July 3, 1956

CCF

Robert Ross (Roy) Knight

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

Mr. R. R. Knight (Saskatoon):

I think it has been the custom of those who have preceded me to talk not about the particular clauses in this bill but about the particular clauses which are not in this bill and which should be. Before you pronounced your admonition, Mr. Speaker, I was going to do the same thing. I think I shall venture, in view of your kind remarks at the conclusion, to do just that, and I hope that the warning will have some effect upon my more immediate or less immediate neighbours. Of course, one has to draw the line somewhere.

There are one or two things about which I am disappointed in this act in that they are not mentioned in the act. One has to do with charitable donations. I think that what I am going to speak about can be defined as charitable donations. This is perhaps particularly applicable to my own province of Saskatchewan, where we at least think, whatever may be the opinion of those in other provinces, that we have adhered to our program of humanities first and that we

are in the lead in proportion to our population in the providing of decent living conditions for our older citizens. To do that costs money. We have to receive gifts-and I consider them charitable donations-in order to get the first payment for these propositions. Service clubs, churches and people who interest themselves in this sort of thing go out and ask people for money. The very first question they are asked is, "Are these payments deductible as charitable donations?" We have to tell them'that under the present law they are not.

I was very much astonished that when this was mentioned the other day here in the house, the hon. member for Vancouver South (Mr. Philpott)-I hope he did not mean it; I hope he was joking-said, "Why don't you just give it as a church subscription, and then it would be automatically deducted." As far as I am concerned, for me to do that would be dishonest. I do not know what it would be for my hon. friend. If I give a donation on the basis of a private payment for the building of an old people's home, I do not think that that is, after all, a church subscription. I know that that sort of thing is done. However, I have said enough about that, but I think that those payments should be deductible. I cannot see any difference between those and regular charitable donations.

Another matter about which I should like to say a word is the ceiling upon the old age pension payments. Of course, members and, I think, most of the public, are aware that we have to pay extra tax, as we should, to provide ourselves and others with old age pensions: 2 per cent extra on the taxable income. In other words, if I have a taxable income of $1,000, I pay 2 per cent extra or $20 extra for old age pension purposes. If I have $2,000 income, I pay 2 per cent or $40. If I have $3,000 taxable income, I pay 2 per cent extra or $60. But then- and it is a strange thing to me-at that point the schedule ceases to exist. From then on, irrespective of the size of my taxable income, I pay $60 only.

To me there is no justice in that; there could not be to one who thinks of things as I do. If a man has a taxable income of $10,000 or $15,000, he has to contribute only $60 from the wealth with which he has been blessed to help pay for the pensions of those who are not so able. I think something should be done about that. The Minister of Finance (Mr. Harris) should let that scale slide. I am thinking of a sliding scale. Let it slide. Let it keep on sliding.

Another thing I want to bring up is the matter of corporation profits. I have to confess to having two small investments in

Canadian corporations and they bring me in a total of approximately $40 a year. I discover that at the end of the year I am allowed to deduct one-fifth of that $40 not from the amount of money upon which my income tax is based, but from the actual tax itself after the tax is computed. I can see no reason or justice in that. I can see no reason why I should be allowed to deduct $8 from the actual amount of tax which I otherwise would have had to pay if I did not have these investments. I know that what I am going to say now has been disputed. I do not think it has been disputed in this house because I know it can not be disputed. I do not know what the exact figures are but let us say that a man has an income somewhere between $10,000 and $11,000. I see the minister is getting ready to interrupt. He has heard this mathematical formula before.

Topic:   INCOME TAX ACT
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LIB
CCF

Robert Ross (Roy) Knight

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

Mr. Knight:

You are going to hear it a lot more and as far as I am concerned the people throughout the country are going to keep on hearing it too. May I say to the Minister of National Revenue (Mr. McCann) that audiences are so aghast when they hear this that they simply do not believe that even this Liberal government could perpetrate such a thing.

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CCF
CCF

Robert Ross (Roy) Knight

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

Mr. Knight:

It is a fact that if a man is working as a doctor, a top mechanic or whatever you like, earns somewhere between $10,000 and $11,000 by so working and has a wife and a couple of children if he is a normal man, he discovers that he has to pay income tax of about $1,600. I say "about". I am getting away from pure mathematics. But if that same man were in the position where he had never done a tap of work in his life but had an income of between $10,000 and $11,000 a year from investments in Canadian corporations his income tax would be exactly nil. That is a word that has been introduced by the member for Eglinton (Mr. Fleming) and this is another nil. The amount of income tax he would pay would be exactly nil except for the aforesaid $60 that he would have to pay on account of the old age pension. If the Minister of Finance or the Minister of National Revenue, who was good enough to interject, can deny that statement, let them get up and deny it now.

