October 29, 1979

PC

William J. Yurko

Progressive Conservative

Mr. Yurko:

In Alberta we have various programs for helping the aged in direct assistance which, I understand, does not exist in Saskatchewan. What we have to do in this nation above all else is to decrease the stranglehold on the economy that is imposed on it by governments taxing to the extent that they spend 42 per cent of the GNP of this nation.

A very appropriate article was written recently in which it was suggested that if we do have a depression it will be the first social-oriented depression in the history of the world, for the simple reason that the government has involved itself in the economy to the extent that the production of wealth in this country has suffered drastically. The difficulty with this

October 29, 1979

nation, with its abundant resources, abundant opportunities and well trained people, is that it has engaged itself in a system of redistributing wealth and has forgotten how to create wealth.

Before 1 come to my general comments on the bill 1 should like to say something about frugalness. 1 mentioned frugalness in one of my earlier speeches. I was fortunate in that 1 grew up on a farm as a member of a pioneer family. Next to us lived another pioneer family, a very frugal couple. Throughout the years they amassed more and more wealth. Eventually, the man died and left all his wealth to his wife. Madam allowed herself only one luxury-she hired a maid called Mabel.

In the intervening years, madam accumulated more and more wealth through hard work and frugality. It was her wealth, and Mabel helped her accumulate it. As she became older and came closer to her last days on earth, she called Mabel in and said to her, "Mabel, I want you to bury me face up in my coffin. I want you to bury me in my best black satin dress," she said. "But Mabel, as 1 will be lying there on my back, I want you to cut out all the material from the back of my black satin dress and make yourself a skirt."

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURETO AMEND
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?

An hon. Member:

That is what 1 call Tory Economic policy.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURETO AMEND
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PC

William J. Yurko

Progressive Conservative

Mr. Yurko:

And Mabel said to the madam, "Madam, I must tell you that 1 disagree with you because if you can see yourself walking up them golden stairs into heaven, all the people behind you will be staring at your bare back." And madam said, "No, they will not, Mabel. They will be staring at my husband because 1 buried him without his trousers on."

Now I want to get to the more specific comments.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURETO AMEND
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?

An hon. Member:

Stay where you are.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURETO AMEND
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PC

William J. Yurko

Progressive Conservative

Mr. Yurko:

Well, I have been fine most of the day.

The small business tax rate has been a subject of extensive public discussion over the past, and the proposals of the previous government have been widely criticized. Under the proposals introduced in the November, 1978, budget, the benefits of the special corporate tax rate on small business would have been denied to three categories of small business income. They were professional income, the income from certain personal services, and the income from the provision of certain management and other administrative services. Under these proposals, these types of business income would have been taxed at the normal rate of corporate taxation of between 46 per cent and 51 per cent depending on the province, rather than at the special rate of 25 per cent for small business.

This clause of the bill introduces a new small business tax rate of 3316 per cent for any Canadian-controlled private company engaged in any of the three categories of business previously described. For this purpose the professional group, which originally included doctors, dentists, lawyers and accountants, will be expanded to include veterinarians and chiropractors.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURETO AMEND
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?

An hon. Member:

What is in it for Mabel?

Income Tax Act

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURETO AMEND
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PC

William J. Yurko

Progressive Conservative

Mr. Yurko:

This new tax rate will generally ensure that, when the corporation pays a dividend, the amount of tax for which a shareholder will receive credit will approximate the amount of tax actually paid by the corporation. As a result the over-all tax result will be neutral, whether the corporation pays salaries or dividends. Such corporations which retain earnings in the business will still enjoy a tax deferral since the tax rate of 3316 per cent is lower than the personal income tax rate on taxable income in excess of $15,000. This deferral would not have been possible under the proposals of the last government. In addition, the new rules will be reflected in the law rather than in the regulations. The changes will apply to taxation years commencing after 1979 for corporations in existence on October 23, 1979, and to all taxation years for corporations formed after today.

