Mr. A. J. MACDONALD (Glengarry):
My purpose in participating in the present debate, Mr. Speaker, is to direct your attention to the fact that notwithstanding the wonderful progress of the province of tMr. J. D. Chaplin.]
Ontario along industrial lines its outstanding and predominant industry is still agriculture. Fortunately all parties concede that agriculture is our basic industry and that when this industry prospers all others prosper. In view of this fundamental fact it is reasonable to expect that the elected representatives from the province would be very much concerned with the present position of this industry, and that its requirements would evoke the sympathetic interest of hon. gentlemen opposite. I submit that it is fair to say that during the progress of this debate whatever sympathies hon. gentlemen opposite have shown have been on the whole with the protected interests.
Having been closely associated with the farming industry of my native county of Glengarry for the last thirty-five years, and having an intimate knowledge of the constant struggle on the part of the vast majority of them to make ends meet, even in that fertile county, I have endeavoured to evolve a reasonable explanation for this condition of mind on the part of hon. gentlemen opposite. Perhaps a casual analysis of the report of the Chief Electoral Officer in respect of the last general election will provide it. Looking at this report one finds that, sixty-eight Conservatives were elected out of a total of eighty-two candidates. They were elected by 57 per cent of the votes polled, and 38 per cent of the total possible vote, and of these sixty-eight members, four are classified as farmers, one as a retired farmer, three as farmers and breeders of pure bred stock and one as contractor and farmer.
With all due deference to the superior training and the intellectual attainments of the many gentlemen of the learned profession in that group I submit, Mr. Speaker, that this very training precludes them from a sympathetic understanding of the problems confronting the farmers of this country and that those among them who should be sympathetic have permitted their sympathies to be dulled by their environment. How many of the elected representatives from Ontario have a clear understanding of the income and expenditure of the average farmer? Yes, how many gentlemen connected with tin press of this Canada of ours have an adequate conception of the income and expenditure of our average Canadian farmer? In the final analysis the press may be held accountable for the wealth of misunderstanding prevailing in the industrial and urban centres of our fair country in this respect. In this connection I wish to direct your attention to an article in Toronto Saturday Night which was
The Budget-Mr. Macdonald (Glengarry)
reprinted by the Ottawa Journal of the fifth instant and which reads:
Taxes, Tariffs, Industry
When the Canadian Council of Agriculture met the cabinet the other day the members expressed themselves strongly against the reduction in the income tax. These philanthropists believe in taxation. Of course they do-for everybody but themselves. Their worry is not that they pay income taxes, but the reduction in the income tax may by hook or crook make it necessary to levy other taxes and these may get to them in time.
As for the application of the income tax, be it high or low, they have no reason to worry. Last year according to recent figures there were exactly 3,061 farmers in Canada paying income taxes, and the sum total they paid was $162,000. This chicken feed was contributed by 530 Ontario agriculturists, to the amount of $19,351. In Quebec 42 paid $3,775, which was just about half the sum that British Columbia farmers paid. In the Canadian west farmers appear to have a reasonable view in respect to their responsibilities. In Saskatchewan 1,492 farmers paid $70,956.
In Alberta 663 farmers paid $49,894, though Manitoba fell down with only 171 farmers paying $6,303, but this was nearly twice what Quebec paid.
As fifty per cent of the people in Canada either live on farms or draw incomes from them the question of income taxes so far as they are concerned is rather a joke, particularly in view of the fact that upward of half of the country's wealth is derived from the farm.
Of course if the 168,000 employees who in 1925 produced $13,973,000 as their contribution toward the income tax collected, could live off their salaries in the same manner as the farmer lives off his acres, with no one to check them up, our interest in the income tax would not be of a character to keep us awake nights.
And this brings up another question. If the government proceeds to rip the vitals out of industry who is to pay the taxes? Where is the government to find that six or seven hundred million dollars necessary to meet the yearly liabilities? Land taxes look to b'e in sight.
In 1924 Ontario and Quebec paid $44,000,000 out of the total of $56,000,000 paid in income and war taxes, while out of $4,700,000 paid as business profits tax Ontario and Quebec contributed $3,500 000. If industry is to be sacrificed to make a holiday for the Progressive party and such part of the Liberal party as believe in such things, the time will come when a complete revision of taxation methods will be necessary to meet new conditions.
