Hon. DOUGLAS ABBOTT (Minister of Finance) moved for leave to introduce Bill No. 454, respecting income taxes.
He said: Mr. Speaker, in my budget speech some weeks ago I expressed the hope that I would be able to place before the house this session a revision of the income tax law.
It is, perhaps, unnecessary for me to repeat that it is not the intention of the government to press this bill for enactment at the present session. Nor, indeed, is it my wish to invite debate on the measure at this time. The purpose of introducing the bill now is to give members full opportunity to study it before next session, to explore thoroughly various aspects of the legislation, and to be in a position to give parliament the benefit of their views when the bill is presented for enactment next session.
It is hoped that this bill will receive wide circulation in the hands of the public. Various organizations throughout the country, such as the Canadian Bar Association, the Dominion Association of Chartered Accountants, and the Canadian Tax Foundation, are well equipped from the technical point of view to render a useful service to the country through an exhaustive analysis of this legislation. I can assure all interested groups that suggestions for improvement in the statute will be welcomed and given careful study by the government.
A bill of this kind is, of course, definitely non-political. I think all parties agree that we must have an income tax. We are unanimous in our desire to see the best possible law on our statute books. All agree that we should strive for simplicity and certainty. The law should lend itself to efficient administration. We are, I think, all on common ground in seeking these objectives. Once the best possible instrument has been forged, it then, of course, becomes a political matter as to how far the instrument will be used as a revenue measure and how the total burden imposed by it will be distributed among taxpayers.
It is not my intention to delay the business of the house at this time with a detailed account of how the new bill differs from the present Act. I think, however, it might be helpful if I briefly indicated the general plan of the revision, giving some of the highlights of the new measure, and pointing out certain methods used to secure greater simplicity and directness. To assist in getting a picture of the new arrangement of the law I have had
Income Tax Act
a comprehensive table of contents prepared and inserted at the beginning of the bill. Also, in addition to marginal notes opposite each section or subsection, members will find on each right-hand page references to the corresponding provisions in the present law. This will readily enable comparisons to be made between present and proposed legislation.
The bill divides the subject matter into eight parts as compared with eighteen parts in the present Act. Part 1 covers the general income tax on individuals and corporations which, of course, is the main body of the law. Part 2 imposes the taxes on non-residents, which taxes are deducted at the source on payments leaving Canada. These two parts cover the fundamental part of the taxing statute. The content of the remaining parts can easily be determined by running through the various headings.
As I have stated, part 1 deals with income tax proper, and it is set up under eight divisions. It will be seen the bill starts off directly with what is known as the charging section. It commences by stating who is liable for tax. This direct way of starting a piece of legislation of this kind may be regarded by the house as a perfectly obvious and logical way to open such a statute. However, under the present law the charging section is not reached until thirty-eight pages of other material have been presented.
Perhaps the house would bear with me if I read section 2 of the bill, because I think it offers a fair sample of the simplicity of language and the directness of the approach in the new law which have been among the main objectives in the revision.
2. (1) An income tax shall be paid as hereinafter required upon the taxable income for each taxation year of every person resident in Canada at any time an the year.
(2) Where a person who is not taxable under subsection one for a taxation year
(a) was employed in Canada in performing the duties of an office or employment at any time in fhe year, or
(b) carried on business in Canada at any time in the year,
an income tax shall be paid as hereinafter required upon the part of his taxable income for the year that was earned in Canada
(3) The taxable income of a taxpayer for a taxation year is bis income for the year minus the deductions permitted by division III.
Division II starts in by giving general rules for computing income. I should perhaps mention here that after exhaustive study of the legislation of other countries and of the nature of the problems involved, it was decided not to attempt a specific definition of income. So far as I know, no country has achieved a satisfactory definition. Accordingly, the general scheme of the law, as will be seen by section 3 is to tax jdl income and to indicate the general sources of income, that is, income from businesses, property and offices or employments. Section 4 follows up this general indication by stating that income from a business or property shall be determined in accordance with generally accepted accounting principles. We believe that by providing a general formula of this kind the best practical common sense results will be achieved. The income tax division in making assessments will interpret the legislation and the taxpayer, if he disagrees, may have his case heard by the new income tax appeal board and, if still not satisfied, take it to the exchequer court.
I should like to call particular attention to division VIII at the end of part I. The house will observe that it provides for what might be called a set of boxes for exceptional kinds of taxpayers or special provisions not of general application. In the previous law these items cluttered up the main body of the law. A separate division for these unusual cases or situations greatly simplifies the part of the statute which is of general interest to the ordinary taxpayer.
Special attention has been given in this revision to the question of ministerial discretion. The house may recall that the income tax legislation of last year provided for an ad>-visory board to review cases where ministerial discretion had been exercised under forty-three designated provisions in the law. The house may be interested to know that of these forty-three ministerial discretions only two remain in the new bill. Furthermore, these remaining two do not affect the amount of any tax payable. One requires the concurrence of the minister upon the change of a fiscal period of a taxpayer, and the other gives the minister power to determine who shall be the taxpayer where multiple trusts are set up in favour of the same beneficiary.
In cases where some degree of flexibility is felt necessary we provide that rules shall be determined by regulations fixed by order in council, which will be subject to review by the courts and will not involve the objectionable principle of ministerial discretion, as is the case in the existing law.
Possibly the house would be interested in the method adopted in eliminating discretions. This has been done by converting the discretion into a rule of law dependent on a question of fact. An example will make this clear. For instance, subsection 2 of section 6 in the present law states that
the minister may disallow any expense which he in his discretion may determine to be in excess of what is reasonable or normal for the business carried on by the taxpayer...
Income Tax Act