)

Liberal

Mr. SPEAKER:

Has the hon. member unanimous consent to place the table on the record?

Topic:   INCOME WAR TAX ACT
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CCF

William Irvine

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

Mr. IRVINE:

We do not know what the hon. member is talking about, because we cannot hear him.

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:

Did I understand the hon.

member to say that the table he proposes to put on record was prepared by the Ontario Department of Mines?

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PC

Agar Rodney Adamson

Progressive Conservative

Mr. ADAMSON:

The Ontario Mining

Association. The table is as follows:

Effect of Depletion Allowance at $2 per oz. and Decrease in Mint Charges from 35 cents to 20 cents per oz. on 12 Ontario Gold Mines whose Net Profits was less than $2 per ton

Mine Year Grade oz. per ton Net Profit per ton $ Depletion at 33J per cent $Broulan . 1945 0.19 0.44 18,285Buffalo Ankerite. . . . 1944 0.17 0.15 19,303Hasaga . 1944 0.12 0.11 5,746Little Long Lac.. . . 1944 0.34 1.83 52,192Madsen . 1945 0-26 0.96 44,679Matachewan Cons. . . 1945 0.10 0.41 22,643McKenzie R. Lake. .1944 0.24 1.51 53,920Pamour . 1945 0.09 0.63 117,757Paymaster . 1944 0.22 1.06 63,105Preston East Dome. . 1945 0.25 1.11 114,574Toburn . 1945 0.32 0.55 17,378Young Davidson.. ., . 1944 0.09 0.59 41,148Depletion at $2 per oz. Additional Income* due to decrease in Mint charges $ Estimated Net Profits per ton after applying new depletion allowance and decreased Mint charges $ Estimated Increase in Net Profits per ton $33,932 2,545 0.53 0.0982,132 6,160 0.27 0.1233,578 2,518 0.14 0.0345.564* 3,417 1.89 0.0650,876 3,816 1.04 0.0831,186 2,339 0.42 0.0138,126* 2,859 1.54 0.0379,216* 5,941 0.64 0.0154,538* 4,090 1.07 0.01112,656* 8,449 1.13 0.0225.362 1,902 0.74 0.1929,220* 2,192 0.60 0.01

s

o

m

* 33J per cent Depletion allowance will apply instead of $2 per oz.

Of the 38 producing Gold Mines-

17 made Net Profit of over $2 per ton and were unaffected by Depletion allowance change 9 made a Loss

12 Mines listed above made Net Profit of less than $2 per ton.

Income War Tax

Income War Tax

Now, let us look at the figures for two mines in Quebec, namely Canadian Malartic and East Malartic. The figures in the daily press for Canadian Malartic show the grade at about $3.80 a ton; and therefore on parity Canadian Malartic will lose at the rate of 38 cents per ton. The proposals by the minister have been worked out by the mines to show a magnificent saving of $SOO a year in this mine. The 1945 figures for East Malartic show a saving of precisely nothing. We have heard these figures brought into the house and the statement that they give assistance to the Canadian mining economy. The figures I have just read for two provinces show that they mean nothing. In fact, I wondered at the minister, who is a sensible man, reading them into the record. Surely the department must have been putting one over on him on that score.

One more quotation about mining costs. Mr. Drummond-Hay of Winnipeg who, I believe, is the managing director of San Antonio and God's Lake, speaking recently in Winnipeg said that the concessions are of infinitesimal value.

I say this situation is extremely critical for the mining industry, because once a mine closes, particularly a low-grade mine, it does not open again. Once a mine closes-and hundreds of mines have closed across Canada- Mr. ABBOTT: Hundreds which should never have been opened, perhaps, too.

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PC
LIB

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

Liberal

Mr. ABBOTT:

I am not referring to producing mines.

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August 13, 1946