Hon. Milton F. Gregg (Minister of Labour):

Mr. Speaker, if I have permission to do so without notice, with unanimous consent I would like to present a motion to the house. Last session I tabled with the Clerk of the house copies of the report of the unemployment insurance commission for 1955-56. If I am given unanimous consent I should now like to move:

That this report be referred to the standing committee on industrial regions.

If this is passed it will provide an early opportunity for that committee, namely the standing committee on industrial relations, to consider alleged difficulties and delays with respect to unemployment insurance benefits. In this way I shall comply with my promise to the suggestion in the question asked last Friday by the hon. member for Winnipeg North Centre. I believe, sir, that all the party whips would give unanimous consent to this.

Right Hon. C. D. Howe (Minister of Trade and Commerce):

Mr. Speaker, I wish to make a short announcement having to do with the sale of uranium. On May 25 last I advised the house that the government was considering bilateral agreements which would permit the sale of uranium to friendly governments or their designated purchasing agencies. I pointed out that such arrangements must be made with due regard to safeguards as to the end use of the uranium supplied and the end use of any special fissionable materials which might be produced from the uranium supplied. In these circumstances it seemed desirable that the final determination of policy with respect to safeguard provisions in bilateral agreements should be deferred until the proposed statute for an international atomic energy agency had been discussed and agreed upon.

The house will recall that the statute for the international atomic energy agency was considered at a general conference in New York which was attended by representatives of all of the member countries of the United Nations. Agreement was reached at the conference on a statute for the international agency, and the statute has been tabled. Article XII of the statute contains the control provisions which are designed to prevent the diversion to other than peaceful uses of any materials, equipment or information which may be supplied by the international agency. These control measures may also be invoked in the case of bilateral agreements where the parties concerned request such action by the agency.

The government is now prepared to negotiate bilateral agreements with friendly governments covering co-operation in the peaceful uses of atomic energy and, in particular, the supply of natural uranium for such uses. These agreements will contain control provisions similar to those contained in article XII of the statute for the international atomic energy agency. The inclusion of such control provisions in bilateral agreements is consistent with the support which Canada gave to article XII of the statute for the international atomic energy agency at the New York meeting. Except for the control provisions, sales arrangements concluded under bilateral agreements will be on a normal commercial basis. Eldorado Mining and Refining Limited, the government's designated purchasing agent for all uranium produced in Canada, will be responsible for negotiating the sales contracts. While the amounts of uranium which can be made available under bilateral agreements at present are not large because of existing contractual commitments, it is believed that these quantities will be sufficient to meet the current requirements of those governments which have indicated an interest in obtaining uranium from Canada.

Mr. Howard C. Green (Vancouver-Quadra):

May I ask the minister if there is any change in the situation whereby all the uranium will be sold by the government to other countries?

Mr. Howe (Port Arthur):

There is no change in that arrangement. It is a necessary arrangement as long as the end use of uranium must be safeguarded.

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Mr. Green:

Then I understood the minister to say that we would be selling the natural uranium. Will there not be any arrangement at least for the partial manufacturing of uranium into the metal form in Canada and the sale of it in that metal form?

Mr. Howe (Port Arthur):

Mr. Speaker, in speaking of natural uranium I refer also to uranium in metal form. We are now able to deliver uranium oxide. I think in a matter of some months we will be able to deliver uranium metal which is the form in which we would prefer to sell uranium.

Mr. C. W. Hodgson (Victoria, Oni.):

Is the

opportunity still open and available for mines which are still coming into production to obtain contracts?

Mr. Howe (Port Arthur):

If the mines can meet the requirements of Eldorado in that respect I think no door has been closed.

Hon. Stuart S. Garson (Minister of Justice) moved

that the house go into committee at the next sitting to consider the following resolution, which has been recommended to the house by His Excellency:

That it is expedient to introduce a measure to amend the Exchequer Court Act respecting the place of residence and the salary of the registrar of the court.

Mr. Stanley Knowles (Winnipeg North Centre) moved:

That, in the opinion of this house, the government .should give consideration to the advisability of introducing legislation amending the Income Tax Act so as to remove therefrom the 3 per cent floor in relation to the deductibility of medical expenses for income tax purposes.

He said: Mr. Speaker, the purpose of this resolution is to try to persuade the government to correct a grievance which is felt by the vast majority of the people of this country. Indeed, I would say it is felt very keenly by all Canadians who pay income tax. That grievance is the fact that at the .present time medical expenses are deductible ,for income tax purposes only to the extent to which those expenses exceed 3 per cent of net income.

I dislike having to introduce a matter of definition this early in my remarks, but having referred to net income I think I should

introduce at least one definition without going any further. As I understand it, there are at least three types of incomes that are referred to when one makes out his income tax return: total income, net income and taxable income. Total income is obviously all the income which one receives. Taxable income is the final amount upon which you compute your income tax after you have deducted, amongst other things, the statutory amount of $1,000 or $2,000 or more as the case may be. Net income is almost the same as total income; the only difference between total income and net income is that one is permitted to make certain small deductions, such as deductions for trade union dues and pension fund payments, before arriving at his net income. However, for all practical purposes we can talk about this 3 per cent "floor" as relating to one's complete income.

