May 19, 1965

LIB

George James McIlraith (President of the Privy Council; Leader of the Government in the House of Commons; Liberal Party House Leader)

Liberal

Mr. Mcllraifh:

It may be an order dealing with the whole or any part thereof. It may be either way. If I may pick up a word used by the hon. Member, he used the word "restrict". It is a matter of programming the business of the House, although it is quite possible this may be a restriction as well. I hope he does not mind my picking up his use of the word restrict, but I did want to do so in order that he would have a better idea of what we propose.

Topic:   FINANCE
Subtopic:   EXTERNAL AFFAIRS
Sub-subtopic:   PROVISION FOR CONSIDERATION OF ESTIMATES AND ALLOCATION OF TIME
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NDP

Thomas Clement (Tommy) Douglas

New Democratic Party

Mr. Douglas:

If I understand the Minister correctly, in the event of the Business Committee not being in agreement it would be possible for a Minister of the Crown to introduce time allocation in one motion covering all the stages of a piece of legislation through the House?

Topic:   FINANCE
Subtopic:   EXTERNAL AFFAIRS
Sub-subtopic:   PROVISION FOR CONSIDERATION OF ESTIMATES AND ALLOCATION OF TIME
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LIB

George James McIlraith (President of the Privy Council; Leader of the Government in the House of Commons; Liberal Party House Leader)

Liberal

Mr. Mcllraiih:

That would be possible if notice had been given in that form four days earlier.

Topic:   FINANCE
Subtopic:   EXTERNAL AFFAIRS
Sub-subtopic:   PROVISION FOR CONSIDERATION OF ESTIMATES AND ALLOCATION OF TIME
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SC

Horace Andrew (Bud) Olson

Social Credit

Mr. Olson:

We have no objection to the hon. Member for Ontario (Mr. Starr) asking for the adjournment on behalf of the Leader of the Opposition (Mr. Diefenbaker) so that he can follow the Prime Minister (Mr. Pearson). However, I wonder if I could ask the Prime Minister some questions during the next five minutes? He referred to the time used by the House in Committee of Supply during the last few years. I believe he stated he excluded the last session, which had an extraordinary number of days. I should like to ask him if in arriving at the statistics he used he included those sessions that were terminated as a result of dissolution? I, too, have some statistics here which do not agree exactly with what the Prime

May 19. 1965

Minister stated. However, we have taken out those sessions when Parliament was dissolved, because really it is not fair to include them as full sessions.

Topic:   FINANCE
Subtopic:   EXTERNAL AFFAIRS
Sub-subtopic:   PROVISION FOR CONSIDERATION OF ESTIMATES AND ALLOCATION OF TIME
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LIB

Lester Bowles Pearson (Prime Minister)

Liberal

Mr. Pearson:

My figures did exclude the last session, as I think I said. However, I shall have to compare my figures with those of the hon. gentleman in order to ascertain whether or not we were operating on the same basis.

Topic:   FINANCE
Subtopic:   EXTERNAL AFFAIRS
Sub-subtopic:   PROVISION FOR CONSIDERATION OF ESTIMATES AND ALLOCATION OF TIME
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SC

Horace Andrew (Bud) Olson

Social Credit

Mr. Olson:

There were two sessions during the last six years when there were less than 30 days, which terminated as a result of dissolution. I am wondering if they were included?

Topic:   FINANCE
Subtopic:   EXTERNAL AFFAIRS
Sub-subtopic:   PROVISION FOR CONSIDERATION OF ESTIMATES AND ALLOCATION OF TIME
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LIB

Lester Bowles Pearson (Prime Minister)

Liberal

Mr. Pearson:

Yes, Mr. Speaker, the sessions of 1957-58; 1958-59, and so on until 1962-63 were all included and I got an average of 48 days per session covering those years.

Topic:   FINANCE
Subtopic:   EXTERNAL AFFAIRS
Sub-subtopic:   PROVISION FOR CONSIDERATION OF ESTIMATES AND ALLOCATION OF TIME
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?

Maurice Bourget (Speaker of the Senate)

Mr. Speaker:

I understand that by unanimous consent this debate stands adjourned?

Topic:   FINANCE
Subtopic:   EXTERNAL AFFAIRS
Sub-subtopic:   PROVISION FOR CONSIDERATION OF ESTIMATES AND ALLOCATION OF TIME
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PC

Michael Starr (Official Opposition House Leader; Progressive Conservative Party House Leader)

Progressive Conservative

Mr. Siarr:

It is understood that the Leader of the Official Opposition will have his place?