The tenor of this article suggests that inasmuch as upwards of fifty per cent of the country's wealth is derived from the farm, and fifty per cent of the people in Canada either live on the farm or draw income therefrom, the farmers are dodging the payment of income tax because there is no one to check them up. May I suggest that rather than this smug assumption on the part of the would-be saviours of this country that the men and women engaged in our basic industry are dishonest, the fact that only 3,061 farmers paid the small sum of $162,000 in income tax out of a total of $56,000,000 in the year 1924 should be a compelling reason why every man interested in the economic situation and future welfare of our country should pause and ask himself where we are drifting.
For the information of the House and those people in this country not familiar with this problem I invite you to consider seriously with me, as the importance of the subject fully warrants, the financial statement of one of our young farmers engaged in dairying and mixed farming, covering his business operations for the years 1922, 1923, 1924 and 1925. It is my firm conviction that even a superficial examination of these statements will lead to a better appreciation and understanding of many of the problems confronting us at present, and understanding it may force us, even against views honestly held, to consider our whole fiscal policy before it is too late.
This young man owns a 109-acre farm with 50 acres under cultivation, 20 acres of pasture and 30 acres of bush. The value of the farm and stock is $9,000, against which he has a mortgage for $5,000, which is not an unusual condition among the farmers of Ontario. The following are the! financial statements foi 1922, 1923 and 1924:
42,160 pounds of milk from 8 cows at
$1.24 per cwt
Cows and cattle sold and used
Hcgs sold and used [DOT]
Insurance on horse killed by lightning
Eggs and poultry sold and used
Wood sold and used
Maple syrup sold and used
Potatoes and roots used
General repairs $129 00Taxes
94 35Fire insurance
6 50Feed bought for hogs
161 45Hired help
60 00Threshing and Dressing
55 00Blacksmith bills etc
Horse bought to replace that killed 110 00
Balance $1,073 88
Annual payment on mortgage of $5,000, amortized over 20 years at 6 per cent. 435 90
Balance available for clothing, groceries, medical aid and all other necessities... 1923
44,830 pounds of milk at $1.54.
Hogs sold and used
Eggs and poultry sold and used.
Maple syrup sold
Wood sold and used
Potatoes and roots used
The Budget-Mr. Macdonald (Glengarry)
Repairs $100 00Taxes
0 50Feed bought for hogs and depreciation in value
353 09Hired help
08 75Threshing and pressing
39 25Blacksmith bills etc
Annual payment on $5,000 mortgage.. .. 435 90
Feed for hogs and hens.. ..
Blacksmith bills etc
. $1,136 99
Annual instalment 435 90
mean, I propose to consider in detail the omissions as affecting particularly the mining industry.
Now, with particular application to the mining industry in our own country, wherein does the budget fail? First and foremost, no consideration is given to labour, the most essential element in the success of mining or any other industry. I refer especially to the homes and living conditions of the miners and those who live in mining towns.
A discovery being made, development and construction proceeds apace, a town or city springs into existence, and the inhabitants are forced to install water works and sewage systems, build roads, schools, churches, and public buildings. In one stroke they must accomplish what entails years of slow and patient growth in a fanning or any other industrial community. This being done, and the mine put on a producing basis, the federal and provincial authorities step in and reap the benefit without a word of thanks or a gesture of gratitude.
Take for example, the case of a city in the province of Ontario, a city owing its birth and existence to the discovery and operation of a mine, the city of Timmins with a population of some seventeen thousand people. Under the Mining Tax Act of Ontario, that city is not allowed to levy any tax on the profits of the mine within its precincts, nor upon the mill or other mine buildings. The Ontario Mining Tax is not really a profits tax but is an arbitrary method of giving the provincial government a revenue from profitable operations in lieu of a royalty, while assuring would be investors that stability indispensable to a successful commercial enterprise. The act is based on the report of the Royal Ontario Nickel Commission of 1917, which report takes into consideration the taxing systems of every mining country in the world. Let me quote clause 5 which contains the gist of the act:
5. (1) Every mine in Ontario, the annual profits of which exceed $10,000, shall be liable for and the owner, manager, holder, tenant, lessee, occupier, and operator of the same shall pay an annual tax as follows:
(a) Three per centum on the excess of annual profits of such mine above $10,000 and up to $1,000,000.