Since all Canadian business income, other than investment income, of the three categories of corporations affected by the change will be subject to the 3316 per cent small business tax rate, such corporations will be given time to re-arrange their affairs so that they can receive the benefit of the lower small business tax rate on eligible active business income. Because some companies may be unable to re-arrange their affairs before the end of the year, the President of the Privy Council and Minister of National Revenue (Mr. Baker) has indicated that he will be prepared to allow corporations, which wish to reorganize in light of these amendments, to change their fiscal year ends in 1980. No significant changes will be made to the rules proposed by the previous government relating to the treatment of investment income for purposes of small business deductions.

In regard to detailed comments, prior to 1972 a low tax rate of 21 per cent on the first $35,000 of corporate income was available. While the low rate on the first $35,000 was described as an incentive to small business, it was available to all corporations regardless of the type of income they earned, regardless of whether they were expanding or static, regardless of whether they were Canadian or foreign-controlled, or owned by public corporations or private individuals.

To more specifically target the benefits derived from a low tax rate, the current structure of the small business deduction was introduced with tax reform in 1972 in place of the previous measure. In order to focus more accurately on individual Canadian entrepreneurship, the measure was restricted to Canadian-controlled private corporations. In order to direct the benefits to smaller Canadian-controlled companies, the measure now applies to Canadian source business income of a corporation, as long as the corporation's accumulated business earnings net of dividends paid do not exceed $750,000.

Section 125 of the Income Tax Act provides for a 21 per cent tax reduction for the Canadian active business income of Canadian-controlled private corporations. This reduction to a 25 per cent basic corporate tax rate from the normal corporate tax rate of 46 per cent is available annually on up to $150,000 of Canadian active business, until such time as the corporation reaches its $750,000 cumulative limit. When this special 25

October 29, 1979

Income Tax Act

per cent small business rate was first introduced as part of the tax reform in 1972, the amount of annual income eligible for the low rate was limited to $50,000. Both the annual and cumulative limits have been increased twice since 1972.

The small business tax rate was designed to allow Canadian-controlled firms to accumulate funds for expansion, to allow them to compete against larger firms, and to create jobs for Canadian workers. Accordingly the legislation provides that only income from an active business carried on in Canada be eligible for this favourable tax treatment.

Coupled with these tax reform changes and developments regarding the taxation of small businesses, amendments have been made to the dividend tax credit with the view to reducing further the possibilities of double taxation of corporate source income. The dividend tax credit was made taxable by introducing the concept of a gross-up technique to dividends received by individuals. The purpose of the gross-up is to include in the shareholder's income an amount approximating the pre-tax earnings of the corporation. As a result the dividend tax credit provides tax recognition, in the hands of the individual shareholder, for 25 points of corporate tax, which in turn represents the full amount of corporate income tax paid on business income earned by Canadian-controlled private corporations qualifying for the basic 25 per cent tax rate.

In 1977 the dividend credit was increased from one third to one half of the amount of the dividend. This increase generally enhanced the attractiveness of receiving dividend payments and thereby provided an incentive for making equity investments. Also the change had the desirable effect of bringing the tax on dividends more closely into line with the tax on capital gains.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURETO AMEND
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BUSINESS OF THE HOUSE

LIB

Charles Robert Turner

Liberal

Mr. Turner:

1 wonder if someone in the government could inform us of the order of business for tomorrow.

Topic:   GOVERNMENT ORDERS
Subtopic:   BUSINESS OF THE HOUSE
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PC

William James Kempling (Chief Government Whip; Whip of the Progressive Conservative Party)

Progressive Conservative

Mr. Kempling:

Mr. Speaker, we will be proceeding tomorrow in committee of the whole with Bill C-17. When that is completed we will probably go to Bill C-18, then Bill C-3, and if we finish with those we will go on to Bills C-4 and C-5.

Topic:   GOVERNMENT ORDERS
Subtopic:   BUSINESS OF THE HOUSE
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PROCEEDINGS ON ADJOURNMENT MOTION


A motion to adjourn the House under Standing Order 40 deemed to have been moved.


CONSUMER AND CORPORATE AFFAIRS-DISSEMINATION OF INFORMATION GATHERED ON POSSIBLE PROSECUTIONS

?

Hon. J.-J. Blais@Nipissing

Mr. Speaker, the question at issue is one which arises out of a series of questions and, more specifically, a question which 1 asked the Prime Minister (Mr. Clark) on October 17. The question at issue is important because it involves, in my view, the role of the Attorney General as a law officer of the Crown and the independence of the Attorney General in the exercise of his functions, indeed, as a law officer of the Crown, so that the Attorney General may not only be independent in the exercise of that function, but can be seen to be independent.

