May 21, 1951

LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

It would be $142.90.

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Subtopic:   INCOME TAX ACT
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PC

John George Diefenbaker

Progressive Conservative

Mr. Diefenbaker:

I was just figuring it out roughly. It is $142.90 for one brigadier. How many colonels are there?

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PC

Edmund Davie Fulton

Progressive Conservative

Mr. Fulton:

Four. The colonel's tax is $97.35.

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?

Mr, Diefenbaker:

Well, the number of officers over the rank of lieutenant would not be very large. The position there is that the many who receive the small rate of pay of $2.35 a day, the privates, and beyond that of course the non-commissioned officers, would have to pay tax in order to prevent the senior officers from escaping the payment of tax. Looking at the situation from the broadest standpoint, and aside from any sentimental consideration at all, the people of Canada as a whole ask that this exemption be given. Generally speaking, I think that members in all parts of the house-I know of no exceptions, although there may be some-are in support of the idea, as are the people generally.

I feel that even though the minister has rather categorically closed the door to consideration, the desires of the people of the country as a whole should be effectuated. There may be difficulties in administration.

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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

Not serious.

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PC

John George Diefenbaker

Progressive Conservative

Mr. Diefenbaker:

Not serious difficulties?

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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

No.

31S4

Income Tax Act

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PC

John George Diefenbaker

Progressive Conservative

Mr. Diefenbaker:

Then, if there are no serious difficulties in administration-

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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

There are inequities and injustices, not difficulties in administration.

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PC

John George Diefenbaker

Progressive Conservative

Mr. Diefenbaker:

If there are no difficulties in administration-

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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

No serious difficulties.

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PC

John George Diefenbaker

Progressive Conservative

Mr. Diefenbaker:

No serious difficulties; I took it from what the Minister of National Defence said the other day that there were, and the only reason is that it might create inequities. If that is so, then I feel that that of itself is not sufficient, because after all, the only reason for objection to inequities is that they are felt by others. I know of no person in this country who would feel it was inequitable to allow those who serve to be exempt from income tax on their pay and allowances

and I refer to those who serve today in Korea.

Members of parliament have an exemption of $2,000 a year. I know there are some who regard that as inequitable, but I know of no one who would say that an exemption to the men who serve in Korea would be inequitable. Let me give you an example. In the Department of External Affairs we have on foreign service many competent officials. They pay income tax on their income, but they do not pay on their allowances. The result has been that in recent years, while the pay has not gone up, the allowances have mounted. I ask any hon. member to look at the record of public accounts for 1950 at page E-20. These allowances are substantial. While I do not suggest to the Secretary of State for External Affairs that the allowances have increased as a form of indirect exemption, the fact remains that they have materially increased in recent years.

I am just reading indiscriminately from these allowances. I am not speaking of the salaries of $16,000 a year and so on. Allowances, $13,092, $15,366, $15,000, $12,192,

$23,592, $13,836, $13,992, $16,092. I pick out the larger ones as well as the smaller ones- $10,092, $12,792, $25,320, $12,552, $14,892, $13,536. The last one on the list is Pakistan, and it is the last one I gave. No one has suggested that these allowances are inequitable. In addition to these allowances the recipients receive removal expenses, travelling expenses and the like. These allowances are given in part because the officer on foreign service, as the leader of the opposition said, does not enjoy the benefits that his taxation would grant to him were he within this country.

I do not want to engage in any sentimental discussion. I went to the reading room about

a week ago and I read the editorial comment across the country, in publications of different political persuasions, and without exception the general demand that was voiced was for the granting of this exemption. For instance, here is what the Windsor Star said in an editorial on May 14:

Making it worse.

The federal government's arguments against income tax exemptions for service men on overseas duty are going from bad to worse.

The latest, offered by Defence Minister Brooke Claxton, is that it's difficult to devise a system of exemptions that would be fair to all concerned. By way of example he said that if the forces overseas were relieved of all income tax liability, a major general would gain $172.30 a month and a first-class private only $6.85.

But a major general is at the divisional command level, and for every officer of that rank there are about 10,000 privates. Does this mean that to keep one major general from saving $172.30 a month in tax, the department is willing to nick the privates for $68,500?

As it happens, we haven't a major general in Korea, nor are we likely to have one there or in Europe for some time. Our highest officer in Korea is a brigadier. Are 6,000 or 7,000 privates to be clipped for $6.85 a month each, therefore, just to keep one brigadier from saving about $120?

Our financial wizards in Ottawa should come down to earth.

That represents the general viewpoint today. The minister has stated that it is not a question of administrative difficulty; it is the inequities or anomalous conditions that would be created. There would be no anomalous condition or inequity created if the pay and allowances were exempted. A person with a private income would make out his income tax return the way we do, and on top of page 2, I think it is, he would show as an exemption his pay and allowances from the armed forces the same way as we show our $2,000 allowance.

