April 14, 1943

LIB

James Joseph McCann

Liberal

Mr. McCANN:

The legislation contemplated in this resolution is of a character which I am sure will commend itself to any who have been engaged or interested in the mining industry. The fault I find with it is that its scope is not broad enough. I agree with the hon. member for Parry Sound in that it should include prospectors as well as companies, or other individuals, who might be engaged in the mining industry.

One perhaps might wonder why I have anything to say in respect of this matter, but I can tell the committee that I spent the early days of my professional career in the mining country. Since that time I have been interested in the development of mining and, like many others, I have been connected with syndicates, and with the backing of prospectors who have gone into the wild areas of Canada in conquest of minerals of one kind and another.

When I hear talk to-night about Cobalt, I hear it from men who quite evidently know nothing, or very little, of the history of Cobalt.

I was there in the early days of that camp. The reason why cobalt is brought into this country from Africa is that it can be brought here cheaper than it can be mined in our own country.

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CCF

Joseph William Noseworthy

Co-operative Commonwealth Federation (C.C.F.)

Mr. NOSEWORTHY:

Is that the only consideration in the war?

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LIB

James Joseph McCann

Liberal

Mr. McCANN:

If my hon. friend will wait until I have finished he might understand a little bit about it. From what he has already said it is'evident that he does not understand very much about it.

Cobalt of itself is not mined in Canada for its own sake; it has been a by-product of silver mining. When silver demanded a price of $1.25 an ounce the by-product cobalt was then of very little value. The hon. member for York South referred to the Deloro smelter. The reason why great quantities of cobalt were found at that smelter is that it was left there by several customs silver mining companies w'ho were sending their silver to be refined at Delora. There was a stock pile of it at one time as large as this chamber. .Cobalt then became of some value and was shipped to Europe, to Germany principally, where it was used for dyeing purposes. It then began to be used in connection with the hardening of steel, and other uses have developed during the war. If the government wishes to stimulate the mining of cobalt, the proper approach would be to increase the price of silver. If silver were back to $1 or SI .25 an ounce, there would be plenty of cobalt. The silver mines in the Cobalt area which are closed down and

which contain considerable silver and cobalt would be back into operation, and there would be plenty of this metal to meet the needs of the country.

Mining is one of the most important industries we have in this country. The precambrian shield runs across the northern part of Canada. In this shield is found a great diversification of mineral wealth, the development of which has added greatly to the national wealth of this country. The mining area in Ontario was not opened up through the efforts of prospectors; it was discovered by accident during the development of the Timiskaming and Northern Ontario railway from North Bay to Cochrane. The first discovery was made at Cobalt, and the town was named after the mineral that was found1. In this connection it might be interesting to hon. members to know that the town of Copper Cliff was so named because it was thought that a deposit of copper was being found, but. this proved to be the world's richest deposit of nickel. The Timiskaming and1 Northern Ontario railway was promoted originally to open up the clay belt in that part of the country for agricultural purposes. Prospectors have gone in and made great discoveries. They have rolled back the frontiers of this country, particularly the frontiers of northern Ontario and northwestern Quebec and have been responsible for the establishment, of large industries and communities.

I want to ask those hon. gentlemen who are not favourable to the continuation of the gold mining industry: what will happen to those communities which have been built up as a result of the development of the mining industry? The city of Timmins with 30,000 to 40,000 people, the city of Kirkland Lake with 20,000 to 25,000, Noranda, Rouyn, the Larder lake district-all these communities have been built up as a result of the mining industry. Enormous investments have been made in everything that goes to make up a modern community-homes, schools, industries and everything that is concomitant to the mining industry.

What we should do in this country is to encourage the mining industry. Anything that can be done in the way of passing legislation to make it easier for prospectors or mining companies to carry on their prospecting should be done. It must be remembered that mining is a depleting industry. If these communities are to be maintained, new prospects will have to be found. The communities which have been built up are centres

Income War Tax

of a great development. I am told that since the beginning of the war fifty-four mines in northern Ontario and in northwestern Quebec have been closed down. Most of these are gold mines.

