This has been the law for a long time. I must confess that I think it is equitable. It is not a question whether a person is better off or worse off; it is a question of what exemption one should get for a certain status. That was the law for a long time.
But what I have said would apply anyway. A married man with a wife and one child gets an exemption of $1,500 plus $300 for the child. Without this new section, a widower maintaining an establishment and having one child, but not having a wife, would also get an exemption of $1,500 for maintaining the establishment, plus $300 for the child. In that sense you would be giving the widower with one child the same exemption that you give to a man with a wife and one child.
I think in fairness I should make a brief explanation with respect to this section, and I hope I can get it through before eleven o'clock. Subsections 5 and 6 of section 9 are repealed. As I explained, and as is stated in the explanatory note to the bill, the present averaging provisions in the Income War Tax Act will be replaced by new provisions in the Income Tax Act which will shortly be considered by the house. However, in asking the house to repeal the present measures I should make a statement at the same time outlining the new provisions and explaining how they will differ from the present ones.
First of all, I might explain the reasons for making the change. They are twofold. The change is an attempt to meet the requests of farmers and farm organizations that the averaging should cover a period longer than the present three-year provision. The second purpose is to remove some of the complexities involved in fitting a moving average into a system which at the same time allows the carry backward and forward of losses.
It is proposed that the present three-year moving average be replaced by a five-year averaging on what might be called a "block system". Under the so-called "block system", a farmer may average income for a five-year period and follow it subsequently with a second five-year period, and so on. The averaging periods do not overlap under the block system as they do under the moving average introduced two years ago.
Under the proposed system, the farmer will continue to use the one-year carry back and three-year carry foward of losses. He will then be permitted to average on a five-year basis the incomes as they stand after adjustment for losses.
One of the objections to a period as long as five years was that a farmer would have to wait for this period before securing any benefits from it. It is proposed, therefore, that a farmer may at his option average at the end of four years in the first instance. Thus, the first period for which averaging may be adopted will be 1946, 1947, 1948 and 1949. In
the meantime the farmer will be able to take full advantage of the carry backward and forward of losses.
I believe the new system outlined retains all the benefits which could properly have been obtained under the moving average. In addition, and I regard this as perhaps the greatest advantage of the new system, the new system will be simple to understand and use. I am afraid that the present law providing for a moving average to operate in conjunction with the carry forward and backward of losses might have been too complex for successful operation.
I make that explanation now, because the new bill will contain a provision for the five-year average, and I felt that I should not repeal the existing sections in the present act without making that explanation.
I want to see if I can get to the bottom of the fairy tale which begins in the middle of page 4 of the bill at line 18. I do not know who wrote this, but it was not Shakespeare. I have been trying to understand this ever since the bill came to me in the mail. Does it mean that patronage dividends apply to the entire balances of shares or capital and that they shall be considered as income in the hands of the member at the time of such application and shall not be taxable again when redeemed? Is that what it means? I want to see if I have interpreted aright this terrible collection and conglomeration of words. If anyone wanted to bring about confusion he has certainly done an excellent job.
This is an amendment to sections 9B and 9C and relates to non-residents. This section will have no application to recipients of patronage dividends in Canada. It is being inserted in the non-resident taxing section which, as I explained at the resolution stage, is to impose a fifteen per cent tax on non-resident recipients of patronage dividends. Non-resident recipients of patronage dividends which take the form of an issue of certificate and not cash will be taxed at the time they get the certificate, but not when the certificate is redeemed.