December 6, 1949

CCF

Percy Ellis Wright

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

Mr. Wright:

I have just one comment to make on the minister's statement. I think that farm organizations should have been consulted, and should now be consulted with respect to this. From a reading of the bill it is difficult to determine the effect that it will have in particular cases. Unless the matter is studied further I suggest that the minister consult with the Canadian Federation of Agriculture and other farm organizations with respect to these amendments.

Topic:   INCOME TAX
Subtopic:   INCOME TAX ACT AND INCOME WAR TAX ACT AMENDMENTS
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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

I would be happy to consult with the federation of agriculture, as with any other organized group or individual. In the past I have found that I do not usually have to seek them out when they are as well organized as the federation of agriculture. For instance, in normal matters they seek me out rather than my having to go and look for them. I suggest it is perhaps adding unduly to the responsibilities of the Minister of Finance that he should have to go about the country submitting proposed legislation to separate groups. I believe he has discharged his duty when he gives reasonable notice of it, and invites, as he always does, representations from interested parties. I should be happy to discuss this matter with any group that is interested.

Topic:   INCOME TAX
Subtopic:   INCOME TAX ACT AND INCOME WAR TAX ACT AMENDMENTS
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LIB

Andrew Wesley Stuart

Liberal

Mr. Stuart (Charlotte):

During the last eight or ten years there has been quite a lot of criticism about the write-off of engines for fishermen's boats. The engines that are being largely used today in fishing boats are converted automobile engines, the life of which in many instances would be two years, sometimes less. I have had complaints from fishermen that before they can write off the cost of the first engine, they would perhaps be using a third one. Does the regulation take care of that situation?

Topic:   INCOME TAX
Subtopic:   INCOME TAX ACT AND INCOME WAR TAX ACT AMENDMENTS
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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

The new one would, but I do not believe the old one does.

Topic:   INCOME TAX
Subtopic:   INCOME TAX ACT AND INCOME WAR TAX ACT AMENDMENTS
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Amendment agreed to. Section 7 as amended agreed to. On section 26-Municipal or provincial corporations.


LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

I have another technical

amendment to this section.

Topic:   INCOME TAX
Subtopic:   INCOME TAX ACT AND INCOME WAR TAX ACT AMENDMENTS
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LIB

Alphonse Fournier (Minister of Public Works; Leader of the Government in the House of Commons; Liberal Party House Leader)

Liberal

Mr. Fournier (Hull):

I move:

That subclause 3 of clause 26 of Bill 176 be amended by deleting the word "deriving" in the fourth line thereof and substituting therefor the words "substantially all of which derived"; and that the following subclause be added to the said clause 26;

"(5) In determining whether the income in the years 1947 and 1948 of a corporation or association incorporated or organized as a credit union or cooperative society is not liable to taxation by virtue of paragraph (q) of subsection 1 of section 4 of the Income War Tax Act, that paragraph shall be construed as if it were enacted in the same form as paragraph (i) of subsection 1 of section 57 of the Income Tax Act."

Topic:   INCOME TAX
Subtopic:   INCOME TAX ACT AND INCOME WAR TAX ACT AMENDMENTS
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Amendment agreed to. Section as amended agreed to. Sections 27, 28 and 29 agreed to. On section 30-Dividends declared.


LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abboil:

I have an amendment to this section, to correct a typographical error.

Topic:   INCOME TAX
Subtopic:   INCOME TAX ACT AND INCOME WAR TAX ACT AMENDMENTS
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LIB

Alphonse Fournier (Minister of Public Works; Leader of the Government in the House of Commons; Liberal Party House Leader)

Liberal

Mr. Fournier (Hull):

I move that section 30 of the bill be amended as follows:

That the figure "1949" in the eighth line of subsection 2 of section 30 of Bill 176 be deleted and that the figure "1950" be substituted therefor.

Topic:   INCOME TAX
Subtopic:   INCOME TAX ACT AND INCOME WAR TAX ACT AMENDMENTS
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Amendment agreed to. Section as amended agreed to. Section 31 agreed to. On section 32-Nonresident-owned investment corporation.


PC

Donald Methuen Fleming

Progressive Conservative

Mr. Fleming:

Representations have been made by the Toronto board of trade in connection with subsection 3 which deals with nonresident owned investment corporations The board states:

The board has interpreted the provisions of the Income War Tax Act as extending the dividend exemption of section 4(n) to nonresident-owned investment corporations. The proposed legislation appears to be a retroactive change denying the exemption referred to. The board has on many occasions urged that retroactive tax legislation be not resorted to, and again points out that in the opinion of the board this is a highly undesirable practice and should be avoided.

