July 9, 1940

NAT

Harry Rutherford Jackman

National Government

Mr. JACKMAN:

A great many of these annuities have been sold on the understanding that no income tax would be payable. A man could pay in only one dollar, as the minister has suggested, and then increase the annuity. If the clause stating that such annuity will be free from income tax does not appear in the contract itself, it certainly did appear in some of the printed matter produced by the agent when the annuity was sold. I am not holding a brief for any person who pays in a nominal sum in order to obtain a larger annuity later on, but the fact is that government agents did tell these people that if they took out small contracts they had the right to increase them up to a maximum of $1,200.

Topic:   INCOME WAR TAX ACT
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I admit that has been taken away.

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CON

Agar Rodney Adamson

Conservative (1867-1942)

Mr. ADAMSON:

A contract for $1,200 in force would be still free from income tax?

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LIB
NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Air. HANSON (York-Sunbury):

What is intended by the first clause of the resolution?

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Insurance which is payable by way of annuity has been held to be not taxable as income; this makes it taxable as income.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Air. HANSON (York-Sunbury):

I must congratulate the minister upon obscuring his intentions by the language of his resolution; no one could understand the resolution itself.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I have made it clear now.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Air. HANSON (York-Sunbury):

The minister certainly has. I think we ought to have further consideration of that point. Where a man entered into a contract to purchase insurance to be payable in instalments, the equivalent of an annuity, the law of this country has been that such payments are free

Income War Tax Act

from income tax. The government is now going to tax these payments, so why not say so?

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LIB
NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

It does not say so in the resolution. It is absolutely misleading. There is no credit reflected upon the government for bringing out the resolution in that way. That clause would have slipped through if I had not asked about it because no one would have understood what it is about.

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LIB
NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

The minister did not volunteer anything. I do not want to impute motives, but that is the case.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Nothing could be clearer than that section. Let me read it and then ask my hon. friend frankly whether it is not perfectly clear. It reads:

That the definition of income be clarified and extended to cover the amount of annuity payments made to life annuitants under purchased annuity contracts.

That is clear; there is no evasion there. I was clear in any explanation also.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

The first part is not clear to me.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

With regard to the policy of doing that, may I say that there is no justification for putting annuities from life insurance contracts in a position different from that of other annuities. Whether annuities should be taxable as income is a broad question. By this amendment to the act we are adopting the principle which has been uniformly applied in England. They regard an annuity as income, as a flow of income to the person and not a return of capital. The contrary principle is adopted by the United States. This government had to take the responsibility of deciding which principle it would adopt, and the decision has been to adopt the British principle. It would be idle for me to say that there are not excellent grounds for taking the other view, and excellent grounds for taking this view. There are reams of decisions and many pages containing argument of counsel and opinions of judges in connection with this question. We have now brought our law consistently into line with the English theory that an annuity is income.

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CON

Agar Rodney Adamson

Conservative (1867-1942)

Mr. ADAMSON:

The minister has said that rights already in existence will not be abrogated?

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LIB
CON
LIB

July 9, 1940