amusements on which expenditures might legitimately be taxed but unfortunately the problems of administering a comprehensive amusement tax are very great. I shall recommend, however, a 5 per cent tax on the amounts wagered at horse-racing meets and anticipate that it will produce SI,000,000 in revenue, virtually all of which will be collected in this fiscal year.
The excise taxes on alcoholic drinks were raised substantially in September, 1939. Increases in these taxes may have serious effects on provincial revenues and render the problems of controlling illicit manufacture and sale extremely difficult. Viewing sales from the standpoint of revenue and relying upon the provinces to apply such regulations to the trade as are proper, I note that sales of spirits have not increased during the past year, the sales of wine have remained fairly stable despite the gradual disappearance of stocks of European wines, and beer sales have increased sharply. I, therefore, propose that the tax on malt be increased by 20 per cent from 10 cents a pound to 12 cents and that related taxes on beer and malt syrups be increased correspondingly. In respect of wines, the proposal is that the tax be increased from 15 to 40 cents per gallon and that on sparkling wines from $1.50 to $2.00. These increases should produce, in the full year, $3,500,000 on beer and $1,000,000 on wine or about $3,200,000 and $900,000 respectively in the current fiscal year.
Turning to another type of beverage, it is recommended that the excise tax on carbonic acid gas, the essential component of what are popularly known as "soft drinks," be increased. It has required some experience to learn the proportion which the present tax of 5 cents a pound bears to the sale price of the product. It is now proposed to increase the tax drastically, raising it from 5 cents to 25 cents a pound. At this rate, the tax will still not exceed the proposed United States tax of one cent a bottle and should produce an additional $2,000,000 of revenue, of which probably $1,900,000 will be collected in this fiscal year.
In addition to the above, there are a number of other proposals. The excise tax on playing cards is to be raised from 10 to 15 cents a pack. That on cosmetics and toilet preparations it is proposed to increase from 10 per cent to 25 per cent. It is recommended that the tax on long-distance telephone messages be increased from 6 to 10 per cent. To offset the match tax there is at present a tax of 20 per cent on lighters or 10 per cent if the lighter is a part of some other article. Since the excise tax on a wide range of mechanical, metal products for household and personal use is 25 per cent, it is proposed
to apply the same rate to lighters whether combined with other articles or not. For the purpose of protecting the revenue, it is recommended that the excise on cigarette tubes be raised from 5 to 10 cents a hundred. It appears that the tube in contrast to the paper gives rise to some illicit commercial manufacture. It is estimated that these changes will produce in the full year $3,310,000, of which $3,105,000 will be collected in 1941-42.
There is one more change in the indirect taxes. Having refrained during nearly two years of war from suggesting any discouragement to building, it has now been decided to recommend the removal of building materials from the list of exemptions under the sales tax. In the meantime, the provision for home improvement loans has been exhausted, the application of the National Housing Act has been narrowed, and the Wartime Housing Corporation has been set up to provide for the more urgent housing needs. At a time when we have many extraordinary needs for building construction, it is desirable to reserve, where possible, building operations for the post-war period. The withdrawals of this exemption, which I consider to be temporary, should provide $15,000,000 in revenue, of which perhaps $13,500,000 will be collected in this fiscal year.
I have already mentioned the increase in the tax on sugar from 1 cent to 2 cents a pound. A corresponding increase from 4 cent to 1 cent is recommended for glucose and grape sugar retroactive to the date when the sugar administrator increased the price of cane sugar. It is also recommended that the new rate of 2 cents a pound apply to corn syrup in tins of 10 pounds or less. To some slight degree, molasses is competitive with corn syrup, but in view of the extensive use of molasses in live stock feeds the tax is not extended to molasses.
These indirect taxes are not such as I should be comfortable in recommending in normal times but when the need for revenue is great and when the need for concentrating our energies on the successful prosecution of the war is so vitally necessary, we must have recourse to taxes which if not good taxes are better than others which we have rejected. Each of us will be affected by one or more of these taxes, but no one need pay all of them. If people choose to avoid some of these taxes by saving rather than spending, I shall be satisfied.
