December 19, 1951 (21st Parliament, 5th Session)

LIB

Clarence Decatur Howe (Minister of Defence Production; Minister of Trade and Commerce)

Liberal

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

The hon. member for Greenwood asked me a series of questions on December 17 about the effect of various government measures upon capital expenditure in Canada. As I said at the time, he is really asking me to read the minds of our businessmen who have not done things they might have done. My answer can only be in the most general terms. In the first place, I do know from personal contact with businessmen that deferred capital cost allowances have influenced investment decisions in a number of cases. But, of course, one cannot make statistical calculations on the basis of that kind of evidence.
It should be borne in mind in trying to assess the effects of the deferment of depreciation that such deferment does not apply generally. There are a number of exemptions set forth in the regulations, and the Minister of Trade and Commerce is authorized to issue certificates entitling the taxpayer to current allowances where the properties are being acquired for carrying on certain basic industries listed in the regulations, and where the investment makes a direct contribution to the defence effort. In other words, the policy is selective in character and that is the way it is working.
As a means of getting some general impression of the way the policy is working, I asked the officers of my department to compare the estimates of 1951 capital expenditure with those for 1950. With the permission of the house I should like to put the table on Hansard. It is necessarily a very tentative analysis and is subject to revision when later
2192 HOUSE OF
Inquiries of the Ministry and more up-to-date information is available. The table is as follows:
Per cent change in the volume of investment, fall estimate 1951 over 1950 Total private and public investment + 7
Capital expenditures not subject
to income tax + 3
Capital expenditures subject to
income tax . +11
Capital expenditures eligible for capital cost allowances without certificate of eligibility +2
Capital expenditures eligible for capital cost allowances subject to the issuance of a
certificate of eligibility* 1 . +83
Capital expenditures not eligible for capital cost allowances1 _ g
1These estimates were made before the recent amendment embodied in order in council P.C. 6384, which enables the Minister of Trade and Commerce to issue certificates for structures under construction as of April 10, 1951, and properties which the taxpayer was obligated to acquire at that date.
The table shows that where capital expenditures are assumed to be eligible for a certificate there is an increase of over 80 per cent in volume between 1950 and 1951, whereas in those cases where the taxpayer is likely to be subject to deferment of allowances, unless he had a commitment to purchase on April 10, 1951, or was in course of construction, there is a decrease of 8 per cent in volume.
I am not suggesting that deferred capital cost allowance, which has been in effect for only eight months, is the main or only reason for these results. That may be due also in part to other government measures to which the hon. member referred, or perhaps to factors which have nothing in particular to do with government policy. All that I can say with any certainty is that the various measures we have taken to curb inflationary pressures seem to be working in the right direction.

Topic:   CAPITAL COST ALLOWANCES
Subtopic:   DEFERMENT
Full View