June 23, 1952

PC

George Alexander Drew (Leader of the Official Opposition)

Progressive Conservative

Mr. Drew:

In view of the fact that the hon. member for Winnipeg North Centre has made some comments about my remarks, may I ask if he means by that that the federal government should exercise control over education in the provinces, where grants are made for education?

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

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

Mr. Knowles:

If I may be permitted to answer the question of the leader of the opposition (Mr.- Drew), asked during the speech of the hon. member for Peace River (Mr. Low), the answer is very definite-and it has been placed on the record repeatedly -that we insist that there be no interference of any kind on the part of the federal government with provincial administration of education. That has been made clear in the resolution of my colleague the hon. member for Saskatoon, and in all of our speeches an the question of federal aid for education. No one has any doubt about that point at all. My question was: If we on this side of the house-the leader of the opposition and those of us in this group, and the hon. member for Peace River-take that stand with respect to education, why can we not take the same stand with respect to other matters?

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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SC

Solon Earl Low

Social Credit

Mr. Low:

I would say there is no good reason why we should not take the same stand with regard to other matters. In fact, that is the stand I am taking-exactly that. But when we talk about centralization and taxation powers for the purpose of redistribution, so that the people of the country can share equally in the good things Canada

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Tax Agreements with Provinces has to produce-well, then, we get into a type of theoretical discussion which, I am afraid, has no termination at all.

It looks to me as though we are getting onto pretty dangerous ground when we talk about the centralization of taxing powers in the federal government, on that basis. I think there has to be a completely new approach to the whole matter of revenue. I would like to look at it more from the point of view of revenue than of taxation.

Somehow or other, in discussions of this kind, it would appear from what we say that we think there is no other way of getting revenue, except through taxation. But that is not true; that is not true, by any means. I think there is one government at least in the Dominion of Canada that has proven quite definitely that there are other sources of revenue.

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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LIB

James Sinclair (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. Sinclair:

Out of oil wells, though. We cannot all have them.

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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SC

William Duncan McKay Wylie

Social Credit

Mr. Wylie:

Jealousy will get you nowhere.

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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SC

Solon Earl Low

Social Credit

Mr. Low:

We are using that as a means of obtaining revenue; but I would say once again to the hon. member for Coast-Capilano (Mr. Sinclair) that you cannot begin to compare an $89 million industry, and its power or ability to provide revenue, with a $525 million industry, such as he has in British Columbia. You cannot put them on the same basis.

Let me point out that out of the $89 million industry last year in Alberta we obtained much more revenue than did British Columbia from the $525 million industry, an industry based upon resources belonging to all the people out there.

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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LIB

James Sinclair (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. Sinclair:

The hon. member is comparing royalties and leases which in no way affect corporation taxation.

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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SC

Solon Earl Low

Social Credit

Mr. Low:

The same thing would be true with respect to the oil industry. There are large corporation taxes paid just the same as in the lumber industry, and there are the same types of wages and salaries paid and dividends and profits. What I am getting at is that I think it is a wrong approach to consider taxation as the only source of revenue for a government. It is not. The sooner we realize that it is not, the sooner we are going to come to some new arrangement as between the various governments of Canada so that the responsibilities allocated to those governments by the British North America Act can be discharged fully by the respective governments.

I think we shall have to change our approach. I say that the revenues which the

provinces need to discharge the responsibilities placed upon them by the British North America Act ought to be made available. They can be made available. Anyone who says that they cannot is denying that this country can produce in tremendous quantities. The amount of revenues to be obtained by all governments in Canada is limited only by the extent of the resources we have, manpower resources and natural resources, and our ability to get labour and effort applied to those resources. That is all. What we need to do is to approach this whole matter of revenues for governments from the point of view that what we must get into the hands of the various governments is revenue to enable them to discharge their responsibilities under the constitution.

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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PC

James MacKerras Macdonnell

Progressive Conservative

Mr. Macdonnell (Greenwood):

Would the

hon. member think it was a good thing if, by some happy accident, let us say by finding out that crown lands produced a terrific amount of revenue, a government found itself depending less and less upon taxation? Does he not think it is sound that a government's revenue should come from taxation? Is not that the chief hold that the citizen has on a government in calling it to account? Supposing, for example, a government did not need to tax at all; would not that create a very unsound situation?

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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SC

Solon Earl Low

Social Credit

Mr. Low:

It is pretty hard for me to assume that any government would ever get into the position-

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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PC

James MacKerras Macdonnell

Progressive Conservative

Mr. Macdonnell (Greenwood):

I once heard a conversation between two men, evidently from Alberta, where one expressed some hope that Alberta might be able to do away with taxation altogether.

