February 17, 1969

?

Some hon. Members:

On division.

Topic:   GOVERNMENT ORDERS
Subtopic:   AGRICULTURE
Sub-subtopic:   COMPENSATION FOR CONTAMINATION BY PESTICIDE RESIDUE
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Motion agreed to, bill read the third time and passed.


ANIMAL CONTAGIOUS DISEASES ACT

AMENDMENTS RESPECTING COMPENSATION. APPEALS, ETC.-REPORT STAGE

LIB

Horace Andrew (Bud) Olson (Minister of Agriculture)

Liberal

Hon. H. A. Olson (Minister of Agriculture) moved

that Bill C-156, to amend the Animal Contagious Diseases Act, as reported (without amendment) from the Standing Committee on Agriculture on Thursday, February 13, 1969, be concurred in.

Motion (for concurrence) agreed to.

Topic:   ANIMAL CONTAGIOUS DISEASES ACT
Subtopic:   AMENDMENTS RESPECTING COMPENSATION. APPEALS, ETC.-REPORT STAGE
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PEST CONTROL


REGULATION OF PRODUCTS USED IN CONTROL PROCEDURE-REPORT STAGE .


LIB

Horace Andrew (Bud) Olson (Minister of Agriculture)

Liberal

Hon. H. A. Olson (Minister of Agriculture) moved

that Bill C-157, to regulate products used for the control of pests and the organic functions of plants and animals, as reported (with an amendment) from the Standing Committee on Agriculture on Wednesday, February 12, 1969, be concurred in.

Motion (for concurrence) agreed to.

Topic:   PEST CONTROL
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INCOME TAX ACT AND ESTATE TAX ACT


The house resumed from Thursday, February 6, consideration of the motion of Mr. Benson for the second reading and reference to a Committee of the Whole of Bill C-165, to amend the Income Tax Act and the Estate Tax Act, and the amendment thereto of Mr. Saltsman (page 5191).


NDP

Alfred Pullen Gleave (N.D.P. Caucus Chair)

New Democratic Party

Mr. A. P. Gleave (Saskaloon-Biggar):

Mr. Speaker, in addressing myself to the amendment, I want to put some emphasis on how it will affect the farmers of this nation and, I suppose, also small businesses. The small business man operates much the same way as the farmer in that he tries to gather together and hold enough capital to operate an enterprise on an individual or a family basis. I will not quote the percentages because I think they have been quoted adequately by the speakers who have preceded me, but in looking at the tax rates proposed in this bill it seems to me

February 17, 1969

Income Tax Act and Estate Tax Act that the amount which will be demanded in estate taxes from the family farm business will be such that it will be difficult for those farm businesses to continue.

Certainly, this proposed taxation measure is of real benefit to the wife, and so it should be. In the family farm business particularly, the wife has contributed substantially to whatever estate there is at the time of the husband's death. But the point that I am really concerned about is whether or not this type of farm can continue to exist on the Canadian scene. If we are not particularly concerned with who controls the farming resources, and particularly the land of this nation, perhaps we do not need to be concerned about the estate tax structure. But if we do have some ideas as to the type of farm we want, which I happen to have, then we do need to be concerned about the type of estate taxes we have, the manner in which they are applied and whether or not they will permit a certain type of farm structure to continue. The land resources of this nation, including livestock if you like, will be farmed whether they are farmed by a family farm type operation, which has been the practice until now, or whether they are operated by a corporate structure. Somebody will still produce corn, flax, rapeseed, wheat, soya bean, sugar beets and potatoes. But I happen to think that we will have a better structure if the ownership of our land resources is maintained under individual control. If individual control of the land is continued, I believe it will allow for more competition. I do not think there is a more competitive structure in the nation today than in the farm sector, unless it is in the fisheries, as has been pointed out by some members of the house. In the farm industry, there is a type of competition which our society finds desirable. If we want to continue this system we will have to have a tax structure which will enable this type of operation to continue.

The weakness of the estate tax which is proposed under the bill, and which also existed under the old act, is the fact that it is imposed at the very time of the greatest weakness in this type of business, namely, when it is being transferred from one generation to the next. This is the time when the government says: "We want a bite out of it".

I suspect this is also true of the small businesses, although I have no special knowledge in that area. At this time the generation that is leaving the farm is trying to take enough out of it to retire or to satisfy some other member or members of the family.

[Mr. Gleave.l

[DOT] (8:50 p.m.)

