May 19, 1965

SC

Guy Marcoux

Social Credit

Mr. Guy Marcoux (Quebec-Montmorency):

Mr. Speaker, since I do not wish to have the sad honour of killing this motion introduced during the hour reserved for private members' business, I will make but a few remarks about it.

At the beginnig of my comments, I must say that I am quite surprised that the old stalwart of the socialist party, who just spoke, is very happy that all parties in this house support this motion, since he and other members of his group always request greater action from the government while insisting that its sources of revenue be constantly decreased.

However, if the government must relinquish some revenue, I believe that it should be the revenue coming from citizens with modest means rather than that from those citizens who have a much larger income.

Personally, I have dealt on several occasions with the problem of small businesses which are unfavourably affected by the Income Tax Act when, for example, they must pay the sales tax within 30 days after the contract of sale of some items, while they get paid for the same goods six months or a year later. This places small businesses in a very difficult situation, since they must bear for six months or a year the cost of a sales tax which has not been paid back to them.

I must say that frequently some businesses and industries must sell their assets because they cannot meet the requirements of the department. In this case, it is about the same thing. Even if the minister has a discretionary power, under the act, the persons concerned must go through the whole series of officials of the Department of National Revenue, first at the local level, then at the regional level and finally, if they are lucky, the office of the deputy minister. If they are unlucky, and if they know their member of parliament, it will be the latter who will try to intercede with the minister in order to protect his constituents.

In my opinion, it would be much better if the act would contain a section stipulating that the officials themselves have the authority to grant to estates the right to act along the line of the motion introduced by the hon. member for Wellington South (Mr. Hales).

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Estate Tax Act

He mentioned a while ago some businesses which fall into foreign hands. I appreciate that it is sad, but it is equally sad to see family, personal and individual businesses fall into the hands of large companies, even if they are Canadian.

Individuals who worked hard all their lives, who saved money by tightening their belts so as to make a success of some industry or business see-or do not see because they are dead-that business or that industry fall into the hands of extremely wealthy corporations which take over small businesses, often at give-away prices.

These large limited companies have always been treated with particular consideration by our governments. Under our system, legislation has, in most cases, been drafted with a thought for those foreign companies or their Canadian branches. One has only to take a good look at the legislation passed by this parliament to notice that, in many cases, these limited companies, these big and extremely powerful corporations receive every consideration from our governments.

I think it is to the credit of the hon. member to have had a thought for the small business, the individual and the toil of those persons who have worked hard all their life to set up a business and, especially, their successors who, in most cases, would be interested in carrying on the work of their predecessors but who, because of the long arm of the estate tax, are forced to surrender the business to foreign hands or to larger companies.

I merely wanted, Mr. Speaker, to congratulate the hon. member and tell him that we agree with him. I hope the government will not consider necessary to refer the study of this motion to the banking and commerce committee but will take a decision immediately, or as soon as possible, since it is evident that this problem exists and that it can be settled to the satisfaction of everyone only through government action.

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

David Réal Caouette

Ralliement Créditiste

Mr. Real Caouetie (Villeneuve):

Mr. Speaker, that motion moved by the hon. member for Wellington South (Mr. Hales) deserves serious consideration because it directly affects trade, the automobile industry, the auto parts industry in Canada as well as similar industries in the United States.

When we ask for the production of all correspondence, letters or other documents exchanged between the Canadian government and the American government since January 1, 1964, in connection with the agreement

providing for duty-free trade within the automobile industry, it is because we feel that the house would find it useful to become acquainted with those agreements between the Canadian and the American governments, and because it would enable the house to realize that it is true that we live in a system under which the small ones become even smaller and in greater number.

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:

I regret to interrupt the hon. member, but I wonder whether he is now discussing the resolution under consideration, that is, resolution No. 4 introduced by the hon. member for Wellington South (Mr. Hales) concerning the advisability of amending the Estate Tax Act to provide for payment in appropriate cases of estate tax assessments by instalments.

