Hugh John FLEMMING

FLEMMING, The Hon. Hugh John, P.C.

Personal Data

Party
Progressive Conservative
Constituency
Carleton--Charlotte (New Brunswick)
Birth Date
January 5, 1899
Deceased Date
October 16, 1982
Website
http://en.wikipedia.org/wiki/Hugh_John_Flemming
PARLINFO
http://www.parl.gc.ca/parlinfo/Files/Parliamentarian.aspx?Item=e7d3aa7f-46b2-4d6c-82a4-8a11a0ea4e6e&Language=E&Section=ALL
Profession
lumberman, merchant

Parliamentary Career

October 31, 1960 - April 19, 1962
PC
  Royal (New Brunswick)
  • Minister of Forestry (October 11, 1960 - March 17, 1963)
June 18, 1962 - February 6, 1963
PC
  Victoria--Carleton (New Brunswick)
  • Minister of Forestry (October 11, 1960 - March 17, 1963)
  • Minister of Mines and Technical Surveys (July 18, 1962 - August 8, 1962)
  • Minister of National Revenue (August 9, 1962 - April 21, 1963)
April 8, 1963 - September 8, 1965
PC
  Victoria--Carleton (New Brunswick)
  • Minister of National Revenue (August 9, 1962 - April 21, 1963)
November 8, 1965 - April 23, 1968
PC
  Victoria--Carleton (New Brunswick)
June 25, 1968 - September 1, 1972
PC
  Carleton--Charlotte (New Brunswick)

Most Recent Speeches (Page 4 of 166)


November 29, 1971

Mr. Flemming:

That is right. What will probably happen is that they will be able to use the benefits of the lower tax rate for expansion and to make themselves more efficient, and at the end of the period they will be prevented from selling it even to one of those good corporate companies which I mentioned earlier. By being obliged to retain it, they will not have the liquid funds to carry on because they have been put back into equipment and general improvements in the plant. It seems to me that some consideration might be given to the question of corporate taxation as it applies to companies with a long record of satisfactory performance in accordance with the laws of this country.

If the government in its wisdom, or lack of it, decides that in future things will be changed and there will be no foreign ownership of business in Canada, that is their right. But they should at least present it to this Parliament and the people of Canada for approval. It is my opinion that the people of Canada will not approve it. It is my opinion that the government will go out of business on that issue. If they want to do it in the future, possibly there is some justification. But I submit, Mr. Chairman, that we cannot say to corporate citizens who have had satisfactory business relations and who have contributed to the building of flourishing communities, "You are no longer welcome in Canada and you must get out". I do not think the people will support that kind of attitude and will say to the government, "You are the ones who should get out."

That is my contribution relative to the small business provision. I know something about small business. I know something about frozen assets, about small businesses not having ample funds and not having a great deal of liquidity. Nevertheless, small business is helped a good deal by government taxation policies. Compared with taxes which large corporations pay, the tax rates of small businesses are somewhat favourable. The government reduced corporate taxes by 7 per cent in 1971 with the idea of stimulating business. I believe in that policy and I hope, as I am sure we all do, that it will bring benefits and improve employment and the general economic situation of the country.

We must bear in mind that developments taking place from day to day may affect some of the things that governments can do. I do not pretend to be an expert on oil and gas. The other day the National Energy Board decided that we did not have a sufficient surplus of natural gas for additional export and that we should not export more than had already been approved. I am sure we all recognize that the National Energy Board comprises a group of men who are anxious to do a good job and perform a worth-while service for the country.

November 29, 1971

Income Tax Act

Nevertheless, I submit, Mr. Chairman, through you to the parliamentary secretary that since there is a demand for this product, since our neighbours to the south want it, it would be the essence of common sense for the government to say to those exploring for oil and gas, "Not only will we make the tax laws applying to you beneficial; we will make them even more beneficial than they have been." It seems to me that you will not get people to risk their money for holes to be dug in the ground in search of oil and gas unless there is a reasonable prospect that at some point they may receive some benefit from the venture. After all, they will drill many dry holes in the process.

The government, I submit, should be encouraging exploration because a market for gas has been established. I have found that when there is a demand for a product, people do their best to produce it and meet the demand. When there is demand, people will always attempt to fill it. The government, however, will not acquire for this country additional supplies of oil and gas if it imposes taxes so onerous that people will not undertake the risks associated with the finding of those products.

My time has almost expired. I urge the parliamentary secretary to note what has been said about small business. There is one more thing I want to say. If an owner should dispose of a small business, what would be the difference to him if he were to dispose of it to a Canadian owner as opposed to a foreign owner? It seems to me that someone should rise and in simple language tell the members of the committee just what is the position of the owner of a small business and what he can do in this regard. I realize that some may say, "Why do you not read the bill?" I much prefer to hear an expert who is familiar with the bill and has studied it explain to the committee what he has discovered. I hope that before long we will receive in this committee a simple explanation. How will the owner of a small business be affected if he sells his business to Canadians or if he sells it to foreign owners? What will be the difference to him?

