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 1653 Cost Main Street 
 
 Rochester. N«« York I4r, uSA 
 
 (716) «2 - 030O - Phon. 
 
 ('!») 288 - 5989 - fax 
 
CANADA 
 
 BUDGET SPEECH 
 
 nRI.IVKRXD BY 
 
 HON. SIR THOMAS WHITE, M.P. 
 
 MINISTER OF FINANCE 
 
 IK THK 
 
 HOUSE OF COMMONS 
 TUESDAY, APRIL 24, 
 
 1917 
 
 OTTAWA 
 PRINTED BY .1. nit I^ TACH^, 
 PRINTER TO THE KINO'S MOST EXCKLI.KNT MAJESTY 
 1917 
 
 ■>w.-c,j; v,..-r, 
 
CANADA 
 
 BUDGET SPEECH 
 
 liKLIVKRKI) IIY 
 
 HON. SIR THOMAS WHITE. M.P. 
 
 MINISTER OF FINANCE 
 
 HOUSE OF COMMONS 
 TUESDAY, APRIL 24, 
 
 917 
 
 OTTAWA 
 
 PRINTED BY J. u« L. TACH*. 
 
 PRINTEK TO THE KIWI'S MOST KXCKLLENT MAJK3TY 
 
 1917 
 
 19884—1 
 
•• • •• • • • 
 
 •• • • • i 
 
 
 
 dL] 
 
 Ml 
 
 I 
 
 I 
 
COMTEITTS. 
 
 Pmk. 
 FiKBl Y«ir UM«-17— 
 
 Revenue 5 
 
 Expenditure (Ordinary) 8 
 
 War Expenditure 6 
 
 Net National Dfbt C 
 
 Sources of Revenue — 
 
 ('u»tomfl Taxation on Luxuries 7 
 
 Income Tax 7 
 
 fiuAines!^ Profits Tax 8 
 
 Canada's War Ixtans 10 
 
 Cai. "s Trade, 1916-17 10 
 
 Resolution: 
 
 Amendment to Hu^inrs* Pti.tit- War Tax 
 
 Act, 1916 11 
 
 19884— li 
 
 68586 
 
I 
 
 J 
 
 BUDGET riPEECir 
 
 liKI.ITMBIl Rf 
 
 HON. SIR THOMAS WHITI-:, M.F. 
 
 MINIMTICU OF" KIJiTANCK 
 
 HOI SK OF COMMONS, TUESHAY, APRIL 24. 1917 
 WATS AND MEANS— THE BUDOET. 
 
 Iloii.iunii.l.- Sir THOMAS WHITK (Minwier uf 
 Fiiiiiiit')' ) iinivrtl : — 
 
 Thut Hie S|H>iiker Uo now leuv« the C'liiiir fnr thi- Houiv to |to iiiUi 
 Cniiiiiiittn- of Wayii and MeiiiiA. 
 
 Ill- Miid: .Mr. Spfukor, I avail iiiv^Hf of th«- upp«*rtiiiii(,v 
 iitfonlcti l»y this motion to maki" thi- hiiiiiuiI biulp-t Ntatonieiit. 
 
 Tin- tValnri-4 of tho public tinaucc^ in whi. h I ctmmTc 
 tlio HoiiMc to U> chieriv infpreHtwl at the prenfiit time are thf 
 rchitionshifi iM-twccn national im-oine and national expeuditiirr 
 and tin- iuiTcaw in the national d«»bt. For the first year of 
 th«' war the n-vonne from all sources was about $130,000,000. 
 It ro«(' during the wcond yi-ar to $170,000,000. For the year 
 rndi'tl ^larcli ."Jl la>t, I am happy to say, cur income will reach 
 $2.'{:i.000,000. or one liundre<l million in advance of the tisca! 
 year 1015. In round fifrnrcN. $1.14.000.000 of the aRp-e^ratc 
 was derived from customs. $24,000,000 from excise, and 
 $ 1 2,.">00,000 frr>m the business profits war tax. From this 
 last named la.\. which was introduced by the Budget of last 
 year, we estimated Miat we should receive $25,000,000 during 
 the three years of its currency. Our experience has prove<l 
 that this estimate will lie larjrely e.\c«H'de<l. This tax was 
 retriactive. U'ing levied in respi-ct of biisin.»ss acoountiu); 
 p«'ri.jd* endin}? subsequently to December :S1. 1914. TW 
 