There are some changes to be recommended in the War Exchange Conservation Act which I shall enumerate. It is proposed to add black tea to part I of schedule I under which the house will recall, permits are refused. Adequate supplies of black tea can be obtained
The Budget-Mr. Ilsley
for sterling payment. Two other items, games and puzzles, and woven fabrics of cut pile are added to clear up anomalies. A more important change is recommended in the addition of vegetable oils to part II of schedule I. It is the intention to issue permits for the importation of vegetable oils, endeavouring to obtain as much as possible of them for sterling or Canadian dollars. The Department of National Revenue will be assisted in administering permits by the oils administrator under the Wartime Prices and Trade Board.
No goods are removed from the prohibited classification by the resolutions about to be tabled, although for technical reasons four items are being struck out of both part I of schedule I and out of the Customs Tariff.
Very substantial changes are recommended in respect of schedule II of the act, the schedule extending war-time treatment to imports from the United Kingdom. Though a large number of items are affected, I can explain briefly what is recommended. For the cotton and artificial silk items, now free under the act, no change is recommended. Certain items, on which the United Kingdom has asked for concessions, viz., cellophane, bathroom fixtures and earthenware, glass manufactures n.o.p., nickel-plated ware, and needles are to be made free, it is recommended under schedule II. It is further recommended that the British preferential rates be subject to a discount of 25 per cent in the case of woollen and worsted yarns, warps, fabrics, and clothing, and boots and shoes, that duties on fabrics and articles of linen, jute, hemp, and mixed fibres, oilcloth and linoleum, carpets, rugs, and carpeting, and all items (not already free) in groups I, V, VI, VII, VIII, IX and XI of the Customs Tariff (with the exception already mentioned of boots and shoes) be made subject to a discount of 50 per cent. No modification of the rates on liquors, sugar, tobacco, and silks is suggested. The result will be that, aside from the revenue items just mentioned, all imports from the United Kingdom will be free or subject to British preferential duties reduced by 50 or 25 per cent. The discounts proposed are to be in lieu of and not additional to the 10 per cent reduction now applicable for direct shipment. In the case of woollens the 25 per cent reduction will apply to the British preferential ad valorem and specific rates of duty but the operation of the limitation of the duty of 50 cents per pound as a maximum will remain unaffected.
These sweeping reductions are made to facilitate movement of goods from the United Kingdom. It is not expected that imports
from the United Kingdom will increase significantly. The difficulties of shipping are well known. Labour in the United eingdom is being withdrawn even from export trades to war industries and in many cases materials are lacking. We are suggesting sweeping reductions for the express purpose of facilitating the importation of whatever goods under changing circumstances the United Kingdom wishes to export to us. It may be that she will find it desirable to curtail her exports to us. In such case, we shall do without them. We desire to leave the greatest possible scope for selling to us whatever goods she wishes to sell.
The changes proposed in the Customs Tariff are of a minor character. The resolutions about to be tabled affect twenty-two items but a very small volume of trade. Seven new items will effect a reduction in the British preferential and intermediate tariffs on film wrapping paper, inedible gelatine, kyanite, strings for musical instruments, nickel rods for spark plug electrodes, oven thermostats and automatic oven lighters for gas stoves, and wire drawing dies in the rough.
Seven additions to existing items provide for reduced rates on carbon bisulphide mixtures for fumigating grain, machines and complete parts thereof for making boxes for fruits and vegetables, machinery and apparatus, of a class or kind not made in Canada, for maintenance and testing purposes in connection with gas and oil wells, infant identification beads, juvenile construction sets of rubber, cashew nut shell oil and spoon blanks.
For three items, covering essential oils, cut pile fabrics, and collodion, new wording is suggested to simplify administration.
For two items, covering ovens for commercial bakeries and veneer-making machinery, amendments are proposed to include in the items "complete parts".
In respect of two items relating to crayons, changes are proposed to carry out the intention of the United States trade agreement concerning the rate on chalk crayons.
Finally, in respect of tire fabric of rayon, the continuance of a special but higher rate is recommended.
Summarizing the revenue results of this lengthy recital of new and increased taxes, we expect to derive from them during a full year approximately $300,000,000 of additional revenue after making allowance for payments to the provinces under the agreement which I have proposed. During the balance of the current fiscal year we hope to collect nearly $250,000,000. The estimated yields of the various tax changes are recapitulated in a table which, with the consent of the house, I shall now place on Hansard: