What to do till Benson comes: or White Paper Ju Jitsu

DR. CRANFIELD:

Those of you who have shown your double interest in the speaker and his subject are here again to meet this man, within whose path fate built in head winds on Thursday, November 26th. You are finally to be rewarded. For my part I commend your confidence in my oath that I would deliver him to you whole and in good voice. Those of you who were here in November may find my introduction familiar.

On that earlier occasion I presented the speaker to you in absentia. I believe it is only fitting that he should know the general tenure of my remarks at that time. I linked the physician (myself) to the tax lawyer (our speaker). The physician parries the scythe of death knowing that inevitably the running of the sands of time establishes that it is merely a postponement.

This tax lawyer shields us from the full force of the tax laws for he recognizes that, as with death, the power to tax is the power to destroy. On the earlier occasion I made reference to a cartoon. That witty man, Macpherson, whose pictorial gifts are displayed in the Toronto Star, last November in a five-column-wide cartoon portrayed this destructive power and captioned it, "Certificate of Air Worthiness". His sketch shows a pranged aircraft labelled "Canadian Economy" standing amidst a bellow of black smoke, up on its nose. The dazed back seat passenger is "Private Business". The test pilot, unmistakably the Honourable Mr. E. J. Benson despite his attire of flight boots, sheerling-lined jacket, muffler and goggles, is walking away unscathed. He wears his usual Pixie smile, is cheerfully unconcerned with the wreck he has just left, and is blithely lighting the ubiquitous pipe while he is saying with a gesture, "It's all yours?" (I had no idea that this timely reference to air travel would plague our guest, fortunately not quite as pictured by Macpherson! ) Our speaker of today is as frugal in parting with information about himself as he, undoubtedly, is in parting with your tax money to Ottawa, he's a 17 % er. Readers of the Management Magazine Canadian Business have read his article, "Why Can't We Have Proportional Personal Income Tax". They will recognize the reference to a 17% tax, after a basic deduction. Our tax consultant symbolized this in his curriculum vitae by sending me just 17 lines about himself. Trinity College School and McGill claim him as their combined product. By 1938 he had his B.A. and B.C.L. After this he spent his life till 1946 as Assistant Deputy Minister (Legal) to the Income Tax Division of the Department of National Revenue in Ottawa. Leaving this he was appointed Counsel to the Committee of the Senate formed to study and reform Canada's income tax laws. He was the man who was responsible for the redrafting of much of the new Income Tax Act that emerged after the war. Concurrently he had joined the firm of Foster, Hannen, Watt, Stikeman and Elliott. In 1952 he formed his own law firm, Stikeman, Elliott, Tamaki, Mercier and Robb, where he is continuing his practice in taxation and administrative law with offices in Montreal and London, England. He is an exgovernor of the Canadian Tax Foundation, General Editor of the many tax publications of Richard De Boo Limited in Toronto and a director of many sound Canadian companies. From this I judge him to be Canada's most qualified tax expert. As for his flying about: Last November's failure to arrive here from Montreal casts no aspersion on his skill as an aviator or on his air judgement. Both are excellent. Indeed, he had piloted his plane to Ottawa the night before but decided, because of the unfavourable weather prediction, to return to Montreal ahead of this storm and come up by commercial flight on Thursday morning. The weather was so completely rotten that not only did that plane take off an hour late but it flew 1/2 hour slow. Your persistence and his however are to be rewarded. One last quip from me is to repeat to you a comment from before, that since he flies and since he is qualified at the Bar in Quebec and Ontario you must refrain from referring to him as a Bar Fly. Mr. H. Heward Stikeman presents his answer to the tax dilemma of the controversial Benson White Paper under the title "What to Do Till Benson Comes: of White Paper Ju-jutsu".

MR. STIKEMAN:

Mr. Chairman, ladies and gentlemen! After that introduction, we hardly need a speech. I must say that I am overcome that so many of the faithful have returned to what my irreverent secretary has termed "the second coming". I know that many of you will doubt that there was ever a first coming!