 5 
 
6 
 
 profits of the first accounting period of businesses subject to the 
 tax were much affected by the severe depression and dislocation 
 of business incidental to the first months of the war. Never- 
 theless, from this first period the sum of $12,500,000 has 
 already been collected, and when the full levy is made we 
 expect to have collected in respect of this period as much as 
 $15,000,000. For the second accounting period, the taxes for 
 which are payable during this year, w? estimate that the 
 amount collected will be much larger— in fact, as high as 
 $20,000,000, or more. The increase will, of course, be due to 
 the business prosperity which has prevailed in Canada during 
 the past year and the profits made in supplying munitions of 
 war. On th'' whole, notwithstanding the difficulty of organiz- 
 ing on short notice the oflicial machinery necessary to cover so 
 large a country as Canada, the tax has worked out much more 
 satisfactorily than wc expected, and the total results will be 
 much greater than the c:itimate. 
 
 I have said that the total income of the past fiscal year 
 was $232,000,000. Leaving aside for the moment our dire<'t 
 war expenditure, our outlay for the past year was upon 
 ordinary account $145,000,000 and $27,000,000 upon capital 
 and subsidy account, or a total of $172,000,000. It is to be 
 iHime in mind that of our ordinary expenditure $25,000,000 
 represents increased interest and pension charges due to the 
 war. Taking our total revenue at $232,000,000 and our total 
 current and capital expenditure at $172,000,000. we find that 
 during the past fiscal year we were able to pay from our income 
 all current and capital expenditure, all charges of interest upon 
 our increased national debt, all pension outlays, and in addition 
 devote the sum of $60,000,000 to payment of the principal of 
 our war expenditure. For a country such as Canada, of sparse 
 population and without the conditions of long-established and 
 <'oncentrated wealth prevailing in older and more settled com- 
 munities, the result must be regarded as extremely satisfactory. 
 Coming next to the question of our direct war expenditure, 
 we find that with our increasing military effort it also is con- 
 tinually increasing. Since the beginning of hostilities our total 
 war outlay, including estimated and unadjusted liability to 
 Great Britain for the maintenance of our troops at the front 
 and inclusive of withheld pay, totals, so far as we can calculate. 
 
about $600,000,000. As the result of this large war expendi- 
 ture, the net national debt of Canada, which was $336,000,000 
 before the outbreak of war, has risen to over $900,000,000, 
 although this will not be shown by our o£Bcial statements for 
 some months to come. By the end of the present fiscal year 
 it may reach $1,200,000,000. 
 
 From the beginning it has been clear that it would not be 
 possible for the people of Canada to pay, during the war, more 
 than a part of the principal of our war expenditure. The 
 policy of the Government has therefore been directed along two 
 main lines: first, to fund the war indebtedness so as to post- 
 pone its maturities to periods well beyond the end of the war, 
 and secondly, by increased taxation on the one hand and the 
 reduction of current exjxMuliture on works on the other to bo 
 in a position to meet from annual income all annual outlays 
 including increased interest and pension charges and in addi- 
 tion a substantial iimount of the war expenditure itself. 
 
 In order to carry out this programme it will be necessary, 
 as oiir war expenditure, and consequently our interest and 
 pension charges increase, to increase also our income. This 
 raises the question of the sources of revenue still open to us. 
 A higher customs taxation upon luxuries has been frequently 
 suggested, hut this proposal overlooks the fact that most articles 
 of this character are embraced under fixed rates in the treaty 
 with France, and the tariff cannot therefore be raised in 
 respect of these. Apart from this we should hesitate at a 
 time when France needs the advantage of all her sales on this 
 side of the Atlantic to assist her exchange, to place a prohibition 
 or increased duty against importations from our great Ally. 
 
 Then it has been frequently suggested that following the 
 example of Great Britain and the United States, we should 
 adopt an income tax upon all incomes beyond, say. $1,000 or 
 $2,000. The comparison in this regard, however, of Canada 
 with either of these countries is fallacious. We are not a 
 country of large accumulated wealth and of incomes derived 
 from investments. Canadian incomes are derived mostly from 
 personal earnings, and while there are many exceptions, tlio 
 rule prevails generally throughout the Dominion. So far as 
 T am aware the incomes of the professional and salaried classes 
 throughout Canada have not materially increased since the 
 
autbri'ak of llic war. Tii the 
 
 (iecliiietl. This Ix^ing so, it dfH's not 
 
 •«so <if iiiaiiy they have aouiullv 
 
 ni)oii theso the l.iinleii of an additioiiiil 
 
 scoiii equitable to imp.. 
 
