July 9, 1940

NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

I do not think that is fair, and I am going to oppose it. The number of guest children who will come out under private arrangements in any event, I should judge, will not be large, but people out of the goodness of their hearts are taking these children, in many cases without any financial obligation on the part of their parents. Very often they are relatives. The cases I have in mind are those of relatives or business associates. A friend of mine who is in the fire insurance business knows some people at the head office in London of the company he represents. When this problem arose he cabled that he was prepared to take two of either sex of a family without any financial arrangement at all; if it could be made, well and good, but in any event he was willing to take two children into his home. It appeared that there were three young boys in a family and he agreed to take those three boys into his own family for the duration of the war, without any arrangement for a financial allowance from England, as he assumed there would be considerable difficulty

Income War Tax Act

in that respect. These children have either arrived or are in transit. The principle involved has appealed to the government and to the minister, but they are proposing to restrict the exemption to the cooperative scheme sponsored by the governments of the United Kingdom, Canada, or any of the provinces. It seems to me that there is a gross discrimination there which should not be permitted to exist. Before the allowance is made the facts should be established and the case should be bona fide. But why in the world the government has limited the exemption to the sponsored arrangement with the government and refused consideration to those who have made a gratuitous arrangement is beyond me. I do not see any principle involved. Is the minister making a distinction between people who may be considered well to do, and others? I do not think that can be applied. Why is the exemption limited?

I do not agree with it. I do not think the committee will agree that it is a fair deal and it ought not to prevail. I would ask the minister to apply it to every genuine case so that the taxpayer shall get the benefit; otherwise have no exemptions at all. It should be one or the other.

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LIB

Arthur Graeme Slaght

Liberal

Mr. SLAGHT:

May I add a word in a kindly spirit. This afternoon there has been repeated reference to the children coming to Canada and they have been termed, variously, evacuees, refugees and refugee children. I have sinned in this respect myself in the past two weeks. I take a special interest in this problem and therefore I would urge the suggestion, which I read the other day, that in Canada, in referring to these unfortunate youngsters, we should call them guest children.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

Hear, hear. It is a very good suggestion and we ought to carry it out in the resolution itself.

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LIB

Arthur Graeme Slaght

Liberal

Mr. SLAGHT:

One can imagine these little folks, after being here some time and possibly reading the deliberations of the House of Commons, turning to their foster parents and saying, "Daddy, am I a refugee? Am I an evacuee, and what is an evacuee?" It is not easy to avoid mistakes of this sort, but I suggest that we in this house should set a good example by referring to these children in the way suggested.

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NAT

Gordon Graydon

National Government

Mr. GRAYDON:

With regard to the question of exemptions in respect of guest children -I am following the terminology suggested by the hon. member-there must surely be a distinction between guest children coming to Canada who are under some form of endowment, either from their parents or by virtue of some trust fund that may have been set

up on their behalf, and other children. There is a difference which I presume the minister recognizes, because it is hardly fair to suggest that a person taking a guest child from England and receiving some indemnity for looking after it during the war should be in the same category, so far as income tax is concerned, as those who are looking after children without any means of support of their own. I know of one case of my own knowledge. People who will be paying the national defence tax are often below the scale of what you might call our middle class of wage earners. There are many people in this class *who have a good deal of difficulty getting along. I know one man who will be faced with some difficulty when filling out his returns in connection with the national defence tax-and it would apply to the income tax in a comparable way. He has three children who are not guests but whom he and his wife have been looking after for some years in Ontario because the parents of these children died and left them without any means of support. This man has no other children himself and naturally he would like to know what the ruling will be under such circumstances.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

He could legally adopt them.

