Mr. LAWSON:

We all agree with that.

At one o'clock the committee took recess.

The committee resumed at three o'clock.

Mr. LAWSON:

Wait a minute. They

cannot, for this reason. To. do that you would have to try to segregate that portion of the time of the four executives of the parent company which is devoted to the interests of the subsidiaries and then charge against the subsidiaries a proportion of their salary and have these men receive their salaries in fifty pieces, fifty cheques, from fifty subsidiaries. The thing is simply not reasonable or feasible, but for the purposes of operation of their subsidiaries it is essential to have these four officials in the head office. No matter how the minister exercises his discretion, if this subsection is passed the net result will be to triple taxation on a part of the earnings of the combined subsidiary and parent companies. I do not care how the discretion is exercised, that will be the result. The parent company has an income of, say, $100,000 from its subsidiaries, which is therefore non-taxable, and the parent company earns from its own operations, in exactly the same business as the subsidiaries, another $100,000 gross income. The parent company's expenses of operations are $80,000 a year, but included in this $80,000 are the salaries of four officials.

Mr. LAWSON:

I quite agree that under our present act that $100,000 could be paid out to a non-resident in salary and deducted as an expense of operation before the tax was received by the government, but I do not think that that is what happens in practice. In fact the non-resident-owned investment corporation pays the tax before paying out any money in the form of salaries.

Mr. LAWSON:

I am merely illustrating the impossibility of doing what the Minister of Finance suggests could be done in fairness to taxpayers; I say it cannot be done. The money has been paid, the books are closed, the returns have been made.

Mr. LAWSON:

To do what?