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

David Réal Caouette

Ralliement Créditiste

Mr. Caouetie:

Mr. Speaker, I am sorry, I was not in the house at the beginning of the debate and, of course, I did not have the right item. I will therefore restrict my remarks to resolution No. 4 introduced by the same hon. member, namely:

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 approprite cases of estate tax assessments by instalments so as to reduce the number of "forced sale" liquidations of estate assets-

As the hon. member for Quebec-Mont-morency (Mr. Marcoux) mentioned, it is true that in the past this Estate Tax Act has forced many small family businesses to go into liquidation following the death of the father or of one of the shareholders or some member of the family. We have seen it happen on many occasions, not only in the province of Quebec, but especially in that province in the lower St. Lawrence area, for instance, where small family concerns have been forced out of business.

Not very long ago, I happened to talk with the directors of a Quebec business, the Thi-bault firm, in Megantic county. This is a fine and thriving business run by a close family made up of the father and all his sons. The sons are worried because if their father were to pass on, they are the ones who would be stuck with the problem of taxes and they would have to sell their industry.

Obviously, we must accept our responsibilities and save Canadian enterprise, small businesses and especially family concerns.

Mr. Speaker, this motion surely deserves the attention of hon. members and,

May 19, 1965

Estate Tax Act

especially, of the government, if we want to assure our entrepreneurs and the owners of our small industries that their firms will not cease to exist following the death of one of the owners or of one member of the family.

We fully support the proposal made by the hon. member for Wellington South and we will not prevent its adoption by prolonging the debate; on the contrary, we will allow everyone to have his say on the advisability of improving Canada's tax legislation to protect the interests of small industrials and enterprises, in other words, the interests of the Canadian people as such. [Text]

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

John Hollings Addison

Liberal

Mr. J. H. Addison (York North):

Mr. Speaker, I never cease to be amazed by the versatility of the hon. Member for Ville-neuve (Mr. Caouette), and he has just demonstrated very effectively that ability in this House of Commons.

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

An hon. Member:

That was just changing gears.

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

John Hollings Addison

Liberal

Mr. Addison:

I heard someone say that he just changed gears. The hon. Member for Villeneuve and I have something in common-we are both in the automobile business.

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

David Réal Caouette

Ralliement Créditiste

Mr. Caouette:

That is the best line in the world.

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

John Hollings Addison

Liberal

Mr. Addison:

It has been said, Mr. Speaker, that there are two things we cannot escape, death and taxes. In this particular motion before the House we are dealing with two insurmountables at the same time.

The hon. Member for Wellington South (Mr. Hales) introduced this motion during parliamentary debate last year, and I think his arguments were well founded. From the expression of hon. Members who have spoken on this motion in the House, and the weight of public opinion, there is certainly some reason for endorsing his position. However, I should like to point out that at the present time 75 per cent, or three quarters, of succession duties are paid to the provinces, and only 25 per cent of the money raised in this area of taxation is held by the Federal Government.

The Carter Royal Commission report is expected to be brought down this fall, although we had hoped it would be available earlier, as indicated by the Minister of Finance (Mr. Gordon) in his budget address. When that report is received I suppose we will know what will happen in respect of this 22620-96

division of this tax money, but it seems to me that as a result of last year's changes in the Estate Tax Act, whereby we turned over three quarters of this revenue to the provinces, it is almost conceivable that sooner or later the Federal Government will completely vacate this field of taxation.

What we are talking about here in this motion is the possibility of the Federal Government legislating in a field in which it may or may not be involved after the report of the Carter Royal Commission.

I should like to point out that the Minister of Finance in his budget speech of April 22, as recorded at page 439 of Hansard, said this in regard to the Estate Tax Act:

I do not propose this year to introduce any amendments to the Estate Tax Act. We amended the Estate Tax Act last year, as you will recall, in a number of particulars, and I said that any material changes would now affect provincial revenues more than they would affect our own budget position.

[DOT] (5:40 p.m.)

I went on to say we felt action should be deferred on such changes of substance until we had seen the results of both the federal and provincial commissions of inquiry, and had consultations with the Provinces. That is still the situation.

As the hon. Member for Wellington South (Mr. Hales) pointed out, organizations and individuals have made presentations to the Carter Commission. When its recommendations are presented to the Government, and before a definite position is taken by the Federal Government, in all probability the matter will go to the tax sharing committee, which consists of the 10 Provincial Treasurers and the Minister of Finance (Mr. Gordon), because, as we realize, the matter has more to do with the Provinces than with the Federal Government.