The second issue is the independence of the director of investigations as he discharges his responsibilities under the Combines Investigation Act.

There is a series of undisputed facts. There was a meeting which was held on October 12 at eight o'clock a.m. and which was called by the Attorney General of Canada. Attending that meeting were the Minister of Justice, (Mr. Flynn), the Solicitor General and Minister of Consumer and Corporate Affairs (Mr. Lawrence), the Minister of Transport (Mr. Mazankow-ski), and the director of investigations as well as sundry officials.

The discussion centred around possible criminal violations under the Combines Investigation Act involving Western Transport Association and Household Goods Corporations. What is also not disputed is that no such meetings had been under the previous administration involving the Minister of Consumer and Corporate Affairs and the Attorney General at the time when the Attorney General was contemplating prosecutions under the Combines Investigation Act. Those are the facts which we know.

The facts which we do not know are much more numerous. First of all, what was the purpose of that meeting? Was it to gather information? Was it to provide information? Or was it a forum in order to have parties influence the course of the investigation or the prosecution? What role did the director of investigations play at that meeting? Was it an active role? Was it a reluctant role? What role did the Minister of Consumer and Corporate Affairs play in terms of protecting the director and his independence? Had the director actually submitted his evidence under Section 15 prior to the meeting, or was the meeting intended to head the director of investigations off at the pass so that the Attorney General would not have to make a decision under Section 15 as to whether a prosecution ought to be held?

What role did the Minister of Transport play at that meeting? Was it one of gaining information, or was it one of providing information? There is some dispute about those facts. What was the nature of the brief that was prepared by the Minister of Consumer and Corporate Affairs for the benefit of the Minister of Transport which, allegedly, the Minister of Transport never received?

What was the nature of the briefing note prepared by the Minister of Transport's own officials? Was that only to pro-

October 29, 1979

vide him with information, or was it suggestive of his role in preventing a prosecution or in somehow affecting the role of the director? Was there any attempt to interfere with the director's investigation or with the ability of the director to have the Attorney General deal with the matter under Section 15?

Finally, what role did the Attorney General play in this particular meeting? From his own evidence he did not even know what was going to be discussed at that meeting. What representations were made by the Minister of Transport or his officials to the Minister of Justice and the Attorney General? Answers have to be found to all those questions in order to satisfy the House that the independence of the Attorney General was protected.

I wish, Mr. Speaker, to bring to the attention of the House a quotation from a very distinguished jurist relating to the issue of the independence of the Attorney General in matters of prosecution or potential prosecution. This gentleman stated, "1 would say that any consultation would have to be on the legal propriety of the prosecution and not on any other element. It might be, for instance, that some other member of the cabinet might be very experienced in a particular branch of the law involved, in which case he might consult him." That is a very precise indication of the role of the Attorney General as he considers whether he ought to take on a particular prosecution. Mr. Justice Spence is advancing a very interesting argument. I am not saying it is a conclusive argument, but surely that is the sort of debate in which this House has to engage itself.

Next, what about the independence of the director in the discharge of his responsibilities? Was he protected? Was he free at that meeting to advance his own views? Had he discussed the matter with the Minister of Consumer and Corporate Affairs so that that minister, at that meeting, would be aware of the position the director took and so that the Minister of Consumer and Corporate Affairs could protect his director in the face of his cabinet colleagues? Was that investigation completely independent? What we know-

Topic:   PROCEEDINGS ON ADJOURNMENT MOTION
Subtopic:   CONSUMER AND CORPORATE AFFAIRS-DISSEMINATION OF INFORMATION GATHERED ON POSSIBLE PROSECUTIONS
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PC

Geoffrey Douglas Scott

Progressive Conservative

The Acting Speaker (Mr. Scott, Victoria-Haliburton):

Order, please. The hon. member's time has expired.