0>) Five per centum on the excess above *1,000,000 and up to $5,000,000; six per centum on the excess above $5,000,000 and up to $10,000,000; seven per centum on the excess above $10,000,000 and up to $15,000,000, and on the annual profits above $15,000,000 a percentage or percentages increasing in like progression.
Of this amount, the provincial government allows fifty per cent up to a maximum of
835.000 to go to the local municipality. Over and above this, the federal government lifts
about twice the total and contributes nothing to the municipality.
Allow me to refer to the profit and loss statement for the Hollinger Mine for the year 1925: '
Taxes, province of Ontario $152,296 62
Municipal taxes (except residences owned
in city) 35,000 00
Dominion of Canada 1925 taxes 388,000 00
Dominion of Canada 1924 taxes (adjustment) ' 57,597 34
Not only does the federal government corral more than double the amount levied by the province but the levy is made without allowing the mine to deduct from profits the amount paid either the province or the municipality.
A further incongruity lies in the fact that with regard to the federal income taxes, no allowance is permitted for money spent by mining companies on outside ventures. As everyone knows the development of new mines is extremely hazardous in a financial sense, the proportion of payable mines to the total number of properties on which work is done, being very small. If mining organizations are going to survive they must get new mines, but as the law stands for every dollar spent by a mining company in outside prospecting, exploration, development, and equipment, a tax is paid, and even under the new tax regulations the cost to the companies is $1.04i. It seems only reasonable to ask that in view of the large, very large element of risk in the development of new properties, mining companies should be allowed to spend annually a certain percentage of their capital in outside ventures and that this money if so spent, should be exempt.
With regard to the reduction in the rate from ten and one half per cent to nine per cent, I consider it is merely a matter of shifting the burden with a net loss to the actual shareholder. As pointed out by the hon. member for Quebec West (Mr. Parent):
If you happen to be part owner of a mine, the company first pays the income tax, and as shareholder or part owner you must also pay, so that whereas you are given consideration for depreciation only once you must pay the tax twice.
On hearing that statement I was inclined to agree with the hon. member, but on further investigation I find it is not true. There is a fifty per cent allowance on net profits for depletion of the mine, also an allowance of fifty per cent on mine dividends in the case of gold and silver and twenty-five per cent in the case of copper. No allowance is made in the case of nickel. This is an incongruity which should be rectified.
The Budget-Mr. O'Neill
Reverting to the case of the municipality, I consider it is only fair, equitable, and just that the Dominion, spending a very small item on geology or any activity contributing to the success of provincial mining ventures- I mean comparatively speaking-should
acknowledge indebtedness to the working man and help reduce his tax burden. He pays income and property tax to the municipality as well as income to the Dominion as well. To my mind, it is nothing short of robbery on the part of the federal authorities. The case is totally different from every other community. The city in question, and every mining city as a matter of fact, is situated away off on the frontier; the inhabitants are all workmen raising families, and the school question is more acute than that of housing. Why, in Timmins last year more than the provincial allowance of $35,000 was given out in charity to the workless! Yet the federal money grabber can walk off with approximately one-half million dollars without the slightest qualms of conscience. The same applies in the good old township of Tisdale, in Teck, and down through the silver region.
Recognizing the fact, Sir, that Canada's mineral industry has reached such tremendous proportions, I believe, and I am sure all hon. gentlemen in this House will agree with me, that the time is ripe for the immediate calling of a conference of representatives from the Dominion, the provinces, and the various mining associations for the purpose of framing uniform and non-duplicating tax laws and uniform mining laws in general throughout the Dominion of Canada. I have heard mining men of experience and prominence say that the federal mining laws are beyond all doubt the worst in the world, both as to acquiring and as to holding mining property. There are some irritating differences between the laws of Ontario and those in vogue in Quebec, and these could easily be ironed out before the industry becomes further established. I might add that I have heard mining men from Africa, Australia, and the United States state that Ontario mining laws worked out to greater advantage than any with which they had experience.