Members of the House of Commons are justifiably concerned that because of the necessity of paying death duties there is the possibility that certain of our industries may fall into foreign hands by reason of a lack of cash available in the businesses in order to pay such duties. I should like to point out to the House that one of the recommendations in the budget this year was for the provision of a pool of capital in an organization to be incorporated as the Canada Development Corporation. The Minister of Finance had this to say about the new Canada Development Corporation, as found on page 434 of Hansard:

It would be the function of this corporation to share in financing the initial development or expansion of large scale industrial projects in Can-

May 19, 1965

Estate Tax Act

ada, and to provide financing, including refinancing, for large Canadian enterprises which might otherwise be led to seek funds outside Canada, with a consequent loss of ownership and control to non-residents.

This very important piece of legislation will be coming before the House of Commons and obviously one of the purposes is to provide capital in addition to the capital provided by other Government agencies, such as the Industrial Development Bank.

One thing that concerns me and a great many other Members, I believe, is the area of discretion with regard to the percentage of estate tax that can be charged by individual provinces. At the present time three provinces, British Columbia, Ontario and Quebec, have a different arrangement from the other seven provinces. It seems to me we must be very careful not to adopt an attitude which will induce a person to move from one province to another before he dies in order to reduce the amount of his estate tax. This is a consideration that not only affects the provinces but the country as a whole, because it is no longer necessary for people to remain here. They now have the opportunity of moving to what are referred to as tax havens, where they pay no succession duties and by this means they perpetuate their estates.

On the other hand, we have got to be very careful in Canada that this type of taxation does not destroy Canadian equity. I think we have done the right thing in reducing the personal income tax by 10 per cent in the present budget. This is something we are doing here and now. So far as death duties are concerned, as the hon. Member pointed out, people know what is going to happen and the best they can do is to try to prepare themselves financially so far as their estates are concerned.

In the proposal that the hon. Member has brought before the House he is suggesting that estate taxes be payable by instalments. In effect this would mean that we would be financing the provinces, in that we would be collecting the money and then turning it over to the provinces. This means that under the Federal-Provincial Tax Sharing Agreement we would in effect be lending money to the various provinces with no provision for the payment of interest on the money lent.

I should like to point out something with regard to large estates, and I refer specifically to two large estates, the Killam estate and the Dunn estate. When these

estates were assessed the succession duties were of immense magnitude and the moneys collected were used to set up the Canada Council. This was the source of the initial funds for the Council, and a very worthwhile purpose is being served.

With regard to preparing to meet succession duties I would point out that insurance is one method and providing liquid funds in a business is another, but it seems to me that as more and more businesses are becoming publicly controlled the individual has a better opportunity now to provide some assurance that his family will be able to carry on. I should like to end by referring to what I said on this matter last year with regard to the amount of such taxation. As found on page 2293 of Hansard of May 6, 1964, I said:

Today it is not necessary for someone to remain in Canada. Persons who build estates have the privilege of moving to an area in which there is no succession duty. I would agree with one of the earlier speakers, that there is today in Canada a process of liquidating family owned businesses in order to provide ready cash for succession duty purposes.

While this is true, Mr. Speaker, there are many more opportunities today for small businessmen to be able to prepare themselves for the time when these taxes have to be paid. While I support the principle of the motion of the hon. Member for Wellington South, I think that on balance we must wait for the report of the Carter Royal Commission and we must realize that we are talking about revenue which is now largely provincially controlled.

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

Frederick Johnstone (Jack) Bigg

Progressive Conservative

Mr. F. J. Bigg (Athabasca):

Mr. Speaker, I am pleased to add my support to this very worth-while motion. It may not be well known to those who have not studied this matter as thoroughly as the hon. Member for Wellington South (Mr. Hales), but the fact is that all pension schemes are now covered by succession duties. If a man dies leaving his widow with pension rights, it is assumed that the woman will live for 20 or 30 years after her husband has died, and all her pension payments are lumped together and taxed. This large sum of money is added to the estate and taxed on a theoretical basis, because it is not a liquid asset. The result is that in many cases the widow finds herself obliged to sell her home or farm or her interest in the small family business in order to pay these arbitrary taxes to the Government.