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NAT

Gordon Graydon

National Government

Mr. GRAYDON:

He has not done 60, for reasons best known to himself. I suggest that a distinction should be made between these classes so that in bona fide cases where people are really looking after children and paying for them, whether they be guest children or Canadians, they will receive consideration in connection with the national defence tax. Certainly I do not agree with giving exemptions on income tax or national defence tax for the keeping of children whose parents are partly looking after them. If exemptions are to be given the taxpayers should prove to the satisfaction of the department that no contribution is being received from any outside source. I leave that suggestion for the consideration of the minister, because I know that there are certain cases of hardship that should receive attention.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

With regard to these children, the leader of the opposition says that no distinction should be drawn between those who come under a sponsored scheme and those who come by private arrangement. I admit that when I first looked at the resolutions I was rather of that opinion myself and therefore I went into the question with some care with the previous minister and with the officers who were engaged with him in the consideration of the problem. Hon. members under-

Income War Tax Act

stand that apart altogether from this question of children who are coming to the country, if a taxpayer takes children-whether related to him or not-into his home and brings them up without adopting them he cannot receive the S400 exemption. That question has been debated in the house on several occasions and successive ministers have always stood firmly by the principle that unless the child was the taxpayer's, no exemption could be allowed on its account.

Next came the question of children coming to Canada, to whom the hon. member for Parry Sound refers as guest children. In the case mentioned by the leader of the opposition, whether they are the children of relatives or the children of friends, who quite often are people of considerable means, or at any rate of some means, it was thought that there was no good ground for giving these exemptions any more than for granting the exemption to thousands of persons who under similar conditions do not enjoy it. On the other hand when the movement becomes a mass movement sponsored by governments to meet a great national need, when the children come from families of friends or relatives, not from well-to-do homes entirely but from all sources, and go into the homes of generous people, often not at all well-to-do, people of limited means, it was felt that we could go this length in infringing the principle that has been preserved in our income tax legislation from the beginning, and under those circumstances permit an exemption of $400 per child.

But I should also point out that even then the exemption is limited. The proviso is that the tax benefit obtained as a result of the exemption shall not in any case exceed the amount of the tax benefit received by a married .person in' respect of a net income of $5,000. The reason for that is that if two children were taken into the home of a taxpayer of large income, one who, let us say, is paying thirty per cent on his utmost bracket of taxation, he would be able to reduce the income tax otherwise payable by him by thirty per cent of $800, which would be $240. He would receive n much greater benefit than would the taxpayer in the lower brackets. Therefore we thought it just under the circumstances to attach the proviso that I have mentioned.

I am inclined to think that when all the factors in the situation are considered, unless we are to amend the act as proposed by the hon. member who spoke last, and make it necessary for the income tax division to hold an inquiry into these cases, go into them minutely and find out just what the facts

are-whether the children are really being maintained and will be maintained without later recompense in any way

unless we are to change entirely the principle of the act I do not think we could insert a provision that would be fairer than the present one.

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NAT

Gordon Graydon

National Government

Mr. GRAYDON:

I am still not convinced that the minister's amendment fully meets the situation. As I understand it-I have not seen the amendment, I have only heard it read-unless these guest children come under a cooperative scheme sponsored by the British and Canadian governments, no income tax exemption will be allowed in respect of them-Does this mean that unless a taxpayer takes a child from the provincial distribution depot which is being set up by the welfare departments in the various provinces, no guest child may be included as a dependant so far as income tax exemption is concerned? There are many people in Canada to-day who are doing their best to arrange for the care of one or more guest children. As soon as the arrangements were announced by the government many people communicated privately with people in England to get a child about whom they knew something or who to their knowledge was anxious to come to Canada. These people are being discriminated against- because the parents of many of the children are not able to contribute anything to their support-in favour of persons who go to the provincial welfare organization and take a child from that distribution point. That seems to me to be the position in which the minister has left it.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I am afraid there will be some cases in which taxpayers in this country will be taking children without any chance of being later recompensed for keeping them and who will not be able under this amendment to get the exemption. But any other arrangement would be open to still further objection. This seems to be about the most reasonable course that can be taken, having regard to all the facts.