One reason for this closing down has been the inability of these companies to secure workers and steel and drilling equipment and explosives. These things are needed more and in a different direction in our war effort, and the mining fraternity have no quarrel with the government for having put restrictions upon the materials and equipment used in their industry. If these communities are to become active in the post-war period it will be necessary that some concessions be made to permit their rehabilitation. New prospects will have to be looked for and developed. If prospectors, mining companies and individuals are granted the concession embodied in this resolution, three, four or five years from now, when the war- is over, there will be a number of new prospects to be developed.

Reference has been made to-night to the development of base metals and minerals. I am interested, of course, in the magnesium which is being developed in the county of Renfrew. This is not a new prospect by any means because it was discovered over thirty years ago and was mined for a brief period at. that time. But the process of separating the magnesium from the ore is new. As hon. members know, this process was developed in the national research council. It was the four mining companies of Ventures, God's Lake, Moneta and Bobjo which put- their money into Dominion Magnesium and carried on the experimental work with reference to this development.

Had these people not been in the mining industry and been able to furnish the experienced help which they transferred from northern Ontario we would not be in the splendid position in which we are to-day in reference to this particular product. As I say, this prospect was found many years ago. The development took place a year ago February, the first concrete being poured) on February 19, 1942. By August they were in production, and from August 19 up to the end of March this company has produced 2,000,000 pounds of magnesium, which is one of the strategic minerals of this war. Not one pound was produced prior to the development in Renfrew county. A thousand pounds go into every aeroplane, and the total production is being used for war purposes.

I mention this to the minister because I believe there are many other prospects of this

type throughout the country. They will be developed only by the individual prospector or the syndicate or company which is interested in mining. If -we can grant concessions to these people in order that other developments of this type may be found in other parts of the country, then we shall be doing something not only for the mining industry but for the war effort as well. Therefore I am very happy to agree with those who have already spoken and taken the position that this concession should not only be given to companies but be extended also to prospectors and syndicates.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

There are a few points that should, I think, be cleared up before the resolution is carried. The suggestion has been made that the resolution should cover not only exploration companies but syndicates, mining partnerships and individual prospectors. In our legislation of last year we provided by section 10A (5):

A taxpayer shall be entitled to deduct from the sum total of the income tax payable by him under this act and the excess profits tax payable under the Excess Profits Tax Act, 1940, forty per centum of the following:

(b) An amount not exceeding five thousand dollars actually expended by any mining or exploration company in prospecting for base metals or strategic minerals in Canada by means of its own prospectors.

The omission of exploration company in the resolution was not intentional, an exploration company can be added in the bill. This merely follows the policy of last year's act.

With regard to the further suggestion that syndicates, mining partnerships and individual prospectors should be placed in the same category, I should like to give that a little consideration because, as at present advised, I am not able to see that it would be of any benefit to them whatever. What has been urged upon us very strongly is that contributions by outside parties, individuals and others, to prospecting syndicates should be allowed as deductions from the income of those individuals for income tax purposes up to a certain point. That has been the proposal-not the proposal that has been placed before the committee to-night by several hon. gentlemen who have spoken, and I say I do not think that the proposal put forward to-night would be of benefit.

Take the individual prospector. I am informed by the commissioner of income tax that if a prospector makes a discovery of value he is not taxed on that at all, so that it would be of no benefit to give him a deduction for income tax purposes of what he spent from

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his income. He has no income; he has a capital gain. He has something that is not taxed. As I say, however, I will give consideration to the suggestion, although I do not think it would be a helpful one.

When we go back to the proposal that has been made in correspondence and by personal interviews, and so on, on behalf of prospectors and prospecting syndicates, what is that proposal? It is that we enlarge our provision of last year. Our provision of last year was that individuals could deduct from their incomes for income tax purposes up to a certain limit:

Contributions to associations, syndicates or mining partnerships registered or otherwise recognized under the laws of any province of Canada and organized for the purpose of prospecting in Canada for base metals or strategic minerals, not exceeding in the case of any one association, syndicate or mining partnership five hundred dollars, and not exceeding five thousand dollars in respect of the aggregate of the contributions made to all such associations, syndicates or mining partnerships.