 iiK'onie tax — for thcv 
 
 are taxed now upon their incomes bv municipalities and 
 provinces— at a time when owing to the war the cost of living 
 has so greativ increased. If suc^i a tax is to he imposed, it 
 seems to me tliat h. far as the great majority of Canadians 
 are concerned, it might better k- levied in time of peace, when 
 the cost of living is again noninii. It is further to be pointed 
 out that fh<> maximum amount which would be obtaine.l from 
 such a tax in Canada would in terms of Dominion finance 
 Ik? comparatively small and that its administration would 
 require alnu.st a second Civil Ser^■ice sufKcient in numlx r i.. 
 wver every municipality, rural and urban, throughout the 
 Dominion. The cost of levy and colbn-tion of such a tax would 
 be much higher proportionately than in a geographically small, 
 wealthy, densely populated country like Great Britain or than 
 in the United States, which although of the same area as 
 Canada has twelve times the population and much more than 
 twelve tinu's our wealth. On the whole it would appear to nu- 
 that the income tax should not be resorted to by the Dominion 
 (lovernnient until its necessity l)ecomes dearly and unmistak- 
 ably apparent notwithstanding the drawbacks which 1 have 
 mentioned. In connection with this tax it is also to be observed 
 that the larger incomes in so far as they are not personally 
 earned are derived in part from holdings in joint stock coui- 
 panies already subject to taxation under the prov . ns of the 
 Business Profits War Tax Act. It must also be remembered 
 that the Canadian public are voluntarily supporting the 
 Canadian Patriotic, Red Cross, and other funds. The amount 
 contributed annually to these funds is much in excess of the 
 amount likely to be realized from any income tax. It is true 
 that some wealthy men do not contribute their fair share to 
 these funds. But this would akso be true in any scheme 
 of income taxation especially with issues of Dominion bonds 
 exempt from Dominion taxation. 
 
 The question of further revenue then narrows down to 
 abnormal profits made by business firms during the period of 
 the "ar and this in my view is the proper and legitimate source 
 to which to look for increased- revenue to meet the inerea'sef] 
 
9 
 
 •i>-it of tlif war. If a bnsiiie^T^ is imikinj?. in war tinic, profits 
 tltove the normal, tliey imisf be iliu- to tin- almoriiial eouditious 
 •nnt(<l l)v ilio war, tliafis to say, such a l»iisiiH»*!i U deriving 
 
 riv V>(! 
 
 ailvantajjt; from the war. It follows tlia! it may properly 
 rcijuired to i-ontributo a share of sui-h prr>tit.-v U< the Govi-rn- 
 nic'iit for the purposes of the war. 1 ilo not see. Mr. Speaker, 
 that i, inake^ nnicli differetiee whetiier the l-v.siness in (piestion 
 is the making of munitions or of any other elass. Munitions 
 iire needed and no discredit attaches to the enterprise whicli 
 provides them. The steel company which engages in the pro- 
 duction of munitions could in most eases make as much if imt 
 more money by selling its steel products in world markets. 
 Moreover, it would be inequitable to discriminate against the 
 lirni which makes a profit upon the finished article known as 
 muuitiou.s and leave unta.xed the profits (it may be equally 
 large) of those firms which manufacture and supply the raw 
 material or partly manufactured products from which they are 
 made, or the businesses throughout the country which make 
 abnormal profits from the distribution of money expended by 
 (Governments in payment for such munitions. If higher 
 profits are made in the manufacture of munitions the higher 
 the tax taken under business profits legislation. 
 
 In accordance with the principle which I have enuuciat«'d 
 the Government last yi'ar imposed the Husiu<'ss Profits War 
 Tax. rn<ler that legislation profits in excess of a certain per- 
 centage upon capital invested were taxed to the extent of 
 twenty-five per cent of such excess. This measure has provei' 
 quite successful, not the least of its merits being the small 
 cost of its administration which will probably not ex<eed one- 
 half of one per cent upon the amount collected. In view of the 
 increasing interest and pension charges due to the war and 
 believing this to be the true source to which recourse should 
 !iow be had for further revenue, we i)ropo«e to extend this tax 
 by taking an increased share of profits. 
 
