Mr. ILSLEY:

I do not know whether it is out of income or not.

Mr. STEWART:

Where else would it come from?

Mr. ILSLEY:

It is out of his money.

Mr. STEWART:

It is out of his income.

Mr. ILSLEY:

Or capital, or both.

Mr. STEWART:

It is out of his income, and if he could show for that year that he paid the interest for that particular year he would get a deduction.

Mr. ILSLEY:

Yes.

Mr. STEWART:

Then why should it not be possible for him to go back over the years and get a refund?

Mr. ILSLEY:

That is a different question.

The CHAIRMAN:

Shall section 6 carry?

Mr. LAWSON:

I do not suppose it is

worth while to bring this matter to a vote, but I certainly wish to go on record as strongly opposed to this provision, and I think it ought to be given a great deal of consideration before it is passed. It is unfair to people who have no control over the situation. I have in mind at the moment an estate where the mother of the deceased, who was entirely dependent upon the deceased for support, will receive a comparatively modest annual income. There will come a time when three or four years' interest will have to be paid to the succession duties branch in Ontario, on some amount of money, when that amount of money is ascertained. What is paid will be deducted from the income of that widowed mother. And the same thing will apply to the child, who is now twelve years of age and is being maintained in school through a trust fund. The widowed mother and the child of the

Income War Tax Act

deceased are to be asked to pay income tax on income they never received, never could receive and never will receive. It is entirely contrary to the principle of this type of legislation.

Mr. LAWSON:

Has consideration been

given to the question whether or not nonresident investment corporations would be excluded from the operations of the section by the words "unless such non-resident pays tax thereon under this act"?

Mr. ILSLEY:

It applies to all of them.

Mr. LAWSON:

Does it apply to nonresident-owned investment corporations?

Mr. ILSLEY:

Yes.

Mr. LAWSON:

Some few years ago, with a view to bringing foreign capital to this country, we enacted provisions in our Income War Tax Act relative to non-resident-owned investment corporations. As a result a good deal of foreign capital came to this country, based on the provisions of the act as it then stood. The dominion obtains a tax on the income of a non-resident-owned investment corporation, and I imagine the total amount obtained annually is substantial. By reason of a non-resident-owned investment corporation having power to pay out its funds to non-residents in the form of directors' salaries, and so on, rather than in the form of dividends, a great deal of foreign capital was induced to come to this country. It would seem to me that this enactment would simply reverse the position we took in 1935 or 1936. As the government gets the tax anyway, no matter in what form a non-resident-owned investment corporation pays out its income, I can see no reason for making this amendment applicable to non-resident-owned investment corporations.

Mr. ILSLEY:

Mr. LAWSON:

Oh, no.

Mr. ILSLEY:

The people who bring their money here to invest in non-resident-owned investment corporations bring their money here to keep. This is not a high-salaried field.