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LIB

James Joseph McCann (Minister of National Revenue)

Liberal

Mr. McCann:

Do you take into account that the income he has has probably come from

Income Tax Act

corporations which pay 47 per cent on it before he ever gets it?

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CCF

Robert Ross (Roy) Knight

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

Mr. Knight:

I am very well aware of the argument that the corporation funds have already been taxed in the hands of the corporation. That is that old thing I have heard so often before.

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LIB
CCF

Robert Ross (Roy) Knight

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

Mr. Knight:

The minister will tell me that it is double taxation but the government is not so particular about double taxation being perpetrated in certain other directions which, if I had the time, I could mention here. But what I have stated is largely, if not mathematically, accurate and true. It is true, and to me it is a disgrace and a blot on our national life. Any government that can perpetrate that sort of thing or that would believe that sort of thing is right has an attitude towards things and people in which I cannot share. I know the argument is put forward that we want to encourage Canadian investment. There are other ways. We do not have to encourage it to that extent, to that degree or by that method.

As I have said, the people do not believe it. I said it once before in an election campaign and somebody wrote a letter to the Star-Phoenix and said: "This man Knight should not be allowed to go around telling lies. The thing is impossible, the thing is ridiculous. Of course anybody with an income of $10,000 has to pay a proportionate amount to the national treasury." Well, I countered that statement. I took an income tax form and went down to my hon. friend's department. I told them that I wanted the income tax form filled out in the name of Brown, Smith, Jones or whatever you like. They said, "What are the conditions?" I gave them the conditions. I gave them a hypothetical case. I put the income at $11,000 or $12,000 and said that the man had a wife and two children and was such and such an age. I told them I wanted to know what his income tax would be.

They asked from where the man derived his income. I gave them the names of certain Canadian corporations. I said, "I want you to fill that out and fill it out right because I am going to ask you to sign it when you have finished." The man laughed. I presume he knew what I was after. However, he did his work. I will say that for him. He filled it out and he said that the man would ordinarily pay income tax of $1,600 or $1,700 but because of the fact that he derived his income from dividends from Canadian corporations solely the only thing he would have to pay would be $60 towards the old age pension inasmuch he would have an exemption of 20

Income Tax Act

per cent or $2,000 on the $10,000 he received in dividends. I said, "Would you please fill that out and sign it?" He did so. I then went and took a quarter page in the paper as a paid advertisement, and they did not call me a liar after that.

I suggest that the minister look into that matter. It is iniquitous, unfair and unjust, no matter how you look at it. The Minister of National Revenue was talking about double taxation. I wish we could get some proper definition of what they are now beginning to call under the act, and I am referring to the act, "registered pension funds" because there is a considerable amount of confusion in that regard. I receive letters about it all the time and I am sure that other members do too. Let us take what used to be my own profession, teaching. Here we have a superannuation fund which we create. The province of Saskatchewan puts in so much, we put in so much and so on, and after a while you get a pension. In their innocence these people said that it would be fine if anybody wanted to pay in more than the amount that was called for. It would be a form of extra saving, and a lot of people put in a little extra money, $1,000 or $1,500, over the course of a good many years. But when they come to take the money out it is a different proposition. You take it out and you pay income tax on it.

We paid income tax on the money as we earned it, but when we put it in the fund it suddenly became engulfed in this lack of definition of what is properly a registered pension fund. Is it a savings bank? Is it a benevolent society, or what is it? Before we are through it may be a small loan company. At any rate, there is some doubt about the matter. When you go to take out your money and get back the money you put in you are told you have to pay income tax on it for the second time. That is what I meant when I reminded the Minister of National Revenue that in some cases they do not worry too much about double taxation.

The same question has arisen with regard to other provisions and other societies of one sort and another. I think the last letter I had was from a group of firemen in the city of Saskatoon. Because of some little technicality the department had decided that they were not operating what is called a registered pension fund.

The hon. member for Mackenzie (Mr. Nicholson) referred to the need of people who do not .pay income tax at all. I should like to say a word or two on behalf of those who have sufficient income to just pay income tax, and I shall be brief. I do not want to shut somebody else off. I shall simply say that I think these income tax exemptions

should be raised in view of our present prosperity. We hear a great deal about it from the government side. We hear about the increase in the gross national product, how well we are doing, how our surpluses are climbing. I think this is probably a direction in which these smaller people should get some help. I am all for the income tax. I think it is a good, fair and just method of taxation. However, I think there are some people now paying income tax who should not be paying it at all.

There is another thing I wish to mention and with this I conclude. I hope that this bill will provide for this point. The minister can inform me whether or not it does so. I am thinking particularly of farmers. I am not so clear about the matter of labour unions. I have not studied the matter. I am thinking of the business of conventions. Certainly I think that people who are gathered together in farm unions should be allowed to deduct the expenses of their conventions. I see the minister nodding his head although that does not appear in Hansard. I am asking the minister now whether it is true that, by a clause in this bill, from now on those farmers who attend farm union conventions will be allowed to deduct their expenses for income tax purposes?