 We propose to take from persons, firms and jompanies 
 liable to the Business Profits War Tax Act, lOlG, fifty per 
 cent of all profits in excess of 15 per cent but not exceeding 
 twenty per cent per annum and seventy-five per cent of all 
 profits in excess of twenty per cent per annum upon capital. 
 That is to say, up to fifteen per cent they will be liable to the 
 
 i 
 
10 
 
 exiating legislation and in addition we shall take one-half of 
 their profits between l.-» per cent and 20 per cent and three- 
 fourths of their profits teyond 20 per cent. The increased 
 tax will chiefly aflFect manufacturers of munitions and other 
 war supplies. While the percentage of excess profits which h 
 taken is large, suflScient is left to provide incentive to effort 
 on the part of all subject to the tax. 
 
 The new legislation will apply to the last accounting period 
 of the three year term provided for in the Business Profits 
 War Tax Act, 1916. namely, to all accounting periods ending 
 after December 31, 1016. I am unable to estimate what amount 
 will be derived from this taxation as it will depend upon the 
 condition of business during the year. It will however give us 
 without doubt a very substantial additional revenue. 
 
 Before leaving the question of taxation, I desire to say 
 that the measures we have adopted have necessarily broadened 
 in their scope as the war has progressed. No one has at any 
 time been able to forecast the length of the war. It has now 
 lasted nearly three years and the end is not yet in sight. 
 Should another year be added to its duration with the con- 
 sequent increase in our financial burden new sources of revenue 
 must undoubtedly be sought. In seeking for these it should. 
 I am sure, alwayd be kept in mind that Canada has been in 
 the past and will likely be for many years .a the future a 
 country inviting immigration and capital to develop its 
 resources and contribute to its prosperity. Especially should 
 we in considering taxation measures for the period following 
 the war keep in view the desirability of the flow of settlers 
 and capital to Canada not being retarded through fear on 
 their part of heavy Federal taxation. 
 
 CANADA 8 WAR LOAXS. 
 
 The question of our financing since the last Budget was 
 fully explained and discussed in the first part of this session. 
 During the recess we successfully floated the third Canadian 
 War Loan, an issue of $1.-)0,000,000 five per cent, twenty year 
 oonds at 96. The public response was most gratifying, the 
 issue having been oversubscribed to the extent of a'bout one 
 hundred million dollars. The proceeds of this loan will enable 
 us to finance both ourselves and the Imperial treasurv in 
 
11 
 
 respect of expenditures iu (*anada until Juno. It is my 
 present intention to arrange then fur an issue of notes or 
 treasury bills and if conditions are favourable offer another 
 war loan in the early fall. 
 
 Since the outbreak of war we have floated in Cam'^a 
 domestic loans aggregating $350,000,000 and have in addition 
 furnished $160,000,000 thiough our chartered banks to the 
 Imperial treasury to meet its commitments for munitions and 
 supplies purchased in Canada. Everywhere, I believe, this 
 iH regarded as a very notable achievement on the part of 
 Canada. It has not only made possible our participation on 
 » large scale in the war, but it has in greater measure than 
 we realized brought about the present state of prosperity in 
 the Dominion. Without the aid afforded by the savings of our 
 people the expenditures which have been made in Canada bv 
 bt^th Governments for supplies and munitions co'ld not have 
 lK>en made, so that those whi have saved have benefited not 
 only themselves but the entire community. While our national 
 saving during the war has be^n gratifyingly large, it is not 
 80 great as it should have been, and to-day no better advice 
 can be offered to the public than to exercise the strictest thrift 
 and economy. Every additional day the war lasts makes this 
 individual and national duty the more imperative. 
 
 Canada's tradk 1916-17. 
 
 No aspect of our affairs during the war is more striking 
 than the vast increase which has taken plaoe in our inter- 
 national trade. The aggregate of our imports and exports 
 (excluding coin and bullion) for the fiscal year 1912 was 
 $841,000,000; for 1913, $1,063,000,000; for 1914. $1,090,- 
 000,000; for 1915. $9JV8,000,000 ; for 1916, $1,309,000,000. 
 For the year ended on March 31 last, the total international 
 trade of Canada reached the enormous total of $2,043,000,000. 
 
