Air. HUME CRONYN (London):
Herbert Ames), if my memory serves me correctly, that future loans should not be exempt * from taxation. Hitherto,-I speak subject to correction,- all our domestic loans have been exempt from federal taxation. Last year, when the present hon. Minister of Public Works (Mr. Carvell) brought up this point to the Minister of Finance, he was told that to issue a loan subject to taxation and to make it a success, the yield rate must be made more attractive and that therefore the matter was as broad as it was long. With very great deference to a man for whose opinion I have the highest respect, and whose experience and judgment in these matters is in quite a different class from my own, I venture to differ from him on that point. I think that if you will take a concrete statement-an absurd statement if you like, but simply for the purpose of illustration,- it will show wherein the difference lies. Let us suppose an investor with an income of $200,000 free to change his investments. If he holds no war loan, under the new scale, he will be liable to the payment of a tax of nearly $50,000; that is, that about one-quarter of his entire income will go in taxation. If, however, he be free to invest in the war loan, he escapes any taxation. I do not say that this is a possible case, because no man has his investments in such shape that he could realize on them without loss and invest in war loans, but for the purpose of an illustration it will answer. Take a hundred married men with incomes of $2,000 and let these incomes be derived purely from the war loan. They would pay no tax because their incomes are not over $2,000. If, then, we issue a taxable loan at a higher rate, the man of small means will receive the higher rate, and either pay no tax, because his income is under the limit, or pay a very light tax; whereas, the wealthy man, while he also does receive the higher rate, is subject to a tax that far more than offsets the additional amount the country must pay by way of increased interest. I would therefore strongly support the suggestion of the former speaker that the Minister of Finance and those advising him should carefully consider this phase of the question.
I quite understand that last year, when we had to issue not one but two loans, and when our financial position both with Great Britain and the United States of America was not clearly defined, it might have been a risk to attempt to take such a step. But I am inclined to think that with the work done on the Victory Loan, and with
the stimulus throughout the country caused by that work, a loan, subject to taxation could be successfully floated.
I would add to that suggestion a second one, and it is that the convertible feature of these loans should be now dropped. We all hope, just as we hope for peace, that this may be the last of these loans, but if there are others to follow, and others at a still higher rate of interest, it greatly increases the burden of the country if the holders of the former issues can convert them into those paying a higher rate. The effect of that action will perhaps not be great this year. It would only affect, if at all, the wealthy investor, but its full effect would come into operation so soon as a further loan was floated.
I now enter upon what we may fairly term debatable ground and that is the question as to the method by which our taxes are raised. As one of the former speakers has remarked, the criticism directed against the Budget was somewhat in line with the old-time debates which have for so long been heard in this House. In examining the revenue which the country secures from one source or another, we see that indirect taxes still contribute the major portion of our income. I want to say to the hon. member for Brome (Mr. McMaster), who invited us on this side of the House to partake of his simple and magic process of healing, that I was born, and have lived beside the true Jordan all my life and neither the Abana or Pharphar nor any of the rivers of Damascus hold superior attractions for me. The ideals which, one carries, more or less dormant, perhaps, throughout life, have pictured a people deep-rooted in the soil, and a yeomanry, satisfied, hardy and intelligent, who would carry on the great career of our race. Whether from prejudice or other insufficient reason, my imagination has never been greatly stirred by the appeal of huge industries and the ceaseless whirr of the wheels of commerce.
Perhaps, too, closely associated with these are the slums of the big cities, the penury and hardship of the poor, and the sharp contrasts which there exist between wealth and poverty. I make this explanation so that I may feel myself free to say, starting from such a standpoint, I would not urge during the present war any great change in tariff conditions. We have seen growing up of late years in the United States those huge combinations of capital and industry very often termed trusts. We have read much of their ruthless powers,
and their sometimes wholly indefensible methods of competition. I do not think this is the day to do anything which would deprive the Parliament of Canada of the control it should have over those who manufacture or .sell goods within her borders.