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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SC

Solon Earl Low

Social Credit

Mr. Low:

I cannot conceive of a condition under which a provincial government would not have to use taxation, if not continuously at least periodically. It will be a long time I suppose before we see governments doing away completely with the power to tax. But I think it is possible for governments, provincial governments particularly, to apply the minimum of taxation and attempt to secure the bulk of their revenues from other sources. I believe that that is possible. As a matter of fact I think we are demonstrating that in the province of Alberta.

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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PC

James MacKerras Macdonnell

Progressive Conservative

Mr. Macdonnell (Greenwood):

And desirable?

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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SC

Solon Earl Low

Social Credit

Mr. Low:

I think it is desirable; I do not think there is any doubt about the desirability.

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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SC

Ernest George Hansell

Social Credit

Mr. Hansell:

It would still have the power.

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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SC

Solon Earl Low

Social Credit

Mr. Low:

I would point out to the hon. member for Greenwood that although a provincial government might not be applying

taxation measures, it would still have the authority to tax. That authority should be kept by the provinces. It should be remembered that the resources from which a province might obtain large sums of money are expendable. They are resources that eventually will play out and when they do the province would of necessity have to go back to the imposition of certain taxation measures which it may have abandoned in the meantime.

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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PC

James MacKerras Macdonnell

Progressive Conservative

Mr. Macdonnell (Greenwood):

What a

wonderful time the government would have in the interval.

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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SC

Solon Earl Low

Social Credit

Mr. Low:

I am not so sure. One thing we have to have in our mind is that no principle can be said to be absolute. I believe the hon. member for Greenwood will agree with that. What I am speaking of this morning is this: I think that if we approach

this whole matter of dominion-provincial relationship so far as finance is concerned from the point of view of getting into the hands of the provincial governments, and through them to the municipal governments, the amount of revenue which they require to carry out their responsibilities under the constitution, we will be doing a whole lot better job than if we just think in terms of taxing powers, having to tax here or tax there.

It seems to me that the revenue which any province needs at the present time has to be assured to it and should be assured for years ahead. I do not believe it is possible for us to give them a feeling of stability by merely extending taxation agreements for five-year periods. I do not think that that is possible nor is it desirable.

I should like to see some permanent solution to this whole question. The sooner we do what the leader of the opposition, in the final minutes of his address this morning, said we should do, namely, review the taxation system and how the various taxes impinge upon the various governments, review them to see if there is not some way of coming to an agreement by which the provinces will know that certain taxation fields are exclusively theirs and certain taxation fields are exclusively the dominion's-approaching the whole matter from that point of view and reaching a final agreement and conclusion as soon as possible-the sooner we will be able to establish our provinces and our municipalities on some basis of stability and permanency.

I am concerned, as I said in the beginning, with preserving in our federal system a balance which shall not be subject to undue centralization or undue decentralization. On the other hand, we realize that there must be a strong central government as well as

Tax Agreements with Provinces strong provincial and local governments. That is desirable. It is that balance which I think we ought to try to achieve.

The leader of the opposition spoke of attempting to preserve the vitality of our federal system. I think perhaps it can best be described as vitality in a country like ours with its diversity of resources, diversity of conditions, a land that extends from the Atlantic to the Pacific. It seems to me that one of the important things we have to do is to lay down a set of policies and conditions under which we can guarantee that the vitality of our country shall never be diminished or depleted.

I think decisions have to be made soon on a more permanent basis. While we are prepared to accept the principle of Bill No. 347 which is now before us, I do not want it to be assumed that we are permanently in agreement with the idea of an extension of taxation agreements every four or five years. That is not adding to the possibility of stability in our country in any respect. We support the bill for the time being, but we do ask that the government of Canada which controls the financial policies of the whole country make every effort to come to some final allocation of powers and authorities in the financial field which will guarantee that the provinces and municipalities will have the wherewithal to take care of the responsibilities placed upon them by the British North America Act.

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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PC

James MacKerras Macdonnell

Progressive Conservative

Mr. J. M. Macdonnell (Greenwood):

Mr. Speaker, I agree with those who have said we will support this measure. I just want to underline one or two things that have been said already. I think there is no doubt that we all agree with the remark that has been made that we are all federalists. We do not believe in a unitary form of government. I think it was the Right Hon. Ernest Lapointe who said that the dominion after all was the child of the provinces and not vice versa. There are two things which I think are clear. First of all we are taking what was an emergency measure and perpetuating it. When I say "perpetuating it" of course I know we say that it is temporary. I think we admit it is an expedient, but after something goes on for five, ten or perhaps fifteen years it is not so very temporary and it becomes very difficult to unscramble the omelet. I think we all admit as an academic proposition that it is sound that those governments that spend money should raise the money they spend. However, we have departed a long way from that principle. Eight of the provinces have found it a comfortable and apparently a comforting thing to do.

