I come now to indirect taxes. I would remind the house that, in the three previous war budgets, we have made a highly selective approach to indirect taxes. We have attempted to collect revenues on specific expenditures rather than on all expenditures. Remembering that we already had an 8 per cent sales tax at the outbreak of war, we have avoided, since the first war budget, except in last year's increase in the sugar tax, indirect taxes which would raise the cost of the necessaries of life. The imposition of the price ceiling has added conclusively to the weight of argument against general rather than selective increases in consumption taxes. I propose to follow again, therefore, a selective approach and recommend substantial increases in taxes which fall on luxury expenditures. It is hoped that these taxes will discourage such expenditure. To the extent that they do, current savings will be increased. To the extent that such expenditures persist, the treasury will benefit from the revenue. The excise duties on alcoholic beverages have already been increased substantially since the outbreak of war, but the record of sales leads me to conclude that further large increases can again be made. I shall recommend that the excise duty on spirits, which was increased from $4 to $7 a gallon in September, 1939, be raised to $9 and that on Canadian brandy from $6 to $7. The pre-war excise duty on malt was 6 cents a pound and was increased to 10 cents in September, 1939, and to 12 cents in April, 1941. My recommendation is that it The Budget-Mr. Ilsley. be now increased to 16 cents a pound and that corresponding increases be imposed on malt syrup and on beer imported as such. It is proposed that the excise tax on wines be raised from 40 to 50 cents and on sparkling wines from $2 to $2.50 per gallon. It is anticipated that these changes will result in an increase of revenue of 811,650.000 in this fiscal year and $15,600,000 in a full year. It is recognized that the provinces, as well as the dominion, derive revenue from the taxation or sale of alcoholic beverages. They have also the responsibility for regulation of the sale. If the tax increase here proposed should seem likely to affect their revenues they have it in their own power to raise their prices or taxes. The purpose of these increases is to provide additional revenue for the dominion at the expense of the consumer, not to make inroads on provincial revenifts. Sales of cigarettes, now taxed at 86 per thousand, have increased very rapidly despite war-time increases in excise duties of 50 per cent. It is proposed, therefore, to amend the Special War Revenue Act to provide for an additional excise tax of one cent for each five cigarettes or fraction thereof contained in any package. Relative to cigarettes, smoking tobacco has been less highly taxed. While not seeking to equalize the rates, I propose an additional tax of one cent per ounce on manufactured tobacco. It will be recommended further that the rate on raw leaf tobacco be raised from 10 to 20 cents a pound. It will be recommended also that the tax on cigars be increased by 25 per cent, the tax on cigarette papers be increased from 5 cents to 6 cents per 100 and that on cigarette tubes be raised from 10 cents to 12 cents per hundred. It is estimated that these increases on tobacco, in its various forms and uses, will produce additional revenue of S17,205,000 in the fiscal year and $22,950,000 in the full year. I shall recommend that a number of excise taxes be increased and that some new taxes be imposed. The increases proposed are briefly as follows: On soft drinks, of which the supply is at present inadequate to meet the demand, a specific tax of 1 cent a bottle in addition to the present 25 per cent tax; on carbonic acid gas, a corresponding increase from 25 cents to 50 cents a pound; on playing cards, an increase from 15 cents to 20 cents a pack; on passenger transportation, a rise from 10 per cent to 15 per cent with the exemption limit raised from 50 to 75 cents; on berths, from 10 per cent to 15 per cent with a minimum tax of 35 cents, and on parlour-car seats, from 10 cents to 15 cents; on long distance telephone calls an advance from 10 per cent to 15 per cent with a corresponding adjustment of the rates on pay-station calls, the maximum tax being limited to 75 cents; and on telegrams, cables and radiograms an increase from 5 cents to 7 cents per message. On furs, which are at present subject to sales tax at 12 per cent, it is proposed to advance the rate to 25 per cent and change the form of tax from a sales tax to an excise tax. I shall propose new excise taxes to be levied, at the manufacturer's level, on candy and chewing gum at a rate of 30 per cent and photographic films and plates, except for industrial and professional use, at the rate now imposed on cameras, 25 per cent. I shall further recommend a new tax of 25 cents per month on telephone extensions in private households. The treasury will be glad to have the revenue but, if anyone chooses to discontinue their use of such extensions, the telephone companies will be glad to have the instruments. It was my opinion, at the time of the last budget, that expenditures in dance halls and cabarets were a proper occasion for taxation, but I was unable at that time to find a suitable formula. I shall recommend that a tax of 20 per cent be collected on all expenditures in dance halls, night clubs, cabarets and other such establishments which combine any two of the following features: provision for dancing by the patrons, the sale of alcoholic beverages, the offering of musical or other entertainment by paid performers. This tax is to be payable by excise stamps affixed to the bill or account which must be rendered by the proprietor to the patron. It is proposed that this tax take effect on July 1 next. I shall recommend also that excise taxes be levied on the retail purchases of certain luxury articles. The tax of 25 per cent of the retail price is to be accounted for by the affixing of excise stamps to the bill, cash slip or the article itself. The articles, on the retail price of which it is recommended that this tax be applied, are (1) articles of personal luggage, brief cases, jewel cases, purses, handbags, sports bags, etc., with an exemption of articles selling for $1 or less; (2) diamonds, jewellery and imitation jewellery and all goldsmiths' and silversmiths' products, articles of ivory, jet, amber, mother-of-pearl, etc., with exemption of articles selling for 50 cents or less; (3) articles of cut glass or crystal, articles selling for 50 cents or less

