Bill C-445 (Historical)

An Act to amend the Income Tax Act (tax credit for loss of retirement income)

This enactment amends the Income Tax Act to provide a refundable tax credit to a taxpayer in respect of whom an employer and the employees failed to make the contributions required to be made to a registered pension plan.

Income tax Act

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

Mr. Speaker, perhaps once you hear the beginning of my speech, you will want to extend the time to allow me to get in my entire speech.

Bill C-445, which is sponsored by the member for Richmond—Arthabaska, is a proposal for a refundable tax credit to deal with shortfalls in pension income. From the onset, I will state that we do not support this proposal as it is fundamentally flawed.

First and foremost, the largest issue with Bill C-445 is cost, which the Department of Finance estimated to be approximately $10 billion. Clearly, supporting a proposal with a cost of this magnitude would be fiscally irresponsible and it would threaten Canada's fiscal health.

Furthermore, the proposal also raises serious issues with respect to pension and tax policy and ignores the present state of Canada's retirement income system. Bill C-445 touches on a matter of importance to all workers, the security of their pensions.

This government recognizes that the security of workers' pension benefits is a key element in ensuring the effectiveness of Canada's retirement income system. It has been recognized that Canada has a diversified retirement income system based on a mix of public and private pensions. The old age security and guaranteed income supplement programs, along with the Canada and Quebec pension plans, are considered to be the pillars of that system, ensuring a minimum level of income in retirement for Canadian seniors.

[Louis Plamondon, Bloc, Bas-Richelieu—Nicolet—Bécancour, QC]

Mr. Speaker, it is also a pleasure for me to speak at second reading to Bill C-445, which was introduced by my colleague for Richmond—Arthabaska and which I was honoured to second. I would first like to thank him for all the work he has done with me to prepare this bill. I would also like to thank the member for Chambly—Borduas, the Bloc Québécois researchers and the officers of the House of Commons who advised us on the legal aspects and the drafting of the bill.

I would like to congratulate the member for Richmond—Arthabaska because he expressed in his speech the very thoughts of the former employees of Atlas Steels and the Jeffrey mine. These people were treated unfairly and they were victims. This request is not based on a whim. They want to redress a wrong. He explained the financial blow dealt to these individuals who had already retired in the belief that their pensions were guaranteed for the rest of their lives.

I would like to thank the NDP member who spoke just before me. He definitely extended the debate to the complex issues faced by seniors, including health. From the outset, he said he was prepared, together with his party, to support the bill. I thank him. As for the few questions he may have, we will attempt to reassure him when we study the bill in committee.

I would also like to thank the Liberal Party critic whose speech was very clear. From the start, he said that this bill deserved to be referred to committee. He said he had questions, and I understand that. He is entitled to have questions. But I think that he did not completely understand the purpose behind this bill.

The member for Richmond—Arthabaska, the member for Chambly—Borduas and I would be very happy to answer his questions and to appear before the committee. The former employees are also prepared to come and work with us, including Mr. Saint-Michel and the Jeffrey mine retirees' representative, Mr. Fréchette. They will come to explain the situation and I do not think they will have any problem answering the Liberal critic's questions. I thank him for supporting this bill. These two pledges of support, along with the support of all the Bloc members, ensure that this bill will be sent to committee so that it can move to the next stage.

However, the Conservative member's statement surprised me. I did tell several Conservative members from Quebec about this bill. I am not judging them, but it seems they may have forgotten to inform the parliamentary secretary, who spoke earlier. Talking about $10 billion shows that either he is trying to get people worked up about this or he has gone crazy. Imagine: $10 billion! We are talking about some 260 workers in one place and about 900 in another. The total per year would be $1.7 million. These people are not going to live forever. Every now and then, some of them die. They are not young, and a few years from now, this will not cost the government anything. Yet he was saying that it would cost $10 billion. Where did he get that number from?

Perhaps his speech was influenced by the combined deficit of all public and private retirement funds in Canada. If all of those people lost their jobs and were covered by this bill, it would cost $10 billion. What kind of logic is that? It does not make sense. This is a matter of a few million dollars, and we are asking the government to fix an injustice. As I said earlier, it is not as though these workers acted on a whim. We have to demonstrate compassion for workers who have been deprived of income to which they had a legal right.

These people, like all workers, including the members of this House, paid contributions out of their income. The employer also paid, of course. Those contributions went into a fund and, all of a sudden, one third of the money was taken away without giving the retirees a say in the matter.

However, this fund was supposed to be guaranteed. If hon. members who retire were suddenly told, a year later, that their pension was being cut by one third, I think the reaction would be violent or at least very noisy. An injustice has been done and we want to correct it. The people suffering this injustice worked hard for many years. They have managed to build up a strong claim and a bill was born out of this claim.

