Mr. NESBITT:

Is there any way of getting at the profits of the large American grain dealers who deal on the Toronto and Winnipeg grain exchanges, more especially Winnipeg, such as the Armours, Patten and that class of people, and who are supposed to make large profits? They "hedge" on grain-anybody who understands grain exchange business will know what that means -and they make very large profits in the transfer from month to month.

Sir THOMAS WHITE:

If they are carrying on business in grain in Canada, and if

they have capital invested in that business, they will be liable if their profits are such as to bring them within the provisions of the Act. A grain firm might have very small offices and yet might have a good deal of money invested in the business in Canada.

Mr. NESBITT:

I do not think they are capitalized.

Sir THOMAS WHITE:

They might have a good deal of money invested in carrying this grain and otherwise in connection with the conduct of their business. In the case of an American firm doing business in Canada from the United States, its capital might relate to its American business and not to its Canadian business and, if so, the Act would not apply.

Mr. NESBITT:

I think they all have

branch offices in Toronto or Winnipeg, especially Winnipeg. They do not carry capital, I think, but they have a large amount of money invested and the minister might get at them in that way.

Sir THOMAS WHITE:

I think that would be capital.

Sir THOMAS WHITE:

I beg to move that the words " next " and " to " in the second line be transposed.

Section amended as proposed, agreed to.

On section 13-assessment by minister; payment of taxes where two accounting periods accrue on 1st July, 1916; liability to pay tax continued for three years:

Mr. A. K. MACLEAN:

I would suggest that we take this up clause by clause; it is too involved to follow by merely reading. I would like to have an explanation of the first clause. What is the purpose and effect of this provision with regard to two accounting periods in one year?

Sir THOMAS WHITE:

My hon. friend will recall that when the measure was first introduced it was pointed out that there might be taxation payments in respect to two accounting payments falling due in the present year, and in order to relieve taxpayers from having to make payment in respect of both we determined to spread the payments over three years.

Mr. A. K. MACLEAN:

Will the hon. minister please take a case; we can follow it much better.

Sir THOMAS WHITE:

Take the case of a firm whose accounting periocL ended 31st January, 1915. Its next accounting period would end 31st January, 1916. Now, if we made the assessment in respect of those two accounting periods this year the firm in question would have to pay, in 1916, the taxation in respect of 'both accounting periods. So the following proviso is made:

Provided, however, that if on the first day of July, one thousand nine hundred and sixteen, any person is liable to pay a tax for two or more accounting periods, comprising a period of not less than two years, then such person may pay the tax for the accounting period or periods comprised' in the first twelve months on the first day of November, one thousand nine hundred and sixteen, and for the accounting period or periods comprised in the second twelve months, on the first day of November, one thousand nine hundred and seventeen, and may pay a tax for the accounting period or periods comprised in the subsequent twelve months on the first day of November, one thousand nine hundred and eighteen.

So the parties assessed will be liable to pay on only one accounting period in twelve months.

Mr. NESBITT:

The Bill provides:

In default of payment, interest at the rate of ten per centum per annum shall be paid on such tax until the said tax and interest are paid.

Is this ten per cent in the nature of a penalty?

Sir THOMAS WHITE:

Yes,

Mr. NESBITT:

Does that apply to the poor fellow whose accounting periodt ends, as the minister has said, on the 31st of January, 1915, and then has another on the 31st of January, 1916, and postpones payment until next year? Does the ten per cent apply to the postponement?

Sir THOMAS WHITE:

No, for he is not in default. This is in the nature of a penalty. Otherwise, there might be difficulty in collecting it.

Mr. NESBITT:

The minister allows postponement of payment for the second accounting period for the very purpose of assisting the man to pay. It is almost certain that the only reason a man does not pay when the tax is due is that he is too hard up. Don't you think that ten per cent is a rather severe penalty? Would not seven per cent be quite enough? A tax is not like any other debt; the man will pay

it promptly if he possibly can. And you do not help him to pay by adding ten per cent to his tax. I have always argued for that principle as against people who, when a man is 'behind in his payments, impose an excessive penalty. I think it is a mistake; for, if a man is honest and willing to pay, nothing is gained by adding excessive interest.

Sir THOMAS WHITE:

This penalty is in most assessment measures. My view is that the parties who will be liable to this tax will 'be so well able to pay that there will probably not be much in arrear. But I have no objection to reducing it to seven per cent, and; probably that is sufficient. I move:

That in the twenty-eighth line of subsection 1, the word " ten " be struck out and the word " seven " substituted.

Mr. SINCLAIR:

If a man makes no return for three years, as mentioned under subsection 3, will he have to pay interest.'