Hon. R. B. HANSON (York-Sunbury):
Mr. Speaker, in rising to make a contribution to this debate I find myself in some difficulty. There is such a multiplicity of topics to which one could direct his attention that it is difficult to pick and choose among them.
I think my first duty is to make reference to the announcement yesterday by the Minister
(Mr. J. A. MacKinnon.]
The Budget-Mr. Hanson (York-Sunbury)
of Finance (Mr. Ilsley) of the fourth victory loan, and to give him and the national committee the assurance that this party will be one hundred per cent behind this, the greatest national effort the Canadian people have ever made with respect to finance.
Financial support is one of the sinews of war; it is more than a mere measure of our effort. This nation will respond in full measure to the national appeal. With all my heart I endorse the minister's appeal. In the past a3 opportunity offered I tried to pull my full weight in these financial campaigns. The Easter recess will afford every one of us another opportunity for service to Canada, and I appeal to every member of parliament as he goes home for the recess to get in touch with his provincial and county committees, and to offer his services in any capacity, so as to help put this loan over the top. By so doing, hon. members will be rendering a national service and giving the leadership which is so necessary if this huge loan is to be a success. Members of parliament from one end of Canada to the other should be, and I hope are, leaders of public opinion in their respective communities. Here is another chance to show our people our faith in our country and the cause for which we fight.
I have said in the house many a time and oft that the Canadian people would support the government to the limit provided that they were sure of equality of service and equality of sacrifice, and that there should be an end to waste and extravagance. I wish I could think there has been an end to waste and extravagance in government spending, but in all truth and honesty I do not think so. I beseech the minister, the watchdog of the treasury, to prevent improvident expenditures.
I wish to make brief reference to the speech of the hon. member for Lambton West (Mr. Gray), who is now in his seat. Referring to the man-power question the hon. member made reference to myself and my stand on the policy of national selective service. I am grateful to him for his commendation of my stand, but I suggest to him that his remarks were hardly fair to the membership of this party and its stand on this important question. If the hon. member has not yet read the resolution of the national convention of the Progressive Conservative party as passed at Winnipeg, he should do so at once. In that resolution, this party declared for compulsory selective service and total mobilization of resources, in the following words-I propose to put them on record:
Recognizing that the world struggle in which Canada is engaged requires a total war effort, we believe in compulsory national selective 72537-86J
service, and that all those selected to serve in the armed forces should be available for service wherever required. We believe in the effective total utlization and proper allocation for war, by compulsion where necessary, of all the resources of Canada, including agriculture, industry and finance, as well as man-power, and that our aim should be at all times to bring about, so far as human means can achieve it, an equality in sacrifice.
I commend to the hon. member and to the people of Canada the principles underlying this resolution.. It is what I have been saying for a good many months past. By those principles the Progressive Conservative party stands and will be judged1 in the days to come.
The hon. member for Lambton West made his profession of faith in the following terms:
I believe . . . that in a free society the obligations and privileges of military training should be shared generally in accordance with a fair and just system of selective compulsory raining, and that such service should be without geographic restriction.
I commend that position also, and I suggest the hon. member might have gone further and told the people of Canada, as I tell them now, that without an acceptance of the national plan of military service there should be no demands for rights in the postwar world. We in Canada have never been taught our national obligations. I have referred on more than one occasion to the excuse-not the reason-which was given for the establishment of the thirty-day training plan. One of the main reasons alleged was that the youth of Canada had to be taught a sense of national obligation. I am not going to labour that point now, but I want to observe that while we are all clamouring for rights and privileges, national obligations have not found much place in our peace-time or war-time philosophy. If we are to believe the reports that have reached us in recent days and hours, there are momentous days ahead. From the Russian theatre of war we had until a few days ago very heartening reports which have raised optimism to the point of believing that Germany was in a state of collapse and that the end of the war is near, might even be expected this year. But events within recent days have dispelled that illusion. The display of German striking power against Russia in recent days has been terrific. Disaster has not come to German arms in that theatre of war. A titanic struggle is developing over there, with the approach of spring and summer, and the end is not yet.
