May 15, 1941


The house in committee of ways and means, Mr. Fournier (Hull) in the chair.


INCOME WAR TAX ACT


Resolution 1 agreed to. 2. That paragraph AA of the first schedule to the act be repealed and in lieu thereof there be imposed a tax of 4 per centum on the investment income defined to include dividends, interest, rents, royalties and other like income and not to include salary, wages, fees or other like income from any office or employment of profit or income derived from the carrying on of a trade, vocation or calling.


NAT

Grote Stirling

National Government

Mr. STIRLING:

The minister has received a considerable number of resolutions from cooperative associations with regard to a possible amendment to the clause which affects them. So far as I can see, the amendments now before the house do not affect the clause in the Income War Tax Act, subsection (p). Can he assure me that is the case?

Topic:   INCOME WAR TAX ACT
Permalink
LIB
NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

What is the position with respect to quasi-cooperatives? I understand there are substantial numbers of very large cooperatives in some provinces operating on the alleged theory that they are cooperative, but as a matter of fact they are operating exactly the same as any corporation, declaring dividends, never distributing their total profits among their shareholders or members, and they do not pay income tax. What is the position? Are they true cooperatives? The law, as I understand it, is that true cooperatives do not pay income tax. What is the position with regard to those which are in the in-between class, such as I suggest, and is there any reason why they should not pay income tax?

Topic:   INCOME WAR TAX ACT
Permalink
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

One would have to take

individual instances and determine whether any particular cooperative or alleged cooperative was within the section exempting cooperatives. That is sometimes pretty difficult. I do not think there is very much more to be said about it than that. Apparently the section is fairly clear, but, like many clear sections, when it comes to applying it to a particular group of individuals and the business they are transacting it is often very difficult to know whether a concern is a cooperative within the meaning of the act, and important disputes have arisen as to whether certain business organizations are or are not within the exemption.

Topic:   INCOME WAR TAX ACT
Permalink
NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

The definition is found in part II, section 4, of the

Income War Tax Act dealing with exemptions and deductions. Subsection (p) of section 4, part II, of course, is well known:

(p) The income of farmers', dairymen's, live-stockmen's, fruit growers', poultrymen's, fishermen's and other like cooperative companies and associations, whether with or without share capital, organized and operated on a cooperative basis, . . .

Such companies and associations may market the produce of, or purchase supplies and equipment for non-members of the company or association provided the value thereof does not exceed twenty per centum of the value of produce, supplies or equipment marketed or purchased for the members or shareholders.

This exemption shall extend to companies and associations o-wned or controlled by such cooperative companies and associations and organized for the purpose of financing their operations.

I had in mind the pools and grain growers of the west. Has an investigation been made into their status, and has it been legally determined that they come within the exemption?

Topic:   INCOME WAR TAX ACT
Permalink
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

The business affairs of the pools are under active investigation at the present time. It has not been definitely determined whether they are subject to income tax or not.

Topic:   INCOME WAR TAX ACT
Permalink
NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

If the

matter is under investigation, that is enough for me.

Topic:   INCOME WAR TAX ACT
Permalink
NAT

Howard Charles Green

National Government

Mr. GREEN:

Paragraph 2 of the resolution deals with investment income. Will the minister explain what changes it is intended to make in the law relating to taxation on investment income, in relation to personal income tax and corporation income tax and also with regard to the tax on non-residents? I think that these points might very well be cleared up at this stage.

Topic:   INCOME WAR TAX ACT
Permalink
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

It is a difficult matter to explain.

Topic:   INCOME WAR TAX ACT
Permalink
NAT

Karl Kenneth Homuth

National Government

Mr. HOMUTH:

I do not know what hon. members have to talk about, but we simply cannot hear what is going on.

Topic:   INCOME WAR TAX ACT
Permalink
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

At the present time there is what is called a tax on investment income, but it is not a true tax on investment income except within a very small range, because all income over $14,000 is deemed to be investment income. For instance if a $50,000 salary is the only income of an individual, the part of it over $14,000 is deemed to be investment income. The so-called investment income tax, therefore, is not a true investment income tax. Now there has been an alteration in the rates and schedules, so that there will be on all investment income, over a small exemption at the lower end, a surtax, and the schedules and

Income War Tax Act

rates of taxation in reference to non-investment income have been so framed as virtually to absorb the old graduated so-called investment income tax rates. There is also a flat four per cent tax on investment income in addition to the ordinary graduated income tax.

Topic:   INCOME WAR TAX ACT
Permalink
NAT

Howard Charles Green

National Government

Mr. GREEN:

Does that mean that a person with a taxable income of say $1,000 would pay the income tax rate on that and in addition would pay four per cent on any portion of that income of $1,000 which is derived from dividends, interest, rents or royalties?

Topic:   INCOME WAR TAX ACT
Permalink
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

If the $1,000 is over the

exemption. There is an exemption at the lower

bracket.

Topic:   INCOME WAR TAX ACT
Permalink
NAT
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

No, this is individual income tax. The corporation tax is a flat rate.

Topic:   INCOME WAR TAX ACT
Permalink
NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

They have no investment income tax?

Topic:   INCOME WAR TAX ACT
Permalink
LIB

May 15, 1941