It might not be inadvisable here to refer to the present status of Canada's mining industry. The situation is well outlined in a report by S. J. Cooke, chief of the Mining, Metallurgical & Chemical branch of the Dominion Bureau of Statistics at Ottawa in the course of an address at the opening session of the annual meeting of the Canadian Institute of Mining and Metallurgy in Montreal, March
3rd, 1926. Reviewing the developments of the year, Mr. Cook pointed out that the production of minerals reached a value of $224,846,237, an advance of $15,262,831 over the total for 1924, and well towards the record valuation of $227,859,665 attained in 1920, when new production records were established. Among the metals the remarkable advances in the production of gold, lead and zinc were the most outstanding. Improvements in outputs marked the totals for nickel, copper, cobalt and silver. Sales of asbestos increased during the year by more than $2,000,000 to a total value of $8,995,854. Improvement in the production of other non-metallic minerals was noted in the figures for fluorspar, graphite, gypsum, natural gas, petroleum, quartz natural sodium sulphate and carbonate, salt, talc, and soapstone. Production figures for coal, feldspar, pyrites and mica were below those reported in 1924. Except in coal, losses were negligible. Coal showed a loss in tonnage amounting to 508,796 tons and as coal at the mines sold at slightly lower prices during the year the value of the output showed an even greater loss proportionally than the tonnage.
Metal mining in Ontario showed wonderful prosperity in 1925. Gold, silver, nickel, and copper were produced in abundance and in addition to these leading minerals there was a production of almost every other economic mineral with the exception of coal. British Columbia's output of lead, zinc, copper, gold and silver added greatly to Canada's mineral wealth. Quebec's asbestos fields continued to supply by far the greater part of the world's tonnage of this useful commodity; lead, zinc, gold and silver were also reported. Developments in the Rouyn field in Quebec were watched with interest by the mining world during the year. Much progress was made. Alberta, Nova Scotia and British Columbia produced large tonnages of coal in addition to other minerals. Manitoba's mines yielded gold and silver, but more important perhaps than the actual yield of metals was the fact that Manitoba's mineral area was made the subject of a more intense study during 1925, than in other years so that the prospects of production from this source were very considerably improved. New Brunswick's coal and building materials added to the total for Canada. Interest in the oil-well developments in Alberta was very keen throughout the year; it is probable that very encouraging developments will occur in the mineral industry in this province in the early future.
Upwards of 64,000 persons find employment in Canada's mining industry. Ontario, British Columbia and Nova Scotia mines alone fur-
The Budget-Mr. O'Neill
nish employment to more than 45,000 persons. Nearly 20,000 are employed in Canada's metal mining and non-ferrous metallurgical works. About 34,000 people are employed in nonmetal mining and approximately 11,000 in the production of structural materials and clay products. To these salaries and wages totalling approximately $83,000,000 are paid annually. The importance of the purchasing power represented by the employees of Canada's mining industry is sometimes not fully appreciated. Fuel and electricity constitute an expense item reaching a total of almost $20,000,000 a year; much of the progress that has been possible in the mining industry in recent years has been due to the extensive development of hydro-electric power facilities.
Investment in Canadian mines amounts to approximately $632,444,000; of which $281,-
828,000 is invested in metal mining and metallurgical works treating Canadian ores; $259,-
361,000 represents the investment in non-metal mines and $91,255,000 the cost of properties and plants producing structural materials and clay products. .
Mining, now third in rank among Canada's primary industries contributes extensively to the wealth and prosperity of the Dominion. Large tonnages of freight move from and to the mines; many subsidiary industries depend upon the mining industry for their prosperity. Canada's progress in the production of mineral wealth has been notable particularly in recent years; the developments in established fields have won the confidence of the investing public; the discovery of new mineral areas has provided attractive opportunities for those of a more speculative nature; the growth and evident stability of the mineral industry stamp it as one of the great and increasing factors in Canada's industrial and commercial life.
At this point, Sir, I would refer to certain special items in the matter of the mining industry regarding the tariff and sales tax. Here is where 1 may find myself a bit isolated, although I am sure it is the policy of the protectionist party not to advance the interests of one class at the expense of another, and should be, of course, the policy of the government.