Tax Agreements with Provinces

I have often reminded the house that we have been passing through very prosperous years when the goose has been hanging high and the provinces have received grants which I presume were very satisfactory to them. So the thing has gone along, but nevertheless I do not think anything has happened to cast doubt on that principle. If I remember right it was strongly asserted by, among others, one who was very well known in this house, the present premier of Nova Scotia.

There is one other thing I want to say. Even in spite of provincial satisfaction which seems fairly widespread, we do see one place where our present system is not really giving satisfaction, and that is in the case of the municipalities. I take it that the municipalities were not and could not be present at the discussions which took place because after all the municipalities are creatures of the provinces, and it would be almost, if not wholly, impossible to carry on discussions with them at large. Nevertheless there remains the problem that the leader of the opposition (Mr. Drew) mentioned, and it seems to me it is a very real one. I should just like to say that in my opinion we should remind ourselves when we are doing this that, in spite of its wide acceptability, we are infringing upon a principle which I do not think has ever been satisfactorily set at nought in argument. We say we are doing it temporarily but as the years go on it is going to become harder and harder to make a change without great disturbance. There are some indications now, notably in the municipalities, that we have not solved the problem so far, and I should not wonder if, before the final solution comes, we may find, as people find so often, that we have to go back to accepted principles.

Mr. G. M. Ferrie (Mackenzie h Mr. Speaker, I want to say a few words with respect to these tax agreements. I am sure that western members agree with the principle one hundred per cent. We hear a great deal about the centralizing of taxation but in a country like ours it is very hard to get away from it. The wealth produced in the western provinces is not taxable. It is the taxable dollar that you have to take into consideration, and that taxable dollar goes to eastern Canada. The taxable dollars accumulate in the place where commodities are bought. We buy goods from eastern Canada and the profits are made in eastern Canada. It is impossible for the governments of western Canada to tax those dollars. I say that all should come within the scope of the agreements in a federation of this kind. It unites the whole of Canada. We have a big industrial area in Ontario and

Quebec and then an agricultural area east and west of the two industrial provinces.

The agricultural areas must have some form of taxation that will help them and that form of taxation is controlled now by the dominion government. The provincial governments have no right to enter that field of taxation. Even if they had, the head offices of the big industries are in eastern Canada and the governments of the agricultural areas still could not tax them. The system in effect at present in some of the provinces is being condemned. That is most unfair. In the last provincial election the premier of Saskatchewan was going around the country condemning the action of the federal government so far as the moneys paid to them are concerned. I do not know what it would amount to now but before the taxation agreement was entered into all the province of Saskatchewan could collect in the form of income tax, corporation taxes and succession duties was $4,500,000. If they had the opportunity to tax today about all they could possibly collect would be double that amount. One has to take into consideration the amount of wealth produced in that province which should be taxable but cannot be because it goes out of the province. Let us say that they would have got $8 million today if they had the power to tax. The federal government is taking care of the taxing and in doing so is giving the province of Saskatchewan $26 million.

The distribution of that $26 million has prevented Saskatchewan from falling into a depression. If we in Saskatchewan as an agricultural province did not have the benefit of the grant from the federal government we could not possibly enjoy a standard of living that would compare with any part of the industrial areas of Canada. We could not tax real property in order to secure the amount of money the provincial government should have to do the job it has to do. The only way we can secure a fair distribution of the taxable dollar is under the system now being followed by the federal government. We in the west are very pleased with the way the federal government has taken hold of this matter. It is agreed that we would like to have more money but I think it is the duty of those who receive the money to give some praise to the man who has to collect it. In many parts of the country he is being condemned for high taxes. The people are paying taxes but they are having the money paid back to them and receiving services so there should be no kick coming. I wish to congratulate the

minister on the job he has done. I hope he will carry on and give us more instead of less.

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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PC

Agar Rodney Adamson

Progressive Conservative

Mr. Rodney Adamson (York West):

Mr. Speaker, I have listened to the complaints of the west with respect to this matter. May I say that the one hope of having a geographically balanced economy for Canada is the industrialization of the west. Industrialization of the west can take place only through the development of natural resources other than farm resources. I only hope that the citizens of the three western provinces will try to forget wheat and try to remember that a great part of three western provinces is under the Pre-Cambrian shield and that a great part is now potential oil country of the greatest magnitude. Until such time as we can go farther in the west in producing natural resources other than farm produce we will not have a truly balanced economy.

There is just one other matter that I wish to bring to the attention of the minister. I have mentioned it before and I do so now very briefly because I think it is important. I refer to the matter of succession duties. Succession duties were brought in as a war measure simply and solely. They were an invasion of the provincial field but were justified as a wartime measure. To my mind collection of succession duty by the federal government is an invasion of provincial autonomy.

Topic:   TAX AGREEMENTS
Subtopic:   COMPENSATION TO PROVINCES IN LIEU OF CERTAIN TAXES
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June 23, 1952