Another point, which is of still later discovery, and I think is now admitted by most military writers: No nation can undertake any part in modern warfare unless she is wholly organized in industry. That is an admission we dare not hope this war will be the last war. Whether that be so or not, it would be well to wait and do nothing to affect the standing of our industries during the present crisis. Even with more diffidence than in the case of the-former suggestion, I would like to ask the Acting Minister of Finance and his colleagues to consider the advisability of the appointment of a permanent tariff and financial commission. The whole world of finance has so altered in the last few years that most of us feel* we should be again at school in considering questions such as these. The first thing that is necessary in formulating a tariff, ot making a financial decision, is to know the facts, and so far as I am aware we are in woeful ignorance of many of the facts governing the industries which we presume either to aid, or as they claim injure, by the imposition or reduction of customs duties.
There is one other point which I would like to also mention, and that is in connection with the Excess Profits Tax. I have no interest in any institution making a profit out of the war. Nay, rather, every institution with which I am connected has been injured rather than helped, and the struggle has been rather to maintain prewar earnings than to reap benefits from war conditions. But, endeavouring to look at this question from an impartial standpoint, it does seem to me that the very sharp rise from a tax of one-fourth when profits amount to fifteen per cent to one-half of those profits
when they amount to twenty peT cent, and a further increase to a seventy-five per cent tax on additional profits will act as a check on the expansion of many of the fundamental industries of the country, and will, moreover, deter the entry of fresh capital into Canada. We must not forget that jwe can obtain a high return from the 'best form of investments which do not call for any personal energy, and where there is an almost absolute absence of risk. When, therefore, sums are put into industries
where risk is always a predominant feature, where a series of lean years may occur, it is wise, I think, both from the point of view of the industry and of the country, that that industry toe allowed to accumulate a very substantial reserve to meet the poissi'ble hard times ahead of it. Then, too, we moist not forget the effect of our increased Income Tax and of our Excess Profits Tax on future Government loans. There can be no doubt, as one [DOT]writer has put it, "the ultimate source of a national loan is the unspent income of the nation's producers." Hitherto it is possible (we have been able to find investors whose money has been lying by awaiting some suit-, able security, 'but that reservoir will soon be emptied and we must then depend upon the thrift and productiveness of the nation to yield each year a sufficient sum which can be turned over to the Government to aid in the war. As one American financial writer has put it:
When a nation declares war it is turning its face towards commercial bankruptcy, and the task of the financier at that time is to so control both the machinery of credit and the machinery of taxation that the productive power of the country may he used to make headway against 1 unproductive consumption, and at the same time to hold under control those forces that tend to wreck the industrial organization by which that power is maintained.
Canada, to my mind, is in one sense the most marvelous factory of the world, a plant ready and waiting for the workers. It is true that we may have, for the moment, too heavy, an overhead cost; we may have a multiplicity of legislative machinery, more than sufficient for our population. But, looking to the future, and believing, as I think we all do, in the progress this country will make once times become normal, every care should be taken not to place barriers against that progress.
In concluding these remarks, Mr. Speaker,
I feel sure that the country is prepared to accept any burden imposed by this budget cheerfully and in the 'best spirit. It has been said that some section or other of the country does not realize that we are .at war.
I think, sir, we do realize that we are at war; but, perhaps a majority of us do not realize the personal obligation cast upon every one to do. his or her share. The habits of a lifetime, the love of ease, the conventions which surround us, prevent us from giving full effect to the force which we could exercise in aid of the nation. We do not forget the claim of those who have
given up their all, and who say to us in the words of the poet:
O you that still have rain and sun,
Kisses of children and of wife,
And the good earth to tread upon,
And the mere sweetness that is life,
Forget not us, who gave all these For something dearer, and for you!
Think in what cause we crossed the seas! Remember, he who fails to challenge Fails us too.
I do not believe, Mr. Speaker, that this country will fail the challenge; it will rise to the heights; it will gird its loins, and bend its back to meet whatever burden may be put upon it for the one end we have in view.
Mr. A. B. Me001G (Kent, Ont.): Mr. Speaker, in rising to say a few words in this debate, I wish, in the first place, to congratulate most heartily the Acting Minister of Finance (Mr. Maclean) for the able way in which he presented his case yesterday to this House and to the country. I also wish to pay my respects to my colleague the hon. member for the city of London (Mr. Cronyn) upon the excellent matter of his maiden speech in this House.
Topic: QUESTIONS PASSED AS ORDERS FOR RETURNS.
Subtopic: THE BUDGET.