Like my colleague from Richmond—Arthabaska before me, I would like to pay tribute to Pierre Saint-Michel and Gaston Fréchette and their two teams. They looked for a legal way to provide the workers with partial compensation for their losses. Today, after consulting experts, legislative drafters and House experts, they have finally found a solution to recover some of the loss. They will get that solution if every member of this House sets partisanship aside and understands the need to be compassionate and provide these people with social justice. This gesture, which would cost the government barely a few million dollars in the early years, would allow these people to obtain some compensation for their losses.

Today, I am calling on the Conservative members from Quebec to influence their government. I have chosen to sit as a sovereignist MP with a vision of Quebec sovereignty. They have chosen to sit within a party in power that claims to better defend the interests of Quebec. Well, ladies and gentlemen, now you have the opportunity to prove it.

I am calling on the members for Lévis—Bellechasse, Beauport—Limoilou, Pontiac, Beauce, Jonquière—Alma, Lotbinière—Chutes-de-la-Chaudière, Louis-Hébert, Roberval—Lac-Saint-Jean, Mégantic—L'Érable, Charlesbourg—Haute-Saint-Charles and Louis-Saint-Laurent. They have said they might have some influence. Perhaps the critic and parliamentary secretary who spoke earlier might change his mind when the second hour of debate takes place in early June.

I hope this bill will be referred to committee by a unanimous vote. I ask them to use their influence. It is time for these members to prove they do have some influence and to act to change the parliamentary secretary's speech and their party's vision.

The Liberal members have agreed to refer this bill to committee, and I thank them. The NDP members have also agreed, and I thank them. Of course, the Bloc Québécois will support this private member's bill, and I ask the Conservative members to do the same.

I repeat, this is not a partisan gesture, but an act of human compassion and social justice. I therefore ask that all members support this bill and that, during the next hour of debate in early June, there be only speeches in support of this bill in this House so that we can act to reassure these people following the injustice they suffered a few years ago.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Mr. Speaker, I rise today to speak to Bill C-445, An Act to amend the Income Tax Act, specifically to provide a tax credit, which we have been hearing about in this debate, for the loss of retirement income. It was introduced by the member for Richmond—Arthabaska and I appreciate that member's concern for the workers of his province and how this bill may help all workers across our country.

However, before I get into my remarks, recently in this debate we heard from the Conservatives a list of all of the things that they have done for seniors. I have one more thing for them to put on their list and that is the $1 billion they owe seniors from the CPI mistake that was made a number of years ago. Each and every senior who is owed that $500 for each year should be addressed by the government and should receive the money. If they owed the government money, they certainly would have somebody knocking on their doors.

Back to Bill C-445, it would grant a refundable tax credit equal to 22% of the reduction in pension benefits experienced by beneficiaries, other than trusts, of registered pension plans who suffer a loss of pension benefits, normally when their pension plan is wound up in whole or in part. It applies to both defined benefit and defined combination plans. This bill certainly will catch the ear of Stelco workers in Hamilton who went through the CCAA bankruptcy protection recently. They saw the sale by their employer of their company and all the insecurity about their pension and benefits. They had to deal with this stress for two years.

Seniors who have already retired and those who are about to retire have worked hard. They have played by the rules all of their lives and now they need their pension plans. They need their income to retire in dignity and respect. They too often find their retirement benefits reduced through no fault of their own.

I will not suggest this bill would address fully the problems they will face but it offers some modest fairness for retirees.

In addition to Bill C-445, we in the NDP call on the federal government to explore other options to help retirees which should be based on the premises: that all workers deserve decent pension coverage, that all workers deserve to get the pension they have earned, that we show respect for today's and tomorrow's retirees, that retirement investments must work for and not against workers, and that the government has a national job strategy so that dignified retirement is possible.

A recent polling of Canadians found that 73% are worried about not having enough money to live on after retiring. Canadian workers worry about the solvency of their private pensions. They worry about the adequacy of both CPP and public income supports.

They know, for instance, that inflation does far more damage to retirees than any other group of Canadians. Over 250,000 seniors today live under the poverty line, under that cutoff point. Too many retirees are living in poverty. It is the responsibility of the government to protect seniors and not leave them hung out to dry.

A particularly alarming statistic is that one-third of seniors, most of whom are women, have little income outside of OAS and GIS, and have an average annual income of around $12,000. How are these seniors expected to live in dignity on barely $1,000 a month?

How are they expected to afford to stay in their family homes or expensive senior retirement residences or afford the cost of living and utility bills, not to mention the high price of gasoline for those who can still afford a car?

How are they expected to afford the medications each month, especially since the government will not provide a national pharmacare program? How are seniors expected, after all of those expenses, to meet the high cost of food?

Since the middle 1990s, according to the National Advisory Council on Aging, seniors' income levels have reached a ceiling and are no longer keeping pace with the rest of Canadians. In fact, the mean income of seniors rose only $4,100 compared to other Canadian households, which rose $9,000 between 1997 and 2003. Thirty per cent of families today have no private pension assets at all.