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LIB

Walter Edward Harris (Minister of Finance and Receiver General; Leader of the Government in the House of Commons; Liberal Party House Leader)

Liberal

Mr. Harris:

There is one provision which may not be as wide as my hon. friend has suggested. However, there is a provision. We can discuss it in committee of the whole.

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CCF

Robert Ross (Roy) Knight

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

Mr. Knight:

When we come to committee of the whole I also want to ask my hon. friend what the situation is with regard to labour unions in the matter of attending conventions. I want to know whether that will come under the same heading.

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LIB

Walter Edward Harris (Minister of Finance and Receiver General; Leader of the Government in the House of Commons; Liberal Party House Leader)

Liberal

Mr. Harris:

It does.

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CCF

Robert Ross (Roy) Knight

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

Mr. Knight:

With those few remarks, Mr. Speaker, I think I will leave the matter until the committee stage.

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SC

Ernest George Hansell

Social Credit

Mr. E. G. Hansell (Macleod):

Mr. Speaker, I shall try to remain within the confines of this bill. Although you may think that I am somewhat remotely within the confines of it, I think that I am within the terms of the bill, at least as much as were some hon. members who have spoken previously. I was afraid that my friend the hon. member for Saskatoon (Mr. Knight), having been a high school principal for many years and being an educationalist, was perhaps going to steal or, shall I say,-

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CCF
SC
CCF
SC

Ernest George Hansell

Social Credit

Mr. Hansell:

I want to bring to the minister's attention something that is lacking in respect of this income tax bill. After all, we always have an income tax bill which in the main revamps the income tax system of the country. I refer now to the fact that there is no exemption whatsoever for the taxpayer who supports a son or daughter who is going to university. A change was made in the Income Tax Act some years ago and at that time I was certainly under the impression that exemptions were allowed on behalf of income tax payers who supported their young people as they went through university. However, my eyes were opened when I found that it was necessary for me to support my young lad. It is a strange thing to me that this matter has escaped me over the years but, according to the Income Tax Act, if an income tax payer claims exemption for himself and his wife, he cannot claim exemption for a son or a daughter who is dependent upon him for his or her university education. To me that is a serious matter. A farmer, for instance, might raise hogs, cattle or something else. He is allowed to write off certain operating expenses as he raises those hogs and cattle. But here is a man who raises a family. It is granted that he gets the family allowance while his children are young. But the moment they come of age where they wear bigger shoes, eat like a horse, wear men's clothes and when the young daughters are obliged to wear more expensive clothes, he cannot claim exemption for them. It is all right if they are forced onto the labour market and earn their own living, but if they want to go forward to a higher school of learning such as a university and prepare to be an engineer or a doctor, the old man must foot the bill. I maintain that is not fair or right. I assert that the Income Tax Act should be amended in order to allow an exemption for a young man or a ypung woman going to university. Otherwise only the people who are in the higher income brackets will be able to afford to put their young people through university. People with moderate incomes just cannot afford to put a young man or young woman through university.

I calculate that it takes about $1,000 a year, even though the young man or the young woman may earn a certain amount of money during summer vacations. It costs a great deal to put a young man or young woman through university. There is the matter of clothes to wear and certain upkeep including board, fraternity fees, tuition and books. It costs a great deal of money. As a matter of fact, if the young person is not earning an income, we are allowed $400 67509-358

Income Tax Act

exemption for him or her but we are allowed that anyway when they get to a certain age, provided they are still going to school. But as soon as they graduate from high school and want to go to university we are then allowed the same exemption of only $400. That simply means this, Mr. Speaker. As soon as they arrive at the age where they are able to go to university, then there is no exemption from the income tax at all and no assistance whatsoever. I believe that the minister should take that matter into consideration and permit the $1,000 income tax exemption that is allowed. Here is where the discrepancy comes in. If a man does not have a wife, and manages to get along without one, he can send his boy to university and claim $1,000 exemption.

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LIB

James Joseph McCann (Minister of National Revenue)

Liberal

Mr. McCann:

Where would he get the boy if he has no wife?

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SC

Ernest George Hansell

Social Credit

Mr. Hansell:

But if he is married and has a wife to look after the home, he cannot claim that exemption. If he has a housekeeper to look after his home, he can claim exemption for her if he happens to be a widower, but he cannot claim exemption for his son. You cannot claim more than $1,000 for either a wife, a housekeeper or a son or daughter who is going to university. Now, that seems to me to be unfair. It seems to me to be ridiculous. I would ask the minister to give some real consideration to the amendment of the Income Tax Act so that some further exemption could be allowed to the people who are putting their sons and daughters through university.

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July 3, 1956