Mr. Abbott:

I think some of them estimated the additional tax they would pay if their income reached a certain figure and they were

projecting their operating results for another nine or ten months in order to arrive at that conclusion.

Mr. Adamson:

Did any of them say that this would mean ten or fifteen per cent of their capital?

Mr. Abbott:

It is capital employed, which is a complex definition. Five per cent of capital would not mean much to some of them.

Section stands.

Sections 13 and 14 agreed to.

On section 15-Withholding.

Mr. Fleming:

This is the section which requires deductions from salaries or wages or from other payments made to certain classes of taxpayers. As the committee will realize, the regulations have recently been changed, and one of the principal effects is now to require a higher percentage of deduction than has prevailed for some years. The rate of deduction now is so high that it virtually amounts to the payment in advance of 100 per cent of the tax, with the inevitable result that when the taxpayer comes to prepare his T1 return on or before the following April 30 in most cases he will find he has overpaid, and will have to make application for a refund and wait for it. What reason can there be for departing from the percentage which has been established for some years and which appeared to be operating satisfactorily, as far as anything we have heard is concerned?

Mr. Abbolt:

I understand that the Minister of National Revenue proposes to give the reasons for the changes in the regulations on his estimates.

Mr. Fleming:

I think the Minister of

National Revenue should be here to make a statement because this is the place where we will have some opportunity to deal with it. We will probably have the estimates of the Minister of National Revenue the last day of the session or the day before when everything is going through at a gallop. This is an important question which affects hundreds of thousands of taxpayers across the country, and I expect it will mean great inconvenience to them through having to make applications for refunds in the following year and then wait for the payment of those refunds. There are going to be many more applications for refunds than there have been hitherto and obviously many taxpayers will have to wait. If the Minister of National Revenue is not available I suggest that this section stand until he is here to make such statement as he intends to make. We would

Income Tax Act

then have an opportunity to examine the statement and analyse the reasons put forward in support of this new policy.

Mr. Abbott:

This is an administrative question, but I have no objection to the section standing.

Section stands.

Section 16 agreed to.

On section 17-Tax on income from property transferred between husband and wife or to minors.

Mr. Adamson:

I should like the minister to explain this new section. Does it deal only with a gift or transference or has it more far-reaching implications?

Mr. Abbott:

I am informed that as the law now stands if a husband transfers property to his wife he becomes liable for income tax in respect of income from that property. If he transferred all his property to his wife he would continue to be liable for income tax on the income from the property but would not have anything out of which the tax could be realized. This section is intended to block up that loophole.

Mr. Adamson:

As I understand it, the law as it now stands and before this section is passed would make a husband liable for income tax if he transferred revenue producing property to his wife, that is income tax on the income from that property.

Mr. Abbolt:

That is correct.

Mr. Adamson:

Does this section make the wife liable for the tax on that property?

Mr. Abboii:

It is really a collection section; it makes it possible to collect under certain circumstances.

Mr. Macdonnell (Greenwood):

Does it

lessen his tax?

Mr. Abbott:

There is only the one tax; there are not two taxes.

Mr. Adamson:

Under this section a husband could transfer revenue producing property to his wife and be relieved of taxation if he was in the higher bracket.

Mr. Abbott:

The tax liability would be determined in respect to the husband's income, but it would be possible to take it from the wife. It is almost like a garnishee in her hands.

Mr. Adamson:

If the husband transferred property producing a revenue of $1,000 a year his income would be reduced under this section by $1,000.

Mr. Abbott:

No, his income would continue to be $1,000, but if he did not pay the tax

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on it the department could assess the wife for the amount of the tax.

Mr. Adamson:

Let us say that a husband has an income of $10,000 a year and transfers to his wife a piece of property bringing in a revenue of $1,000 per year; then his income would be $9,000 a year. His wife's income increases by $1,000 a year. Is that the import of this?