July 15, 1940

LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Yes. Nothing was discussed more than the probability that when the budget came down heavy taxes would be imposed on cars, and everyone who was in the business or was connected with the business conducted his operations with that possibility in the back of his mind. If therefore dealers did not protect themselves under their contracts, they have themselves to blame to a

Special War Revenue Act

certain extent. Perhaps I am going a little too far in making that statement, but certainly a tax on automobiles was no surprise to people in the automobile business.

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NAT

John Ritchie MacNicol

National Government

Mr. MacNICOL:

A dealer in the town of Chatham who ordered his car on May 11 would have got delivery by May 15, but a man in British Columbia being several weeks away could not get delivery within the time to escape the penalty of ten per cent. I can see the minister's point. There must be a stop somewhere, but I can also see that some people are penalized through no fault of their own but merely because they live at a distance.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

The minister is making delivery the test and nothing else.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Yes.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

I suggest that the question of bona fides might have been given consideration. The officials will say that that is harder to check up on. It is, but if there is a firm order for sales, an enforceable order, as one hon. member has put it, payment having been made, that is of course .a bona fide sale, and I suggest that some consideration should be given a case of that kind. If it is the decision of the government that actual physical delivery shall be the test, and if they rigidly adhere to that principle, I suggest that some damage will be done to dealers and they will have to pay taxes on cars which otherwise they would not pay. The minister says that everyone expected this tax. Well, everyone expected a tax on gasoline. The tax did not come in one case and it did in the other. But that is not a safe ground to put it on. People were warned that cars were going up and a great many people did act on that principle, but I should not like to base the tax on the principle that people ought to have known that it was going to be imposed.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

We should be doing the same thing if the tax had been a surprise to every one. We do it in every budget. In the case of imported cars, unless they were imported before June 25, the tax applies. We do not inquire whether there was a contract to import them at all. That is the general rule. Importers know they may be caught if they are not careful, and indeed they may be caught even if they are careful.

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NAT

Karl Kenneth Homuth

National Government

Mr. HOMUTH:

On other occasions when tax proposals have been brought down in this house and a certain tax has been made applicable prior to a certain date, representations have been considered. The minister has

said that all people in Canada must be treated alike. Coming from Ontario I am not so sure that the day will not come when we shall have to give some consideration to the question of distances in Canada from coast to coast. People in western Canada and British Columbia and people in the maritime provinces have to pay a certain toll for purchasing goods in Ontario. Personally I regard that as good for our Canadian economy, but I am not so sure that concessions will not have to be made in other directions, as in this matter for instance, if we are to work out a national economy that will be worth while. I think there is something in what the leader of the opposition has said and some consideration should be given to the contract.

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Amendment agreed to. Resolution as amended agreed to. 5. That the said act be amended by adding thereto after section eighty-eight the following section: "88A. (1) In addition to any duty or tax that may be payable under this act, or any other statute, there shall be imposed, levied and collected a war exchange tax of ten per cent on the value for duty of all goods imported into Canada, payable by the importer or transferee who takes the goods out of bond for consumption at the time when the goods are imported or taken out of warehouse for consumption. (2) The tax imposed by this section shall not apply to any goods imported into Canada,- (a) which are entitled to entry under the British preferential tariff, or under trade agreements between Canada and other British countries; (b) Which are entitled to entry under Customs Tariff items 360, 460, 690, 690a, 696a, 700, 700a, 701, 702, 703a, 704, 705. 705a, 706, 707, 708, 709; or to fish caught by fishermen in vessels registered in Canada or owned by any person domiciled in Canada and the products thereof carried from the fisheries in such vessels. (3) Where the war-time prices and trade board reports to the governor in council that any producer or producers of goods have taken advantage of the tax imposed by this section to increase the price of such goods by an amount greater than is justified by any increases properly arising from such tax in the cost of materials or parts entering into the production of such goods or to maintain prices of such goods at levels greater than are so justified, the governor in council may, upon the recommendation of the said board, impose upon all or any of the products of any such producer an excise tax at a rate not to exceed ten per cent of the selling price of such products for such period of time as he may determine, remove or induce customs duties applicable thereto for such period of time as he may determine, fix the prices thereof and/or take such other measures and impose such penalties as he may determine." Mr. HANSON (York-Sunbury); The minister was good enough to allow this resolution to stand because I had made some representations to the Department of Finance about it. Special War Revenue Act



I wish to have a ruling on a case of this kind: Goods of a class or kind not made in Canada-caterpillar tractors-were ordered by a dealer in Canada under a firm order at a fixed price f.o.b. point of delivery in Canada, duty, sales tax, freight and all other charges paid. This was a written order which would be enforceable under the statute of frauds. The goods may or may not have been made up, but they did not arrive in Canada prior to the date of the budget. They were ordered through a dealer for contractors about to do war work, namely, clearing for the construction of airports, under a firm contract, at a price fixed with all charges paid, laid down in Canada. Some of them were in transit before the budget was delivered; some of them were ordered but not actually shipped. But if no allowance is made in either case the dealer has to pay this tax, and it is an amount of some importance. I had the matter up with the Deputy Minister of Finance, and he said consideration would be given to it.


LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

The hon. member said "all charges paid".

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

Perhaps I was using the term loosely-all the then known legal charges paid. This tax was not even contemplated. The minister has not the excuse that the public ought to have known that this import tax was going on. The dealer must lose the amount of the tax, because while his customer could not make him deliver the actual article, certainly he could make him pay damages for non-delivery; if he had to have that particular type of implement he might sue for specific performance, or, in the alternative, for damages. Unless some consideration is given to that particular type of importation one dealer that I know will lose several thousand dollars; for he had the sole agency for this particular implement, and he had made his contract in the terms which I have stated. I took the matter up with the department immediately he notified me, and it has been under consideration.

A grave injustice would be done to the dealer in this case if he had to pay the tax himself. If, per contra, the minister has the power to do this, why not say by statute that on delivery the buyer shall pay the tax? That is where it belongs; he is going to make money out of the government with the use of this machine. I do not say it would be good ethical practice to say by statute that the incidence of the tax should be passed along to the ultimate consumer, but there would be some justification for it. I should like to know whether the department has come to any conclusion with regard to this matter. Perhaps I should have communi-

cated with the commissioner of excise, but I did not know by whom the act was to be administered. Having sent the matter to the Department of Finance I thought I was doing the best I could for my people. If the buyer has to pay this tax it is a great injustice. I submit that the consumer ought to pay it.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I do not think that a provision enacted by this parliament which would be an attempt to saddle the tax upon the consumer in a case of this kind would be constitutional. I know very little about constitutional law, but it would appear to me that the consumer who has entered into a contract for the purchase .of goods at a fixed price would have ithe right, if the dominion parliament came along and said he must pay that price and something more, to contend that the dominion parliament was interfering with the contract he had made; it would be a direct interference with property and civil rights. I doubt if it could even be done under the War Measures Act, because not everything can be done under that act, but only a limited class of things. For that reason I think thait an attempt by this parliament to pass the tax along to the consumer when there has been a resale would be ineffective. Cer-. tain dealers, and importers other than dealers, in making contracts for the resale of imported articles, protect themselves against additional taxes, whether war taxes or otherwise. The other day an importer came to me who thought that the tax ought to be remitted on a commodity of which he was a large importer and which he had resold. He made no attempt to conceal the fact that under ithe contract for resale he had the right to collect the additional duty from the purchaser. His point was that the war exchange tax raised the price unduly and would make the burden on the purchaser too heavy. In the case the hon. gentleman has put, the dealer could have protected himself against additional rvar taxes, but I assume he did not do so.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

Not as far as I know.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

It seems to me that the only relief we could afford would be to take the tax off altogether in cases where there had been a resale by an importer prior to June 25, 1940.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

As distinguished from actual delivery.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Yes, I am not talking about delivery-where there had been a bona fide sale. We have not done that, and we do not care to do it. It is not usual. We have had seventy years' experience with that kind of transaction. When the duty was raised on

Special War Revenue Act

tea, as it has been, or on sugar, in the years gone by, so far as I know there has been no provision to protect the importer in cases where he has made a resale, in which event he would not be taxable, and the importer who had not made resale would be taxable. Whether or not that discrimination would be justified, I do not know. But we are merely following the regular practice, in putting on this tax, which in effect is a customs duty. We are simply following the regular practice when we say that goods imported, or taken out of warehouse for consumption, after the tax goes on, must pay the duty, entirely regardless of any transactions which have been entered into between the importer and other persons.

The case the hon. member has described is not the only one. I have in mind another distressing case. An importer in western Canada made arrangements for the importation of certain goods. He agreed to sell those goods. They are not in Canada yet, but they will enter the country either in the latter part of this month or in the early part of August, and he will have to resell them at the price he agreed to take for them, a price which did not include the tax. He did not protect himself because he had not the tax in mind.

I am inclined to think that in some cases the ten per cent tax, or the ten per cent increase in the tariff where the goods are dutiable, is not going to cause actual loss. In many cases it will cause only loss of profit or reduction of profit.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

Of course

that is not an argument. A man is entitled to be paid for doing business.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I know that.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

It comes

out of the dealer's pocket. The minister should not be dogmatic about it.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

The leader of the opposition is picturing the loss that is going to come to this man, and is appealing for consideration by virtue of the effect it will have upon that man's personal fortunes. When that kind of appeal is made-and that is the only kind which can be made in circumstances such as these-so far as I can see, there is no right or wrong in the matter. We are following the regular practice; the matter of ethics or of principles is not involved. The matter of raising the duty ten per cent, or imposing a ten per cent duty on duty-free goods, and calling it a war exchange tax. is a matter of practice. We are doing what governments have done from confederation, when they have raised taxes. And I would point out that ten

per cent is not such an undue increase that heavy losses are going to occur to persons because they have resold, assuming they have made no profit at all on the resale.

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July 15, 1940