Mr. G. H. CASTLEDEN (Yorkton):

Mr. Speaker, my speech will be somewhat shortened by what has been said this afternoon by the hon. member for Vegreville (Mr. Hlynka). I want to congratulate him and his compatriot in our group, the hon. member for Dauphin (Mr. Zaplitny) upon their contributions to this house. They are a credit to themselves and an evidence of the real greatness of the Canadian people.

The 1947 budget was presented to us as one granting great relief to the income taxpayers of Canada. But reviewing the budget in its entirety and analysing its figures, I find that the greatest relief has not been in the income tax field at all but in the granting of exemptions from the excess profits tax as af December 31, 1947. It has been evident to the Canadian people and to us here for many, many months that monopoly enterprise as we know it in Canada has been putting pressure on this government to give it relief from the excess profits tax, along with its demands for the removal of price controls. Price controls were removed during the first few months of this year in spite of the tremendous increase in company profits which were being made in almost every field of Canadian industry. Attention has already been drawn to the tremendous increase that has taken place in company profits for 1946 in most of the industrial firms in Canada, and with the removal of price controls we shall find that these prices will rise abnormally. What justification the government had for removing price controls when profits were climbing as they were is best known to them. But the Canadian people are alert and are watching these things.

Then the hon, member's prediction of gloom and despair is really a bogey. He actually expects prosperity?

Mr. CASTLEDEN:

I shall come to the point which the hon. member raises if he will listen.

Mr. GIBSON (Comox-Alberni):

You will be disappointed if we have prosperity.

Mr. CASTLEDEN:

The final surrender has been that this government, on top of taking price controls off, now permits the removal at the end of 1947 of the taxation of excess profits. It should be remembered that the excess profits tax was imposed as a check on profits arising out of war business. It will be remembered that this government passed a special order in council setting aside the legislation passed in 1939 which limited profits on war contracts to five per cent, when these industrial firms refused to make badly needed

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war goods so long as that act remained in operation. The excess profits tax was a tax on above normal profits arising out of war conditions. We maintain that the present situation, under which these companies are still making excess profits, arises out of conditions which are a direct result of the war; namely, there is an abnormal purchasing power in the hands of Canadian people as a result of war savings, gratuities and so forth, and, in addition, the ordinary peacetime requirements of the Canadian people in food, clothing and other goods were not available to them during the war. There has been this long period of security of goods, linked with a long period of pre-war scarcity of purchasing power, so that today the demand for goods was never greater.

In view of those conditions the checks of price control should have been maintained. If they are to be removed the least we could expect was that the government would continue to tax excess or abnormal profits. But price ceilings are being removed and the companies can now charge on most commodities all that the traffic will bear. The scarcity of goods and the purchasing power in the hands of the people in the form of war savings and war gratuities provide an effective market, and for a few months the industrialists of this country will enjoy greater profits. They are going on a profit spree today. We are opening the floodgates to an inflationary period which, I fear, will bring its consequences, and unfortunately, while the industrialists and those who are making these profits are having their spree today, all the Canadian people will suffer and suffer deeply in what will happen afterwards. Higher prices mean higher costs of living, and higher costs of production. The agriculturalist is not able to keep up, and the falling wages mean lower standards of living. All the benefits of the prevention of inflation are going to be lost to the Canadian people.

Mr. MITCHELL:

The hon. member talks about falling wages. Would he give an example?

Mr. CASTLEDEN:

I am talking about the natural fall in wages which will come as soon as the purchasing power of the Canadian people has been used up. With increased cost of living, savings will be taken away; people will not be able to purchase commodities at high prices and commodities will not be there.

Mr. MITCHELL:

That is emotional

economics.

Mr. CASTLEDEN:

It is one of the minister's balanced economies, speaking in a large w:ay. The Canadian people have been left to

the uncontrolled and unrestrained profiteering of those who control many of the necessities of life, and essential commodities, such as food, clothing and shelter. The government in power has finally yielded to the pressure put on by those who are engaged in the distribution of Canada's necessities at the expense of the great mass of the people. I maintain that the results will not be felt for a year or two, but they are inevitable. There will be first a greater concentration of wealth in the hands of a few; second, a rapid depletion of the purchasing power in the hands of the Canadian people-

You hope.

Mr. CASTLEDEN:

-and a period of excess profits. When this is over and Canadians can no longer purchase, production will be reduced; wages will fall and lay-offs in industrial plants will then be common. To prevent these results, controls should be maintained, and, above all, excess profits should be taxed.

You want to see a depression.

Mr. CASTLEDEN:

I do not want to see a depression; I want to prevent it. The removing of controls and the allowing of an increase in profits, and then on top of that taking off the taxation on excess profits are two steps which make for an ultimate depression. The fight of the government of the country during the wrar to control inflation was an example to the world. The Canadian people benefited tremendously from the measure of control to which they subjected themselves, and they did so in most cases with very fine grace.