Consider the battle of North Africa, part of the Casablanca plan and strategy. Reports
The Budget-Mr. Hanson (York-Sunbury)
indicate that the battle is developing into a major struggle, the result of which is still in grave doubt. Instead of being a matter of weeks it has developed into a battle of months, and in the meantime the invasion of the soft underflank of Europe has been indefinitely postponed. Clearly the next few months will be momentous, and terrific sacrifices will be demanded of the people of the united nations.
Instead of viewing these matters in their proper perspective, what are we doing, and what have we been doing in this house? We have been talking about social security and like matters, while the fate of the civilized world hangs in the balance. Let us get back to realities and face the facts. Let first things come first. Let us put our backs into the winning of this war. That is our first [DOT]objective. Do not let our minds and attention be diverted into other channels; for that way lie defeat and disaster.
We are also hearing a good deal at this time about post-war international policies. There are even those who are drawing blueprints of a post-war international phase of the life of this globe. My colleague the hon. member for Lake Centre (Mr. Diefenbaker) yesterday in an able speech delivered in this house, made some constructive proposals in that regard, especially with reference to the principle of the freedom of the air. I do not deprecate that; I am not opposed to that type of discussion. But it seems to me that concrete proposals are altogether premature at this time, when we do not know, when we are not yet assured, that there will be a post-war world in the sense in which we visualize it. Rather I am disposed to concur wholeheartedly in the statement of the President of the United States at a press conference at Washington on Tuesday last, in which he is reported to have indicated *disagreement with those who would frame post-war international policies in detail now. He said that what the United States was trying to do was, first, to win the war; second, to work towards general objectives. With that statement I am in perfect agreement. He indicated that his administration did not favour any pronouncement at this time on post-war policy except as to general willingness to cooperate with all the other united [DOT]nations.
There is one great principle however which Canada as a nation should ever keep in the forefront in dealing with this subject, and that is that Canada should never give countenance to any idea of dismemberment of the empire
in the post-war period. The party to which I have the honour to belong and which I have followed all my life is unequivocally committed to the belief that the future of this dominion as a free nation can best be assured as a member of the British commonwealth of nations. By that declaration we stand or fall. We believe that second only in importance to the winning of the war is the maintenance of the British connection and our position as a component part of the British empire.
I have no intention of entering into any discussion of the policies and actions of the wartime prices and trade board; we heard something about that on Monday. But, representing as I do a semi-urban and rural constituency, I feel that some recent decisions of the board call for comment. First, I refer to butter. The situation with respect to dairy process butter in my province is still unsatisfactory, to say the least. There is still a discrimination between the price, the farmer receives for butterfat delivered to the creameries and the price the farmer receives for his dairy butter. At first this discrimination amounted to as much as ten cents a pound, which for as long as that full rate lasted is lost forever to the producer. Recently a corrective order was made under which a portion-only a portion-of this spread was to be wiped out, by dairy farmers being permitted to sell dairy butter to wholesalers and retailers at an increased price. This is certainly a benefit and has gone some way toward ending the discrimination between these two classes of producers. But a portion of the differential still exists and is a cause of unrest and even anger on the part of our dairy butter producers; for in my province sixty per cent of the butter is produced by dairy farmers.
I wish to refer also to the action of the wartime prices and trade board in respect to the question of seed potatoes. Down in the provinces of New Brunswick and Prince Edward Island we claim to raise the best seed potatoes on the north American continent. They are the cleanest and the freest from plant diseases. For a long time our agriculture departments, both provincial and federal, have been endeavouring to get our farmers out of the production of table stock and into the production of seed stock. The question has been largely one of markets. One of the best markets we ever had for seed stock was in Cuba. That market was closed to us, for reasons to which I will not advert at the moment. More recently, under the trade agreements with the United States, quotas were established for the entry of our
The Budget-Mr. Hanson (York-Sunbury)
seed stock into that country. The quotas were so small that I am informed by producers that the county of Queens, Prince Edward Island, could supply the whole quota in any given year. That may or may not be true, but in any case under the trade treaties we did get some access to the seed potato market of the United States. It is a market into which we have sought entry for a long time. They want our seed stock; their fields, particularly in northern Maine- and I say this with some deference-are old and diseased, and they cannot produce unless they have access to good clean stock. Prices for seed stock have always been higher than prices for table stock, but I understand that now the wartime prices and trade board have either imposed an embargo on the export of seed potatoes to the United States, or have made such export subject to licence. I
suggest to the minister under whose control the matter would come that this is a mistake from every point of view. A determined effort should be made to change that position, and I would ask the member of the government responsible to direct that the whole matter be reviewed. Not only shall we lose the export market in the United States, and the greatly enhanced price of the product; we will lose what I consider to be of at least equal value, the good will of our customers across the line. They will resent that action. I do not know, but I would assume that so far as the New Brunswick product is concerned, there is an ample supply of table stock. According to the local newspaper, which I received at noon to-day, there are at present 16,000 more tons of table stock available in New Brunswick than were available at this time last year. Now, with the prohibition of the export of seed potatoes to the United States, there may be something of a glut. I do not know that this will be so, but I do know that the producers of seed potatoes will be obliged to accept in the local market the price of table stock instead of the greatly enhanced price they would have received had those potatoes been sold for the purpose for which they were produced, namely seed potatoes.