In this age of insecurity and tremendous job loss in our manufacturing sector, as well as the pulp and paper sector, the federal government must look beyond today and beyond the next election cycle. It is time for some long range planning in conjunction with our defined pension plans as to how to support workers in their retirement years.

In my riding of Hamilton East—Stoney Creek, I hear repeatedly about the moneys owed to seniors that I spoke about before. Regarding the error in the cost of living, we should imagine what a $500 per year repayment would do for somebody with an income of $12,000 per year and what it would mean to them.

The Conservative government has handed corporate Canada $14 billion in tax breaks each and every year, and only a pittance to seniors. When seniors owe tax to the government, they have to pay or they are charged interest that compounds daily. However, when the government owes money to seniors, it simply dismisses those seniors and tells them that they do not matter.

The Conservatives tout their two point cut to the GST and the $60 billion they took out of the fiscal capacity of the Government of Canada to respond in a reasonable way to the plight of seniors. Seniors across Canada have to choose between buying medication and eating. That is disgraceful and the government should be ashamed.

The government should cancel the corporate tax cuts and use the money to give seniors a reasonable raise in their CPP benefits. The Conservatives should follow the lead of the NDP and start a national prescription drug program for all Canadians.

The Conservatives should follow through on the promises they already made to seniors and implement the seniors charter, created by my colleague from Hamilton Mountain.

In June 2006, nearly two years ago, the House passed the NDP's seniors charter, which called for the government to work with the provinces to rectify decades of underfunding of seniors programs. The seniors charter called for the recognition of older Canadians as creative, active and valued members of our society.

The charter would have enshrined the right of every senior living in Canada to the following: income security, through protected pensions and indexed public income support that provides a reasonable state of economic welfare; housing, through secure, accessible and affordable housing; wellness, through health promotion and preventive care; health care, through secure, public, accessible, universal health care, including primary care, dental care, home care, palliative care, geriatric care and pharmacare; self development, through lifelong access to affordable recreation, education and training; government services, through timely access to all federal government programs and services, including family reunification.

It would create a seniors advocate to: conduct public education and awareness initiatives on the rights of seniors; ensure that all new and revised policies and programs affecting seniors receive public input from older persons; require that all new policies and programs affecting seniors are announced with specific timelines for implementation; act as an ombudsman for seniors with respect to all government services and programs in making recommendations as appropriate that assist seniors; and that would advocate and report annually to Parliament on government policies and programs affecting seniors, including the effectiveness of federal funding related to the needs of older persons.

I wonder how many members present have had to eat cat food. I read an article on how seniors choose cat food because of its low price in order to get some protein because they simply cannot afford to purchase groceries. That is one of the great shames in this country. We have to do better. The government has to do better for our seniors and this is a national disgrace that can no longer be ignored.

[Ted Menzies, Conservative, Parliamentary Secretary to the Minister of Finance]

Mr. Speaker, I appreciate the opportunity to speak to Bill C-445, a proposal for a refundable tax credit for shortfalls in pension income, which has been introduced by my good friend, the member for Richmond—Arthabaska.

The intention of the member's proposal is somewhat laudable. It seeks to assist Canadians who have seen their retirement incomes negatively impacted by a failed business. Unfortunately, it is fundamentally flawed to such a degree that we cannot support it.

The biggest problem with Bill C-445 is its annual cost, as was referred to previously by my colleague in a question, which is estimated to be approximately $10 billion. Clearly, were Bill C-445 to be enacted, it would have a negative impact on Canada's fiscal position.

This proposal also raises serious concerns with respect to pension and tax policy, while also failing to take into account the multitude of prudent ways we are improving Canada's retirement income system. Again, as previously mentioned, Bill C-445 relates to the tax treatment of pensions and savings, an area that this Conservative government has recognized as a key priority, an important element for economic growth as well as an improvement for living standards.

As I am sure the House is well aware, our Conservative government has implemented an ambitious and aggressive agenda to reduce the tax burden on Canadians by cutting corporate taxes and personal income taxes, cutting the GST and many more. Tax cuts have prompted Canada's competitiveness and improved our standard of living, but tax cuts also spur investment while creating jobs, encouraging economic growth and allowing the freedom for Canadians to save.

Personal savings provide Canadians a means to invest in their own future and improve their standard of living. Savings also bring the peace of mind that comes with the knowledge that funds will be available in the event of an emergency or for future endeavours like starting a small business, purchasing a home, or a child's education.

Our Conservative government has taken major steps to improve incentives for Canadians to save. Most significantly I would point to the introduction in budget 2008 of the tax-free savings account, commonly known in the House as TFSA, whose introduction has been heralded in nearly all corners as an exceedingly positive initiative, perhaps the single most important personal savings vehicle since the introduction of RRSPs in 1957.

Indeed McGill University Professor William Watson praised it as a “great step forward for the country...almost all Canadians will now be able to shelter all their savings from tax”.