The Budget-Mr. Ilsley. being exempt; (4) articles of china, porcelain, stoneware, etc., except such articles for use in the preparation or serving of food or drink, the 50 cent exemption also applying to this category; (5) clocks and watches; (6) ash trays, tobacco pipes, cigar and cigarette holders, and cigarette rolling devices and other smokers' accessories; (7) fountain pens, propelling pencils, desk sets and desk accessories. In respect of the last three groups of articles the tax will not apply to articles selling for $1 or less. I am sure that the house will agree that these excise taxes will fall on articles which it is not essential to purchase in war time and that they will fall almost wholly on persons who make unnecessary expenditures, and thus give evidence that they are in a position to contribute to the revenues of the country. I expect that the increases in excise taxes will produce additional revenue in the fiscal year of $20,995,000 and $28,025,000 in the full year. In the case of taxes on commodities and services which are levied on the retail price and paid by the consumer or patron when his bill is paid, the tax will be stated separately from the price and will be deemed not to be part of the price for the purposes of the maximum prices regulations. Of the commodities on which new or increased taxes are assessed on the manufacturers' price it may be noted that furs are exempt from the maximum prices regulations, as are also sales of alcoholic beverages by provincial liquor boards. The other commodities affected are subject to the maximum prices regulations, viz., alcoholic beverages sold otherwise, cigarettes and tobacco, cigarette papers and tubes, candy and chewing gum, photographic films and plates, soft drinks and playing cards. On cigarettes and tobacco, the new taxes are separately stated and will be so indicated by stamps on the packages. The tax will not be considered part of the price for purposes of the maximum prices regulations. In respect of the other commodities, the wartime prices and trade board will permit such adjustments as are necessary and equitable. Expenditures on one commodity and one service affected by tax increases, cigarettes and passenger transportation, are included in the Dominion Bureau of Statistics cost of living index. That index has since the institution of price and income control acquired an importance which it did not previously have. It is calculated by precisely the same methods that have been used since its inception. No considerations of policy or expedi- ency can be permitted to affect it. However, these tax increases will be separately stated and clearly identifiable as taxes on the com-sumer. I propose that in the case of cigarettes which, desirable as they may be in other circumstances, are clearly not necessaries of life for the population as a whole, the new tax shall not be deemed part of the price for the calculation of the cost of living index. In announcing the offer to provincial governments regarding tax agreements last year, I stated that if certain taxes were given up by the provinces it was possible that the dominion, in order to prevent certain classes of companies from benefiting by the change, might impose special taxes in these directions. On reviewing the situation, it has been decided to levy a tax of 2 per cent on premiums paid on. life, fire and casualty insurance, in addition to the taxes we at present impose which are confined to fire and casualty insurance. In the case of other classes of companies it was found that the increase in dominion taxes on profits more than offset the special taxes -which they had been paying to the provinces and accordingly no special taxes by the dominion are necessary. Since the taxes collected in this fiscal year will cover both 1941 and 1942 the revenue in the fiscal year should be $13 million or double the annual yield. The changes proposed in the customs tariff provide for a number of tariff reductions and amend the wording of several items to facilitate administration. The resolutions about to be tabled affect twenty-five items and also provide for increased additional duties on imports of alcoholic beverages. The changes being made in these additional duties equalize the increases being made on the same commodities under the Excise Act. The existing excise duty on beer is being removed from the schedule to the Excise Act and replaced by a gallonage tax in the customs tariff. New duty free items are being provided to cover machinery and apparatus for operating oil sands by mining operations and for extracting oil from the sands so mined, fuel injection pumps and nozzles for diesel and semi-diesel engines, magnesium scrap and crude cotton seed oil for canning fish.' Additions to existing items provide for reduced rates on semi-finished piston castings of any material, parts of saggers, glass tubing for use in the 'manufacture of vials and ampoules, especially designed pins for marking systems, unbraided wick for the manufacture of wax candles or tapers, belting, non-elastic woven fabrics for the manufacture of abdom- The Budget-Mr. llsley. inal supporters and spinal braces, mouthpieces and wood bowls for the manufacture of tobacco pipes. The wording is being amended to facilitate the administration of the items covering parts for use in the manufacture of motor trucks, motor buses, motor truck bodies, motor bus bodies, prepared or preserved vegetables, blended orange and grapefruit juice, silicate of soda and resin or rosin. This completes the tax changes which I am-recommending and I shall put on Hansard two tables, one showing the estimated increases in. revenue which are expected in the remainder of this fiscal year and in a full year from the; new and increased taxes, and the other showing the full revenue estimates for the present fiscal year after giving effect to all the changes and tax rates and time of payment: Yields from Proposed Changes in Taxation Increased yields from changes in existing taxes- Personal Income Tax Corporate Income Tax Excess Profits Tax Insurance Premiums Excise Duties- Spirits (potable) Malt Malt Syrup and Beer Tobacco (raw leaf) Excise Taxes