The origin of that provision was a request made to the government in the early part of last year, long before the budget came down. Consideration was given to that request. Although it was of a most unusual nature and asked for governmental action which has no counterpart elsewhere so far as I know, we dtecided that we would accede to that request and I made a statement to the House of Commons early in the year, long before the budget, that this tax relief would be given to contributors, to associations or to mining partnerships.

It was represented, too, that there were here in Canada a great many prospectors, some of them getting along in years. I do not know that I would be strictly correct in calling most of them elderly, but at any rate some of them were, and it was represented that they needed some financial assistance to get them out searching for base metals and strategic minerals. It was represented that they did not need very much but that if we would provide, as we did, taxation relief in respect of contributions up to $500 for persons, and not exceeding S5.000 in all, so that an individual could contribute $500 here. $500 there and so on, it would be of great benefit in getting prospectors busy. We did that. I am not in a position to report to the committee as to the results obtained. I have tried to ascertain the extent of those results, but I am not able to report on them accurately and shall not attempt to do so. The fact that I am not able shows that the results were not very great. There were some results; there is no doubt about that, but they were not as great as I had hoped.

That is not due to any fault in the policy or in anybody connected with the policy. It is perhaps due to the conditions that existed last year.

When I had to give consideration to the request to increase greatly these amounts, to increase the $5,000, to increase the $500,

I had to consider whether it was desirable to extend that practice of allowing individuals to show on their income tax returns to be deducted from their incomes for income tax purposes, contributions for this, that or the other purpose, and -1 came to the conclusion, rightly or wrongly, that the practice should not be extended. In fact, I am somewhat concerned about having introduced it. However, we are extending this provision for the year 1943. It is not in the resolution because that is not necessary, but it will be in the act. There will be an extension of the provision in the act for the year 1943. It is a year by year thing. It was done for 1942 last year and it will be done for 1943 this year, but I do not think it should be extended. This is what was asked for last year, and the grounds for the request were then veiy clearly set up. But as I say, I do not think we would be justified in extending it.

With regard to last year's section, I wish to place on record my interpretation of that phrase relating to the forty per cent.

A minor change will have to be made in renewing the tax concession granted under section 8 of the act last year in respect of contributions to prospecting syndicates.

As the law stood for 1942, the concession was in the form of a straight credit against the tax bill rather than in the form of a deduction from income. The result was that companies which were receiving a depletion allowance received a tax credit of forty cents on every dollar of contribution, whereas if the concession had been in the form of a deduction from income the concession would have resulted in a tax saving of 26J per cent of the amount of their contribution. In renewing this provision for 1943 the intention is to continue the present tax credit for individuals and companies not in receipt of a depletion allowance at the rate of 40 per cent of the amount contributed, -but to limit the tax credit to 26$ per cent in the case of subscriptions by companies receiving a 33$ per cent depletion allowance. I may -say that this is not unfair, nor can it be regarded as discriminatory treatment, since the adoption of the tax credit device was merely a means of simplifying the mechanism. The principle behind the concession is that taxpayers may take their contributions to the syndicates as a deduction

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from income for tax purposes, with the provision that the tax saving should not be greater than that which would be realized by a taxpayer paying tax at the 40 per cent rate. Under this principle the actual tax saving to those receiving a depletion allowance of one-third would be 26f per cent, while those not receiving the depletion allowance would make a tax saving of 40 per cent.

I made the same explanation about the limitation of 40 per cent in regard to oil.

I do not remember just what points were raised in the course of the debate; but one of them raised and repeated by several speakers was this, that we ought to amend our resolution or draft our act in such a way as to give encouragement to prospecting for gold as well as for base metals and strategic minerals. I am afraid we cannot do that. The argument which is used for amending the act in this way is that we must make preparation for the post-war period, that gold will be of great importance to us then, and that now is the time to start to prepare for it.