TFSA will be a flexible, registered, general purpose account that will allow Canadians to earn tax-free investment income. As the TFSA matures over the next 20 years it will permit over 90% of Canadians to hold all of their financial assets in tax efficient savings vehicles in combination with existing registered plans. In 20 years, relative to the size of today's economy, the tax relief provided by the TFSA will grow to over $3 billion annually.

In addition to the landmark TFSA, our Conservative government has introduced a number of tax measures to improve the pension and RRSP system, such as: doubling the amount of eligible income that can be claimed under the pension income tax credit to $2,000, the first increase since 1975; increasing the maximum age to 71 by which Canadians must convert their RRSPs to registered retirement income funds and begin receiving pension payments; permitting employers to offer more flexible phased retirement programs in order to retain older, experienced workers and ease succession planning pressures; increasing the age credit amount; and permitting pension income splitting. The cumulative effect of these important measures represents nearly $1.6 billion in tax relief every year for pensioners and seniors.

Clearly, this Conservative government has worked to improve the tax treatment of pensions and RRSPs and to make our retirement income system even more effective in meeting the needs of Canadians, and we will do more. However, we must make certain that policies are prudent and consistent with sound pension and tax policy principles.

Regrettably, Bill C-445's proposal to introduce a refundable tax credit for pension shortfalls is neither the most prudent nor the best way to promote the security of pension benefits. It would create undesirable economic incentives for pension plan sponsors and would be an improper use of the tax system. As well, it would be exceedingly costly and unfair in its application.

I will now expand on the points to which I have just alluded.

Bill C-445 would go far beyond its proposed intent. It would not provide a refundable tax credit in respect of shortfalls in pension income but would instead effectively provide a refundable credit on the full amount of pension benefits received by most retirees.

This is because, as drafted, the proposed credit would be based on the difference between the pension benefits payable to an individual from a registered pension plan and the amount of benefits received by the individual from a retirement compensation arrangement. As a result, the proposed credit would be extremely costly. In fact, it would cost about $10 billion annually. I am assuming that this is why the Speaker ruled earlier today that this private member's bill does require a royal recommendation. I would concur with his decision.

Such a costly measure clearly would not be supportable. Let us make no mistake: it would put Canada into deficit and would put at risk the fiscal health of future generations of Canadians. Regardless of whether Bill C-445 has been drafted properly, its underlying objective is to provide a government-backed guarantee for pension benefits. This would not be good tax or economic policy and would not be fair to the taxpayers of the country.

The tax system is not intended to ensure or compensate individuals for the loss of pension benefits due to the underfunding of pension plans. Indeed, the proposed refundable credit would set a significant precedent for government compensation of shortfalls in expected retirement income in other situations.

Let us consider the example of an RRSP saver or an individual in a defined contribution pension plan who does not achieve the pension income he or she expects because of poor investment performance. Bill C-445 would mean he or she could request that a similar credit or other compensation be provided to help offset such shortfalls.

There are a number of other significant concerns with the proposal. For example, it would effectively mean that the federal government would provide compensation for shortfalls in pension income for provincially regulated plans. Moreover, providing a government-backed guarantee is not the best way to protect pension benefits.

The best way of ensuring that promised pension benefits are secure is to have healthy plans with good supervision. Providing any kind of guarantee or compensation for pension benefits, whether through the tax system or otherwise, is potentially costly for taxpayers. In addition, it raises issues of fairness, given that the costs would be borne by all taxpayers while the benefits would accrue only to a minority of those participating in pension plans.

Therefore, I urge members not to support this fundamentally flawed proposal.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

moved that Bill C-445, An Act to amend the Income Tax Act (tax credit for loss of retirement income), be read the second time and referred to a committee.

Mr. Speaker, I hope that you do not get the feeling that I am always talking, since I just spoke during another debate. I want to say that this bill is particularly close to my heart and that I am moved today as I speak to this issue, not only because this is my bill, but because a number of people worked on this bill. These people deserve our consideration, and that is why we drafted such a measure.

I will briefly explain Bill C-445, An Act to amend the Income Tax Act (tax credit for loss of retirement income). This enactment amends the Income Tax Act to provide a refundable tax credit to a taxpayer in respect of whom an employer and the employees failed to make the contributions required to be made to a registered pension plan. It was introduced at first reading on May 17, 2007. Today, nearly one year later, we are ready to debate it at second reading. It is making good progress. We hope that the bill will move quickly through Parliament so that the people affected get what is coming to them.

I will give a brief account of how this bill came to be. In my riding, the Jeffrey mine, a chrysotile mine, went bankrupt, throwing many people out of work. Unfortunately, their retirement fund also disappeared like snow in the sun because there was a loophole when the company went bankrupt. People lost a great deal of money in all this. For years, Jeffrey mine retirees used every possible means to obtain some compensation. The Government of Quebec gave a certain amount of money at a given point, but it was a one-time contribution that did not cover their losses.