At the same time, the son or the son-in-law who is taking over must find capital to replace whatever had been taken out by the father or the mother who had retired. What is to be done in cases like this? The government wants to raise money, and certainly it has to do so. But what is to be done in terms of preserving the structure of our farms? The recently appointed president of the Canada Grains Council says we should promote the commercial farm, not out of disregard for the litle farmers but out of regard for the industry as a whole. The commercial farmers, he says, will form the base of Canadian agriculture. I have a high regard for the president of the Canada Grains Council, Mr. Runciman of the United Grain Growers. I have known him for a number of years. The government must have a high regard for him, too, because they have just appointed him to what I am sure they consider to be a key post in the affairs of western Canada.

I would say to the minister through you, Mr. Speaker, that I am thinking in terms of the commercial structures which he himself has in mind in the range between $50,000 and $200,000, which represents the capitalization one finds in most of our operating farms in western Canada today: one should not collect any estate tax at all if it is intended that farms of this type should continue. When an estate reaches a figure over and above the optimum amount needed to run the size of farm the minister wants, the revenue department can probably collect estate tax without endangering the structure which is thought desirable. But up to that point, no estate tax should be collected. I say to the minister that this principle has in part been recognized already, since provision is made for deferring settlement for a certain period of time. This is permitted simply because the minister realizes that the period during which ownership changes is a time of greatest weakness in the structure. The people coming in cannot immediately pay the tax. For this reason, the government allows payment to be deferred over a period of so many years. I would point out, Mr. Speaker, that during these years the occupant of a farm will be taking operating capital out of the undertaking in order to pay the tax which the government demands. During all this time his standard of living will be reduced and only a bare minimum will be spent on operating equipment.

February 17. 1969 COMMONS

In my opinion, we should collect no tax from a tenant as long as a farm stays in direct tenure within a family. If a son or a son-in-law takes over, do not collect any tax. Let it rest in abeyance, or do not levy it at all. Once a farm goes out of the tenure of a family, then collect all the tax that is due. You see, Mr. Speaker, if we want family farms to continue, if we want individual ownership of farms to continue, it will be necessary to develop a tax system which encourages their continuation. Otherwise, they will disappear.

The margin of return to a farmer-operator is simply not sufficient to allow for paying of estate tax and at the same time to maintain the operating capital that is needed. Figures can be found everywhere to support this contention. I shall not even bother to quote them because they can be obtained from so many sources, and have been published by so many economists. I say it is in the interests of the Canadian people to consider an approach of this kind. The Canadian people are getting the benefit of cheap food. An hour's work in the manufacturing industry today will buy more pork, or more beef or more bread than it used to buy. I put the figures on record during a previous debate, and I shall not repeat them now. The consumer is getting a good bargain and it is therefore in the interests of the Canadian people to see that the present type of farm structure continues. They are getting a bonus every year.

The arrangement I have suggested would also prove of advantage in deterring rapidly escalating land values. It would encourage a farmer to hold on to his land. If he placed it on the market he would immediately lose his advantage. The advantage to the operating farmer would be to continue operating his land from one generation to the next. Today, the advantage to the farmer lies in selling his land. We should be developing real social objectives as far as farming and agriculture are concerned. We ought to decide on the kind of farms we want, and then develop tax laws and estate tax laws in particular which will encourage farms of that kind to continue. I do not think anyone is wise enough to be able to say arbitrarily that a farm ought to be of this size, or that size, but we can determine broadly what we believe to be a desirable objective and then work out the kind of tax laws which would encourage farms of that type.

DEBATES 5621

Income Tax Act and Estate Tax Act

The farmer is already in a poor bargaining position as compared with other sectors of society. He does not possess the bargaining power of the professional groups, or of large scale industry or of the labour unions. He is willing to go into the market place and bargain his capital and labour. I say: consider the value of this group of people to the economy and ask yourselves whether the type of taxation upon which you decide, the estate tax particularly, encourages them to continue.

Let me give the house an example. A man in my constituency wrote to me about a gift he had made to his son. I think he had six quarter sections of land. He wanted his son to continue on the farm with him, so he gave him a quarter section and placed a certain value on it. But the estate tax people came along and said the land was worth more. In the end, the farmer had to find about $400 in order to give his son a quarter section and get him started. I would have no objection, supposing he had given his son a few thousand dollars, to the estate tax collectors taking a certain share of it. I hold no brief for the withholding of tax on large amounts of money passed from father to son-possibly because I was not given any such amounts myself.