I think the only policy which we can properly follow in this country is to confine extraordinary tax concessions, which really amount to expenditures, to objectives which have to do with the war. I do not think we would be justified in making these tax concessions at this period purely for post-war purposes. There is so much to do to win the war; there is so much production which- we require for war purposes, that we should confine these extraordinary concessions and privileges and expenditures to those purposes. And I am sure that, whether that is correct or not, the nations with which -we are associated in this struggle think it is correct, and they would think anything else was a most improper course to pursue. If we at this stage of this critical struggle were to devote any considerable proportion of our energies, our materials, our man-power, our resources to preparations for post-war prosperity, instead of to war efforts, I am afraid that we would place ourselves in an indefensible position.

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LIB

James Joseph McCann

Liberal

Mr. McCANN:

For what are all these rehabilitation and reconstruction and social security committees set up, if it is not for that purpose?

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

They are not making expenditures.

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LIB
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Not immediately; and I

may say that none are authorized.

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LIB
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

No expenditures are authorized.

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LIB

James Joseph McCann

Liberal

Mr. McCANN:

Well, then, there is a lot

of wasted time on them.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

It will probably be some

time before expenditures are authorized. In any event, these committees are not asking for tax concessions or anything of that kind.

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LIB

James Joseph McCann

Liberal

Mr. McCANN:

I should like just to say

to the minister, that this is what he said about prospecting: when men go out prospecting, under this provision they are to be encouraged to prospect for base metals.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Yes.

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LIB

James Joseph McCann

Liberal

Mr. McCANN:

A man may go out, or a

syndicate may send a man out, and he prospects for six months and, perhaps, does not make a find till the last week, and what he finds may not- be a base metal; he may be prospecting all the time for base metals and run across a gold discovery. Yet, because he has not, according to this resolution, found something of the nature of molybdenite or copper or scheelite or tungsten, but finds gold, he is not to be allowed the concession. I submit to the minister that to deal with people in that manner would not be fair nor would it be within the spirit of this resolution.

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PC

Agar Rodney Adamson

Progressive Conservative

Mr. ADAMSON:

There is just one more

suggestion I should like to make to the minister. A great deal of prospecting is now being done on land, as yet not adequately surveyed, which is covered by large deposits of clay or earth put there by glacial action. I might mention the district between the Porcupine camp and the Kirkland Lake strike; that is covered with clay. On geological grounds I believe there are veTy large deposits of metal in that area. Also it is reasonable to suppose that it contains, as we have discovered at Dome and other places, considerable deposits of metal such as scheelite. In the. first place, it is>

extremely expensive to get through that clay. The prospector does it with difficulty, using a diamond drill, and probably finds a deposit which contains a mixture. All our ores are "mixtures," to use a lay term, and part consists of gold, but there is also scheelite or some other strategic metal. Are we to penalize that man because he makes a gold discovery? It is there, I think, that the minister is taking the wrong premise, on this matter of excluding gold. As he said, it will not take a great amount of man-power or money or anything else, and

Income War Tax

you will simply penalize the fellow because he discovers gold. I think that is wrong; it is unscientific and untenable.

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Resolution agreed to. 20. That contractual payments made in respect of any dominion government annuity contract shall be permitted as a deduction against the refundable portion of the income tax payable.


PC

Joseph Henry Harris

Progressive Conservative

Mr. HARRIS (Danforth):

This raises again the question which is so contentious of the differentiation between capital and income in the matter of dominion government annuity contracts. I think the minister ought to give the committee a short statement, and in doing so perhaps he could answer one or two questions that arise in the minds of some members. First, contractual payments made in respect of any dominion government annuity contract, whether capital or income, are to be allowed, as I read this resolution, as a deduction against the refundable portion of the income tax payable. The income tax payable will in most instances be from revenue, with the result that the contractual payment of cash which is made out of capital will be used to refund a portion of the income tax payable which is pure income tax. The government is entrenching itself with regard to this whole annuity problem that arises when capital is being taxed when it is returned to the annuitant. This situation, coupled with succession duties, complicates the issue very much. I think the minister should make a short statement.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

The question of taxability of annuities- does not arise under this resolution at all.

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PC

Joseph Henry Harris

Progressive Conservative

Mr. HARRIS (Danforth):

What will this *concession do?

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April 14, 1943