June 5, 1951

LIB

James Sinclair (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. Sinclair:

When they were trying to get around this they were specifically mentioned. Because of this interpretation they are no longer specifically mentioned. That is the price of the car and all these other things connected with the car which the manufacturer sells to the dealer and the dealer sells to the consumer.

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CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

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

Mr. Knowles:

Would it not be fair for the parliamentary assistant to tell us what kind of car has a servicing contract for ten thousand miles?

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LIB

James Sinclair (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. Sinclair:

It is certainly not the job of the parliamentary assistant to mention any trade names, but the car is parked right out in front of this building on the right hand side, with plenty of dust on it.

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CCF

Robert Ross (Roy) Knight

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

Mr. Knight:

I should like to get some clarification of a ruling concerning the importation of certain diamonds, in connection with which I have had several communications. This is a case in which diamonds were sent out of the country for reconditioning, I think to Antwerp. When such diamonds are sent there they are checked by the customs at that port and certified as to identification. Then the necessary repairs are, made, which I presume is simply a matter of cutting down the diamond. You cannot make a diamond larger; it has to be made smaller. This work is done and the diamond is returned through the customs at Antwerp, where it is again checked for identity. But when it comes to the Canadian side an excise tax is charged just as though it were a new stone. The original stone paid an excise tax when it was admitted to the country in the first place, and these people are greatly concerned. They say they cannot have that work done with advantage to themselves in this country, and it is therefore necessary to return such stones to the point of origin in a foreign country. When it comes back, however, they find the same tax collected as though it were a new stone, and they say they cannot charge their customers enough to carry on this sort of work economically. .

After these people wrote to the department they were informed that the ruling that the second charge was correct was based upon the fact that these stones are not easily identifiable. In the letter to which I am

referring at the moment the writer says "identical" but I think he must mean identifiable. I would like some comment on that. Does not the parliamentary assistant think that tax is unjust under those circumstances? It is an easy way out to say, "Well, how can we tell it is the same stone? Let us collect the second tax," but I think this should be looked into, and if the regulation is not justified by the facts it should be changed.

One of the letters I have had from the retail merchants' association, backing up this claim, asks that the case be reconsidered. They suggest that the ruling in this instance be clarified, since this firm definitely cannot continue to pay the customs duty on diamonds which are forwarded for reconditioning. As I say, there is no place in this country where the work can be done. This looks to me like an unjust tax, like an easy way out. If there is a process of identification, as I submit there is, then the diamonds should be identified and the tax paid only once. If the stone has been improved1 in value I suppose there could be a tax on the improvement, but I do not think it has. It has been made smaller, and has decreased in value.

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LIB

James Sinclair (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. Sinclair:

This, of course, would be primarily matter of customs administration that would come under the Customs Act which was under consideration last week. So far as I know, the only reconditioning that could be done to diamonds, to use that word loosely, would be regrinding to make a diamond smaller and with different facets. No one would have that done unless it was going to improve the value of the diamond. One would not deliberately take a diamond and have it cut down to reduce its value.

The other point is that if a manufacturing process is involved in connection with any article, whether that article be raw or semifinished, and the article is brought back into the country, naturally its value has been increased, so there are sales and excise taxes, in the case of luxury goods, on the processing which has changed that article from a semi-finished nature to a finished nature.

However, getting back to my first point, this is primarily a matter for the administration of the Department of National Revenue, so it does not quite come within the Excise Tax Act. I am quite sure, however, that the Minister of National Revenue will take note of the hon member's plea in this regard and give him an answer.

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CCF

Robert Ross (Roy) Knight

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

Mr. Knighi:

If there were an increase in

value, as the parliamentary assistant suggested, I could see the justice of charging a tax on that increased value, but not on the total value of the stone. I do not think his

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argument is well founded when he says the value has been increased, because I am comparing two values. I am comparing the value of the stone upon which the excise tax was originally paid with the value of the stone on the second occasion. A stone would be sent out to be reconditioned because it had deteriorated or been damaged so it was not worth the original cost. The comparison I am making is between the value of the diamond in the first instance, which was certainly higher, and the value in the second case; but it was upon that original value that these people had to pay their excise tax. Now, after the diamond has deteriorated and they have gone to the expense of having it made of some value, you are taxing them on the full value of the stone, which you have done already on the greater value in the first place. I do not think the first argument advanced by the parliamentary assistant holds water. I cannot see it. He gives the assurance that the Minister of National Revenue will look into the matter. Of course we have had that assurance at least once before. The matter was looked into, and I was taking this opportunity to suggest that the decision in that case was wrong. However, again I ask that the matter be looked into.

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IND

John Lambert Gibson

Independent

Mr. Gibson:

Can the parliamentary

assistant tell me the mechanics of the change in the application of the sales tax to logging truck tires? There has been a change recently, and I would like the parliamentary assistant to explain it to me.