[DOT] (9:00 p.m.)

Someone in our group stated the proposition that if a young man or woman of decent education and reasonable intelligence received a windfall in the form _of so many thousand dollars, he or she should pay tax on it. I am not arguing for the individual but for a structure in our society that is of value. I am not taking a moral stand; I do not think morality has very much to do with this. But I do not think that if a farmer whose farming operation is not making him particularly rich decides to give his son a start in farming he should be asked to pay society for the privilege.

In the area where I live and farm young men are leaving the farms, not staying on the farms. It is good farming area, well developed with good sized farms. But unless we provide some incentive and make it worth while, these young men will not stay. We are insisting on burdening them with a load of debt so that they find themselves working for the next 10 to 20 years in order to pay interest at 8 or 9 per cent on 25 or 30 per cent of present farm values. If they have any brains they will say that the game is not

February 17, 1969

Income Tax Act and Estate Tax Act worth the candle. Therefore, I ask the minister to see whether he can persuade not only himself but those who advise him that the matters I have referred to this evening should receive some consideration.

Topic:   INCOME TAX ACT AND ESTATE TAX ACT
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Rémi Paul

Mr. Paul SI. Pierre (Coast Chilcotin):

Mr. Speaker, the two constants of mankind are supposed to be death and taxes. The minister has contrived to get them both in the one bill for our consideration tonight. Estate tax is what we call it, but what we are really dealing with here is a capital gains tax because an estate is capital; it is stored labour. It differs from other capital gains taxes only in the time of its collection. It is collected after the owner's death from his heirs. To my mind this should be one of the most fair forms of capital gains tax, and it is this broad statement that I should like to expand a little later in my remarks.

The bill itself, of course, is not simple. Very few things involving government or law are simple any more. I suppose we might as well face this complexity as one of the burdens of modern society; there is no point in our lamenting the fact. Some of us may look with some regret to days not long ago when there were simple wills. I can recall one in my riding of Coast Chilcotin which was written with a pencil on one sheet of store newspaper. A rancher left his ranch to his sons to be divided equally between them. The instructions on the sheet of paper were very simple. The eldest son was to draw the line dividing the ranch in half and the younger son was to have first choice of the halves. It worked very well.

Another example occurs to me and I recommend it for study to the minister's staff. This was the case of an Indian who had died leaving all his wordly goods to one of two sons. The will was to be decided in this way. These were the instructions. The two sons were to take their best saddle horses and there was to be a race. The son whose horse was last across the finish line would inherit the entire estate. You may be able to anticipate, Mr. Speaker, what happened: the two sons got on their horses but neither man would move from the starting line. Fortunately there was an old Indian in the village and they called on him to break the stalemate. He looked the situation over and gave some brief instructions. The race was won; one horse came in first, one came in last, and the estate was settled according to the will. The minister has such experts on his staff that I am not going to tell him what the solution was,

except that the old Indian solved the problem with two words. He was not a politician but a man very brief in speech.

In this bill as first presented there were provisions with which I strongly disagreed. The bill, in my opinion, did not reflect some of the realities of life that affect small businesses-farms, ranches, to name a few. I noticed that many of us made complaints about the bill. As a matter of fact, the other day the minister said that slightly more than 100 complaints from government members had been received, and as I recall it the opposition parties also contributed eight. So, members on all sides of the house were concerned about the bill. Speaking for myself and for several others, there were three points to which we took strong exception. One of these concerned the sudden burden placed upon small estates closely held, of which ranches and farms are a typical example. The sudden impact of even moderate estate taxes could be very damaging to such holdings.

It is true that even under the present act it is possible to arrange time payments. The minister says that only about 40 people in the last decade asked for such arrangements to be made and this makes me very doubtful that many people were aware of this provision. In any event, time payments should have been made a matter of right for estates of this nature, which are closely held and which may find it simply impossible to raise estate taxes quickly. The minister has now seen fit to change this section of the act and a five year period in which to make six payments is now to be permitted as a matter of right under the revised bill.

There was another objectionable feature to the minds of many of us, and it was this: Since there are major differences between this new estate tax and the present one, a great many people are going to have to rewrite their wills in order to adapt them to the new legislation. I congratulate the minister for bringing in the changes. They will permit executors, after August 31 next, to elect whether they wish to pay estate taxes under the new or old acts.

[DOT] (9:10 p.m.)