I know we go deep in the pot so far as taxation is concerned. Twenty years ago

May 19, 1965

$60,000 was almost an unheard of sum. I for one have never dreamed of having an estate of that size, if I live to be a thousand. But with the enormous change in the value of real estate today, the fact is that a modest home in Canada is valued at from $12,000 to $16,000 and if the wife has a pension of $2,500 or $3,000 a year it is assumed, according to the actuarial tables, that she will live for say another 25 years; and $75,000 is added to the estate. Then, if you add the $16,000 from the home to this estate, you find the estate tax people immediately going to your wife and asking her to make out a cheque for several thousands of dollars.

[DOT] (5:50 p.m.)

This situation becomes even worse when the assets of the estate are tied up in a family farm. The Minister of Agriculture (Mr. Hays) would be the first to say that you need $40,000 to $60,000 of farm capital for the family farm. When the breadwinner of the family farm dies, the Government agents move in and assess this farm at its current value. The machinery is only valuable as farm machinery to be used on that farm.

I am sure that the legislators who introduced this Act in the first place were desperately seeking for money with which to run our many services. They had no idea that in this last decade the expansion in home estates and pension schemes would cause such serious hardships for widows and children. This expression "hardship", is a lawyer's expression; what is hardship to one person may not be hardship to another. If you take the average income of a poor fisherman, his idea of hardship would be entirely different from that of the wife of a university professor in one of our major cities, who may be used to paying perhaps $150 or $200 per month rent and maintaining a reasonable, middle class home.

Today we heard from the Prime Minister (Mr. Pearson) about the added burdens that bureaucracy place upon Ministers of the Crown. They have no time today to be deciding what is hardship and what is not, or to be going through a mountain of correspondence in this regard. Of course there will be a mountain of correspondence coming up. I suggest that for once we should be ahead of the pressure that is bound to arise in one form or another from our new social legislation. We are going to be forced to change this Act in any event so why not admit the necessity now and take this forward step? It is not going to cost the Govern-22620-961

Estate Tax Act

ment a great deal of money, but will relieve individual cases of hardship.

I see we still have time for a vote so I should just like to mention that the backbenchers in Parliament are always talking down sensible motions presented to them by private Members. We are always asking for the right to be heard. We are trying to streamline our procedure so that we can be heard. What is the sense in asking for the right to be heard if we do not follow that up by voting? Let us, for once stand up and use this machinery in forwarding to the Government this demand for a change and then it will be their responsibility.

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

Sylvester Perry Ryan

Liberal

Mr. S. Perry Ryan (Spadina):

This is substantially the same motion that we debated during Private Members' hour on December 9, 1963. The hon. Member for Wellington South (Mr. Hales) has, however, made a slight amendment to his original motion. He has inserted the words "the advisability of", after the words "consideration to", in the second line of this motion as it appears on the Order Paper. It now reads:

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.

The amendment has if anything, weakened the hon. Member's motion. I suggest it indicates some loss of confidence on his part, and I have no confidence in this motion whatever. I cannot support it. I just do not believe there is any section of the Estate Tax Act, as it stands by itself, that forces the sale of Canadian business enterprises to foreigners. I believe that such foreign takeovers result from other causes.

In 1963, as recorded on page 5618 of Hansard, I made the following remarks:

There have been some cases where the necessity ol paying estate tax and provincial succession duty has been cited as the reason, or additional reason, for selling a controlling interest in a company to foreigners or to a foreign company. This seems strange when one knows that any company with good management can easily make arrangements to pay the taxes due to both jurisdictions.

When one hears such talk he should consider whether or not an excuse is being given by an incapable or disinterested heir for his failure to assume an unexpected or unwarranted responsibility. I would say from my own experience that in almost every case of such a sale the real reason is that death has brought about an unusual circumstance. There has been a change of management or there has been no management left whatever.

May 19. 1965

Estate Tax Act

I would say from my experience that in almost every case of such a sale the true reason is that it was brought about through an unfortunate change of management, or the fact there was no management whatever. Often there is no person capable, in the line of succession, to carry on the business. Trust companies will not undertake to run any complicated business where there has been no foresight in dealing with management problems in the event of the death of the successful founder or operator. Occasionally the person designated by the deceased to succeed him falls down oa the job. In any of these circumstances, the sale to the best buyer becomes imperative. It is true, particularly in recent years, that the best buyer is likely to be from the United States. However, with the advent of the Canadian Development Corporation referred to by the hon. Member for York North (Mr. Addison), this situation will change. Today there are many more people from the United States in the market, and they have more surplus money. Therefore by reason of the lack of qualified management personnel, and by reason of the fact

there is no lack of United States cash, I believe the estate tax is only a minor factor in the sales which have been made.