Wines Cigarettes Tobacco (manufactured) Cigars Cigarette Papers and Tubes.. Soft Drinks Carbonic Acid Gas Playing Cards Passenger Transportation.... Berths and Parlor Car Seats. Long Distance Telephone Calls Telegrams and Cables Furs Yields from New Excise Taxes- Candy and Chewing Gum Films and Photographic Supplies Telephone Extensions Cabarets, Dance Halls, etc Stamp Tax on

Luggage Jewellery, Clocks, Watches Cut Glass and China Ash Trays, Pipes, Fountain Pens, Pencils, etc...

Full year

58,ooo'.66o 6,500,000 6,000,000 9,000,000 200.000 350,000

$ 400,000 17,600,000 4.000. 000 100,000 900.000 5.000. 000 300.000 100.000 3.000. 000 500.000 900.000 250.000 750.000

Balance of current fiscal year 1942-43 $ 45,000,000* 105.000. 000* 165.000. 000* 13,000,000f 4.500.000 6.700.000 150.000 260.000

$ 300,000 13,200,000 3,000,000 75.000 670.000 3.750.000 225.000 75.000 2.250.000 375.000 670.000 190.000 560.000

* 5,800,000 Total $ 17,225,000 $ 12,900,000 $246,075,000 $377,850,000 * These estimates for the balance of the current fiscal year include substantial effects of proposed changes m the time and method of payment. t Two years revenue will be collected in the balance of the current fiscal year, the nrooosed rate increases being retroactive to January 1, 1941. * 3592 The Budget-Mr. llsley.

Forecast of Total Ordinary Revenue for Fiscal Year 1942-43 Increase in revenue Total Revenue from resulting from ordinaryexisting taxes budget proposals revenueCustoms duties $ 135,000.000 $ 135,000,000Excise duties 123.000,000 $ 11,610,666 134,610,000 218,000,000 218.000,000War exchange tax 95,000,000 95.000,000Other excise taxes Income taxes- 85,000,000 38,240,666 123,240,000Personal National defence tax 240,000,000) 150.000.000( 45,000,000 435,000,000Corporation 200,000,000 105,000,000 305.000,000Interest and dividends 28,000,000 28,000,000Excess profits tax 275,000,000 165,000,666 440.000,000Succession duties 15,000.000 15,000,000Miscellaneous taxes 2.600,000 13,000,666 15,600,000Total tax revenue $ 1,566,600,000 $ 377,850,000 $ 1,944.450,000Non-tax revenue. 105,000,000 105,000,000Total ordinary revenue $ 1,671.600,000 $ 377,850,000 $ 2,049,450,000