The third complaint many hon. members raised was that, in its original form, the bill would have imposed estate taxes on all estates over $20,000. The philosophy behind this part of the measure escapes me. We are told that estate taxes have two purposes, to

February 17. 1969 COMMONS

raise money for the government and to prevent the pyramiding of family wealth from generation to generation. That is all very fine, but how an estate worth $21,000, by any stretch of the imagination represents the foundation of a family's dynastic fortune, escapes me. I should be surprised if the money the government collects from estates of between $25,000 and $35,000 equals the amount spent on collection.

I commend the minister for changing his mind and for introducing a floor of $50,000, below which no estate will be taxed. I wish I could be satisfied with the $50,000 floor, but I cannot be. For many years the basic exemption level has been $50,000. For several years now we have been suffering from an inflation which has eroded the value of our dollar. This legislation ought to recognize that inflation has greatly diminished the value of our dollar. In large part, the dollar has lost its value because many levels of government for many years have indulged in irresponsible spending policies.

Topic:   INCOME TAX ACT AND ESTATE TAX ACT
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?

Some hon. Members:

Oh, oh.

Topic:   INCOME TAX ACT AND ESTATE TAX ACT
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LIB

Paul St. Pierre

Liberal

Mr. Si. Pierre:

Governments are responsible for the inflation from which we suffer. Although the minister has established $50,000 as the floor below which estate taxes will not be collected, I should have preferred to see a floor of $100,000 established. The present floor, however, is a vast improvement over the $20,000 floor.

There are, of course, some excellent features in the new legislation. The elimination of estate tax on estates passing from spouses to widows or widowers should strike most hon. members as eminently fair. If we accept the proposition that wives contribute to the accumulation of a family's capital wealth, surely it was wrong for the government to intervene previously and collect estate taxes on the death of one of the partners. Indeed, one wonders why that provision was retained so long in the old law. Possibly it represented a hangover from the Victorian idea and I hesitate to use the words, that women were inferior. That, I think, was a delusion to which later generations have not subscribed.

In the bill are new increased exemptions for minor children and for totally dependent invalid children. There is a new exemption of $10,000 for the adult child. Formerly, tax was levied with respect to such adult children.

I listened to several critics of the bill. Several suggested it should be withdrawn and

DEBATES 5623

Income Tax Act and Estate Tax Act studied again. I find their attitude difficult to understand. Surely, hardly any hon. member of the house will claim this bill is not a considerable improvement over the old legislation. It is much fairer.

I was interested in the remarks of the hon. member for Saskatoon-Biggar (Mr. Gleave) and I have figures in my possession which support many of his contentions. The figures were produced by the British Columbia Department of Agriculture as a result of a selective survey of British Columbia ranches. They show how low are the earnings of ranches that many would consider extremely valuable. For instance, the survey has figures for ranches valued at between $50,000 and $100,000 and shows returns on capital for the years 1965, 1966 and 1967.

Topic:   INCOME TAX ACT AND ESTATE TAX ACT
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?

An hon. Member:

Those are not ranches.

Topic:   INCOME TAX ACT AND ESTATE TAX ACT
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LIB

Paul St. Pierre

Liberal

Mr. St. Pierre:

The figures shown as returns on capital are -1.2 per cent, -0.4 per cent and -0.12 per cent respectively. On ranches valued over $100,000 and under $180,000-

Topic:   INCOME TAX ACT AND ESTATE TAX ACT
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NDP
LIB

Paul St. Pierre

Liberal

Mr. St. Pierre:

That is the point I am coming to. Ranches valued at over $100,000 in the three years I have referred to made a profit on capital of 1.2 per cent, then 1.5 per cent and then 2.28 per cent. For ranches valued at $180,000 there is no calculation for 1965. The

1966 profit is shown as 4.1 per cent and the

1967 profit as 5.06 per cent.

Topic:   INCOME TAX ACT AND ESTATE TAX ACT
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An hon. Member:

And how much of that was deeded?

Topic:   INCOME TAX ACT AND ESTATE TAX ACT
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LIB

Paul St. Pierre

Liberal

Mr. St. Pierre:

It is clear that if any rancher had sold his ranch at its valued price and invested the money in government bonds, surely one of our safest investments, which pay 6.5 per cent or more he could have drawn an income at no risk to himself, without having to do any work, much greater than the annual income he has been earning for the last several years.

Topic:   INCOME TAX ACT AND ESTATE TAX ACT
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February 17, 1969