March 17, 1926

LIB

James Alexander Robb (Minister of Trade and Commerce; Minister of Finance and Receiver General)

Liberal

Hon. J. A. ROBB (Minister of Finance):

My hon. friend (Mr. Church) has presented his argument in a very fair manner, as he always does, and I thank him at once for his kind personal reference to myself. If there is any man in public life who requires a little comfort once in a while it is the Minister of Finance of the government of the day.

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink
IND

William Findlay Maclean

Independent Conservative

Mr. MACLEAN (York):

He is standing it all right.

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink
LIB

James Alexander Robb (Minister of Trade and Commerce; Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

Of course I am speaking of

governments in general. There might be another government to-morrow. The Minister of Finance is obliged to find revenues for the administration of the affairs of the country and to provide for the deepening of harbours, for the erection of public buildings, for increased salaries, and all the rest of it. No later than yesterday the hon. member for Toronto Northwest (Mr. Church), who has so

eloquently pleaded this afternoon for a reduction in the income tax, pleaded with equal ability for expenditures in the city of Toronto and for increased salaries to the employees of the country. Clearly, I shall have to have a half hour's quiet talk with my good friend to see whether he can offer me some recipe to enable me to meet the two demands he has made.

I know, of course, that taxes are never popular. Everyone likes to have his taxes as low as they possibly can be, and there are _ a great many people in Canada who are try- >

ing to dodge taxation. There are also methods provided whereby they can do so; we ourselves provided such methods during the war. At that time everyone was keyed up and we were all anxious to finance our share of the obligations of the war. We therefore issued a considerable quantity of tax-exempt bonds, which to-day are held for the most part, not by the ordinary taxpayer whom we can get at, but by rich people who could and should contribute to the revenues of the country. They have these tax exempt bonds stored away and are thereby enabled to evade taxation.

My hon. friend is quite correct when he says that the income tax and other taxes which the people of Canada are to-day paying are the result of the war. We went into the war to the limit, assuming great obligations, and although, as my hon. friend says, the war has been over for some years we must not forget that the expenditures incurred during that time have still to be met. In that sense, therefore, the war will not really be over for Canadians for some time to come.

I do not suppose that there is an hon. member who would stand up in his place in this House and advocate a repudiation of the obligations which we undertook in the war. Well, we require money not only to meet the interest in our war debt but for pensions, and many other expenses which are directly attributable to the war. For instance, it is reckoned by officers of the department that of the estimates now before the House fifty-eight per cent is required to -provide for statutory and war expenditures. Hon. gentlemen will therefore observe how difficult it is for a government, let it economize how it will, to make both ends meet and to provide for the requirements of the country. And everyone who h'as confidence in this country will admit at once, I am sure, that there are certain undertakings which it is necessary that we should carry out.

My hon. friend referred to the conference held a few years ago in Ottawa between the

Taxation in Canada

Minister of Finance of the Dominion iand the treasurers of a number of the provinces. Not all, but most of the provinces were represented at that conference, and while there was a difference of opinion upon some issues, I think we were unanimous on one point, and that is that both the Minister of Finance for the Dominion and each of the provincial treasurers were fairly well disposed to maintain the policy of "what we have, we hold." The provincial treasurers were all anxious to retain their taxes and I was equally anxious to hold on to the taxes in the federal field. It is true, as my hon. friend said in his concluding remarks, that the provinces have incurred considerable expenditure in recent years. This is due to the condition of the times. The automobile has brought about an increased expenditure in most provinces through the construction of better roads-for good roads are expensive. Many of the provinces have spent a good deal of money on the improvement of their highways, and this of course, involves taxation. I am glad to say, too, that there has been an improvement in our system of education; most of the provinces are paying more for education to-day. Many of the municipalities are also paving their streets, erecting public buildings, and doing other things that are adding materially to their expenditures, so that the provinces and the municipalities unquestionably have increased burdens to bear. But none of the provinces or municipalities have any war obligations to discharge. The obligations of the war are upon the federal treasury, and we of the Dominion parliament, having a desire to provide for the expense of the war and the carrying on of the affairs of the country, must consider very carefully what taxes we can dispense with. I notice in the argument of my hon. friend that he did not challenge the right of the Dominion government to impose an income tax. That question was challenged by a minister of one of the provinces, who claimed that under the- British North America Act the provinces alone could impose income tax. The question was decided in a judgment rendered by the Privy Council in the case of Caron vs. the King in 1924, and for the information of hon. members I shall place on the record the headnote of that judgment:

The parliament of Canada had power under section 91 head 3 of the British North America Act, 1867, to enact The Income War Tax Act, 1917 and amending act, of 1919, whereby every 'person residing or ordinarily residing or carrying on business in Canada is rendered liable to pay income tax; and a minister of the government of a province is liable under the acts

in respect of the salary and sessional indemnity payable to (him under statutes of the province.

The Income Tax Act of 1917 was first introduced by Sir Thomas White in July of that year. It might be ' interesting to hon. members to have on the record the opinion of Sir Thomas White, who was Finance minister of the day. Sir Thomas White was not only a good Finance minister, but a good lawyer and a well posted legal authority as well, and had very decided views on taxation problems as between federal and provincial governments. Sir Thomas, in presenting that bill, made these observations, which I find on page 3760 of revised Hansard of 1917:

Mr. Chairman, the enactment of the Military Sendee bill which has just passed through the House will result in material increase in and acceleration of the war expenditures of the Dominion.

By that bill, provision ds made for calling an additional 100,000 men to the forces of Canada. In view of the expenditure involved, and in order to maintain the credit of the Dominion, it is necessary that we should adopt further taxation measures. Apart from this necessity from a financial standpoint, there has arisen, in connection with the Military Service bill, both in this House and in the country, a very natural and, in my view a very just, sentiment that those who are in the enjoyment of substantial incomes should substantially and directly contribute to the growing war expenditures of the Dominion.

In view of these considerations, I desire to-day to lay before this committee proposals for a national measure of income taxation. I may say that the adoption of such a measure is a distinct innovation in federal fiscal legislation. Hitherto we have relied upon duties of customs and of excise, postal rates and other miscellaneous sources of revenue. It is true that since the outbreak of the war we have adopted the Business Profits War Tax Act which is a measure of direct taxation akin to income taxation, but not so wide in its scope. As the members of the committee are aware, the Dominion government, under the provisions of the British North America Act, is empowered to raise revenue by any mode or form of taxation, whether direct or indirect. On the contrary, the provinces, and, by consequence, the municipalities which derive their taxation powers from the provinces, are confined, in the raising of their revenues, to measures of direct taxation. For this reason, since the outbreak of the war, I have hesitated to bring down a measure of federal income taxation. As I have stated, the provinces and the municipalities are confined to direct taxation, and I have not regarded it as expedient, except in case of manifest public necessity, such as I believe exists at the present time, that the Dominion should invade the field to which the provinces are solely confined for the raising of their revenue.

It will be observed that Sir Thomas White hesitated to bring down that measure, but having the responsibility of providing for the maintenance of our army at the front and for the interest on the debts which had already accrued, he saw the necessity of entering the income tax field and thus providing revenues for carrying on the affairs of the country.

I have sometimes heard Sir Thomas White criticized for having, when he was financing

Taxation in Canada

the war, exempted so many from taxation through tax-exempt bonds. I was never disposed to find much fault with that, because we were living alongside of the United States and they as well as most of the countries in the war at that time were providing tax-exempt bonds. Sir Thomas, having the responsibility of raising money, adopted those measures which were adopted by most of the other countries. So I say here to-day that I am not challenging the policy of Sir Thomas White. Had I at that time the responsibility I have to-day, and under similar conditions,

I do not know that I could have done much better.

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink
CON

Robert James Manion

Conservative (1867-1942)

Mr. MANIQN:

I would like to ask my

hon. friend a question. Is it not also true that in the United States there are many states and municipalities which have the right even to-day of issuing tax-exempt bonds?

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink
LIB

James Alexander Robb (Minister of Trade and Commerce; Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

I am coming to that in a

moment, but the fact remains that in financing the war we did provide a means for many people to evade taxation. We have tax-dodgers in this country, as they have in other countries. I am told of a method of evading taxation which is not novel to this country but was borrowed from the United Kingdom, whereby certain companies were organized to enable people to escape taxation. Notwithstanding all that, the people of Canada very cheerfully and willingly contributed to the public exchequer for the carrying on of the war, and the revenues which we have derived from these various taxes have helped materially in providing the interest on the war debt and the pensions we are now paying.

My hon. friend a few moments ago made some reference to the changes in the revenues derived from these sources of income. I have before me now the figures. The revenues from that source in 1918-1919 were $9,349,719.80; in 1919-1920, 820,263,739.91; in 1920-1921 $46,381,824.31; in 1921-1922, $78,684,354.80; in 1922-1923, $59,711,538.37; in 1923-1924, $54,204,027.99; in 1924-1925, $56,248,04282. These figures may be found in the Public Accounts, at page 47.

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink
CON

John Wesley Edwards

Conservative (1867-1942)

Mr. EDWARDS (Frontenac):

In what

year was the maximum amount received?

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink
LIB

James Alexander Robb (Minister of Trade and Commerce; Minister of Finance and Receiver General)

Liberal

Mr. ROBB :

The maximum was received

in 1921-1922. That, I imagine, would be due to the addition of some of the revenues from some of the previous years, when there was a change coming in concerning the business profits tax and the income tax. Some of the taxes which formerly went into the business profits tax might have come in the income tax.

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink
CON

George Reginald Geary

Conservative (1867-1942)

Mr. GEARY:

If I might ask a question,

why does my hon. friend give the years as "1922-1923" and so on?

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink
LIB

James Alexander Robb (Minister of Trade and Commerce; Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

That is the way they are listed in the public accounts, from which I am quoting.

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink
CON

George Reginald Geary

Conservative (1867-1942)

Mr. GEARY:

Will the minister tell* me

why that is? It is the annual calendar year.

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink
LIB

James Alexander Robb (Minister of Trade and Commerce; Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

The fiscal year ends March

31, and I refer to this year, for instance, as 1926-1927.

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink
CON

George Reginald Geary

Conservative (1867-1942)

Mr. GEARY:

I see what you mean.

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink
LIB

James Alexander Robb (Minister of Trade and Commerce; Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

In addition to the income tax, we have other special war taxes that were imposed under the legislation of 1915. It is not necessary for me to enumerate all these special taxes, but the total revenue derived from these so-called war taxes-so-called war taxes, let me repeat that-in the last fiscal year was approximately $147,000,000, while during the same period the expenditure on account of the war was approximately $167,000,000; so these taxes imposed for war purposes last year were, in round figures, about $20,000,000 short of providing for the total obligations arising that year out of the war.

It may interest hon. gentlemen, in view of statements that have been made from time to time as to the cost of collecting the income tax, to know that the Commissioner of Taxation, Mr. Breadner, advises me that the cost of collecting the income tax has during / the past five years averaged two and two-thirds per cent.

While we all admit that Canada has more taxes than we would like to have, and more taxes than we had prior to the entry of Canada and of the whole world into the war, nevertheless Canada is not taxed to a degree that would induce any of our citizens to leave Canada and go and live in some other country. Indeed, the taxation in Canada compares favourably with that of almost any other countiy in the world where the people enjoy the same comforts. I have here a newspaper reference to the comparative taxation of Canada and other countries. I shall not read the article, because hon. members read the papers just as I do, but if they will refer to the Ottawa Citizen editorial column of March 13, 1926, they will find there a comparison of the per capita tax paid by Canada, Australia, Great Britain and the United States. It is estimated that the total per capita tax paid in Canada, and this includes, I imagine, federal, provincial and municipal taxation, is $66.11; in Australia, $69.68; in Great Britain, $97.12; and in the United States, $67.39. In other words, the per capita tax in the United States,

Taxation in Canada

the country where they boast much of reduction of taxation, is $67,39, as compared with $66.11 in Canada.

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink
CON

Robert James Manion

Conservative (1867-1942)

Mr. MANION:

May I ask my hon. friend

a question in that regard? I do it for information, because that statement has been put out two or three times, and I fear it is wrong.

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink
LIB

Ernest Lapointe (Minister of Justice and Attorney General of Canada)

Liberal

Mr. LAPOINTE:

It is right.

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink
CON

Robert James Manion

Conservative (1867-1942)

Mr. MANION:

What I was going to ask

is this: How is it that the per capita tax in

Canada is only $66 when the tax collected by the federal government alone amounts almost to that? Where do the provinces and the municipalities come in?

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink
LIB

James Alexander Robb (Minister of Trade and Commerce; Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

I am speaking of the taxes

imposed. I have here a statement which has been sent to me by a firm-I do not like to give the name, but if any hon. gentleman is interested I will show him the letter in confidence. It is from a firm of high-class attorneys and counsellors-at-law in New York city, and they provide me with this information. It came about in this way. Their attention had been directed to the grumblings of some Canadians over the duplication of taxation in Canada, and they said: You people in Canada do not know anything about taxation. Here is the information they give me as to the taxation that would be imposed upon a gentleman residing in the city of New York. He would be subject to:

1. Federal income tax.

2. New York state income tax.

3. Local real estate taxes.

4. Local taxes upon certain kinds of personal property.

5. Special tax laws, for instance, the tax on motor cars, motor boats, and so forth.

In addition to the foregoing, all individuals there indirectly pay various forms of excise taxes, taxes upon theatre tickets, taxes on club memberships, taxes upon automobiles, and so forth. Then in addition to that, there is another tax which their heirs cannot escape after they are gone; that is, the inheritance tax. Some of our provinces have an inheritance tax, but we have no federal inheritance tax like they have in the United States. In the United States they not only have a federal inheritance tax, but many of the states also impose an inheritance tax, and a resident of New York city, or rather his estate, would have to pay not only a federal inheritance tax, but the New York state inheritance tax and the inheritance tax of any other state in which he held property.

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink
CON

Peter McGibbon

Conservative (1867-1942)

Mr. McGIBBON:

Would it not be much fairer to compare the ratio of taxation with

that of income? Upon that basis does not Canada stand fourth of all countries in the world?

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink
LIB

James Alexander Robb (Minister of Trade and Commerce; Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

That is a debatable proposition. Having placed these figures on Hansard, I come now to something that may be perhaps a little more hopeful. If hon. gentlemen will follow the estimates as presented to parliament, and the expenditure as found in the public accounts, for the different years this government has been in power, they will find that each year there has been a reduction in the estimates presented to parliament, and a reduction in the expenses incurred. We have reduced some of the so-called obnoxious taxes, and we have made certain exemptions. When Sir Thomas White brought in some of his obnoxious taxes, the sales [DOT]tax, for instance, and' excise taxes, certain exemptions were made, and from year to year we have added to the list of exemptions. On certain foodstuffs we have reduced the sales tax, and on certain items we have removed it entirely; we have cut it in two on boots and shoes, and the finances now are in such shape that I hope to sit down with the officers and be able to work out something that will give a little relief to the people in the waj' of taxation. I do not say that that relief will be in income taxation; I do not say it will be in the sales tax, but I do agree with my hon. friend from Toronto Northwest (Mr. Church) to this extent, that in so far as we are able we must from year to year try to reduce taxation, and particularly try to get away from these so-called obnoxious taxes. But we can only do that if we have the support not only of those who sit on this side of the House, but as well of hon. gentlemen opposite in effecting economies. It is no use to preach economy one day, and the next day to urge expenditures in different parts of the country.

I repeat that there are certain expenditures that must be carried on. Not long ago I had a conversation with the president of one of the largest banks in the country; perhaps I am betraying no confidence when I say it was with the president of the largest bank in Canada. He said: "Mr. Robb, I think we have carried this economy idea to an extreme. I think it is reasonable that the government should provide certain expenditures for carrying on the affairs of Canada and developing this vast country." So that is the policy of the government: to economize where we can but not to the extent to discourage the development of our country and the opening up of new territory.

Taxation in Canada

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink
CON

John Léo Chabot

Conservative (1867-1942)

Mr. CHABOT:

From 1921 to 1925 the

revenue from special war taxes was about $535,000,000 more than it was from 1917 to 1921. What attempt was made by the government during that time to economize with a view of reducing taxation and the cost of living? The minister spoke of economy. Well, the government had an increase in the revenue there, from that source alone, of over $500,000,000 in those four years. I fail to see what attempt was made to reduce the taxation of the national debt at that time.

Topic:   TAXATION IN CANADA
Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
Permalink

March 17, 1926