The inequity is caused by a few people having the idea that they are being discriminated aganst, that something unfair is being done. I cannot think of anyone in this country who would consider that an inequity was being created by exempting the pay and allowances of those who are serving in the armed forces. I hope the minister will have his officials look into this matter. It is little things like this that, while unimportant-the minister says it is only a matter of $1 million of revenue-undermine morale. It is this kind of thing that causes a feeling of resentment. It is this kind of thing that, as we all know, whether we sit to the right or the left of the Speaker, creates those pinpricks, those difficulties that so often undermine spirit and morale.

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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

As the hon. member suggests, I shall give consideration to all the views that are voiced today. But in order to keep

the record straight I should like to point out that under the Income Tax Act the allowances of our diplomatic officials who are serving abroad are subject to exemption, and the same exemption applies to members of the military or air forces of Canada who are serving abroad and who are receiving allowances.

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SC

Victor Quelch

Social Credit

Mr. Quelch:

Mr. Chairman, we in this group strongly support the suggestion that the pay and allowances of men in the armed services fighting overseas should be exempt from income tax. To my mind there is something revolting about the idea that a man who is fighting for his country and who may be called upon any day to make the supreme sacrifice should also be required to contribute toward the financial cost of the war. Surely his sacrifices should be regarded as full payment on his part toward the cost of the war without his being required to make any other financial contribution.

We must remember that these men when they come back, if they are lucky enough to come back, will be required, by means of taxation in the years to follow, to contribute toward the cost of the war they have fought. Yesterday the minister mentioned the fact that there is no income tax exemption in Great Britain and the United States for men of the armed services. Surely the minister would not say that he supports everything that is done by the governments of Great Britain and the United States?

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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

I do not know of any country where complete exemptions are allowed.

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SC

Victor Quelch

Social Credit

Mr. Quelch:

The minister must be aware of the fact that in Great Britain and the United States there is compulsory military service. Canada and Iceland are the only two countries that have not compulsory military service. There is a big difference between a country that has compulsory military service and a country that has a voluntary system.

If we had in this country a compulsory system whereby every man would have to go into the armed services at the age of eighteen years, we would be spreading the burden equitably across the whole country. But where you have a voluntary system there is no equality of service and sacrifice. In some cases whole families are wiped out. I know a case in the last war where five or six sons in a family were wiped out. That is not equality of sacrifice. I do not think the minister is making a fair comparison when he compares Canada, where there is voluntary service, with countries having compulsory service.

Income Tax Act

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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abboti:

We had compulsory service in the last war.

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SC

Victor Quelch

Social Credit

Mr. Quelch:

The minister is aware of the fact that it is highly desirable that during his term of service a soldier should save as much money as possible toward the day when he must re-establish himself. The minister knows that the benefits granted by the veterans legislation are not sufficient to reestablish these men. The minister knows also that, judging from what has happened in the past, the veteran is usually discharged in a period of inflation during which he must face the added difficulty of re-establishing himself when prices are high.

While we have the dependents allowance board, many soldiers serving overseas are having to make substantial contributions toward the upkeep of their family made necessary by the high cost of living. Yesterday the minister gave a number of reasons why he thought exemption should not be granted to the members of the armed services.

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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

Is the hon. member advocating a general exemption for members of the armed services, or only for those serving in some foreign theatre?

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SC

Victor Quelch

Social Credit

Mr. Quelch:

For those serving overseas. The minister referred to senior officers and stated that the benefits they would receive would be so much greater than those received by the men in the ranks. The minister has dealt with that point himself and shown how that difficulty was overcome in the last war. As reported on page 3152 of Hansard of May 17, he said:

Any single member of the armed forces with an income of less than $1,600 was exempt, and married members were exempt at higher amounts. In addition a complicated tax credit formula was employed to gradually increase the tax above those exemptions until the full rate of tax was paid.

We could give the men in the ranks an exemption of $2,000 in the case of single men and $3,000 in the case of married men, and then steeply graduate the income tax above that so that the officers in the higher ranks would be paying the full amount of the tax.

The minister referred also to the difficulty of deciding who would benefit. That is a problem that is faced by the Department of Veterans Affairs in all their legislation. In every act it has been necessary to define just what type of veteran will benefit. For instance, under the War Veterans Allowance Act the beneficiary is the man who saw service in a theatre of real warfare. Under the Veterans Land Act the beneficiary is the man who saw service overseas or who served twelve months in Canada. I presume that if exemptions are granted from income tax the eligibility will have to be defined carefully,

Income Tax Act

but it should not present any greater problem for the minister than has been presented in the veterans legislation.

I should like to say once again that we must realize that the men who are fighting our battles today are paying their full share of the war; therefore it would not be fair to ask them to pay income tax, because in doing so they would be bearing a double share.

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May 21, 1951