Mr. ILSLEY:
And we say this is a clarification of the present law.
Mr. LAWSON:
Excuse me, but under the present law what may I deduct from the $110 because a foreign country, the United States, has taken $100 from my income?
Mr. ILSLEY:
As we interpret the law, $27.50.
Mr. LAWSON:
And how does the minister arrive at $27.50?
Mr. ILSLEY:
One thousand over four
thousand, or one-quarter of $110.
Mr. LAWSON:
With the law as it is at present.
Mr. ILSLEY:
That is the law at present, as we interpret it; and this section does not change it, but declares it.
Mr. LAWSON:
Do you say we are about to pass a section which does not change the present law at all?
Mr. ILSLEY:
It does not change the present practice, and we think it does not change the present law.
Mr. LAWSON:
Then it seems to me we have had a lot of discussion for nothing, if that is so. May I have the assurance from the minister that in the administration of the income tax grants in the past-we will take the tax year 1937, because we have not yet had a chance to assess 1938-that was the basis on which credits were allowed for deductions on incomes from foreign sources?
Mr. ILSLEY:
Yes, the hon. member may have that assurance; that is correct.
Mr. LAWSON:
And the minister says that all he is doing in this section is to declare what the law already is, as administered by the department?
Mr. ILSLEY:
Yes, we are making it clearer that the present practice will be the law from now on, and we think it has been the law in the past.
Mr. LAWSON:
Then if that is so it does seem to me a pity the minister did not say so about 12.30 this afternoon.
Mr. ILSLEY:
This section was not before us at 12.30 this afternoon. It has been before us only in the last fifteen minutes.
Mr. LAWSON:
No, it was before the committee at the lunch hour adjournment.
The CHAIRMAN:
No.
Mr. ILSLEY:
Not this section.
Mr. LAWSON:
Probably I am mistaken about that.
Mr. VIEN:
My view is that if in the United States I have an income of $15,000 and deductions are being made from that income, under the law of the United States, which brings the taxable revenue to $10,000, I should not be penalized in Canada to the extent of saying that if the income had been earned in Canada, instead of there being a deduction of $5,000 there would have been one of only $2,000, and that therefore the taxable income in Canada instead of being $10,000 should be $13,000. I do not believe the income earned by a Canadian taxpayer in a foreign country should be penalized in Canada to any greater extent than it is being penalized in the foreign country in which it is earned. In so many words, if I understand section 9 correctly it means that if in Canada on an income of $15,000 a deduction of only $2,000 would be allowed, but in United States where such income is earned a deduction of $5,000 is allowed, for Canadian income tax purposes the income would be $13,000 instead of $10,000.