Topic:   PROCEEDINGS ON ADJOURNMENT MOTION
Subtopic:   CONSUMER AND CORPORATE AFFAIRS-DISSEMINATION OF INFORMATION GATHERED ON POSSIBLE PROSECUTIONS
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PC

George Thomas Hendery Cooper (Parliamentary Secretary to the Minister of Justice and Attorney General of Canada)

Progressive Conservative

Mr. George Cooper (Parliamentary Secretary to Minister of Justice and Attorney General):

1 am very eager to rise and respond to the question that has been put by the hon. member for Nipissing (Mr. Blais) because 1 hope that, once and for all, we can put an end to the series of red herrings that have been drawn across this chamber in the last few days on this issue. At the same time 1 should like to refresh the hon. member's memory of what the proper practice is with regard to ministerial responsibility on a matter of this kind.

Here, Mr. Speaker, are the essential elements of the position of the Attorney General of Canada in relation to prosecutions under the Combines Investigation Act, and any other act if it comes to that. The director of investigations and research may

Adjournment Debate

bring any matter under inquiry to the attention of the Attorney General under the provisions of Section 13 or Section 15 of the Combines Investigation Act. Section 15 provides that the director may, at any stage of an inquiry, remit evidence to the Attorney General of Canada for consideration, to determine whether an offence has been or is about to be committed, and for such action as the Attorney General may be pleased to take.

In dealing with a case where a matter has been referred to him, the Attorney General is unquestionably entitled to obtain both information and advice from whatever sources he sees fit, including his colleagues in cabinet. The decision he takes in particular cases must, however, in the last analysis, be his decision. The Attorney General does not act on directions from his colleagues, other members of Parliament or anyone else, in discharging his duties in the enforcement of the law. On the other hand, he must be prepared to answer to Parliament for what he has done after he makes his final decision. These principles are well known and established, not only in Canada, but in every common law jurisdiction. I refer particularly to the United Kingdom where the practice, of course, grew up.

I should like to read into the record the best statement on the question that I am aware of, which may be found in a work prepared by Professor Edwards of the University of Toronto entitled "Law Officers of the Crown". I shall give my hon. friend the reference when I finish. Professor Edwards said:

I think the true doctrine is... that it is the duty of an Attorney General, in deciding whether or not to authorize the prosecution, to acquaint himself with all the relevant facts, including, for instance, the effect which the prosecution, successful or unsuccessful as the case may be, would have upon public morale and order, and with any other consideration affecting public policy. In order so to inform himself, he may, although I do not think he is obliged to, consult with any of his colleagues in the government, and indeed, as Lord Simon once said, he would in some cases be a fool if he did not. On the other hand, the assistance of his colleagues is confined to informing him of particular considerations which might affect his own decision, and does not consist, and must not consist, in telling him what that decision ought to be. The responsibility for the eventual decision rests with the Attorney General, and he is not to be put, and is not put, under pressure by his colleagues in the matter. Nor, of course, can the Attorney General shift his responsibility for making the decision on to the shoulders of his colleagues-

Topic:   PROCEEDINGS ON ADJOURNMENT MOTION
Subtopic:   CONSUMER AND CORPORATE AFFAIRS-DISSEMINATION OF INFORMATION GATHERED ON POSSIBLE PROSECUTIONS
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PC

Geoffrey Douglas Scott

Progressive Conservative

The Acting Speaker (Mr. Scott, Victoria-Haliburton):

Order, please. I regret to inform the hon. member that his time has expired.

Topic:   PROCEEDINGS ON ADJOURNMENT MOTION
Subtopic:   CONSUMER AND CORPORATE AFFAIRS-DISSEMINATION OF INFORMATION GATHERED ON POSSIBLE PROSECUTIONS
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EXTERNAL AFFAIRS-MEETING OF HON. ROBERT STANFIELD WITH PLO

LIB

Roland de Corneille

Liberal

Mr. Roland de Corneille (Eglinton-Lawrence):

Mr. Speaker, ten days ago I addressed a question to the Secretary of State for External Affairs (Miss MacDonald) concerning the meeting held by the Hon. Robert Stanfield with a representative of PLO terrorists. Specifically I asked whether Mr. Stanfield has held any public or clandestine meetings and, if so, had Mr. Stanfield discussed with that terrorist organization any subject other than, or in addition to, the moving of the embassy from Tel Aviv to Jerusalem, and further had Mr. COMMONS DEBATES

October 29, 1979

Adjournment Debate

Stanfield made any undertakings to continue further contacts with the PLO.