Great credit is due to the previous minister of finance for the way in which he dealt with those people, who came asking for special privileges and the right to increase prices. This saved the Canadian people from years of inflation. We were the envy of countries outside of Canada; we were looked upon as an example, but today that is gone.

Mr. RINFRET:

We still are.

Mr. CASTLEDEN:

With prices going the way they are today, with costs soaring, with no limitation on them?

Not so high.

Mr. CASTLEDEN:

I hear hon. members to my right mumbling. They have complained that price control and rationing were killing the initiative of Canadian industrialists. Well, today they are really enjoying a very high profit era, according to all the financial reports

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received today. The Canadian industrialist is now being given his freedom and initiative to clean up for himself. The government is apparently giving him a free rein. The present uncontrolled monopolistic enterprise system is dying throughout the world except in the United States and Canada. I doubt very much whether it could withstand another depression.

I now wish to compare the treatment which the government has given to these privileged industrialists by the removal of the excess profits tax, with the treatment which has been given to another group of people at the opposite end of the economic picture, people who seldom reach the income tax level. 1 want to place before the house the treatment that these people are receiving under the income tax regulations, and particularly in western Canada.

The farmers of Canada, like most Canadians, did not object to paying just and equitable taxes. That particular injustice with which I wish to deal has not affected all the farmers across Canada, because the present injustice arises out of particular government regulations and restrictions which were placed upon these farmers in western Canada during the years 1942 and 1943. In those years the wheat farmers and wheat growers were, by very necessity, singled out by special regulations by this government.

Back in 1945 the Canadian Federation of Agriculture presented to the special senate committee on taxation a brief in which they protested against the inadequate and inequitable application of present income tax regulations to farmers, because those people who framed the present income tax regulations had apparently intended them for general business operations, and had failed to take into consideration the unique position in which the Canadian farmer found himself.

It is interesting to note that the present Minister of Finance (Mr. Abbott) in his budget speech intimated that the act was being revised. So far as the particular grievance which I wish to present is concerned, I fear that the revision will come too late. The damage has already been done and the injustice has been perpetrated; but I would urge the minister to have the act revised as quickly as possible. I would suggest also that in the name of what is proper, decent and right, steps should be taken immediately to right an injustice, which I am going to place before the house this afternoon. I think it is so glaring an injustice that it will arouse any fair-minded person who is familiar with its operation.

Two changes have been made in the farm income tax regulation, one which allowed the farmer who has a loss in any one year to charge that loss against the next year's operation. It was a rather useless piece of patchwork, because when a farmer gets into the position where he has an absolute loss in any one year, assessing him for income tax in the next year is not much of a relief.

The next amendment, which allowed the farmer to average his income over a period of five years, was the first real improvement, but it was apparently implemented by experts who were in touch with the situation, and it very nicely missed the most important year to the western grain farmer, namely, that of 1944. It has come too late to prevent grave injustice.

The complaint which I wish to present to the house-and I have mentioned it on several previous occasions-occurred in 1944. The Canadian people will remember that during 1942 and 1943, because of lack of shipping facilities and the war situation generally and the shortage of storage space and cars, the Canadian government found it necessary to place a quota against farmers delivering their grain. The government requested them, in an effort to assist in winning the war, to store their grain on the farm ready for the hungry people of the world and the armies in the field as soon as they could take it out. Again in 1943 a quota was placed against the farmer and he was requested to keep his grain on the farm. This the farmers did willingly. In some cases the quota was raised. It was as high as eleven bushels; but many of the farmers were compelled to take their production of those two years and store it on the farm at their own expense.

Mr. MAYHEW:

Which was very profitable.

Mr. CASTLEDEN:

I shall show the hon. member in a moment how profitable it was. They did not even ask the government to pay them something on production for that year. In 1944 the farmer was asked to deliver his grain, since the starving people of the world and the armies needed it to help bring victory. In the spring of 1944 the farmers hauled in their grain as rapidly as possible, only to find in 1945 their patriotism rewarded by having all their surplus grain production which they had stored in 1942 and 1943, and delivered in 1944, raise them into the income tax group. The officials came along and took all that production and placed it in one year and charged against them all the moneys they had received in the one year. No appeal from the treatment of the taxation branch has been successful. Some years later the farmer, who never even suspected that he would be placed

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in the income tax group, is called into town by the income tax inspectors and asked for the permit books. The books are checked and the income is assessed for that year. Let me give some examples of actual cases that came to my notice.

A. This farmer in 1942 had an income of $950. The grain was still on the farm. His expenses were $1,100. He had a loss of $150 in storing the grain on the farm.

How much grain

had he ?