The grievance which this resolution deals with is the fact that medical expenses are, as I have already said, deductible for income tax purposes only to the extent that those expenses exceed 3 ner cent of the net income. I submit, Mr. Speaker, that there are few income tax issues so widely understood in this country as this one; I submit that there are few income tax matters concerning which there is such wide-felt support as there is for the proposal contained in this resolution, namely, that consideration should be given to removing the 3 per cent "floor" and making it possible for medical expenses to be deductible right from the first dollar.

Mr. Speaker, if one is in business and that business involves the operation of certain machinery, and if the machinery breaks down, the cost of repairing that machinery is deductible for income tax purposes right from the first dollar. But if a human being breaks down and has to pay medical expenses, deductibility does not start with the first dollar, but only after the payments have reached 3 per cent of his income. If an employer has to meet extra costs involved in hiring extra employees to take the place of persons who are away ill, those extra costs are deductible expenses right from the first dollar. But, as I say, medical expenses allowed to employees who are sick are deductible only if they exceed 3 per cent of income. If one is in business there are all kinds of things-telephone, office rent and so on-which are allowed as deductible expenses right from the first dollar, but when it comes to the medical expenses of an individual, or his family, this basis of immediate deductibility is not permitted.

If you are in the brewery or distillery business you can advertise the beauties of

Canada, or you can advertise in street cars and buses the antics of the otter, and get deductibility in respect of these advertisements from the first dollar. But if as an individual taxpayer you have expenses for medical attention during illness they are not deductible on this basis. Likewise, if you are in the brewery or distillery business, you can make contributions to culture; you can make contributions to the drama festival and get deductions in respect of those contributions right from the first dollar. But if as an individual you are faced with heavy medical expenses you cannot get deductibility until those expenses exceed 3 per cent of your income, and then, of course, you get deductibility only in respect of that portion of your medical expenses which is in excess of that 3 per cent figure.

As an individual you can make contributions to approved charities, and although there is a "ceiling" on the amount you can claim, namely 10 per cent of your total income, you get deductibility in respect of those contributions to charity right from the first dollar of the contributions you make. In the case of medical expenses this is not the case. You do not get deductibility until those expenses exceed 3 per cent of your income.

This morning's Montreal Gazette tells us of another way, Mr. Speaker, in which you can get an income tax concession. If you happen to be a former provincial cabinet minister you can make hundreds of thousands of dollars, get it treated as a capital gain and pay no tax on it at all, according to a report on the front page of this morning's Gazette concerning a huge pipe line paper fortune made by Mr. Nathan Tanner, former Alberta mines minister and now president of Trans-Canada Pipe Lines Limited. I base my statement to that effect on the concluding sentence of the report which says:

Capital gains on stock transactions are not taxable in Canada.

I say to you, Mr. Speaker, that when I read that article this morning I felt that I was acting the part of a piker in standing up in the house today and asking for such a minor concession for the average Canadian as is sought in this resolution compared with the freedom from taxation that is now enjoyed by an individual such as the one to whom I have referred in making huge profits of that kind out of stock promotion and stock manipulation. So, Mr. Speaker, because in all these other instances deductibility is allowed, and in all of them allowed not after a certain point is reached but right from the first dollar, we feel, and in this I believe we are expressing the views of the Canadian people,

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that deductibility of medical expenses should be allowed right from the first dollar of those expenses.

As members of the house know, on former occasions when this matter has been debated I have placed on the record a number of examples to show the comparative treatment between contributions to charity and medical expenses. It is not my purpose to repeat the long list of examples I have given in former years, particularly because there has been no change in the income tax rates since this matter was under discussion a year ago. But just so that it will be clear what this means in terms of dollars and cents, so that it will be clear that we are asking for fairness with respect to medical expenses, and also so that it will be clear that really we are not asking for very much, I should like to put one example on the record.

Take the case, for example, of a married taxpayer with two children of family allowance age where the income is $3,000 a year. In that case the income tax to be paid under present rates and before any adjustment would be $105. If this family had medical expenses of $100 their tax would be reduced to $103.50, a reduction of $1.50. The reason the reduction would be so small for $100 medical expenses lies in the fact that only $10 of that $100 would be allowed as deductible since 3 per cent of $3,000 is $90 and medical expenses are not allowed until the 3 per cent point is reached. On the other hand, if that same family were to give away $100 to approved charities the entire amount of such contributions would be allowed as a deductible expense and their income tax for the year would be reduced to $90. In that case the tax saving would be $15.

Let me put the two facts side by side. If the particular family to which I have referred has medical expenses in a year of $100 the tax saving accorded to that family is $1.50. If the same family gives away $100 a year to approved charities the tax saving to that family is $15 or ten times as much. Other examples produce other results, but my point in giving that example is simply this, that we feel that if it is fair, and we say that it is, to grant tax deductibility to a taxpayer with respect to charitable donations right from the first dollar, likewise income tax deductibility with respect to medical expenses should be granted from the first dollar.

As I say, I have already given that example in order to show that in terms of dollars and cents it is not a great deal that the average Canadian would get out of a change such as this. It is more a matter of principle actually than it is one of dollars and cents. If you want to get dollars in

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terms of savings with respect to the income tax legislation, of course the thing to do is to get in on one of these deals where there are huge capital gains such as the one reported this morning with respect to Trans-Canada Pipe Lines Limited.

Let me say again, as I have done on previous occasions when this matter has been under discussion, that the right to deduct medical expenses for income tax purposes is not a wide-open privilege. It has three main limitations. First of all, there are ceilings. There is only a certain amount that you can deduct by way of a total, no matter how much your expenses may be. Those ceilings are as follows: $1,500 in the case of a single taxpayer and $2,000 in the case of a married taxpayer plus $500 for each dependent to a maximum of $2,000, no matter how many dependents one might have.

There are those-and very good examples have been submitted to me in letters-who feel that this is a grievance, and that the ceiling should be removed or should be raised. Generally speaking, I do not find that those ceilings are too onerous and, so far as my resolution is concerned, it does not touch the ceiling provisions. The point of my resolution is that there is a much more serious grievance, namely the floor.

However, before I come to that matter, may I say this. The second limitation on the deductibility of medical expenses is with respect to the definition of medical expenses. That definition provides that you may, of course, include payments made to doctors, dentists, nurses, hospitals and so on; and also that you may include certain specified drugs such as insulin, cortisone, ACTH and one or two others. Beyond those items that are defined in the legislation there are many other types of expenses which one has at a time of illness but which are not allowed. I recognize the difficulty, for example, as to where one would draw the line with regard to the cost of extra foods that are sometimes incurred at a time of illness or the cost of extra help in the home because of illness. But there are other things besides those such as eyeglasses, other drugs and many things of that nature which seem to be in the category of medical expenses but which are not allowed. It is my view that that definition should be greatly broadened. It is my view that that is almost as serious a grievance as is the floor which this resolution seeks to abolish.

But some of us have learned around here that the best way in which to get consideration of a point is to present one point at a time. Hence my resolution deals with the

third of the limiting factors, namely the floor of 3 per cent which, as I say, we feel is a most serious limitation. The result of that floor is that some of the things the government has added to the list of definitions have proved to be something of a hoax to the people affected. For example, I have had letters from people who are users of insulin and who a few years ago were encouraged by the fact that the government added insulin to the list of drugs that could be included as a medical expense. Those people thought that that action was going to be of some help to them. But there are such people who, though they may be obliged to spend a considerable sum of money in the course of a year in the purchase of insulin, do not get any credit for it against their income tax because that total does not exceed the figure of 3 per cent of their total income.

Therefore, Mr. Speaker, it is because under that setup items that are defined as medical expenses do not become deductible we say that this floor is the most serious grievance of all. If you were to remove the floor you would take care of cases such as those to which I have referred, namely, the users of insulin who do not quite get up to 3 per cent of their income, and you would put people generally in the position of getting the same kind of treatment for their medical expenses as they now get for charitable donations.

I suppose the parliamentary assistant, who I imagine will speak on this matter on behalf of the government in the absence of the Minister of Finance, will be saying that some at least of the arguments that I am putting up today are the same arguments that have been put up in former years. That is quite correct. As a matter of fact, this matter has been before the house on a number of occasions and it so happens, Mr. Speaker, that it has had every conceivable form of parliamentary treatment. This resolution has had the experience of being defeated by a division in the house; it has had the experience of being talked out; it has had the experience of being adjourned, a course that some of us felt was in effect the guillotine. It has also had the experience of being passed. I know of nothing else that can happen to a resolution brought before the house outside of these four treatments. I do not know which of them it is going to get today, but one dares to hope that, with the approach of an event that is likely to take place either on May 27 or June 17, it might get better treatment than it gets in off-election years.

In fact, I am reminded that in one of the years in which the resolution was rejected

by the government, namely, in 1953, with an election in the offing action was taken at least to the extent that the then 4 per cent floor was reduced to 3 per cent; and one can only hope that the forthcoming events will cast their shadow over the government's mind and that a different view will be taken of this matter this year than has been taken during each of the years since the last election.

If some of the arguments I have put forth have been similar to those that have been put forth in former years I imagine the replies will be carbon copies of what has been said before. If so, one of the arguments, of course, will be that the government feels that allowance for medical expenses should apply only when people have to spend more than the average. The government is forever finding sanctity in this principle of the average which is written into this income tax provision. What puzzles some of us, Mr. Speaker, is why no such provision applies to charitable donations. Does the same consideration not apply? Is it not just as true that Canadians on the average give a certain amount to charity as it is true that Canadians on the average spend a certain amount on medical expenses? Just as in the case of charitable expenses no suggestion is made that you get deductibility only after you pay more than the average, why should such an argument apply to this instance?