If our estimates of the yields of new and increased taxes during the balance of the current fiscal year are reasonably correct, the dominion's total revenues for 1942-43 should be approximately $2,050 million. With expenditures of S3.900 million, this leaves a budgetary deficit of S1.S50 million which will have to be covered by borrowing. On these estimates, we shall have paid somewhat more than 52 per cent of our expenditures out of revenue. The enactment of the budget proposals will provide for the collection in 1942-43 of additional sums to be refunded after the war and which it is estimated will amount to $95 million. This will leave for other methods of financing $1,755 million. I shall put a brief tabular statement on Hansard to summarize these calculations in convenient form: Fiscal Year 1942-43 Estimated total expenditure $3,900,000,000 Estimated ordinary revenue 2,050,000,000 Budgetary deficit 1,850,000,000 Estimated refundable taxes 95,000,000 Amount to be met by decline in cash and by borrowing 1,755,000,000 After making full allowance for some reduction in our cash balances which were unusually large at the beginning of this year, for moneys available for investment from the Unemployment Insurance Fund and other special government accounts and for subscriptions from insurance and trust companies and other corporate investors, it is apparent that the balance which should be provided by individual purchases of war savings certificates and bonds is very large, perhaps as much as two-thirds of the total. [Mr. Ilsley.l , No great fraction of this can be provided by individuals with incomes of more than $3,000 or $4,000. Individually they must do their share but the total of their subscriptions will be limited by the smallness of their numbers. It must be provided by people of lower incomes especially those in families whose incomes have increased during the war. Now, the house will understand what I meant when I said that I was not proposing to substitute compulsory savings for voluntary savings. The refundable tax and other provisions which I am recommending are merely to equalize the base from which voluntary savings start. Subscriptions to victory loans and war savings certificates indicate that the current savings of individuals for the purchase of government securities are certainly not in excess of $12 million a week and may be somewhat lower. Over and above the higher taxes, over and above the minimum savings requirement, these current savings must not only be increased; they must be increased greatly if we are to finance this war the sane and the equitable way, if those of us who are not in armed forces are to demonstrate that, as a democracy, we are capable of meeting the stern tests of war as we expect those who dare physical destruction to meet far sterner tests. Will this mean a reduction in our standard of living? Certainly. The war will not be won by disputing as to whether labour or agriculture or employer or employee should get a larger share of a swollen national income. It wall be won, not alone by the valour of fighting forces and the skill of generals but by the willingness of the people at home to make necessary sacrifices-willingness to make those sacrifices first and not after all other groups have made them. The Budget-Mr. llsley. I am asking that there should be by every individual the most rigorous economy. Every dollar we spend means that someone is working for us. Let us not spend it if that someone might instead be working for victory. I am not asking that anyone's standard of living should be reduced below the level of personal efficiency and decency. I am asking that it should be no higher than that level. Let us compete with our neighbours, in saving, not spending; in making shift with what clothing and house furnishings we have, not in buying more; in hard work and plain and thrifty living. All this has an immediate and necessary purpose. All the equipment, materials and labour that we can possibly spare must be used in this bitter conflict for victory. It has a further purpose which gives hope for the future. The savings that we make now will be available after the war. We can then replenish our wardrobes and build our houses and take more leisure, knowing that not only will we be increasing the comfort and vitality of our families but providing work and pay for thousands of people who will come out of the armed services and war industries and earn their livelihoods once more in civilian industry. By all means let us have a new world after the war. It will not come from speeches and laws. We must work and save for it and for victory now. The National War Finance Committee is engaged in the development of an organization in each province which will undertake a continuous campaign for the regular sale of bonds, war savings cerificates and stamps to the public throughout the entire year, supplemented from time to time, by special campaigns. I bespeak for them every dollar of savings that can be made and the active help of everyone in their campaign. I should like to say a word to the business men who operate large and small businesses throughout this country. A big part of the earnings of business must during the war flow into the treasury. That is not because it is government policy to penalize business enterprise but because so large a part of all our incomes and all our work must go to winning this war. I realize fully that where most of the profits are absorbed by taxes it is difficult to be as vigilant in watching costs as when SI of expense saved is SI added to profits and the mark of a well-run business. Nevertheless it is imperative that business men should be vigilant also in the national interest. Let no one have it on his conscience that he took man-power for unnecessary work, that he permitted cost increases which could have been avoided. For business too there is a longer view. Industry is going through a tremendous conversion to war production. When victory is achieved, it will have another great job of conversion to do. It must be prepared to serve again the civilian population, perhaps with many new and different products. It is the business interest and the nation's interest that men of business come to that task with costs that have been kept rigorously under control and with funds available for reequipping and restocking their plants and shops. The refundable portion of the excess profits tax will be available for that adjustment but it will be of less than its full value if business ends the war with highly inflated costs. This, Mr. Speaker, concludes my presentation of the budget. The proposed tax increases are substantial and severe. They are imposed on the assumption that Canadians appreciate the critical gravity of recent events and the necessity of making a supreme effort in the present year. A few weeks ago, the atmosphere was surcharged with optimism which in many of its manifestations was almost lighthearted. The war would be over by January; the tide had turned; Germany was facing internal collapse; Japan had overextended herself; Italy was a joke; and so forth. More and more Canadians were putting forward demands for their own material betterments, and increasing numbers were transferring their interest from war to post-war problems. The events of the last few days must surely have had a sobering effect. This is no time for airy overconfidence. Events in China, events in the Ukraine, events in the Crimea, events in Libya-do not these convince us that the war may not be won this year, may not be won for many years? It was not recklessly that Germany and Japan brought the United States into the war, as they did. What foolish statements we have madel Not long ago, how often was it said that Hitler was a madman, irrationally running headlong to destruction, that Japan was committing hara-kiri 1 Alas, there seems to have been nothing irrational-certainly nothing intentionally suicidal about the plans of our enemies. These aggressor nations prodded the United States into the war because they The Budget-Mr. Ilsley.