I should like to know what consultation there was with the trade before this action was taken. How can these men-none of them producers, so far as I am aware; economists and theorists if you will, office men-sitting here and looking at a picture on paper, looking at statistics, possibly know what should be done? I suggest to the minister that this position should be rectified at the earliest possible moment, and the producers allowed the price they would have
obtained in this export field at least. I suggest also that if possible they be allowed to retain this market which has been laboriously built up over a period of years.
Then there is the question of the allocation of farm machinery under the greatly reduced quotas. Our farmers are confronted with an exceedingly grave problem, so I am informed, with respect to obtaining farm machinery and parts. A controller has been appointed with headquarters in Toronto, and he has allotted to the maritime provinces so many machines and so many parts. In New Brunswick the two principal companies supplying the market are International Harvester and Massey-Harris. The quantity allotted is exceedingly limited. The whole output of International Harvester is controlled in New Brunswick by one company, or rather I should say by two companies controlled by one man. They have the whole province divided among their branches, with respect to the distribution of farm machinery. For some reason one of the executives of one of these companies under the control of this one man has been made the farm machinery controller for the distribution of this machineiy in. New Brunswick. Well, I do not say there is anything wrong with that on its face, but I do say that the public down there are very suspicious about appointments of that kind. Why in the world should a high-salaried officer of these two companies, which between them control the major part of the marketing of farm machinery in New Brunswick, be placed in the position of controller for the whole province? You can draw your own inference. I am going to ask the minister to see that this position is reviewed and that some independent authority down there is made controller, if a controller is required. Human nature being as it is, you can guess as well as I can what will be the result. Within the last few days I was told that the quotas allotted to New Brunswick provided only ten or twelve potato planters for the whole province. This may be all that can be spared, I Jo not know; but the allocation of these planters already has been made through the-medium to which I have referred, with no' one else having a look-in at all. Then when the farmers, in anticipation of fall digging, applied for the purchase of diggers, they were told that it was too soon to ask for them. I suggest that the whole procedure is bringing into disrepute the system which is in operation, and it should be reviewed.
I desire now to say a brief word on the budget. I listened with undivided attention to the minister's address, and I am bound to
The Budget-Mr. Hanson (York-Sunbury)
tell him that my first reaction was that it might have been far worse than it was. But a careful re-reading and analysis has convinced me that while the minister intended to emphasize and did emphasize the fact that the rates of taxation were not being raised, the real truth is that the deadweight of taxation, especially on personal income tax payers, has been greatly increased. Those who sought relief are going to be speedily and quickly disillusioned. Holding the views which t do as to our first fundamental duty in this hour of crisis, I have no wish to appear picayune or to be unnecessarily critical. I had made some notes of criticisms I intended to offer on the general features of the budget, but as time is flying I shall confine myself to one or two points.
I wish to discuss briefly the Ruml plan and its application to Canada. The people of Canada, speaking generally, and the personal income tax payers in particular, are greatly disappointed at the minister's treatment of the proposal known as the Ruml plan. True, the reference in the speech from the throne itself was indefinite, but what the people of Canada believed from the information contained in the speech from the throne was that the plan and the principle underlying it would be implemented and put into operation, thus relieving personal income tax payers of the fear and anxiety of being perpetually indebted to the nation. Deadweight debt has a most paralyzing effect on individual morale and initiative.
What did Mr. Ruml propose in his plan for the United States, a plan which is applicable to Canada? He proposed that the United States should write off all 1942 personal income tax in order to put everyone on a current basis, without forcing anyone to pay two years taxes in one, and in order that the deadweight of debt on individuals should be wiped out. What have we instead? I characterize it as a hybrid proposal. The minister made us pay all our 1941 taxes by September 1, 1942, and then he asked us to pay one-third of our 1942 taxes. In other words, because of the delay in bringing down the budget last year until June 23, the personal income tax payers of Canada were forced to pay sixteen months taxes out of twelve months income and had to make the necessary arrangements in the six months of the last period of the calendar year. We were not told that we must do this until late in June when nearly six of the twelve months had elapsed. In other words, to put an extreme case, we had to pay sixteen months taxes with only six months in which to make our plans and
provisions. It was a tremendous burden upon the personal income tax payers and was wholly unfair.
When the Ruml plan was suggested and acclaimed by almost everybody in Canada as a measure of relief I felt that the government was about to do justice to a group of loyal but hard-pressed citizens. What did we get? We got the Ilsley plan. The minister adopted the principle of current taxation, but he did not adopt the plan for making it current. There is a joker or a hang-over in it. I hope the minister will give consideration to the question of wiping out the arrears for 1942 and making the necessary adjustments. His plan falls far short of what was expected and what we had a right to expect. The Ruml plan, proposed to write off the 1942 taxation in order to put the tax payer on a current basis without forcing him to pay two years' taxes in one year. The minister's device is to write off fifty per cent of the 1942 taxes, but that leaves many people in substantial debt to the government. The full weight of the 1943 taxation is on us immediately and must be met out of incomes which are still further reduced. I am referring to incomes on investment. As a result of the last budget, whether we like it or not, capital values were diminished by hundreds of millions of dollars because of decreases in dividends for distribution to shareholders. The natural result must be that investment income will shrink, and I believe that that is the fact.
There is another aspect of the income tax law to which I desire to make reference, namely, the question of the taxes on annuities. Subsection (g) of section 3 of the Income War Tax Act as amended in 1942 provides:
Annuities or other annual payments received under the provisions of any will or trust, irrespective of the date on which such will or trust became effective, and notwithstanding that the annuity or annual payments are in whole or in part paid out of capital funds of the estate or trust and whether the same is received in periods longer or shorter than one year-
Shall be deemed to be income. It declares by law to be income that which is not true income. It reminds me of a passage which the attorney general of New Brunswick once put into the succession duty act of that province years ago. It declared by law that property coming from an estate ot a deceased person in another province falling into the hands of recipients in the province of New Brunswick was deemed to be property within the province and thus taxable. It aroused my ire that a thing should be declared to be that which it was not. This is in exactly the same category. I have always thought that this provision was most unjust.
MARCH IS, 1943 1357
The Budget-Mr. Hanson (York-Sunbury)
The effect of this provision is to tax annual payments which a testator or donor has directed to be made out of the capital of his estate, usually to supplement an inadequate income. It is in essence a capital levy, and in the final analysis is pure confiscation. This amendment affects a substantial number of estates and trusts. I have been privileged to read a booklet issued by the National Trust Company, Limited, in which several examples are given. I shall confine myself to two.
A testator who died many years ago directed the trust company, as executor, to pay to his widow out of the residue of his estate, which amounted to approximately $36,000, a very modest estate, an annuity of $2,400, to be made up out of income and the balance out of capital. Owing to the heavy encroachments necessary to provide this annual payment, the capital of the estate has now been reduced to approximately $S,000, with an annual income of $260. In order to pay the widow $2,400 the executors must take $2,140 out of capital. Under the Income War Tax Act as it stands to-day, the total payment of $2,400, although approximately ninety per cent of it is pure capital, is taxed as income in the hands of the widow. The annual tax amounts to something over $800.
In another case the testator directed that his widow should receive $3,600 a year. The entire income of the estate did not exceed $800 per annum, so that the $2,800 required to make the annual payment had to be taken out of capital. Again the tax is based on the $3,600, and it amounts to $1,478.
This is confiscation pure and simple. I suggest to the minister that it should never have become law and believing him to be a man of just and equitable mind I urge upon him that he have this whole position reviewed in the light of the facts. I do not know who is responsible for it, but surely the minister did not understand the implications of the amendment to the act when he made it. There may be justification for it, but I am certainly not aware of it. I can think of many arguments against it. I have not the time to go into them to-day, but I do hope the minister will review this position. It gives rise to discrimination against a fairly limited number of income tax payers. It is all very well to say that you can overcome the difficulty by a will. But these injustices arise after the event. Wills which may have been improvident at the time they were made are effective once a testator dies. To adopt my suggestion would be but a measure of justice.
I want to refer to the method of income tax collection. We hear practically nothing
about income tax collection except the quantum of the sum collected. The wide extension of the incidence of income tax in the last few years has undoubtedly led to a huge expansion of work in the income tax department. The view seems to be generally held that this department is grossly understaffed, and that, as a result the checking of income tax returns, both personal and corporate, is inadequate and very much behind schedule. I should like to know what is the number of the employees in the income tax department as of, say, January 31, 1943, as compared with the number on the same date in 1941, and generally what plans have been made to cope with the huge increase in volume of business which must necessarily take place with the filing of this year's returns.
I pause here, Mr. Speaker, to pay my personal tribute to the commissioner for his fairness and his sense of equity and justice. But it is only fair to say that he does not lay down policy. He is purely an administrative officer, administering government policies which are handed to him.
I want some information from the minister when the proper time arrives with respect to the operation of the board of review with respect to depressed industries. How many applications have been made for fixing standard profits or revising them upwards? How many such applications have been dealt with definitively by the board of review?
If, as I have been told, the total in suspense greatly exceeds those in connection with which decisions have been given, would it not be advisable to set up additional panels to expedite consideration of these applications? The present experienced board might then confine its work to important cases and reviewing decisions which are protested by applicants. I have no doubt that it is the practice of most companies, particularly large incorporated companies, to calculate profits and pay their taxes meticulously-that is my own experience-but the idea is held in some quarters that some private companies, partnerships and personal businesses are getting away with murder. That is a pretty strong statement, but that is the report I have had. I have been told also that in certain cases where evasion of income tax extending over a period of years has been brought to light the guilty parties have in many cases been let off with a compromise instead of being fined or prosecuted. If this is so, it is putting a premium on dishonesty. With the present high tax rate, human nature being what it is, it is inevitable that all legal means should be adopted to save the maximum amount
The Budget-Mr. Hanson (York-Sunbury)
from the tax collector, but, if we are not to put a premium on dishonesty, deliberate falsification of accounts should be dealt with ruthlessly and publicity given to the circumstances. That will stop the practice. I should like to know how many legal actions have been taken in the courts to recover income tax. I have never heard or read of one such case in the public press, neither have I heard of any case where there have been prosecutions in the criminal courts for violations of the act and fines imposed and collected. I should like to know what the position is in that regard.
I had intended to refer to the amendment and the subamendment moved by the parties to my left, but I am not sure that I have time. The main amendment moved by the hon. member for Lethbridge (Mr. Blackmore) is in effect a repetition of the proposals which have been made from time to time in this house by that hon. gentleman and his followers, who are proposing a new and different and untried, and, may I say, unorthodox method of financing the national war effort. With great respect I entirely disagree with his policies, but I shall not pause here to debate either the merits or the machinery of the proposals which he advocates.
I do desire, however, to say something about the subamendment moved by the socialist party, in so far as it relates to the nationalization of the chartered banks and other financial institutions in this country. As to that part of the amendment which deals with the question of increasing the old age pensions, I wish the hon. gentleman had severed it from the rest, because I have arrived at the conclusion that old age pensions in this country will have to be increased, that the age limit for males will have to be lowered and the age limit for females lowered still further. Speaking for myself, if that portion of his proposals had been left to itself I should have voted for it.
With regard to his proposal with respect to the nationalization of our financial institutions, I am in entire disagreement. I believe in private enterprise, controlled, if you will, against abuse; but I have been a voice crying in the wilderness in this house. I do believe, however, that there is a multitude of members in this house who believe as I do, if they would only be true to themselves and get up on their feet and say so.
Subtopic: DEBATE ON THE FINANCIAL STATEMENT OF THE MINISTER OF FINANCE