However, I have done a little research into why it was that Air Canada let me down on that ill-fated day in November. As a result I discovered that it was known that I was coming to address the Empire Club. Some of my F.L.Q. friends decided this was too much, and Air Canada did not perform as well as I might have performed myself!

Today I learned that, had I been more intelligent, I would have said, "My dear fellows, the Empire Club is merely an Ontario name for the 'Native Sons'." Now, Native Sons in Quebec connotes only one thing and of course that would have speeded my progress to this city in November just as much as the Empire Club is sure to have impeded it.

Now that I am here I also should note how refreshing it is to hear "God Save the Queen" sung. I don't believe I have heard it in a long time, in fact for so long, I've almost forgotten the words. Even in Quebec where they sing "O, Canada", they sing a different version. A prettier version but one which is relatively difficult to pronounce and sing at the same time since it is in the language of our own native sons. I won't therefore commence with my few words of French. We'll get right to the subject. I didn't imagine, when I first heard it, that I was going to attempt in minutes to offer a viable alternative to Mr. Benson's White Paper. I had in mind telling you what I felt we all should do in terms of evasive action until it happened. However, I will also suggest that there is an alternative reform course to the White Paper which I think is viable and which emanated largely from this province.

When we look at the tax picture today, we have to look back about eight years, and we note that the tax reform steamroller has been rolling along at relatively the same pace with the same unconcerned slowness but it has changed drivers a couple of times. Mr. Carter was in the seat for a while and when he left, we got the new driver who also doubles (for certain cartoonists!) as an airline pilot, as our Chairman has told us. Despite the road blocks which have been put in the way from time to time by outraged public groups, by economists, by widows, orphans and other people who have gone to their tax consultants in fear and distress, and have even left the country, nothing very much seems to have changed in the tax reform picture. Mr. Carter's "equity" has been replaced by Mr. Benson's "equity" and some of Mr. Carter's proposals have been altered to better suit the money-raising requirements of the Government.

Notwithstanding this, as I stand here before you today, we are looking at a situation in which we are still left to guess whether the force of the tax reformers has been more irresistible than the immobility of the public and political objections. The irresistible force has almost overcome the immovable obstacle! Perhaps now we will at last have to consider the matter for the first time realistically and coldly in the light of what is about to come, and not through the rosy-toned lenses of what might have been. We have tended to live in Euphoria in the belief that nothing ever will happen and that it would all just go away. Well, we read in the paper this morning that April is the deadline for something. However we were told by Mr. Benson in a speech in October and again later in the year that it would probably be June before we would see the legislation in full bloom. So, those of us who have been White Paper watchers find it hard to credit that we will see the exact terms of the legislation this April. We also find it difficult to see how it can be tabled at that time without any further consultation with the Provinces. But, perhaps, like Lady MacBeth, the draftsmen are "too far deep in blood" to draw back now.

Mr. Benson, in one of his earlier speeches, assured the Provinces through the medium of a very widely representative audience that consultation with them was the next step in the formulation of this eventful legislation. We don't seem, therefore, to have much time between now and April for meaningful discussion to be had with the Provinces that really matter fiscally, i.e. Ontario, British Columbia and Quebec--perhaps in that order. Thus one suspects that what will happen in April may not be the full dress bill but may be something which is in between a bill and another mini-White Paper for discussion at provincial levels. However, we can't take the chance, and what I have decided to do today is to try and give you some of the impressions and views that I have formulated and passed on to my clients as to what can be done in a purely selfish vein between now and 1972 and then perhaps what we might do from a more unselfish and national interest standpoint in terms of promoting an alternative--if that's still possible and I am beginning to think it is.

Mr. Benson has told us that January 1, 1972 is the day on which this thing will happen. That is to say the legislation which we will see in April or perhaps May or perhaps June for the first time, will take effect and bite on January 1, 1972. He has not told us whether that means that it will chew up fiscal periods which happen to end in 1972 or merely affect fiscal periods which commence in 1972. That is the first serious consideration which should be watched for in order to immediately bring it to the attention of the authorities, after the bill is seen. You can quite envisage the predicament of any taxpayer who has a fiscal period ending say January 31, 1972. It will mean that everything he has been doing from now right through has been relatively in the dark. He has (to coin a phrase!) been "flying blind". I suspect and hope that the law will take the course which is normally followed in that situation so as to affect only periods beginning in 1972 or the portion of the periods beginning before 1972 that end in that year. But that, I think, is the first thing to look out for.

When you look at the year 1971, it divides itself naturally into periods. One is perhaps pretty short, that is between now and April, if the legislation is brought down then, and the other between April and the time when it is passed which could conceivably take a couple of months. We have been told that there won't be any more public shouting, there won't be any more opportunities given to people to attempt to influence the matter politically, but there will obviously be an argument in Parliament. There will obviously also be time for any mechanical deficiencies in the legislation to be repaired by simple representations at the administrative civil service level. All this will probably take, I would guess, a couple of months. Perhaps the decision to introduce the Bill in April is a humanitarian way of seeming to avoid threatening Parliament with sitting through the dog days and passing ill-considered legislation in the heat of Ottawa and under the pressure of wives and families desirous of going off on holidays. So it may be all for the best and I think we can count on having the time between April and the hot weather to do something constructive about it and, what is much more important, to look at the legislation and see how it affects ourselves.

In this connection most of us have plans. I suppose we all have "funk-holes" of various kinds already established in our minds as to what we might do if it is as bad as we think it is going to be. But we can't really firm them up until we see the law. So those six weeks or eight weeks are going to give us a chance to look at the law and make some plans. After that, supposing it is passed in June or July, it won't take effect, assuming that my first prognostication is correct, until January 1, 1972 and it won't affect much of what we do before that time. Thus we should decide almost immediately whether we think we should take any preventive action. When we see the Bill we should try to get hold of our professional advisors and decide what it means--if they know, and try and figure out, if we can get enough of their time, what might be done after it is passed. When it is passed, we have to take our courage in our hands if we have had suggestions made to us and do something.

The reason why I say that we have to take courage in our hands is that tax planning requires astute navigation to avoid the hazards of the present and the dangers of the future law at one and the same time. In short, we must not set a course that will run us aground on some as yet uncharted sandbank or reef in the new law. At all costs you must avoid the reefs. Those I equate with head-on collisions with the Enforcement Section. I look at sandbanks as things which are merely brushes with the Assessors. You can be hauled off sandbanks . . . you usually get wrecked on the reefs.

But the trouble is that, as time passes and judicial thinking progresses, the sandbanks tend to harden into reefs. There are a lot of little polyps working in this sand called assessors and draftsmen and they take a few grains of perfectly innocent-looking sand, that used to be a sandbank, and before you know it you have got a reef. What you did yesterday that was simple tax avoidance or, as Stephen Potter might have said, "the art of dodging taxes without actually cheating", has suddenly become fraud or tax evasion and we must be careful.

I am not being facetious, I am trying to condense this into a short compass so that I will not be bothering you with long citations of judicial authority. But we do have a problem. When you start planning, you plan to do something which will lessen the impact of the law to come and you plan it under the aegis of the law which is now here. What might be permissible in later years might run you into a considerable amount of trouble in this year. So you are really going to have to exercise a considerable amount of judgement and skill which those who navigate under one system of law normally don't have to bother about. There is also the distinct possibility that the provisions of the present Income Tax Act, which make it dangerous enough to do ordinary, simple tax planning, will be hardened in the new law and perhaps even made retrospective to attack attempts to avoid it by actions taken in advance. These are sort of red letters you must put beside the sections that seem to you to be dangerous and ask your professional people to examine them in detail. The reason that I see this hardening process coming in the White Paper legislation is because the whole trend of the Government's public statements on the White Paper, as well as the language itself indicate that it is a relatively socialistic and levelling document.

Mr. Trudeau in his speech in Calgary last year said, "Thereafter legislation will be introduced incorporating policies designed to make more equitable the economic burden shared by fellow dwellers in this complex and varied land" (so far no problem). "These taxation measures are part of the Government's pledge to utilize the wealth of Canada for the good of all Canadians, not just those fortunate enough to be shielded by the protective apparatus of giant corporations, professional organizations or powerful labour unions."

Now that sets a pretty definite and hard line and I should read another quotation which you will probably all recognize, that is "from each according to his abilities to each according to his needs." Does that sound like our Prime Minister? Because if it does, it is Karl Marx from his First Manifesto, word for word. In short, the White Paper is really a wealth distribution mechanism. The principle seems to be to take a dollar from the man most likely to invest it and put it into the hands of a man who will almost certainly spend it. I must say in these poor times the distinction is getting mighty thin because anybody who has a dollar today does not often invest it.

This thinking parallels the changing administrative approach to which I referred a moment ago, to which I must now return, as was evidenced by certain official effusions from the Taxation Division in recent months. You may have seen Mr. Asper's article. He made a considerable amount of mileage out of one of them, a little booklet put out by the Information Branch of the Department, called "You Are Asking--The Story of Taxation". That booklet equated tax avoidance with tax evasion and it said, "What we call tax avoidance" (his is the Department writing) "is something else, generally speaking this involves taxpayers, relatively few, who design schemes or gimmicks or have consultants do it for them for the purpose of evading tax," thus defining tax avoidance in terms of fraud. Fortunately the Department is not quite that crass and that booklet was withdrawn shortly after it appeared.

However, at the same time there was a so-called "Information Circular" issued which is Circular 70-9 which purports to put forward the rather advanced Department ideas of the distinction between avoidance and evasion. It defines fraud or evasion in pretty recognizable terms as the "commission or omission of an act knowingly with intent to deceive so that the tax reported by the taxpayer is less than the tax payable under the law, or a conspiracy to commit such an offence." Theoretically of course this means that you can talk to your accountant or your lawyer and you can consider doing a certain act in concert with others and you can be considered as conspiring! So you have to have a clean mind. Then they go on, "This may be accomplished by deliberate omission of revenue, the fraudulent claiming of expenses or allowances, and the deliberate misrepresentation, concealment or withholding of material facts." Well, nobody quarrels with that, it's sheer unadulterated fraud. We might take a little issue with the use of the term conspiracy because conspiracy is the joining together with the intent to perform an illegal act: whether it is ultimately perpetrated or not makes no difference. It's the thinking that makes it bad if they can prove it. But when they get on to talk about avoidance, which is not evasion, and is probably only what most of us will be highly active in at least thinking about, if not doing, over the next six months in order to get ready for the avalanche, they do it in rather hair-raising terms.

They say the types of cases that are intended to be referred to the Tax Avoidance Division, and mind you they have a whole paraphernalia set up and going on this thing, are restricted to "those where the taxpayer has apparently circumvented the law without giving rise to a criminal offence" (now that's a very difficult thing to do!) "by the use of a scheme or arrangement or device" (it's interesting they don't use the word "plan". You see we have all gotten rid of these words in our vocabulary and we now say plan--they don't. "Plan" is still clean.) "the main or sole purpose of which is to defer, reduce or completely avoid the tax payable under the law. Usually a series of transactions is involved which do not truly reflect what is actually happening and sometimes the avoidance is accomplished by shifting the liability for tax to other taxpayers not at arm's length in whose hands the tax payable is reduced or eliminated . . . ."

If it is concluded that the scheme did successfully skirt the various provisions of the law, but also thwarted what the Department believes was the intent of the law, "the Department will continue the present practice of recommending corrective amendments to the law to prevent the scheme from being used in future years. There is sometimes a fine line to be drawn between tax avoidance and criminal tax evasion. And if during investigation of a case of a tax avoidance it is discovered that there is a prima facie tax evasion offence, the case will be referred to the Special Investigation Division. Then you have the slow measured threat of doom very close behind you."

When one reads that statement, one is reading what is only official policy and what is admittedly only the Administration's view of how the thing stacks up. This view however is still at variance with the decided cases before the courts. Judicial decisions in Canada, England and Australia, in the absence of specific legislation enabling a government to take the position which has been put forward in that circular, have almost always held that tax avoidance is not only proper but even economically justifiable because the theory is held perhaps it is old-fashioned--that if the law is so drafted that if you have a number of choices between paying a lot of tax, some tax or no tax by taking different legal routes to the end result, you are at liberty to choose that which most conforms to the lowest tax burden provided that you do it openly, provided that you do it with full value and weight given to the legalities of what you are doing and provided that, as one writer said, you act as if the tax assessor was sitting right with you. That's hard to do sometimes, but it can be done.

This was well said by a man called H. A. J. Ford in his British Tax Review article of July and August 1961 (this is old stuff, the dispute has been going on for years but it comes into focus when we talk about the next six months)

"Unless the tax law provides otherwise, the taxing authorities and the courts of law must take the law of property and the legal consequences of transactions as they find them."

This is also echoed by Lord Tomlin in C.I.R. v. Duke of Westminster, [1936] A.C. 1, where he said:

"Every man is entitled if he can to arrange his affairs so as that the tax attaching under the appropriate Act is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax."

In Canada the courts have always held to the simple and basic principle that Parliament means what it says when it passes an Act and that the language must be given meaning in strict accordance with the actual words used.

This was said as long ago as 1917 in the Exchequer Court decision O'Reilly and Belanger v. M.N.R., [1917-27] C.T.C. 335:

"If we depart from the plain and obvious meaning of the words of the Act, we do not then construe the Act but we alter it. If the words are precise, no more is necessary than to accept these words in their ordinary and natural meaning."

Again, the President of the Canadian Exchequer Court in Malkin v. M.N.R., (1938-39) C.T.C. 136:

"A statute levying a tax cannot be extended by implication beyond the pure import of its terms, and the terms of a taxing statute cannot be extended to frustrate the efforts of a taxpayer to avoid taxation, for example, by a trust settlement."

It was recently stated that if we depart from the plain and obvious meaning of the words of the Act, we do not then construe the Act, we alter it. If the words are precise, no more is necessary than to accept these words in their ordinary and natural meaning. Well, of course that can be a way out because statutes, particularly taxing statutes are seldom precise.

But you get the general idea which is to only tax where there is language to do it. So you can see there is some variance between those statements of the courts and this Circular. Thus when we come down to thinking about the next few months we should note that the Circular goes on and it gives a list of things that it suspects taxpayers are going to be thinking about. It says these are "some of the complex tax avoidance schemes designed to circumvent the law which the Department has investigated and will continue to have under review"--they "involve the use of one or more of the following." I am going to read some of the examples and you will see perhaps fleeting images in the backs of your minds of ideas you yourself may have harboured, if only briefly, but perhaps now, more seriously, in the light of the oncoming White Paper.

"Tax Haven companies and trusts used to: Divert revenue from sales and services
- Inflate purchases
- Inflate expenses
- Divert investment income Hide investments."

"Hiding investments" is fraud and that of course should not be in that list!

Circular continues:

"(b) Loss companies acquired for the purposes of diverting profits from the existing businesses."

Under the law it is possible in certain circumstances to reduce taxes on business profits by selling a business to a loss company. However, some taxpayers try to achieve the same results by buying up a loss company and diverting profits to it without transferring the business.

"(c) Exempt entities used to defer unduly or completely avoid tax. Deferred profit sharing plans, appropriation to shareholders, artificial deductions by corporations," and so on and so on and so on.

Despite all this, in my view there are still certain definite things you can do. Of course at one end of the spectrum is the fact that you can leave Canada. I think that's silly but a lot of people are doing it. Leaving solely in the face of the unknown does not make economic sense but there are people, and we have seen a lot of them in our professional lives, who fear this so-called "exit tax". If they stop to think about it a bit, they will realize that the exit tax does not hit them until there is a change in the value of their assets between the day called "V-Day" when it comes in (Valuation Day) which will be sometime this year, and the day they leave. At the rate things are changing for the better in this country, it well might be a couple of years before there is a serious increase in value, and during that time they will have time to reflect and take the measure of the new law. So I put leaving just for leaving's sake or fear of the exit tax, as is often advanced to me as the reason for doing so, on about the same plane as the argument made for moving assets from Quebec to Ontario. I put that at the bottom of the list.

I know that you would not like me to leave this subject without giving you my views as to what practical measures should be contemplated and perhaps taken before 1972 and so I will give you a few of the suggestions that I have been making to my own clients. I will however draw a discreet veil over any means that you might employ to accomplish these ends.

For those of you with large estates I would urge that some appropriate estate freezing device be entered upon now. This can be done by a holding company in which you retain the preferred shares, usually of two classes, voting and nonvoting, but make a gift of common shares to your prospective heirs. You could also use a non-interest-bearing demand note if more convenient. You should also make a gift to your wife or to a trust for her benefit, of the nonvoting preferred shares or the note, which must be scrupulously valued to be the same as the assets which you have transferred to the company in exchange for them. Such a valuation will avoid capital gains tax on the transfer and as far as I can see now, there is nothing in the White Paper that will render the freezing ineffectual as protection against estate tax in the years to come. Recently the Department's own Information Circular 47 has given as an even better tool than non-voting preferred: a non-interest-bearing demand note. The Circular tells us this will be valued at face value and thus will not give rise to gift tax.

You should of course also consider term insurance to cover the period of three or five years that you must survive after disposing of the preferred shares in order to have the entire value out of your estate. We do not yet know, but can only hope that this type of estate freezing may also avoid the possibility of an unrealized capital gains tax attaching at your death.

The only disability that I can see, if the White Paper concept of Widely-Held and Closely-Held companies is retained, is perhaps the forfeiting of the ability of the holding company shareholders to elect to be taxed as a partnership.

Something else that you might consider in 1971 is to dispose of any goodwill or accounts receivable. You might also prepay any expenses, admit new partners to professional firms in order to avoid capital gains tax on their entry and get yourself ready to go on an accrual basis if you are now on a cash basis. Some people advocate the acquisition and utilization of loss companies before the end of the year but in view of the nasty remarks made about this type of planning in the Circular, I would tread lightly in this area.

I would also give consideration to moving investments that you may have abroad into companies or trusts in tax haven jurisdictions. In the views of most White Paper watchers tax havens will continue to offer a material advantage over jurisdictions in which tax is payable but with which Canada may not have a double tax treaty or, for that matter even over treaty countries themselves.

It is all very well for us to look at the close to hand and rather selfish things that may be done to lessen the impact on us. One of the sad things to my mind about the White Paper Legislation as we see it now is that I and many others believe it will eventually produce a downgrading of Canada's economic position in the world. What the White Paper proposes is really to limit Canada's ability to continue to compete in a larger world. This is so because it is guided by a design for perfection which can only be measured by our own values but which will render us all more vulnerable in the wider context. There are certain inexorable prerequisites for the economic health of a nation and Canada is no exception to their application. These are an intelligent and competitive work force and the presence of investment capital. The conditions for the retention of the former and the acquisition of the latter are not too dissimilar. In short, the Canadian working and investing environment must be made attractive and competitive in comparison with other developed and developing countries.

The belief exists and is reluctantly shared by much of the professional and business community, that the Government's objectives are not to create a climate for growth and expansion, but are myopically set at repression and contraction in the name of equality and equity. The use of such words as equity and equality under circumstances that can only lead to more inequity and inequality is a contradiction in terms and disturbs thoughtful viewers of the White Paper controversy.

The problems of attempting to legislate perfection have never been effectively solved. Law itself is a paradox. Its goal is certainty and its tools are generalities and principles. To the extent that it attempts to parcel up the principles to meet individual exigencies, it loses its generality and thus its certainty. To the extent that it preserves its generality and certainty, it imposes mediocrity. As James A. Corry has so aptly said in his monograph, Law and Policy, published March 1959 by Clark Irwin & Co. Ltd. in Toronto, "Only mediocre hopes can be realized collectively, that is to say, through the policies and actions of government. Perhaps there is exaggeration here, but also enough of truth to testify to the need for a wide range of individual freedom for those who want to live lives well above the average in conception and performance."

It is still to be hoped that plain ordinary common sense may yet gain the supremacy, and the knowledge that taxpayers are individual human beings with human responses, needs and desires will not be overlooked. If this fact is forgotten, Canada may have the White Paper, but precious little to regiment with its provisions. Our economic island will have become reality and our isolation will be complete.

Although the Ottawa planners will be the last people to admit that they could be wrong--or lacking in common sense, it may be well to remind them that even the greatest judicial minds also fall into error.

As Lord Radcliffe said of Lord MacNaghton in the House of Lords decision in Public Trustee v. I.R.C.:

"There are two reflections which have pressed upon me in considering whether or not to favour this appeal. One is that, if we allow it, we find ourselves deciding that Lord MacNaghten's deliberate opinion as to the construction of the Finance Act, 1894, was on this point quite wrong. That is an unusual situation, for we are accustomed to regard with exceptional respect any pronouncement on law by that great judge. Moreover, one would expect him to have been peculiarly familiar with such a matter as the scheme and purport of this remarkable Act. I can only say that, just as it was his talent to see further beneath the surface of the law than most judges and to discern with clarity what, until he revealed it, had been unseen, so on a very few occasions he may have been led to perceive what was actually not there. I think that this must have been one of these rare occasions."

Let us for a moment before we go look at the alternatives. To contemplate an alternative we must have some hope that this entire nightmare can still be brought within the bounds of common sense. Well, perhaps there is still just enough political and economic uncertainty around to cause that to happen if we continue to oppose it.

However, events have proved that we cannot just push Mr. Benson over by shouting, "You are wrong because -" We have to lever the White Paper aside by a better mousetrap (to mix a metaphor!)--and I think we have one--one that I'll wager many of you here are completely unaware of although it comes from your own province. I refer to the "Blue Paper" or "ONTARIO PROPOSALS FOR TAX REFORM IN CANADA", published over the signature of the Hon. Chas. MacNaughton in summer 1970.

To my mind, and to the minds of many better versed than I in economic and constitutional law, these proposals make more sense than the White Paper for a number of reasons:

1. They are simpler to implement.
2. They do not do violence to established law and fiscal attitudes.
3. They are not as grandiose and leave much that is good in the present fiscal structure still standing.
4. They encourage growth, saving and the increasing development of Canada as a world economic power.
5. They will make Canada an attractive place for foreign capital to invest.
6. They provide total tax reform, Income Tax, Sales Tax, Municipal Tax and Estate Tax, not just Income Tax.
7. They are proposals that can be as acceptable to all the provinces as to the Federal Government.

The only trouble is that the public knows little of them and Mr. Benson has said little or nothing about them in public.

I commend this proposal to you for future reading and what is more I commend you, if you can do so, to recommend it as an alternative if you believe as I do when you read it, that it is a good, sound, workable alternative. Go out and sell it. Don't let it be buried by the silence of our people who are so convinced that they know better than we do that they won't even speak about it in higher places in a certain city which I shall not mention.

This all goes back to the original thoughts that many of us have had that what the White Paper tried to do is to kill a fly on a mirror with a hammer. You may not kill the fly, but even if you do, the breaking of a mirror and the bad luck which follows may well ruin all of us for seven years.

I'll close with one quotation which is comforting, but I'm afraid perhaps may be out of date.

"While the people retain their virtue and vigilance, no administration by any extreme of wickedness or folly can very seriously injure the government in the short space of four years."

That was said over a hundred years ago by President Abraham Lincoln in his first inaugural address and I suggest that one of the ways that the people can retain their virtue and vigilance is by going out and proselytizing the Ontario and Quebec proposals the few remaining months at our disposal. I believe in never ever giving up when it comes to fiscal matters. On the other hand we must remember that it was said 400 years before Christ "that criticism comes easier than craftsmanship".

The gratitude of the Club was expressed by Mr. Marvin B. Gelber.