What could be done? These people came to see me to determine what could be done. At the same time, retirees from Atlas Steels, in Sorel, also went to see their MP, who will speak in a few moments. We worked together, along with the member for Chambly—Borduas who worked very effectively on this file, to see what could be done at the federal level to help these people.

Mr. Gaston Fréchette, chair of the Jeffrey Mine retirees subcommittee in Asbestos, in my riding, represents more than 1,000 retirees who worked at the mine. There are about 1,200 in all. In addition, Mr. Pierre Saint-Michel is the chair of the Atlas Steels retirees group, which has just under 300 members. These people and their supporters—there are many—truly worked with us. Mr. Fréchette came up with the idea of a tax credit. We met with them here and we held press conferences in Asbestos and in the riding of the member for Bas-Richelieu—Nicolet—Bécancour, who also participated in these discussions. Together, we came up with the basis for Bill C-445.

When I said that this was an issue close to my heart and that I was moved speaking about the bill, it is because I saw these people wrack their brains, approach us and ask what we could do to help them. And then they worked on the bill with us so that we could introduce it. I would therefore like to thank not only Mr. Fréchette and Mr. Saint-Michel but all those individuals and retirees who helped out. I would like to extend a very warm thank you to the members for Bas-Richelieu—Nicolet—Bécancour and Chambly—Borduas because, without them, there would not be a bill.

I would like to briefly explain what this bill will do once it comes into force. As I was saying, it would create a refundable tax credit for loss of retirement income. Many retirees have seen their income drop because their retirement fund was running a deficit when their company ceased operations. That is what happened to people who retired from Atlas Stainless Steels, which belongs to Ontario's Slater Steel, and from the Jeffrey mine in Asbestos, closer to home. To help retirees caught in this situation, we propose creating a refundable tax credit for loss of retirement income.

This refundable tax credit, which would amount to 22% of lost income, would not affect retirees' income, whether or not they pay income tax. The credit would also be transferrable to a surviving spouse and would apply to both money purchase and defined benefit plans. Accordingly, a retiree whose income drops from $30,000 to $20,000 would receive 22% of the $8,000 lost, which would be a non-taxable amount of $1,760.

We do not believe that retirees should have trouble making ends meet because they are not receiving the retirement income they contributed to for years. That is what happened to retirees from Atlas Stainless Steels in Sorel-Tracy, whose income has dropped between 28% and 58% since July 1, 2005, and is still dropping.

Passing this bill will make it possible for all retirees caught in this kind of situation to recover part of the money lost. Take, for example, retirees from the Jeffrey mine. Since 2003, they have lost $55 million from their pension fund and $30 million in benefits.

Of course, this bill would not be retroactive. My colleagues should understand that when it comes into force, this bill will apply to the previous tax year. We will not be able to go any farther back than that.

Retirees whose complementary pension fund is smaller than it should have been will be compensated, as will surviving spouses, when they are entitled to part of the income.

The tax credit is 22%. Some may wonder where we came up with that figure. It corresponds to the federal marginal tax rate that applies to the middle class. For people whose income is between $36,000 and $72,000, the tax rate is 22%. That is where we came up with that percentage.

The tax credit is refundable so that everyone can take advantage of it, even those whose incomes are very low and who do not pay taxes. It is a matter of social justice for us. We thought about this. I know that this morning, a ruling was unfortunately made concerning royal assent. From what I understand, if the tax credit had not been refundable, the decision would have been different. We are bound by the royal assent, but I hope that the government will listen to reason.

We made this choice thinking of the poorest members of society. We knew that some people had lost their retirement income, and that some of them had even less money than others. A non-refundable tax credit would have benefited only those with more money. Some people would have been eligible, but I think, unfortunately, that most of our retirees would not have been able to take advantage of the tax credit. That might have been a step in the right direction, but I think it would have been unfair to do it that way. That is why we went with the idea of a refundable tax credit in the bill.

I just explained that low-income people would have essentially been left out. The elected members, at least these three members, as well as the people from the two retiree committees I mentioned earlier, felt that the bill should apply to everyone, especially the least well off. I would like to congratulate the members of the retiree committees who were also thinking of their less fortunate colleagues.

We have to determine how many people this will affect in Quebec. I have heard rumours that the government thinks this measure would take a big chunk out of the consolidated revenue fund. I can say that in Quebec, we have found only two cases where the bill would help now-retired victims of business closures. I am referring to the two cases we have been talking about since the beginning of this debate— Atlas Steels in Sorel and the Jeffrey mine in Asbestos. These are victims of very exceptional cases—I do not know if we can call them very exceptional, but exceptional at the very least—that should never happen again.

Take Quebec for example, again. The Quebec government changed its legislation to require improved capitalization of money purchase benefit plans. And there should not be many cases that come up in Canada either. In Ontario, there is a government fund set up to replenish the pension plans of employees who find themselves in a similar situation. Luckily, governments have made adjustments so that there will not be any more situations like those that the retirees in Asbestos and Sorel have had to deal with.