were convinced that they could, nevertheless, win-win in 1942. Do Canadians realize how critical the situation is at this moment in Russia, in China,, and in the middle east, and how critical it may be elsewhere before long? I believe that now they do and that their individual desires for gain, and ease, and advantage are submerged in the nation's will to win. In this belief, I present this budget to the house and to the Canadian people.

Mr. Speaker, I desire to give notice that when we are in committee of ways and means I shall move the following resolutions:

Resolved, that it is expedient to amend the Income War Tax Act and to provide: 1. That the rates of tax applicable to persons other than corporations and joint stock companies shall be increased to the rates set forth in the following schedule: A. Rates of tax applicable to persons other than corporations and joint stock companies: I. Normal tax- (1) In the case of (a) a married person, (b) a widow or widower with a son or daughter under eighteen years of age and wholly dependent upon such taxpayer for support, or a son or daughter eighteen years of age or over and dependent on account of mental or physical infirmity, or a son or daughter under twenty-one years of age who is dependent upon such parent for support on proof that such child is a student at secondary school, university, or other educational institution; (c) an individual, other than a married person, who maintains a self-contained domestic establishment and who actually supports therein a person wholly dependent upon him and connected with him by blood relationship, marriage or adoption; (d) a minister or clergyman, other than a married person, in charge of a diocese, parish or congregation, whose duties require him to maintain at his own and sole expense, a self-contained domestic establishment and- who employs therein on full time a housekeeper or servant; Provided, in the case of (a), the spouse, and in case of (b), the said dependent, is resident in Canada or in any other part of the territory of the British Commonwealth of Nations, or in a country contiguous to Canada, or is a national or citizen of a country allied with Canada in the present war and is prevented from entry into Canada due to the exigencies of the war, or is legally debarred from entry into Canada; *Seven per centum of the income, if the income exceeds $1,200 per year; And in the case of (e) a husband and wife having each a separate income, {Mr. llsley.J Seven per centum of the income of each, if the income of each exceeds $660 per year; And in the case of (f) a single person, or (g) a married person whose spouse is not resident in Canada or in any other part of the territory of the British Commonwealth of Nations, or in a country contiguous to Canada or in a country allied with Canada in the present war, or whose spouse is not legally debarred from entry into Canada,Seven per centum of the income, if the income exceeds $660 but does not exceed $1,800 per year; Eight per centum of the income, if the income exceeds $1,800 but does not exceed $3,000 per year; and Nine per centum of the income, if the income exceeds $3,000 per year. And in the case of (h) Estates having income taxable as provided by subsections 2 and 4 of section 11 of this act; Nine per centum of the income. (2) From the Normal Tax there shall be allowed a deduction of $28 for the year 1942 and for each year thereafter for each of the following persons who is resident in Canada or in any other part of the territory of the British Commonwealth of Nations or in a country contiguous to Canada or in a country allied with Canada in the present war or who is legally debarred from entry into Canada, and wholly dependent upon the taxpayer for support, namely (i) a child, grandchild, brother or sister of the taxpayer under eighteen years of age, or if eighteen years of age or over, is wholly dependent on account of mental or physical infirmity, or under twenty-one years of age on proof that such child is a student at a secondary school, university or other educational institution; (ii) a parent or grandparent of a taxpayer, wholly dependent on account of mental or physical infirmity; (iii) a child under eighteen years of age maintained by the taxpayer in Canada under a cooperative scheme sponsored by the governments of the United Kingdom and of Canada or any of the provinces of Canada, for children brought from the United Kingdom under a government plan, or under twenty-one years of age, and likewise maintained, upon proof that such child is a student at a secondary school, university or other educational institution; except one such dependent provided for in (b) and (c) of subparagraph (1) hereof; (3) If the tax exigible under the Normal Tax should cause the income of a single person or a husband or a wife to be reduced below the amount of $660 or in the case of those persons referred to in (a), (b), (c) and (d) of subparagraph (I) hereof, below $1,200, then to the extent that it would so reduce the income of the taxpayer, such tax shall not be payable. The Budget-Mr. Ilsley. II. Graduated Rates of Tax: In addition to the Normal Tax there shall be imposed in respect of the income above the exemption hereinafter provided, the following: On the first $500 of income or any portion thereof, 30 per centum per annum, or $150 upon the income of $500; and 33 per centum upon the amount by which the income exceeds $500 and does not exceed $1,000; or $315 upon income of $1,000; and 37 per centum upon the amount by which the income exceeds $1,000 and does not exceed $2,000; or $685 upon income of $2,000; and 41 per centum upon the amount by which the income exceeds $2,000 and does not exceed $3,500; or $1,300 upon income of $3,500; and 45 per centum upon the amount by which the income exceeds $3,500 and does not exceed $5,000; or $1,975 upon income of $5,000; and 50 per centum upon the amount by which the income exceeds $5,000 and does not exceed $8,000; or $3,475 upon income of $8,000; and 55 per centum upon the amount by which the income exceeds $8,000 and does not exceed $13,000; or $6,225 upon income of $13,000; and 60 per centum upon the amount by which the income exceeds $13,000 and does not exceed $20,000; or $10,425 upon income of $20,000; and 65 per centum upon the amount by which the income exceeds $20,000 and does not exceed $30,000; or $16,925 upon income of $30,000; and 70 per centum upon the amount by which the income exceeds $30,000 and does not exceed $50,000; or $30,925 upon income of $50,000: and 75 per centum upon the amount by which the income exceeds $50,000 and does not exceed $70,000; or $45,925 upon income of $70,000; and 80 per centum upon the amount by which the income exceeds $70,000 and does not exceed $100,000; or $69,925 upon income of $100,000; and 85 per centum upon the amount by whicb the income exceeds $100,000. 2. That the exemptions of $1,500 and $750 shall be reduced for the purposes of the Graduated Rates to $660 for all persons; 3. That a married person, or a person heretofore entitled to an exemption equivalent to that of a married person, shall be allowed as a deduction from the tax payable under the Graduated Rates, an amount of $150; 4. That in lieu of the deduction of $400 from income for each dependent child or grandchild there shall be allowed a deduction of $80 from the tax payable under the Graduated Rates; 5. That a deduction from the tax payable under the Graduated Rates be allowed a taxpayer to the extent of 20 per centum of the amount actually contributed for the support of a dependent parent or grandparent, or a brother or sister under eighteen years of age or eighteen years of age or over and dependent on account of mental or physical infirmity, or under twenty-one years of age, upon proof that such brother or sister is a student at a secondary school, university or other educational institution: provided that the maximum credit herein shall not exceed $80. 6. That one-half of the total taxes payable by a taxpayer under the Normal Rate of tax and the Graduated Rates of tax shall be refundable to a taxpayer provided, however, that such refund shall not exceed 8 per centum of the income of a single person, or $800, whichever is the lesser; or 10 per centum of the income of a married person, or $1,000, whichever is the lesser; plus 1 per centum of the taxpayer's income for each dependent, or $100, whichever is the lesser; 7. (I) That the total taxes payable by any taxpayer under the Normal Rate of tax and the Graduated Rates of tax shall be reduced by the amount paid by the taxpayer in respect of (a) payments into any approved superannuation, retirement or pension fund or plan, paid as a term of employment and not repayable during the continuance of such employment; (ib) premiums on life insurance policies in force prior to the twenty-third day of June, 1942; (c) principal payments on a mortgage on one residential property, provided such mortgage was registered and in effect prior to the twenty-third day of June, 1942; Provided, however, that such reductions shall not exceed the amount of the refundable portion of the tax as provided for in resolution 6 above; and the said refundable portion shall be reduced accordingly; (2) That in the case of a taxpayer over sixty-five years of age with income less than three thousand dollars, the total taxes payable under the Normal Rate of tax and the Graduated Rates of tax shall be reduced by the refundable portion of the tax as provided for in resolution 6 above, and the said refundable portion shall be eliminated accordingly; 8. That the refundable portion of any tax exigible under any enactment founded on these resolutions shall be repaid to the taxpayer or to his legal representatives, after the cessation of hostilities between Canada and Germany, Italy and Japan, and in the following manner: The refundable portion of the tax in respect of income of 1942 shall be repaid at such times and in such instalments as the Governor in Council may determine but not later than the end of the second fiscal period of the government commencing after the said cessation of hostilities; the refundable portion of the tax in respect of the income of 1943 shall be repaid at such times and in such instalments as the Governor in Council may determine but not later than the end of the third fiscal year of the government commencing after the said cessation of hostilities and so on in respect of the refundable portion of the tax on income of successive years. The date of the cessation of hostilities shall be deemed to be the date of a proclamation issued under the authority of the Governor in Council declaring that, for the purposes of the said refund, the war no longer exists. 9. That the refundable portion of any tax paid by the taxpayer in the twelve months preceding the first day of September .in any year shall bear interest at the rate of 2 per cent from that date and shall be payable when the refundable portion is repaid; The Budget-Mr. Ilsley.

10. That where, under any existing or future contract or arrangement, a capital or principal sum is payable by instalments or otherwise, without providing for interest, or with interest at a nominal rate only, the Minister in his sole discretion may by regulation or otherwise determine what part of the capital payment represents interest, which shall be deemed to be income for the purposes of this act; 11. That where any royalty company, association, or other body is organized for the purpose of drilling for and operating oil or gas wells whereby the production belongs not to the company but to the investors in the property, the production shall be deemed to be for and on behalf of the company and the income of the company shall be deemed to include the proceeds secured from the sale of the said oil or gas, less necessary expenses; 12. That any pension granted to any member of His Majesty's military, naval or air forces or to any member of the military, naval or air forces of His Majesty's allies, for any disability suffered on active war service by the pensioner or any pension granted to any dependent relative of any person who was killed or suffered any disability while on active war service in the said forces, shall be exempt from taxation; 13. That any amount received as compensation, other than compensation for loss of time, under any Workmen's Compensation legislation of any of the provinces of Canada in respect of any injury or disability incurred or in respect of any death, shall be exempt from taxation; 14. That any employer may deduct as an expense an amount up to 5 per centum of his pay roll, under limitations to be prescribed, paid as contributions to any employees' superannuation or pension fund or plan, excluding therefrom, however, portions in respect of salaries over $0,000 per annum; 15. That a taxpayer shall be allowed a deduction from income in respect of medical expenses in excess of 5 per centum of the income of such taxpayer, incurred and paid by such taxpayer in the taxation year, or paid in the taxation year and incurred within one year prior to the date of payment if such payment is made to any qualified medical practitioner, dentist, or nurse, registered under any Dominion or Provincial legislation or regulation, or public or provineially licensed private hospital, in respect of any birth in the family of, illness or operation upon, the taxpayer or his spouse, or any person dependent upon the taxpayer, in respect of whom the taxpayer w'ould heretofore have been entitled to an exemption and if the said dependent is resident in Canada, provided that the allowance in any taxation year shall not exceed the sum of (a) $400 in the case of a single person without dependents, or (b) $600 in the case of a married person or a person entitled to an equivalent allowance to that of a married person; plus $100 in respect of each additional person (not exceeding four) dependent upon the taxpayer for support; [Mr. Ilsley.J Provided, however, that the maximum deduction hereunder shall not exceed $1,000; and provided further that the said amounts are substantiated by receipts and that such receipts are lodged with and at the time of filing the taxpayer's income tax return; 16. That the revenue losses in any business, of the immediately preceding year, may be allowed as a deduction. 17. That contributions not exceeding $500 to any one registered prospecting syndicate searching for base metals or strategic minerals, but not exceeding $5,000'in the aggregate, and payments not exceeding $5,000 by any corporation in respect of its own prospecting expenses for similar minerals, may be allowed as a deduction from the income of any taxpayer, provided that the tax saving under this act and the Excess Profits Tax Act, 1040, shall not exceed 40 per centum thereof in each case; 18. That the deduction provided for by section 7 of the said Act under which a taxpayer is entitled to deduct from tax the amount paid under part III of the Special War Revenue Act, be repealed; 19. That salary and other periodic payments payable to non-residents of Canada who are residents of a country which imposes a tax of a similar nature shall be subject to a tax of 15 per centum at the source; 20. That the tax payable by all persons other than corporations shall be