 Mr. MICHAEL CLARK: Would the niiuistor kindl.v 
 •live us a stateinput of the exports and imports* 
 
 Sir THOMAS WHITE: If my hon. friend does not 
 mind, I would prefer to give them in committee. I have 
 them here, but I caimo' conveniently lay my hand upon them. 
 This, Mr. Speaker, is nearly double the volume of the largest 
 
12 
 
 trade in thi- history of Canada bofon- tlio wav. Equally 
 notable with this hiigo incn-ast! in volume is the fl.ange which 
 has taken place in relative amounts of imports and exports. 
 For 3012. the balance against us was $125,000,000; for 191.1. 
 Sit.}09,000,000; for 1914, $180,000,000: for 1915, $30,000.- 
 000. For 1910, we had for the first time in many years a 
 favourable balance of $249,000,000. During the last fist-al 
 year this favourable balance increased to $314,000,000. 
 Figures such as these indicate a very prosperous condition 
 within the Dominion. It must however Ix- »U'adily kept in 
 mind tLat the higher prices obtainable undc war conditions 
 for our national products and the output of our industrial 
 j)lants of war supplies and munitions are chietly responsible 
 for this extraordinarily favourable condition of our external 
 trade, and that with the cessation of the war dislocation of 
 industry and modification of prices are bound to ensue. I 
 take it that it is unnecessary for me to mention the large in- 
 crease in our exports due to our grain and other commodities 
 sent abroad by us and the high prices which have been and 
 are being obtained for them. I said that, with the cessation 
 of the war, dislocation of industry and moditicatiou of prices 
 are bound to ensue. The only safeguard against these condi- 
 tions is saving on the part of all who are now engaged at good 
 wages and an- in a position to save and the careful husband- 
 ing of their resources by firms and companies engaged in busi- 
 ness. The position of most businesses in Canada is now 
 thoroughly sound, and it is for their proprietors, with the 
 prudent watchfulness of their bankers, to keep them in that 
 condition. The sources of danger to business in war time are 
 speculation in commodities and stock exploitation on the ex- 
 changes. With these avoided and national savings greatly 
 increased we might look forward witL confidence to whatev(>r 
 may occur in the reconstruction period after the war. 
 We have no t» ff changes to propose. 
 
 To carry out the taxation proposal which I have announced 
 and certain necessary amendments to the Business Profits 
 War Tax Act, 1916, I beg to give notice of the following 
 resolution which I shall move in committee: — 
 
 Resolved, That it is expedient to amend the Ru.^inese Profits War 
 Tax Act, 1916. by providing:— 
 
i:i 
 
 1. Thrtt in niiy busiiif** taxiiWli' under the Act wlipie tlip Hniiu.il 
 protlt* excoed fUtivn [mt oeiituni per niinuin 'h» t.ix shHll I"* iii- 
 creasied to fifty ptT erntiini will) renpect to nil protiti* in excels of tln> 
 said fifttH'n i*r centuui Imt not exoepdinj twenty pi-r oi>ntuni p<'r 
 annum, and wher* ilie profits exceed twenty per centum per annum 
 ♦he t : ohall be increasi-d to seventy-Pve |>er ot-ntutn with rei«|MM."t tn 
 all profits in excess of th>' - lid twenty per centum, iiikI sueh incren^i'.* 
 in ihe tax shall he it'viiU ugainst i.nd paid liy the per.*on owninj! 
 such business for each and every accounting perioti endlni^ after tln' 
 thirty-first day of Deceinlier, one thousand nine hund.>-d and > ixteen : 
 
 2. That for the purposes of the said Act, the actual unimjiairetl 
 reserve, re.*t or accumulated profits held at the commencement of 
 an accouniting >riod by an incor|)orated company shaU be inclu<i<'<l 
 as part of its capital as long as it i? held and useil by the conipniiv 
 as capital; 
 
 That any enactment founded on this resolution sluill b denn-.l 
 to have come into force on and from the eighteenth day -if \t:iv, 
 one thousand nine hundr«><l and sixteen; 
 
 3. That tlie tax shall lie paid each year within one month i.w,, 
 the date of the mailing of the notice of assessment; 
 
 4. That with respect to every business liable to taxation h.-r.- 
 under the period for which the returns srtiall lie made and durint; 
 which it shall be liable for assessment sliall l»' at lea-st thirty-six 
 niontiis, commencing with the lieginning of the first accountin'j 
 period en<lin,a; after the thirty-first day of Dei-ember. 1014, or for sueli 
 less period as the business may have Ixvn carrie«l on f'om the begin- 
 ning of the said accounting period to the end of the p«Tim' for 
 which the said tax may be levied under the said Act.