1 do appreciate the opportunity that is afforded in this House to a member to be able to press for an answer to a question which a member feels was not answered during question period.

To set the record straight, it would be unfair for me to imply or allege that the hon. minister did not reply at all, but the answer was not given to my question. My question was not frivolous, and certainly not deserving of delay. It deals with a matter of grave consequences, consequences meaning that Canada may be giving tacit de facto recognition or encouragement to the PLO, which has, as we know, been involved in terrorist activites, killing not only Jewish but Arab civilians, men, women and children in Israel and in many other parts of the world. It also seeks to obliterate the existence of the state of Israel and indirectly some, or even many members of its population.

Let me point out why it is so serious, important and urgent that a reply to my question be given to this House and to the entire country. What perhaps is at stake is our national honour, the imperilling of the peace process in the Middle East, the possibility of alienating friends such as the United States of America, Israel, and others in the international community, and of giving comfort, therefore, encouragement to the PLO terrorists-a totally immoral act for Canada and an unfriendly one toward the friendly state of Israel.

In short, I would still like to know the answer to my question. The implications are even more grave as the truth unravels. First of all, what rank and authority is Mr. Stanfield perceived by other governments to have? We were told here by the Prime Minister (Mr. Clark) on October 12 that Mr. Stanfield is an ambassador extraordinary, and that because of the adjective extraordinary there can be, and I quote, "no implication of official recognition by the Canadian government of any groups with which he may have consultations." Yet today the Prime Minister tabled a letter from Mr. Stanfield to the Prime Minister on official stationery which describes Mr. Stanfield as, and I quote, "Special Representative of the Government of Canada, and Ambassador at Large." Those are very imposing and impressive titles when added up: ambassador extraordinary, special representative of the Government of Canada, and ambassador at large.

I wonder whether in the eyes of governments which are used to these terms as they have been undertsood in international law or customs over the centuries, it is now realized that a new dictionnary has been written by our Prime Minister giving a new definition to those terms.

Mr. Stanfield met with Khalid al-Fahum, chairman of the Palestine National Council, the PLO's governing body, and a member of the PLO executive committee.

It has been claimed that this meeting between Mr. Stanfield and Mr. al-Fahum does not constitute recognition of the PLO by Canada. Arab diplomats and the PLO, however, can easily

interpret such meetings as constituting a form of recognition of the terrorist organization which remains committed to Israel's ultimate destruction. The PLO's covenant, which has not been renounced, calls for the elimination of Israel. More recent statements by the PLO leaders, including the PLO chairman, Yasser Arafat, belie any intention on the part of that body to recognize Israel or to change its goal of its destruction.

I have in my file recent statements by Mr. Arafat, and I quote:

Armed struggle is our only road. We have no other road to reach Jerusalem, Tel Aviv and every inch of our occupied homeland.

Our people will continue to fuel the torch of the revolution with rivers of blood until the whole of the occupied homeland is liberated ... not just a part of it.

I am confident that we shall eventually overrun Begin's own offices in both Jerusalem and Tel Aviv ... Jerusalem is destined to be the eternal capital of our sovereign independent Palestinian state under the PLO leadership.

Mr. Arafat is not referring only to the "liberation" of the West Bank and Gaza. He refers to the entire state of Israel.

A few weeks ago, Farouk Kaddoumi, director of the PLO political department said; "The PLO will never recognize Israel even if Israel recognizes the PLO" Given such a policy, it seems difficult to comprehend why Mr. Stanfield found it necessary or useful to meet with the PLO's representative. The PLO's vision of peace does not include a state of Israel in the Middle East.

Topic:   PROCEEDINGS ON ADJOURNMENT MOTION
Subtopic:   EXTERNAL AFFAIRS-MEETING OF HON. ROBERT STANFIELD WITH PLO
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PC

Geoffrey Douglas Scott

Progressive Conservative

The Acting Speaker (Mr. Scott, Victoria-Haliburton):

Order, please.

Topic:   PROCEEDINGS ON ADJOURNMENT MOTION
Subtopic:   EXTERNAL AFFAIRS-MEETING OF HON. ROBERT STANFIELD WITH PLO
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October 29, 1979