We are now seeing measures like this in a number of provinces. Perhaps there are former workers from the St. Anne Nackawic Pulp Company Limited in New Brunswick who might be eligible—our research service looked into this. We could study the file in committee, since we have not been able to determine if this is the case or not. More examples like this could come up, but it would not involve many workers.

But even though this may not affect many people, we cannot simply wash our hands of it and stop worrying. Quite the opposite. One thing is certain: we are talking about very few cases and about exceptional situations. The fact that they are exceptional does not mean that they are any less important for the people involved.

We are talking about people who contributed to their employer's pension fund their entire lives only to end up with almost nothing once they retire.

The intention of Bill C-445 is not to hand out a lump sum payment, but to provide an annual payment equivalent to 22% of the loss. If we take the actuarial deficit of the two retirement funds for the people we are talking about, we expect this to cost roughly $1.7 million in the first year for Quebec. Obviously, that amount will decrease over the years as the number of former employees decreases. For all of Canada this measure is estimated to cost between $3 million and $5 million, again if we take the example of the retirees I am referring to. More may be discovered with the current provincial measures, and if we look back, but note that this measure is not retroactive. In cases such as Singer and others, retirees have been compensated. At first we thought about including those cases in our bill, but they are different cases. This exception really only concerns two industries, two companies in Quebec and maybe one in New Brunswick.

Why does this issue concern the federal government? The federal government has a constitutional right to legislate while respecting the supremacy of provincial and Quebec legislation, of course, with respect to old age pensions and additional benefits, including survivor benefits and disability benefits, regardless of age. That is one of the reasons. The compensation set out in Bill C-445—and I wish to emphasize this—is provided as a tax credit. It has no impact on other government program benefits, does not interfere in any way in provincial social programs and is therefore very respectful of the division of powers. The Bloc Québécois would never show up with a bill calling on the federal government to interfere in provincial jurisdictions. That is why I wanted to emphasize this, in case that was what anyone was thinking, but that would surprise me. Most parties here understand what I am saying. The government has a say in this type of procedure.

There are other reasons as well. With a monetary policy that produces recurring deficits and a fiscal policy that does not allow the government to build up a surplus in good years, Ottawa is also responsible for providing relief for retirees who have to pay the price. These are good reasons why the federal government has a role to play in this issue.

I should mention that the coverage by the local press has been very interesting, and I want to thank the local media that have taken an interest in the cause. I will give just one example, because I want to give my colleague from Bas-Richelieu—Nicolet—Bécancour a chance to make his speech. The local media in my riding have covered the story of the Jeffrey mine retirees for a long time. They are involved in an ongoing legal battle, but that is something quite apart from what we are discussing today. This is an issue that regularly makes the news.

I want to read from the May 26, 2007 issue of Les Actualités, the Asbestos newspaper, which refers to this issue and gives a good summary of the situation. I am reading from the front page:

The 1,200 Jeffrey mine retirees who have been fighting for four years to obtain redress after losing their group insurance are beginning to see the light at the end of the tunnel. A bill that would create a refundable tax credit for the loss of retirement income has just been introduced in the House of Commons.

This was very good news.

In conclusion, I want to extend my warmest thanks to Gaston Fréchette, the chair of the Jeffrey mine retirees subcommittee, for raising awareness in this House. He decided to send letters—signed also by the president of the Sorel retirees—to all the members to make them aware of this issue. Mr. Fréchette, who is one of the retirees, also called all the members from Quebec, regardless of their party, to ask them to support this bill. That is what I am also doing today. I am calling on my colleagues to do justice to these people and support Bill C-445.

Bill C-445—Speaker's Ruling

[The Speaker, Liberal, Peter Milliken]

I am now prepared to rule on the point of order raised by the government House leader and minister for democratic reform on April 8, 2008 concerning the requirement for a royal recommendation for Bill C-445, An Act to amend the Income Tax Act (tax credit for loss of retirement income) standing in the name of the member for Richmond-Arthabaska.

I would like to thank the hon. government House leader as well as the hon. member for Richmond--Arthabaska for their contributions on this issue.

In his intervention, the hon. government House leader stated that refundable tax credits are direct benefits paid to individuals regardless of whether tax is owed or not and are paid out of the consolidated revenue fund. He argued that a legislative proposal creating such a tax credit therefore needed to be accompanied by a royal recommendation.

In support of his argument, he pointed to a Speaker's ruling of June 4, 2007, which did not select a report stage amendment to Bill C-52, the Budget Implementation Act, 2007, that sought to create a refundable tax credit because it required a royal recommendation. He also referred to a ruling of May 11, 2006 from the Speaker of the Senate that ruled out of order Bill S-212, an Act to amend the Income Tax Act (tax relief) on the basis that it increased a refundable tax credit.

In response, the hon. member for Richmond--Arthabaska argued that legislation proposing a reduction in taxes has always been permitted under our parliamentary rules, even if this leads to reimbursements being made to taxpayers.

To support his arguments, he pointed to a ruling by Mr. Speaker Parent of October 16, 1995 regarding Bill S-9, An Act to amend the Canada-United States Tax Convention Act, 1984.

The Chair has carefully reviewed Bill C-445, the previous rulings that were cited as well as the comments from the hon. members and believes that the central issue in the present case is whether the creation of the tax credit found in Bill C-445 is strictly an alleviation of taxation or an authorization to spend for a new and distinct purpose. If it is the latter, the bill would need to be accompanied by a royal recommendation before the third reading motion can be proposed to the House.

The bill standing in the name of the hon. member of Richmond--Arthabaska seeks to amend the Income Tax Act by providing for a tax credit to a taxpayer in respect of whom an employer and the employees failed to make required registered pension plan contributions. Whether or not the tax credit is refundable or non-refundable is the key issue in determining the need for a royal recommendation.

Non-refundable credits are deducted from a person's tax payable rather than being calculated separately: they simply reduce the amount of tax payable by an individual. The amount of the credit is limited to the amount of the tax payable.

This is not the case for refundable tax credits, which are unique in the Income Tax Act: they provide for a taxpayer to receive an amount from the government due to a low amount of taxable income and tax payable. Such credits are calculated separately on an income tax return because they are not simply alleviations of taxes otherwise payable.

Bill C-445 is proposing a refundable tax credit. The Chair is of the opinion that the bill would not only alleviate taxation but also potentially allow monies to be disbursed from the consolidated revenue fund, in the event the taxpayer had taxable income for the year that yielded taxes less than the amount of the credit.

The circumstances of Bill C-445 are quite different from those referred by the hon. member for Richmond--Arthabaska in the ruling concerning Bill S-9. There, reimbursements were limited to tax payable. By making a tax credit refundable, Bill C-445 could lead to refunds that are greater than taxes paid. Such spending, for a new and distinct purpose, would need to be accompanied by a royal recommendation.

Accordingly, the Chair will decline to put the question on third reading of this bill in its present form unless a royal recommendation is received.

The debate, later today or on Monday, is currently on the motion for second reading and, as usual, this motion will be put to a vote at the close of the second reading debate.

I thank the hon. government House leader and the member for Richmond—Arthabaska for their comments on this matter.

Royal Recommendation — Bill C-445

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Mr. Speaker, I would like to correct an injustice or perhaps an error on the government's part. In response to the statements made by the Leader of the Government in the House of Commons and Minister for Democratic Reform when he rose on a point of order on Tuesday, April 8, 2008, I would suggest to the Chair that Bill C-445 does not require a royal recommendation.

It is important to understand that this bill amends the Income Tax Act to provide a tax credit to a taxpayer in respect of whom an employer and the employees failed to make the contributions required to be made to a registered pension plan. This bill seeks to help retirees who have lost retirement income.

According to a ruling by the Chair on October 16, 1995 about Bill S-9, a tax reduction would not contravene Standing Orders 79 and 80. The Chair at the time said this:

The bill will also have the effect of granting some tax relief retroactively and there may be some reimbursements payable for taxes paid under the law as it now reads, should Bill S-9 be passed by the House and receive royal assent.

The bill does not appropriate tax revenue, but rather exempts or reduces taxes otherwise payable, in some cases retroactively.

...

In conclusion, Standing Orders 79 and 80 have not been contravened, as Bill S-9 neither imposes a tax nor appropriates money for any purpose. Since the bill relinquishes funds it might otherwise have gained, it is not appropriating money but forfeiting revenue it would have raised without such changes.

It seems to us that this is the same, because it would reduce the tax revenues, as permitted by the Standing Orders. The Speaker will have to consider the fact that this measure seeks not to create a specific program to help workers who have lost their pension funds, but to enable citizens who have paid taxes their whole lives to benefit via tax credits.

This fiscal measure will result in a reduced tax burden on individuals whose retirement income was downsized because their retirement plan was in a deficit situation when the company that employed them ceased operations.

Take, for example, the 1,200 Jeffrey mine retirees in Asbestos, in my riding. Since February 2003, these retirees have lost no less than $55 million from their pension fund and $30 million in benefits. As a result, a retired worker who was supposed to collect $30,000 can now collect only $22,000. When my Bill C-445 comes into force, retirees will receive 22% of the $8,000 lost, a $1,760 tax credit.

I could also have talked about the workers at Atlas Steel in Sorel, who are struggling with the same problem.

If this bill is passed, all retirees who have been victims of this kind of situation will be able to get back some of the money lost as tax credits—that is important to mention. This will amount to reduced revenues for the state, not a new social program.

In conclusion, I am sure that this explanation will enable the Speaker to reconsider the need for a royal recommendation on Bill C-445.

Mr. Speaker, I have faith in your good judgment. I believe that you will come to an enlightened decision in favour of workers, justice and democracy.