With regard to tariff and sales tax, the intention and the desire of the government apparently is to remove or lessen the duties on essential machinery for production in natural resources. The government has been very considerate to us, but there are a number of items where there is discrimination, due in part to the fact that the tariff takes no con-fMr. O'Neill.)
sideration of advances in mining and metallurgical practice, and also due in part to a lack of knowledge with regard to the machinery used by the industry. Following I might mention several items in which this appears to be the case.
There is a considerable consumption of dehydrated borax by the mines, particularly in refining of gold bullion. Ordinary borax comes in duty free, although it is used in the manufacture of a large number of articles which themselves are protected by a duty. The only difference between borax and dehydrated borax is that in the latter some of the water is driven off, but although it is still borax, when imported in that form it pays a duty of 17| per cent.
Mine hoists are not specifically mentioned in the tariff and because of this fact they come in under article 453 and pay a duty of 27J>
per cent plus 5 per cent sales tax. Compressors and wire ropes also pay a high rate of duty and sales tax. If either hoists or compressors are used in the lumbering industry or ropes used in connection with block and tackle, they come in under reduced rate of duty and are exempt from sales tax. This appears to be discrimination against the mining industry in favor of lumbering and as they are both basic industries, there seems little excuse for it.
Rock drills come in under reduced rate of duty and together with drill steel are exempt from sales tax. Drill sharpeners however and steel tempering furnaces pay a high rate ol duty and also pay the sales tax. As the twc latter are used in the manufacture of the drilling bits, it would only seem reasonable that they should be at least exempt from sales tax.
Tariff item 460 provides that, "sundry articles of metal as follows, when for use exclusively in mining or metallurgical operations" shall come in duty free. It appears that the limiting of this to articles of metal is unfair, in some cases. I might point out that steel cyanide tanks come in duty and sales tax free, while wooden tanks, for the same purpose, pay a duty of 25 per cent plus 5 per cent sales tax. You know filters all have filter cloths; American filters have redwood sectors and filter cloths. A complete filter, including the canvas and Redwood sectors, come in duty free, but spare Redwood sectors pay 25 per cent duty plus 5 per cent sales tax and extra cloths or bags pay 35 per cent duty plus 5 per cent sales tax.
I might also mention that crushers, ball mills, tube mills, and so on, come in under reduced rate of duty and are exempt from sales
The Budget-Mr. O'Neill
tax. Cyanide machinery comes in duty free and is exempt from sales tax. Between these two, however, are the classifiers, and the Department of Customs and Excise considers that classifiers do not property belong either to the cyanide machinery or to the crushing machinery, although they are of course essential to both. Because of this classifiers have to pay 274 per cent plus 5 per cent sales tax.
I might also mention that mine cars, and so on, are exempt from sales tax, but the rails on which they run are not. The 6mall mine locomotives, for underground use, which are practically the same as cars, pay a duty of 35 per cent plus 5 per cent sales tax, although they are not manufactured in this country. They perform the same function for the mines as tractors do for the farmers and tractors or locomotives in lumbering operations. Farmers can bring in tractors duty free; lumbermen can bring in tractors and locomotives at 20 per cent, exempt from sales tax. Any person can buy a tractor under a duty of 27i per cent plus sales tax, but the mine locomotive pays a duty of 35 per cent plus 5 per cent sales tax.
It seems to me that the timber used in mining operations should also be exempt from sales tax, because it is really a by-product of farming; also in view of the fact that a certain amount of clearing is done around the mine and the timber is sold. As hon. members know, it does not enter into the final product and timber once put underground has no salvage value. As used in the stopes it is essential to the operation of rock drill and steel, both of which are exempt from sales tax, and as used in the shaft it is essential to the operation of mine cages, cars and skips, which are also exempt from sales tax.
I am also inclined to think it is rather unfair to differentiate to the extent that is done between machinery for the cyanide process and machinery for concentrators, where the same machinery is used in both cases. When used in the cyanide plant it enters duty free and is free from sales tax, while the same machinery used in concentrating ores is not exempt and pays a high rate of duty. Flotation oils, et cetera, are exempt from sales tax when used in the production of a product which itself is not exempt, but when used in connection with gold or silver ores they have to pay a sales tax. These are only some of the items to which I should like to refer.
There is also the question of salt used in the refining of nickel. This is not the ordinary type of salt as manufactured in Canada, but 14011-211
Topic: THE BUDGET
Subtopic: CONTINUATION OF DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE