Mr. ROBB:

Answering my hon. friend's

very fair question-and I observe that he not only iputs a question but attempts to answer it-if he will refer to the public accounts, audited by the Auditor General, he will discover that the expenditure has decreased year iby year since 1922.

Mr. MILLAR:

In connection with the

levying of income tax, has the government considered the advisability of collecting the tax for a period of three, four or five years? If that were done it would be possible to provide for what we might call a lean year out of the profits of the good years.

Mr. ROBB:

There is something to be

said for my hon. friend's suggestion. I may say that the officers of the department have had that matter under consideration and study. Their objection to the proposal is that there is no finality. The system has not been satisfactory in Great Britain. They have there, I think, a three-year period, but it has not been as satisfactory as they would wish. Consequently they have recently been considering the adoption of the Canadian method, which is operative each year. I may say this to my hon. friend, that I have had some very lean years.

Mr. MANION:

I asked the minister a

question as to the issue of tax-free bonds in the United States both by municipalities and by states. He said that he would deal with the question but omitted to dio so. May I ask if the minister has any information on this subject?

Mr. ROBB:

I have information that they

are even now in the United States issuing some tax-free bonds, but I am not prepared to admit that it is a wise policy in these days of peace.

Mr. MANION:

I was not discussing that

point. I merely wanted to know if that was not true, and whether the minister had any

information on the subject.

Mr. W. F. MACLEAN (South York):

I

largely sympathize with the motion made by my hon. friend (Mr. Church), in favour of a reduction in taxation. The minister spoke of the enormous burdens that have to be met in this country, and pointed out that the revenue from income tax goes in a measure to meet these obligations. Now, I want to point out-I have done so before, but I am going to do it again-that we are wasting over $200,000,000 a year by maintaining a duplicate system of railroads in this country.

I read in the evening paper that the new Minister of Railways (Mr. Dunning), says that he is going to maintain the two systems in spite of anything. He does say that he hopes to get a reduction of duplicate services; but I want to take this occasion, as representing the views of the Canadian people, to point out that they feel the enormous burden of our income tax. If that is so, it is up to the government of to-day to begin to reduce that burden and to deal with the railway question and the .waste of $200,000,000 by unnecessary duplicate services. I hope the minister will pay attention to the fact that the Minister of Railways makes the announcement in western Canada to-day that he is going to maintain the two railway services notwithstanding the cost to the country which they involve.

Mr. W. D. EULER (North Waterloo):

Mr. Speaker, contrary perhaps to your expectation,

I do not rise to give support to-day to the remarks of my hon. friend from South York, although there is a great deal to be said for his contention with regard to waste by way of duplication in the two railway systems in Canada. I should like to make one or two observations on the subject of taxation now before the House. I think all of us receive from time to time many copies of resolutions passed by various public bodies and others asking that certain taxes shall be completely wiped out. Some ask that the income tax be discontinued, others say that the sales tax. should be discontinued; and we are quite unable in many instances to judge for ourselves, as between the varying claims, just what we should do. 'It is true, of course, that taxes are always irksome. Anything that takes money out of our pockets is very unwelcome indeed.

As I see it, Sir, and I have had some experience in the matter of municipal taxation, there are really only two principles upon which the system of taxation can be based. The first one, and perhaps the fairest, if it can be applied, is to tax according to the service

Taxation in Canada

that is given by the expenditure of the moneys raised by way of taxation. That would be the ideal way, the fair, and the just way, if it could be properly applied at all times. In the municipality we can do that to some extent. Taxes collected from the ratepayers are expended on education, fire protection, police protection, and so on. So that there we have developed perhaps to the greatest degree the principle of taxation according to value given. The other principle is to tax people according to their ability to pay, and it seems to me that so far as federal taxation is concerned, that is the principle that should be followed. Perhaps I might qualify that statement. If it were possible to pay the expenses incidental to a national debt caused by the war by taxing those who made money as a result of the war, it would be a very good thing indeed. I am not sure that it is possible to do that. Ndw, then I say that the income tax is right in principle. The man who earns a great deal of money, who makes a great deal of money by reason of the opportunities provided by this country, can very well be called upon to contribute a portion of his gains to the expenses of the country.

What about the small fellow?

Mr. EULER:

I am coming to his case in

a moment. While I agree in general with some of the observations, and should like to see the income tax reduced if it were possible, I must disagree with my hon. friend (Mr. Church), who suggested that the collection of income tax should be left to the municipalities rather than to the federal government. Probably I am going to get in wrong with my own municipality when I say this, but I believe that since large incomes are made-I am referring particularly to the larger incomes- largely because of the opportunities presented by Canada as a whole, therefore it is fair that the federal government should take a fair proportion of those earnings. If the principle is correct it seems to me it is then pretty much a matter of how the taxation should be applied. I should like to see taxation, the income tax and other taxes, made as little irksome as possible. There is room for improvement as far as the income tax is concerned and as regards some of our other forms of taxation. So long as I have been a member of this House-certainly so long as the nuisance taxes have been in existence-I have protested against the imposition of such taxation. I think my hon. friend the Minister of Finance knows that; I think his predecessor knows that also.

'

Mr. EDWARDS (Frontenac):

What do you mean by nuisance taxes?

Mr. EULER:

I mean such taxes as the

stamp tax, the tax on checks, the tax on receipts, and all that sort of thing. I see no excuse for the imposition of these taxes; they are just about as inconsistent as the old window tax we used to read about in our school histories. There is no reason for this method of taxation except that it is one means of getting money without any regard as to whether it is got fairly or not, and it imposes inconveniences not justified by the results. I wish the minister could see his way clear, when he brings down the budget, to say "I am going to wipe out the stamp taxes and what are known as the nuisance taxes."

If you make your income tax too high, there is the constant temptation, as we see from day to day, to evade that tax, and I am sure the minister is losing millions of money that should fairly be paid into the treasury if it were possible to collect all the income tax that should be collected. Sometimes a tax will defeat itself. Perhaps I am out of order when I say that I would give as an instance of that in certain forms of excise tax. If you make your excise tax on alcohol-although I have not that particularly in mind-or on tobacco and cigarettes too high, you simply defeat the purpose of the tax altogether and encourage bootlegging and smuggling.

Mr. LAPOINTE:

You are right.

Mr. EULER:

My hon. friend says the

middle man pays the most of the taxes. I do not know what he means by that. Perhaps he refers to the man who earns in excess of $2,000, up to $4,000 or $5,000. While I do not question that, I think it is true that the great majority of the working men of Canada under the present law do not, except perhaps indirectly-I suppose they do indirectly-pay a very great proportion of the income tax, and it should be so. I judge that most of the working men, the artisans and others, do not earn a great deal in excess of $2,000 a year, the amount which is exempt under the present law, and if they have a family of children they have an another exemption of $500 for each child. So that I believe after all most of the income taxes are paid by those who can fairly well afford to pay. At the same time I would have no objection if the sum of the exemptions were somewhat increased, possibly to $3,000.

Something has been said about the overlapping of taxation. I think the fact that three different bodies have the power to tax incomes is absurd in the extreme. That muni-

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1G5J

cipalities should have the power to tax incomes, that certain provinces should have the power to tax incomes, and that the federal government again should have the power to tax incomes seems absurd and entirely unfair. I do not know what the remedy is. I do not know whether it is necessary to amend the British North America Act in order to correct that evil, but if so perhaps it might be worth well to do such an unprecedented thing as to change that act.

Something is said about the fact that the United States have been cutting their income tax, and that because they had done so we also should do it. I grant that it is very desirable, if the United States by cutting their income tax are creating a condition which operates against us so far as business is concerned, that we should follow their example if we can, but we must consider this: If the same conditions obtain in Canada as obtain in the United States, then we can follow their example, but not otherwise. Fortunately for themselves, they are a wealthy nation and they have been able to reduce taxation, but I do not know whether that is possible in Canada. We must find the money to pay our obligations. The Minister of Finance has given us some encouragement to expect something in this regard. In all these proposals to reduce or abolish the sales tax, the income tax, or some other tax I have found a great dearth of practical suggestions as to how these taxes are going to be replaced by something else, and yet that is necessary.

I desire to make one or two suggestions. I spoke of one already, and that is the abolition of what I call the nuisance tax. We ought also to abolish what is known as the supertax-the tax upon a tax. That seems to me unfair. The income tax could also be somewhat simplified again. I would like to ask the Minister of Finance a question. Perhaps the former Minister of Finance (Sir Henry Drayton) would take it upon himself to answer, because it was under his administration and that of his predecessor that the law was framed. My question is, why are speculative profits not taxable? As I understand the law, it is only the income a man makes from his regular business and from dividends and interest receipts that is taxed. A speculator buys a stock upon margin and invests a small amount of money, if you can call it an investment. He puts up perhaps $10,000, and by a fortunate turn in the market makes another $10,000. In that investment there is no labour involved, and that $10,000 unearned profit is free from income tax. I could never see why the profits earned in speculation should not be more justly

taxable than the income earned by a man's own efforts.

Would you give him back his losses?

Mr. EULER:

If he loses money in business, he does not get it back either. It would! be fair to make some provision for losses sustained; say for example a business man has a large profit in some one year and in the next year he may lose just as much as he realized the year before; yet he pays taxes on the profits in the year when he is least able to pay. I know by experience-at least by having my attention drawn to it- that in the year 1920, for example, some manufacturers were very successful and made big profits. However, the next year they suffered very heavy losses-just as heavy as the profits made the year before-and yet in the year in which they lost their money they had to find money to pay the taxes on the profits made the year before. They were not one cent ahead on the two years but, had to pay the tax just the same. I understand that in England-and I am open to correction on this-the period during which the income taxes shall be calculated shall be a four year period.

Three.

Mr, EULER: I think the principle is entirely sound, and we have now had the income tax in operation sufficiently long that we should be able to adopt that principle.

Mr. WOODSWORTH:

What would my hon. friend say in regard to profits made out of bootlegging?

Mr. EULER:

I think I would take them all. I believe absolutely in the soundness and the justice of the income tax. I also believe that it should be reasonably applied and not made any more irksome than is absolutely necessary.

Mr. PETER McGIBBON (Muskoka-On-tario):

I stated in the House the other day that I thought the income tax was one of the most unfair taxes that we had to deal with. I am still of that opinion because the basis of all taxation ought to be its fairness. I should like to draw the attention of the member for North Waterloo (Mr. Euler) to the fact that in the last five years-I am speaking from memory now and I put the figures on Hansard the other day-the salaried class, who cannot evade the income tax, have paid about $62,000,000 out of $170,000,000 odd collected. There is one class in this community who cannot evade payment of their taxes. They not only have to pay their

Taxation in Canada

own income tax, but, as everybody knows, they have to pay a large share of other people's taxes which are passed on to them in one form and another and I am not finding fault with that. I think it is the legitimate process of business to pass the taxes on, but the fact remains nevertheless that the salaried class in this country to-day is being punished the most by this tax. They cannot evade it, and I hope the Minister of Finance will give this matter at least part of his attention. They have to pay their own tax, because their salary is on record, or reported by their superiors; and the income tax of others is passed on to them and they have to pay indirectly.