I come back to my first observation. I do not understand why the proclamation provision should not apply to the entire bill. It could be proclaimed if the government, after it has discussed the matter in this chamber, feels it is desirable to do so in the interests of the people of Canada.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
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November 29, 1971

Mr. Flemming:

Mr. Chairman, I am impelled to offer a few remarks concerning this portion of the tax bill owing to the fact that I am anxious to support the suggestion which has been made by the hon. member for Edmonton West, reinforced by the hon. member for Peace River, when they tried to impress upon everyone within sound of their voice the general desirability of passing a portion of this monstrous bill and leaving the controversial and unacceptable parts to future discussion and future examination. In this way, we could ensure that this whole bill, which after all is a matter of great consequence to the Canadian public, would be taken in stages rather than inflicted upon the people in its entirety. So, I rise for the purpose of supporting that argument and I hope it will meet with some consideration by the government.

I am not expert enough in the rules of this House to know whether or not a large bill with as many sections as this one has could be passed subject to proclamation, and then various sections proclaimed when the government decides that it is appropriate to do it. Personally, I see nothing wrong and no reason why that course should not be applicable to this bill. It seems to me to be fair and desirable, if the government wishes to have the whole bill passed, that they introduce as part of the bill a proclamation clause so that the various sections can be proclaimed as it develops that those sections should be proclaimed. I realize that any suggestion coming from over here will not necessarily be treated with tremendous respect, but I hope that this suggestion which has been advanced by the hon. member for Edmonton West and the hon. member for Peace River this afternoon and which, I understand has been advanced also by the Leader of the Opposition,-I hope my friend, the hon. member for Hamilton West will not take me to task when I say this-will meet with favourable consideration by the government.

In the white paper proposals there were certain suggestions regarding corporate taxation. I do not wish to go into the details of what took place at the various hearings which the committee held, sometimes in the east and sometimes in the west of Canada, but it has been suggested that they took these proposals to the people for the purpose of securing their opinion. I might say, as a member of that committee, that I never saw or heard tell

of any proposals which received as much opposition as did the white paper proposals almost in their entirety. So, if the government learned anything from the hearings which were held by the committee, surely they must have been impressed with the fact that in general terms the proposals were undesirable and unacceptable to the majority of the people of Canada.

I happen to think that the government is wrong in its approach to the whole question. I have said before, and I repeat it because I think it bears repeating, that they could have accomplished the changes that they wished to accomplish by amending the statutes which have been in existence in connection with taxation ever since the inception of parliament, and certainly those in connection with income tax dating back to 1917. There is no reason the government could not have taken what is acceptable to them and then added or taken away from that as it suited them. We would then not have had such a complex and difficult bill to understand. I am not the only one who says that it is difficult to understand. We have had chartered accountants and lawyers who said that they were bewildered by it and were unable to digest it.

So, I submit that the nearest approach to retaining something that is good in the present statute would be for the government to carefully consider the addition of a proclamation clause to the bill, following which it would proclaim from time to time certain sections as the staff and the general public seem to understand them and as they appear to receive that degree of acceptance which would be necessary.

The white paper proposals were examined by the committee under the very capable chairmanship of the parliamentary secretary who is piloting the bill this afternoon. I say to you, Mr. Chairman, that he handled those hearings in a most distinguished way and brought great credit to himself and to the government. I am glad to see him occupying the position he does here this afternoon in piloting this bill. I think that he is more likely to accept some of our proposals than is the other parliamentary secretary who was here last week, at least I hope that is the case, Mr. Chairman. On June 18, in his budget speech, the Minister of Finance modified the proposals in the white paper. He acknowledged that the proposals were unacceptable, not only to the business community but also to a number of provinces. As a result, the government decided to modify the existing system for taxing corporate income rather than introduce a comprehensive new system.

Then, as you know, within the last month or so the government has decided to accept the recommendation that has been advanced from this side of the House on a good many different occasions that they stimulate employment by a reduction of taxation. In other words, what the government acknowledges is that they are willing by a reduction of taxation to encourage private business to employ at least a portion of the people who are presently unemployed. That is what the minister said in his speech. As a consequence, the corporate tax has been reduced by 7 per cent of the amount payable. I hope that the parliamentary secretary will digest this. When the government accepts the proposal that it is going to take 7 per cent of the corporate tax as a means of stimulating employment and the economy, surely that means that

November 29, 1971

when they changed the tax laws, thus increasing taxation, they must have been wrong. I do not criticize them for this reduction as I think it was necessary and I am sure every member of this House hopes and expects that some benefit will result.

I turn now to the 20 per cent dividend tax credit that is being replaced by 33 1/3 per cent. I do not propose to go into that matter in detail because it is rather complicated. I cannot follow the argument that to increase the dividend tax credit will not stimulate the ownership of companies by Canadians. I cannot see how it could fail to have that effect.

I should like to speak now about small corporations with annual incomes of up to $50,000. Under the present act the rate is 21 per cent on income up to $35,000, and under the proposed legislation it starts at 25 per cent but the amount on which that would apply is raised to $50,000. As an alternative to the present lower rate of corporate tax on the first $35,000 of income the government has introduced a small business credit to be available only to Canadian-controlled private corporations. This restriction excludes from the eligible group any private corporation controlled in any manner whatsoever by non-resident persons or by some combination of non-resident persons and Canadian public corporations.

The credit is applied to reduce the federal corporate tax and is computed initially at 25 per cent on no more than $50,000 of business income of each taxation year. The rate of credit is to be decreased concurrently with the decrease in the general corporate tax rate to 24 per cent in 1973, and by a further one percentage point per year until it reaches 21 per cent in 1976. Corporations may continue to claim the credit until such time as they have accumulated and retained $400,000 of earnings.

Since the credit is to be granted at the corporate level it has been found necessary to retain the present detailed associated company provisions, with minor modifications, and the present provision for ministerial discretion in order to restrict the amount of benefits which might be claimed. Both the $50,000 annual limit and the $400,000 retention limit must be allocated annually amongst companies which form an associated group.

I believe that a degree of foreign ownership is beneficial. I believe if you have participation in the management of a company and it brings with it the research it has established as being desirable, and the experience of its operation, it tends to distribute more jobs. I think Canadians should try to emulate this sort of thing and learn from it. Foreign ownership does not necessarily mean ownership within the United States of America. In my province there are companies controlled by the British and some by the French, and in every case they bring ideas to the country. To say that all investment of foreigners should be kept out is ridiculous and I do not subscribe to any such doctrine.

To my certain knowledge there are companies that have been doing business in Canada for 25, 30 or perhaps even 50 years and have acted as good corporate citizens. If they have established a reputation and have conducted their business in accordance with the laws of Canada, then to say that they cannot receive a particular tax benefit seems 24725-31

Income Tax Act

to me to be rank discrimination. I repeat, these companies have established a reputation for living within the laws of Canada, being good, law-abiding citizens, paying their people well and abiding by the labour laws of the country.

I want also to speak about the total business limit of $400,000. That is what they will be allowed-

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
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November 22, 1971

Mr. Flemming:

We are discussing a complex phase of a complex portion of the tax reform bill. When I say tax reform I want to say that I do not subscribe to the words whatsoever, because tax reform suggests tax improvement. This is not tax improvement by any stretch of the imagination. If people were honest with themselves they

would not call this monstrosity tax improvement, because it is not.

When the bill is referred to committee of the whole then I suggest it is the business of the minister sponsoring it to be in his place to explain the bill for the illumination of all members. In this case, that responsibility has been delegated to the parliamentary secretary to the minister, the hon. member for Calgary South, and I find no fault with that. But when the parliamentary secretary fails to rise in his place at the beginning of any series of sections of a complex bill to explain to the committee what the government expects to accomplish by these new portions of this bill, then I do find fault.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
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November 22, 1971

Mr. Flemming:

So the Prime Minister invited them. Let us accept that as a proper statement. But why are they here, if not to object? I submit that business in Canada today is in a state of tremendous confusion and uncertainty resulting largely from the government's actions on taxation. The government seems determined to make change for the sake of change. It has not been demonstrated to me that things needed to be improved.

I said a moment ago that about $6 billion of our total revenue, or about 50 per cent, comes from the taxation of individuals and corporations. However, I did not give the whole story and now I want to do so. In the three years for which I am about to give figures-that is, 1968, 1969 and 1970-the revenue from taxation under the headings I referred to was $4.5 billion, $5.3 billion and $6.7 billion respectively. The point is that here we have tax laws which apparently without disturbing the business community resulted in increased revenues every year of about $1 billion. The government is not satisfied with that; apparently it wants more.

The plain fact is that if business in Canada and abroad is to remain competitive, it must operate in a tax environment that is at least as favourable as that applying to its foreign competitors. I should like the parliamentary secretary to listen to me. If businesses are to remain competitive, Mr. Chairman, it is necessary for them to operate in a tax environment that is no less favourable than that in which their foreign competitors operate. That seems like ordinary, common sense. Apparently this government is not conscious of that fact or, if it is, it is absolutely indifferent. They go merrily on their way chasing after the last dollar and trying to portray the businesses of this country as public enemy No. 1. That is what the government is doing by this legislation.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
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November 22, 1971

Mr. Flemming:

I will take only a minute, Mr. Chairman. We have no assurance from the government that the restrictive measures which have been included in this bill will have any beneficial effect. Perhaps the parliamentary secretary would like to convince me that they will. I would be glad to be convinced. So far, however, I remain unconvinced. The government seems to be absolutely unconscious of the effects of high taxation. It is time it woke up and considered what action it ought to take in the interests of all the people of Canada.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Full View Permalink