Topic:   FINANCE
Subtopic:   EXTERNAL AFFAIRS
Sub-subtopic:   PROVISION FOR CONSIDERATION OF ESTIMATES AND ALLOCATION OF TIME
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?

Some hon. Members:

Agreed.

Topic:   FINANCE
Subtopic:   EXTERNAL AFFAIRS
Sub-subtopic:   PROVISION FOR CONSIDERATION OF ESTIMATES AND ALLOCATION OF TIME
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?

Maurice Bourget (Speaker of the Senate)

Mr. Speaker:

It being five o'clock, the House will proceed to private Members' business as listed on today's Order Paper.

Topic:   FINANCE
Subtopic:   EXTERNAL AFFAIRS
Sub-subtopic:   PROVISION FOR CONSIDERATION OF ESTIMATES AND ALLOCATION OF TIME
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ESTATE TAX ACT

PROVISION FOR PAYMENT OF ASSESSMENT BY INSTALMENTS

PC

Alfred Dryden Hales

Progressive Conservative

Mr. A. D. Hales (Wellingion Souih) moved:

That, in the opinion of this House, the Government should give consideration to the advisability of amending the Estate Tax Act to provide for payment in appropriate cases of estate tax assessment by instalments so as to reduce the number of "forced sale'' liquidations of estate assets, which in many cases have resulted In the loss of Canadian ownership and control of Canadian business enterprises.

He said: Mr. Speaker, my first words must be those of appreciation to the Members of this House who so kindly allowed this motion appearing in my name to stand on Monday last and to maintain its position on the Order Paper, in view of the fact I was unable to be present. I feel quite sure, too, Mr. Speaker, that it was not stood because of the fact it was my motion, but rather because of the great interest which hon. Members have in this particular motion.

I should like to outline briefly the intent of the motion. It is simply this, to ask the Government to give consideration to the payment of succession duties over a greater length of

Estate Tax Act

time and, in worthy cases, by the instalment method. The Estate Tax Act, which came into being on January 1, 1959, was designed to replace and bring up to date the old Dominion Succession Duties Act. There was, however, one section of this new Act which I feel escaped the attention of the Members in this Chamber. I refer to the provision for the payment of succession duties. As the Act now stands, in ordinary cases, these taxes must be paid within six months after death. I realize that under section 16 of the Act the Minister may make allowance for delayed payments where there is hardship. We know, too, that this Ministerial discretion is very seldom, if ever, used. It is very broad in its meaning. What constitutes hardship? The Ministerial discretion is very seldom used to postpone the payment of succession duties. I am not suggesting for one minute that the Minister be given more discretionary power. I think my position in this regard is well known to all Members of this House. I am simply suggesting to the Government that the Estate Tax Act should be amended to take care of this situation.

I introduced this motion on another occasion just about a year ago. I do not intend to take the time of the House to go into the details which I outlined at that time, but will simply review a few of the arguments that were put forward the last time this motion was discussed. There were, I believe, five Members who spoke in support of the motion. It was well received. They were all in agreement, but unfortunately a vote was not taken nor was the matter referred to a committee. I hope at the conclusion of this hour for private Members' business a vote will be taken or the matter referred to the Banking and Commerce Committee.

Now, what were some of the observations of other speakers that were made the last time I introduced this motion? The then Parliamentary Secretary to the Minister of Finance intimated that my thoughts in this regard would have been much better directed to the Provincial Government. He said that three Provincial Governments, Ontario, Quebec and British Columbia, levied their own succession duties under what is called a succession duties act.

[DOT] (5:00 p.m.)

But the other seven provinces, the majority of the provinces, receive the amount of the succession duties by way of rebate under the federal Estate Tax Act. So I would say, in answer to the suggestion which was made at that time, that the Federal Govern-

148S

May 19. 1965

Estate Tax Act

ment should take the lead in this regard and make it possible for these death duties to be paid over a longer period of time, by instalments if necessary.

This is a matter which should be brought before a dominion-provincial conference. According to the best information I can obtain it has never been discussed at such a conference. Perhaps I may quote from Hansard of June 10 where the then Parliamentary Secretary to the Minister of Finance is reported as saying:

The Minister of Finance and the Prime Minister have indicated that there is to be consultation between the provinces of Canada and the Federal Government on tax matters. There has been mention of setting up a committee for this purpose, and personally I would be very much in favour of it. I believe estate taxes and succession duties should be one of the subjects to be discussed with the provinces at this time.

I also indicated on May 6 that it is extremely difficult for the Federal Government to make changes to the present Estate Tax Act because it affects the incomes of seven of the provinces to whom we rebate 75 per cent of the tax. Nevertheless, I am very much in favour of consultations taking place, and I am sure they will take place and that the particular problem raised by the hon. Member in his resolution will be discussed at that time.

About a year has passed by since then and to the best of my knowledge such a discussion with the provinces has not taken place.

Another observation made at that time was that the Department of National Revenue has received no evidence to show that the payments of these duties imposed hardship on many people-in other words, that businesses would have to be sold in order to pay the estate tax. We were told it was difficult to find evidence of hardship. I can only say that the hon. gentleman has not been around very much. He could not have talked to men in business or discussed this question with many firms or individuals. If he had done so he would certainly have heard a great deal of evidence that the need to pay succession duties within six months constitutes a real hardship. I should like to illustrate this hardship by mentioning one case with which I am personally familiar. I refer to a farmer who, with two of his sons, worked for years building up a herd of pure bred cattle. Unfortunately the father died without leaving a will and within six months the mother also died. So the two boys were left with an obligation to pay a large amount of succession duty within six months. They did not have the cold cash with which to do this, yet they were bound to raise the money because the

Minister would not certify that hardship was involved. What did they do? There was no alternative. In order to pay the taxes they had to sell by auction the herd which had taken years to build up. This is one example of the hardship of which I have been speaking.

I am sure there is not a Member of this House who, in talking with manufacturers and others in his community, has not been told about the worry that exists in connection with the payment of succession duties. I know of one industry where two sons were in business with their father. They had built up a tremendous business. Not many months ago they sat down to figure out with an accountant and a lawyer just what the situation would be should any member or members of the family die suddenly. What would be involved in the payment of succession duty? They decided there was only one answer and that was to sell the business. A United States corporation then came in and bought this thriving Canadian industry. I mention this to show how the estate duty legislation gives rise to cases where many privately owned small businesses and corporations are sold on fire sale terms to outside interests just because succession duties would have to be paid within six months.

I know it is difficult to secure authentic information of these cases because in many of them private and confidential matters are involved. I wrote to the Canadian Institute of Chartered Accountants and asked them if they would supply me with a list of firms which found it difficult to raise money for the payment of succession duty within the time allotted and I will quote part of the letter I received in reply. It said:

While many of our members in public practice know of cases where businesses have been sold because of the looming threat of estate taxes, because of the professional relationship with their clients, they are unable to divulge the information you require.

That is the situation in many of these cases. Accountants and others concerned are not allowed to divulge the information. In this regard last year the hon. Member for York-Scarborough (Mr. Moreau) had this to say. He brought to the attention of the Parliamentary Secretary the case of an immigrant to Canada who had established a successful food business and built up successful export sales department. Because it was such a good business, various people offered to purchase it, using the argument as an inducement to sell, that he would be in trouble raising succession duties. In the

May 19, 1965

Estate Tax Act

words of the hon. Member for York-Scar-borough as reported on page 4174 of Hansard for June 10:

They have been using, very successfully, arguments related to our estate tax laws, and have pointed out to him that with the way the company is growing and in view of the shortage of liquid assets his family would have to make a forced sale if something should happen to him.

Later on, the same hon. Member continued:

The Parliamentary Secretary says that the department does not have any evidence of forced sales, but I suggest to him that the problem is a real one, one which a number of firms are meeting before they are actually faced with the situation. They are doing so in two ways, either by selling the enterprise to an American operator or by forming a public company in Canada and thus jeopardizing control of the company which the enterprise of the family has created.

That is another example, and it was supplied by an hon. Member from the party across the way. I could go on. The hon. Member for Hamilton West (Mr. Macaluso) speaking on this same subject as reported in Hansard of the same date at page 4173 said:

I have a recollection of one case in which the widow of the deceased proprietor wished to carry on the business. She was unable to do so because her husband had not provided means whereby the succession duties could be paid. She was unable to carry on the business because of this demand for the payment of succession duties. An appeal was launched under section 16, but she was not able to obtain the discretion of the Minister, so there was hardship involved.

[DOT] (5:10 p.m.)

I could go on giving illustrations of cases where hardship is involved to private individuals, individual businesses, corporations, etc. In February of 1964 the Financial Post wrote an article headed, "In 5 years, these firms have been 'sold foreign' ", They listed all the Canadian companies that had been sold, and who bought them. In most cases they were bought by American corporations. Although I have no proof of this, Mr. Speaker, I believe that many of these companies were sold because they were concerned about raising succession duties. I am afraid that I am taking up some of the valuable time of those who I am sure wish to speak on this very important subject, but I do want to cover one or two other little points.

I have been most encouraged by the interest that has been aroused in the suggestion I am making to the Government. This has been demonstrated by editorials that have *been written and letters sent to me or which

have come to my attention. At the risk of being repetitious, Mr. Speaker, I would like to read one or two of them, and I hope I will be pardoned for anything in them that is of a personal nature. The first quotation is from the Windsor Star. This article was written after I introduced this notice of motion last time. It was written by one W. L. Clark and is headed "Nub of Problem". The article says:

Alfred D. Hales, Conservative M.P. for Wellington South, puts his finger on the nub of the succession duties and estate tax problem. He told that many small businesses have to be sold to raise the cash to meet the death taxes.

The duties have put more than one modest business on the block. A man builds up his firm, then he either has to liquidate before death to provide the taxation money or his heirs have to sell to pay the taxes.

The succession duties and estate taxes are driving small businesses into the arms of big corporations.

I do not think there is any doubt about that:

That may not have been the original idea, but that is how it works out.

Mr. Hales may not get far with his plans to have some redress afforded families. But, a lot of people will wish him luck in his battle against the ghouls.

I have here another article which appeared in The Independent, which I will not take time to read. Then there is a very interesting letter which I received from a business that grew in a very modest way. I would like to read this letter, Mr. Speaker:

Some time back the writer read an article in the Globe and Mail regarding succession duties, estate taxes, etc. You are so right. To me, any firm which necessarily must sell out for this reason should have cause to be supported by the Government.

We have worked very hard and enjoyed seeing our business grow. We started in the basement of our home. Our family and help stuck together and our present shop is 90 feet by 320 feet, and we have taken over another shop 40 feet by 80 feet. We have approximately 140 on our payroll.

I happen to know that business, and it is one of the most thriving businesses in western Ontario. They are very concerned about this situation of succession duties and how it will affect them. In conclusion, Mr. Speaker, the high cost of dying is not just a title for a book; it is a fact staring us all in the face. The total tax on business in Canada is among the heaviest in the world. Business carries more than its fair share. It seems most unfair to me that it should be further saddled by succession duties, payable in cash six months flat from the time of death. As only 1.5 per cent of the national revenue is derived from

May 19, 1968

Estate Tax Act

this source, I think we could put up a pretty good argument as to why death duties are necessary at all. However, they are with us and until the Government withdraws them, this is what we are confronted with. I sincerely hope that the report of the Carter Commission will come forward with some suggestions in line with those I have made. I may say, Mr. Speaker, that several representations and briefs were put before to the Carter Royal Commission and also the Government. The National Council of Women of Canada, the Estate Planning Council of Toronto, and the Canadian Bar Association-

Topic:   ESTATE TAX ACT
Subtopic:   PROVISION FOR PAYMENT OF ASSESSMENT BY INSTALMENTS
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LIB

Lucien Lamoureux (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

Mr. Deputy Speaker:

Order, please. Has the hon. Member the consent of the House to go beyond his allotted time?

Topic:   ESTATE TAX ACT
Subtopic:   PROVISION FOR PAYMENT OF ASSESSMENT BY INSTALMENTS
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?

Some hon. Members:

Agreed.

Topic:   ESTATE TAX ACT
Subtopic:   PROVISION FOR PAYMENT OF ASSESSMENT BY INSTALMENTS
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PC

Alfred Dryden Hales

Progressive Conservative

Mr. Hales:

Thank you, Mr. Speaker. I shall be just one minute. The organizations I have mentioned have shown great interest in this matter and have presented briefs to the Royal Commission on Taxation. I hope that many other Members of this House will take the opportunity to speak on this very important matter with which the Canadian taxpayer is confronted. I hope my motion will come to a vote before six o'clock, but if not I hope the Government will see fit to refer this matter to the Committee on Banking and Commerce.

Topic:   ESTATE TAX ACT
Subtopic:   PROVISION FOR PAYMENT OF ASSESSMENT BY INSTALMENTS
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NDP

Herbert Wilfred Herridge

New Democratic Party

Mr. H. W. Herridge (Kootenay West):

Mr. Speaker, one "Hales" with delight the reintroduction of this motion, and I take advantage of this opportunity to express my wholehearted support for its spirited purpose. It is interesting to see the sort of non-partisan attitude on this question in the House this afternoon, because I think the Members who are here are interested in getting some action along the lines suggested in the resolution.

Here we have a Progressive Conservative Member from Ontario, who I am very glad to know attended a college of mine about two generations after I did, supporting this resolution and working for the persons it would affect. I am quite glad, as a revolutionary Socialist from the Rocky Mountains of British Columbia, to do the same. I know that my friends behind me take the same attitude, and I can see that right across the aisle is a Member of the Liberal Party just dying to give his support to this resolution. I think we are practically unanimous on the spirit and purpose of the resolution, and I think it is a very interesting state of affairs in this private Members' hour.

I agree with the previous speaker when he said that the present Act, the regulations and the degree to which ministerial discretion is exercised are not sufficient to meet the circumstances under which we live today. They are greatly different from those that we, I was going to say "enjoyed" but I should possibly say "experienced" 20 years ago and before that. There are several reasons for this. Many farmers, small industrialists and small businessmen gave hardly a thought of the effects of the Estate Tax Act, because taxes were not levied to the same extent in those days. But the circumstances have changed, in my opinion, because at the present time a much greater investment is required to finance a farm and the equipment necessary to operate that farm; a much greater investment is required to finance a relatively small industry. I know from my own experience in this connection that what one could do 50 years ago with $5,000 takes possibly $30,000 or $40,000 nowadays. Another reason is that there has been a great increase in land values in recent years, farmland values, industrial site values, and so on, which have meant that many persons who years ago never gave a thought to the effects of the Estate Tax Act are faced today with the possible loss of their land, business, farm or industry. This I know from personal experience, and there have come to my attention quite vividly in the last five years many cases of hardship created by the application of the law and regulations as they now stand. The law and the regulations are not drawn in the spirit that we should do all possible to continue to promote the family farm, small industry and small business. We are inclined nowadays, Mr. Speaker, to worship bigness. We worship it in all directions. If a thing is large we bow down and almost adore it. We fail to realize that it is this other element in our society that keeps it healthy and-I say his although I might get ribbed a bit about it-that keeps alive the spirit of, shall I say, free and private enterprise that is responsible to the community which it serves, o (5:20 p.m.)

Topic:   ESTATE TAX ACT
Subtopic:   PROVISION FOR PAYMENT OF ASSESSMENT BY INSTALMENTS
Permalink
?

Some hon. Members:

Hear, hear.

Topic:   ESTATE TAX ACT
Subtopic:   PROVISION FOR PAYMENT OF ASSESSMENT BY INSTALMENTS
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NDP

Herbert Wilfred Herridge

New Democratic Party

Mr. Herridge:

I see I even have applause from the Government side of the House on that score, Mr. Speaker. On the whole I think they generally agree with me. Sometimes we disagree on certain aspects of the application of our policy, though not our objectives or our purpose.

May 19, 1965

I think that this is a subject which is receiving more and more attention from various organizations in the country. I know that farmers organizations and other organizations are concerned about the matter. It is also receiving more publicity in the press and is being discussed more than ever by various kinds of bodies. I suggest, in line with the suggestion made by the hon. Member who introduced the motion, that it would be a good idea to send this motion to the Committee on Banking and Commerce, where the Members of the committee would have an opportunity to study it and to call witnesses of various kinds-officials of the Department to explain the procedures, if necessary the Minister to explain the philosophy behind the present Estate Tax Act, representatives of the Canadian Federation of Agriculture, representatives of farmers unions, of small business and of women's organizations.

It may interest hon. Members to know that this subject is discussed by women's institutes in quite small communities, and by people who 25, 30 or 40 years ago would never have dreamed they would be affected by the Estate Tax Act but who, owing to the circumstances I have mentioned and to other circumstances, now find they are faced with the possibility of losing a family farm or a small business or small industry. I suggest that women's organizations which are interested should be invited to come before the committee and tell their own story in their own language; they could explain how the Act affects their farms, industries or small businesses, and in this way they could present their ideas. Other groups may also wish to give their opinions.

I believe, Mr. Speaker, that this type of legislation can be greatly improved if we receive the participation of the Canadian people on a wide base, shall I say, in giving their ideas and so on. Then as a result of gathering facts and information from these various groups, the committee itself would be able to make some recommendations to this House. Then after that committee reports, a good foundation would be laid for a debate in this House, say at the time the estimates of the Department of National Revenue were being considered, or the estimates of the Department of Finance, whichever is judged the more appropriate.

However, Mr. Speaker, I have just risen to speak briefly and to express my wholehearted support for the hon. Member's proposal, because I know that on this question

Estate Tax Act

the hon. Member for Wellington South and the hon. Member for Kootenay West are two hearts that beat as one.

[DOT] (5:30 p.m.)

Topic:   ESTATE TAX ACT
Subtopic:   PROVISION FOR PAYMENT OF ASSESSMENT BY INSTALMENTS
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May 19, 1965