Some good managers are bom, but most of them have to be schooled. In most cases, he is not a man of greed but rather one of dedication.

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; the hour appointed for the consideration of private Members' business has now expired.

Topic:   ESTATE TAX ACT
Subtopic:   PROVISION FOR PAYMENT OF ASSESSMENT BY INSTALMENTS
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BUSINESS OF THE HOUSE

LIB

John Watson MacNaught (Minister Without Portfolio; Solicitor General of Canada)

Liberal

Mr. MacNaughl:

Tomorrow we will take up the business that was interrupted at five o'clock, namely the resolutions relating to improving the procedures in this House. When the resolutions are concluded, as there is every reason to believe they will be, we will take up item No. 3 on the Order Paper, resuming debate on the motion of the Minister of Finance for the second reading of Bill No. C-102, an Act respecting banks and banking.

At six o'clock the House adjourned, without question put, pursuant to standing order.

May 19, 1965

Topic:   BUSINESS OF THE HOUSE
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APPENDIX "A"

AIR TRANSPORT BOARD ORDER RESPECTING AUTAIR HELICOPTER LTD. AIR TRANSPORT BOARD


Ottawa, Canada Order No. 4222


IN THE MATTER OF THE OPERATION OF COMMERCIAL AIR SERVICES BY AUTAIR HELICOPTER SERVICES LTD.


WHEREAS Autair Helicopter Services Ltd. on February 16, 1965, filed with the Board Original Pages 39 and 39A of its Charter Tariff No. 5 publishing rates for Bell 47G4 helicopters including a statutory declaration as required by General Order No. 35/63 in which D. W. Connor, General Manager of Autair Helicopter Services Ltd., attested that the Company had in its possession as owner one Bell 47G4 helicopter, that the helicopter had registration No. RNN, a Certificate of Airworthiness and was available for service; AND WHEREAS the Board conducted an investigation into the facts respecting the said Tariff filing and is satisfied that on the date of the said statutory declaration Autair Helicopter Services Ltd. (a) did not have in its possession as owner such a helicopter, or any Bell 47G4 helicopter, but such a helicopter had been ordered by Maritime Helicopters Ltd., a subsidiary of Autair Helicopter Services Ltd., but had not been delivered; (b) did not have as owner a Bell 47G4 available for service; and (c) did not have as owner a Bell 47G4 helicopter for which a Certificate of Airworthiness had been issued by the Department of Transport; AND WHEREAS Autair Helicopter Services Ltd. on March 23, 1965, filed with the Board a new statutory declaration purporting to be retroactive in effect attesting that Autair Helicopter Services Ltd. had in its possession as owner and as lessee respectively two Bell 47G4 helicopters, both of which were available for service and certified airworthy by the Department of Transport; AND WHEREAS the Board conducted an investigation into the facts respecting the said new statutory declaration and is satisfied that on the date of the said statutory declaration Autair Helicopter Services Ltd. (a) did not have in its possession as owner a Bell 47G4 helicopter but such a helicopter had been ordered by Maritime Helicopters Ltd., a subsidiary of Autair Helicopter Services Ltd., but had not been delivered; (b) did not have as owner a Bell 47G4 helicopter which was available for service; (c) did not have as owner a Bell 47G4 helicopter for which a Certificate of Airworthiness had been issued by the Department of Transport; and (d) did have under lease a Bell 47G4 helicopter which was certified airworthy by the Department of Transport but which was registered as a private aircraft; AND WHEREAS the said Charter Tariff was accepted by the Board on the basis of two statutory declarations which in the opinion of the Board contained information which was false and misleading; IT IS THEREFORE ORDERED: THAT Original Pages 39 and 39A of Autair Helicopter Services Ltd.'s Tariff No. 5 filed with the Board for effect February 17, 1965, and any revisions thereof, in which were published rates for Bell 47G-4 helicopters, are disallowed. DATED at OTTAWA, CANADA, this 6th day of May, 1965.


AIR TRANSPORT BOARD

May 19, 1965