paid by quarterly instalments during the six months immediately prior to the close of the calendar year and the six months immediately subsequent to the close of the calendar year (a) as to the six months, July to December, one-quarter of the estimated tax on or before the 15th day of September and the 15th day of December each year, having regard to the previous year's income and applying the current year's rates, and (b) as to the six months, January to June, one-half of the tax (after deducting therefrom the previous two quarterly payments) on or before the 15th day of March and the 15th day of June each year, having regard to the income and applying the rates of the taxation year. This shall be applicable to the tax on income of the calendar year 1942 and each year thereafter. Any additional tax found due over that estimated or declared by the taxpayer shall be paid immediately upon assessment, together with interest at 5 per centum after four months from the close of the calendar year. This instalment method of payment shall not apply to persons whose tax is being deducted at the source in respect of salary or wages, and whose salary or wage constitutes three-quarters or more of his income; 21. That the tax payable by a corporation shall be paid by monthly instalments during the six months immediately prior to the close of its fiscal period and the six months immediately subsequent to the close of its fiscal period The Budget-Mr. Ilsley. (a) as to the first six months, one-twelfth of the estimated tax, having regard to the previous or anticipated current year's income, applying the current year's rates, and (b) as to the second six months, one-sixth of the tax after deducting therefrom the previous six months' payments having regard to the income, and applying the rates of the taxation year. This shall be applicable to the tax on profits of fiscal periods ending on and after 31st December, 1942. Any additional tax found due over that estimated or declared by the taxpayer shall be paid immediately upon assessment, together with interest at 5 per centum, after four months from the close of the fiscal period; 22. That the schedule of rates of tax on gifts in section 88 of the said act be repealed and in lieu thereof there be substituted the following schedule, to apply to gifts made after June 23, 1942: On gifts up to and including $5,000.... Per cent .. 10 On gifts exceeding $ 5,000 but not exceeding $ 10,000. .. 11 10,000 " " " 20,000. .. 1220,000 " " " 30,000. .. 1330,000 " a " 40,000. .. 1440,000 " " " 50,000. .. 1550,000 " " 75,000. .. 1675,000 " it " 100,000. .. 17100,000 " " " 150,000. .. 18150,000 " a " 200,000. .. 19200,000 " " " 250,000. .. 20250,000 " a " 300,000. .. 21300,000 " a " 400,000. .. 22400,000 " " " 500,000. .. 23500,000 " a " 600,000. .. 24600,000 " " " 700,000. .. 25700,000 " " " 800,000. .. 26800,000 " a " 1,000,000. .. 271,000.000'.. . . .. 2823. That provisions relating to the collection of National Defence Tax be repealed as of midnight of the 31st August, 1942;24. That commencing after the 31st day of August, 1942, all dividends and registered interest paid by any debtor to residents of Canada shall be subject to a deduction at the source at the rate of 7 per centum;25. That commencing after the 31st day of August, 1942, all salaries and wages paid by any employer to residents of, or persons employed in, Canada shall be subject to a deduction at the source of such portions of the taxes authorized herein as may be determined hereafter by the Governor in Council;26. That any enactments founded on (a) Resolutions 1 to 15 inclusive, 20 and 21 shall be applicable to the income of the 1942 taxation , period and fiscal periods ending therein and to all subsequent periods; (b) Resolution 16 shall be applicable to the income of 1943 taxation period and fiscal periods ending therein and all subsequent periods; (c) Resolution 17 shall be applicable only to the income of the 1942 taxation period and fiscal periods ending therein; (d) Resolution 18 shall be applicable to the income of the 1941 taxation period and fiscal periods ending therein and all subsequent periods; (e) Resolution 19 shall be deemed to have come into force on the 24th day of June, 1942, and shall be applicable to all payments made on and after the said date.