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NAT

Harry Rutherford Jackman

National Government

Mr. JACKMAN:

It is virtually impossible under the exchange regulations in the old country to send money with these children for their support. It is hardly likely that the interests of Great Britain at present will admit of any large aggregate sum being sent out in support of the children. While in a few cases some provision may be made by English parents who have assets in this country, such cases will be proportionately so few in number as to be hardly worthy of consideration. Most of these children, probably ninety-five to ninety-nine per cent of them, will have to be supported by the people with whom they

Income War Tax Act

live in this country. University professors in Toronto have been organizing to bring out children of corresponding professors in the old country who -have no possible means of sending money out with them; it is entirely voluntary. Canada being a partner of the motherland in this war I think we should certainly do what we can, and the government should not prejudice the people who are good enough to pay out a substantial sum each year for the maintenance of these children until the war is over.

Will the minister clarify what he means by his reference to the exemption of $5,000 for a married couple? I do not understand that.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

A married person in receipt of a net income of $5,000 is taxable at a certain rate, which can be ascertained from the tax schedules. The benefit which that person gets by deduction is limited to a figure arrived at by multiplying the $400 exemption for a dependent child by the highest tax rate payable by that married person, which might be, let us say, about S80. If 20 per cent is the highest rate, which I think it is, then 20 per cent of $400 is $80 tax deduction that that person gets by virtue of taking that child. This amendment merely provides that if the taxpayer is in receipt of an income of more than $5,000-let us say $50,000-he still gets only $80 deduction on account of the child, instead of, as would otherwise be the case, perhaps several hundred dollars.

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NAT

Karl Kenneth Homuth

National Government

Mr. HOMUTH:

I feel, with the hon.

member for Peel, that this is grossly unfair. Suppose a man brings three children of relatives out from the old country. If he received from some estate in this country $1,000 towards the maintenance of those children, he would have to show that $1,000 in his income tax return and would be liable to tax on it; yet he could not get any exemption for the three children.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

Unless

they came under a sponsored arrangement.

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NAT

Karl Kenneth Homuth

National Government

Mr. HOMUTH:

That is so. Surely there

cannot be discrimination like this. I know of families in my own town who, when it was announced that children were to be brought out to Canada, immediately cabled their relatives to send their children here. Those children might have come under the government arrangement, but they did not. Their parents were in a position to pay their way here, but they are not in a position to pay for the maintenance of those children in Canada; they are in a low income bracket. The thing is grossly unfair. I do not see why we should have two classes of children so far as the income tax is concerned.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

The hon. member for Rose-dale suggested one reason, that is, that the exchange restrictions in the United Kingdom, as I am informed, make it impossible for parents to send money here to pay for the maintenance of their children. There is no doubt they would send that money if they were free to do so, and in all probability the time will come when they will be able to do so. Many of these are cases of deferred compensation.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

Why does the minister say in all probability that is so? He has no basis for that statement.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I am merely arguing on the probability. Hon. gentlemen opposite are arguing that the reason money is not coming here for the upkeep of these children is not that the parents are not willing and anxious to send it, but that the action of the British government prevents its coming here. It would be entirely wrong to allow income tax advantages to persons in this country in cases of deferred compensation.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

I follow the minister that far, and I am in agreement with the limitation contained in the last part of the proposed amendment. I do not think people in the high brackets should get the allowance that would come to them if they were paying 30, 40 or 50 per cent. But there is one class of these guest children to which the minister should give further consideration. Those are the children brought out by invitation, without any hope or expectation of reward on the part of those who are to become their guardians here. Those people should have consideration. It is a limited class. The government will have records of all these people. The rich and well to do will be looked after, but in my own town I have an Englishman who is an organist in one of our churches. He and his wife are bringing out at least one relative, if not two. I do not know what is the rate of compensation for a church organist in Ontario, but in Fredericton it is not very large.

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NAT

July 9, 1940