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LIB

James Sinclair (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. Sinclair:

I am informed that this

problem has two sides. First there is the increase from eight per cent to ten per cent in general sales tax. Then there is the question whether or not a contract trucker, a man who contracts with a logging company to move their logs from stump to dump, is entitled to the exemption provided for the primary logger who cuts his own logs and moves them down to the sea, at least in British Columbia.

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IND

John Lambert Gibson

Independent

Mr. Gibson:

Then do I understand that

the tires used by the primary logger are exempt from sales tax?

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LIB

James Sinclair (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. Sinclair:

Once again this is a technical question which has been under review by the department for some time. I am not competent to give an answer at the moment, but the hon. member will certainly have an answer promptly from the Department of National Revenue, which administers the act.

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IND

John Lambert Gibson

Independent

Mr. Gibson:

That is what I am rather

curious about. Logging truck tires have been exempt from sales tax over the years. I am just wondering by whose authority-it

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certainly was not done by parliament-this exemption has been taken away. I hear they have a new gimmick in this thing now. They have arranged it so that they say that tires that are designed, manufactured for and used exclusively on logging trucks are exempt from sales tax. Now, there is no possibility of acquiring that kind of tire. It is just like having a slot machine. If you get three cherries, you get some money out of it. In this case the national revenue department has removed two of the cherries. You could not buy a tire of that kind any place in the world. A tire is a tire. There are certainly no tires that are designed for, manufactured for and used exclusively on logging trucks. Where did the authority come from to change that original regulation and make it so that the sales tax is applicable to these tires?

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LIB

James Sinclair (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. Sinclair:

This is quite a technical matter on which the member for Comox-Alberni is apparently much better informed than I am or the officials with me at the moment. I recall two or three weeks ago the member was advocating the broadening of the sales tax to make it applicable to farming and the mining and logging industries. It is for that reason the question is bewildering. He rather advocated that the sales tax be put on these tires, andi when this sales tax has been applied again-

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IND

John Lambert Gibson

Independent

Mr. Gibson:

On a question of privilege, Mr. Chairman, I asked the parliamentary assistant originally if consideration had been given to broadening the base of the sales tax. I think it was a fair question. I eventually got an answer from the minister concerning the particular case about which I was asking. I was referring to the use of radios on logging trucks. The department had ruled, as I presume they have authority to rule, that a radio was not necessary on a logging truck, and was therefore subject to sales tax. However, I must be very careful, I can see that, about suggesting a source of revenue for the department, because it will be held against me for years.

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Section agreed to. 'On section 3-Furs.


CCF

Major James William Coldwell

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

Mr. Coldwell:

This section has to do with 'furs. First of all, I support the idea that luxury furs should bear a tax under present circumstances. What I have in mind is that the cheaper furs should not be subject to the tax. Coming as many of us do from the prairie provinces, we know that in the wintertime furs are very necessary if one is going to drive across the prairies. There are types of furs which are used extensively, not because

they are luxuries but because they are necessities. I have in mind a fur that is known as mouton or beaver lamb, for example. I do not know whether it is included in this group, because, after all, mouton or beaver lamb is really a sheepskin died to look like beaver. It is perhaps one of the cheapest and warmest furs that can be worn.

I suggest to the minister that if it is intended that this tax should apply to furs of that kind, which are necessities rather than luxuries, an exemption could be made. Are these so-called beaver lambskins classified as furs, and if so, are they subject to this twenty-five per cent tax? I have in mind other cheap furs, such as the wolfskin which is sometimes used for parkas and so forth. I believe they should be relieved of this tax. I have no objection to taxing luxury furs.

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LIB

James Sinclair (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. Sinclair:

This is an item, of course, which is discussed in a similar fashion every year. It is quite true that it would be desirable if we could segregate the furs generally used on the lower levels from the expensive furs. During the first war they tried to segregate clothing in that way, but the tax schedules did not work out very well. We levy these excise taxes on all furs, other than the straight sheepskin shearlings, not the ones which are dyed to resemble beaver or the ones to which other trade names are applied but the sheepskin shearlings which are used for the linings of coats worn by workmen, drivers, and so forth. They are not taxed. If the sheepskin is processed to look like a more expensive fur, it actually becomes a more expensive fur and then it becomes subject to this tax.

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CCF

Major James William Coldwell

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

Mr. Coldwell:

Then the ordinary sheepskin, undyed, would not be subject to that tax? It is not classified as a fur?

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LIB
CCF

Major James William Coldwell

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

Mr. Coldwell:

How is it possible to classify a sheepskin, once it has been dyed, as a fur?

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LIB

James Sinclair (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. Sinclair:

Because it has been processed. The reason for processing it and giving it this fancy name is to lift it to a better price in the market than that which would be given for a straight sheepskin. Where sheepskin is worn for its warmth, as by farmers out of doors and drivers of cars-that is, a coat with a sheepskin turned inside-it is not subject to this tax.

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June 5, 1951