Topic:   INCOME TAX
Subtopic:   INCOME TAX ACT AND INCOME WAR TAX ACT AMENDMENTS
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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

As my hon. friend knows, this section relates to a relatively small number of companies owned by nonresidents who have investments in Canada. In 1946 they were given a special basis of tax treatment. They are taxed on the earnings of the company, not at the full corporation rate but at a special rate. Prior to 1946 it used to be 22J- per cent, with a deduction of 7J per cent on income received from dividends on Canadian taxpaying corporations. In 1946 that technical difference was eliminated and the straight rate was made 15 per cent. However by inadvertence the provision of the corresponding tax credit section was not amended. If this section were not put in, the

nonresident would in fact be getting a tax credit to which he was not entitled, which has never been allowed by the department, and for which I do not think there is any justification, in equity or otherwise.

Technically it is true that the effect of this section is to take the amendment back to 1946 when the change from 22J per cent to 15 per cent was made, as I have indicated. I do not think any real objection can be taken to it.

Topic:   INCOME TAX
Subtopic:   INCOME TAX ACT AND INCOME WAR TAX ACT AMENDMENTS
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PC

Donald Methuen Fleming

Progressive Conservative

Mr. Fleming:

Would there be any serious loss if the section were made effective from the date of the minister's budgetary pronouncement? This would obviate any suggestion of unfairness resulting from the retroactivity of taxing legislation.

Topic:   INCOME TAX
Subtopic:   INCOME TAX ACT AND INCOME WAR TAX ACT AMENDMENTS
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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

I do not think so. I have before me the text of the resolution introduced in April 1946, which states:

That the special rates provided for nonresident-owned investment corporations be reduced for the 1947 and subsequent taxation years from 221 per cent to 15 per cent, but that such corporations be taxable on all income received in Canada subject to deductions from the said income in respect of interest and dividends received from other such corporations and foreign taxes paid by the corporation.

In other words, the rate having been reduced from 22J per cent to 15 per cent, there should not have been and there was never intended to be a tax credit to offset that 7J per cent. The old system was 22J per cent and a tax credit of 7i per cent, coming from a certain type of investment. Having consolidated the two and taken the straight 15 per cent rate, as indicated in the resolution, the tax credit was to be eliminated. Through some oversight the tax credit section was not amended. But no nonresident-owned investment corporation has ever asserted that it should in fairness get the tax credit. They have never been allowed it. This is simply to cover the oversight in the drafting of the law. There is no justifiable claim for this tax credit.

Topic:   INCOME TAX
Subtopic:   INCOME TAX ACT AND INCOME WAR TAX ACT AMENDMENTS
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PC

Donald Methuen Fleming

Progressive Conservative

Mr. Fleming:

How many taxpayers are there within this group?

Topic:   INCOME TAX
Subtopic:   INCOME TAX ACT AND INCOME WAR TAX ACT AMENDMENTS
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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

The number has been substantially reduced in recent years. When I was in practice I formed a number of these companies, but since the change in the taxing law in the United States and elsewhere the number of the companies has been reduced. I have not any up-to-date figure.

Topic:   INCOME TAX
Subtopic:   INCOME TAX ACT AND INCOME WAR TAX ACT AMENDMENTS
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Section agreed to. Sections 33 to 44 inclusive agreed to. On section 45-"Corporation" and "corporation incorporated in Canada".


LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

I have a technical amendment here.

Income Tax Act

Topic:   INCOME TAX
Subtopic:   INCOME TAX ACT AND INCOME WAR TAX ACT AMENDMENTS
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LIB

Alphonse Fournier (Minister of Public Works; Leader of the Government in the House of Commons; Liberal Party House Leader)

Liberal

Mr. Fournier (Hull):

I move:

That subclause 2 of clause 45 of Bill 176 be deleted and the following substituted therefor:

"(2) Paragraph (j) of the said subsection 1 is repealed and the following substituted therefor:

'(j) "dividend" includes stock dividend except where the stock dividend has been declared by a nonresident corporation, more than 50 per cent of the share capital of which (having full voting rights under all circumstances) belongs to nonresident persons';"

Topic:   INCOME TAX
Subtopic:   INCOME TAX ACT AND INCOME WAR TAX ACT AMENDMENTS
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December 6, 1949