Royal Recommendation--Bill C-445 and Bill C-490

[Peter Van Loan, Conservative, Leader of the Government in the House of Commons and Minister for Democratic Reform]

Mr. Speaker, I rise on a point of order. I want to speak to the question of the need for a royal recommendation on two private members' bills.

On March 11, 2008, you noted that the spending provisions in two private members' bills appear to infringe on the financial initiative of the Crown. You invited members to make arguments on whether those bills require a royal recommendation. That is what I intend to do at this time.

The two bills are Bill C-445, An Act to amend the Income Tax Act (tax credit for loss of retirement income), and Bill C-490, An Act to amend the Old Age Security Act (application for supplement, retroactive payments and other amendments).

Let me begin with Bill C-445. This bill would create a new refundable tax credit for the loss of retirement income.

Refundable credits are direct benefits paid to individuals regardless of whether tax is owed or not and are paid out of the consolidated revenue fund. As a result, any legislative proposal to create a refundable tax credit requires a royal recommendation.

I would draw to the attention of the House two recent rulings wherein the Speaker of the House and the Speaker of the Senate concluded that creating or increasing a refundable tax credit requires a royal recommendation.

On June 4, 2007, there was a Speaker's ruling that a proposed amendment to Bill C-52 to create a refundable tax credit could not be selected for report stage because the amendment required a royal recommendation.

On May 11, 2006, the Speaker of the Senate ruled that Bill S-212 was out of order because it would have increased a refundable tax credit. The Speaker of the Senate stated:

--bills proposing to alter refundable tax credits need a Royal Recommendation.

This is because the payouts that will be made to taxpayers, who are entitled to claim them, must be authorized. This authorization is the Royal Recommendation. These payments can only be made from the Consolidated Revenue Fund; they are expenditures of public money.

Since Bill C-445 would create a refundable tax credit, it needs to be accompanied by a royal recommendation.

Now, in regard to Bill C-490, this bill proposes a number of changes to the old age security program which would result in increased spending and would therefore require a royal recommendation.

Clause 1 of Bill C-490 would apply to a person who ceases to have a spouse or common law partner because of the spouse's or common law partner's death and would provide that person with the old age security pension that would have been payable to the person's spouse or common law partner, for a period of six months. This extension of benefits would be a new program requirement, which would result in additional spending.

On December 8, 2004, a Speaker's ruling in the case of Bill C-278 concluded that a similar extension of benefits for the employment insurance program constituted a new and additional requirement for spending, and therefore required a royal recommendation.

Clause 2 of Bill C-490 would eliminate the requirement to make an application for a supplement for old age security benefits. Formal application is needed since the information available from the Canada Revenue Agency is sometimes insufficient to determine eligibility. This change would result in benefits under the old age security program being provided to persons who otherwise would not be eligible to receive them. This would be a new program requirement that would require additional spending.

On October 24, 2005, a Speaker's ruling with respect to a provision in Bill C-301, dealing with other proposed retroactive payments under the old age security program, concluded that:

Bill C-301...proposes to alter the process by which compensation is awarded to old age security recipients in the manner that retroactivity is handled.

Clauses 2, 3 and 4 remove the requirement that the recipient must make an application before they can receive a payment...This changes the conditions of the compensation process and creates new or additional spending.

Clause 3 of Bill C-490 would increase the guaranteed income supplement monthly benefit by $110. The Department of Human Resources and Social Development estimates that this change could cost up to $2 billion a year. This would constitute additional spending for a new and distinct purpose and would therefore require a royal recommendation.

Clause 6 of Bill C-490 would provide for retroactive payments where a person has not received a supplement, or a portion of a supplement, to which that person would have been entitled under the act.

On October 24, 2005, a Speaker's ruling on the retroactivity of payments in the case of Bill C-301, respecting the monthly guaranteed income supplement under the Old Age Security Act, concluded that:

--retroactivity is limited by the date upon which the application was made. Late applicants may only be eligible for the period dating from the application. It would appear then that this modification authorizes increased spending which would require a royal recommendation.

The Department of Human Resources and Social Development estimates that Bill C-490's provision of unlimited retroactivity for guaranteed income supplement monthly benefits could represent an initial lump sum payment to beneficiaries of up to $6 billion.

In conclusion, Bill C-490 would result in increased spending for the old age security program in the new and distinct ways I have just outlined. The bill therefore requires a royal recommendation.

Private Members' Business

[The Speaker, Liberal, Peter Milliken]

The Chair would like to take a brief moment to provide some information to the House regarding the management of private members' business.

After a replenishment of the order of precedence, the Chair has developed the practice of reviewing the items there so that the House can be alerted to bills which, at first glance, appear to infringe on the financial initiative of the Crown. The aim of this practice is to allow members the opportunity to intervene in a timely fashion to present their views about the need for a royal recommendation.

Accordingly, following the March 3 replenishment of the order of precedence with 15 new items, I wish to inform the House that two bills give the Chair some concern as to the spending provisions they contemplate. They are: Bill C-490, An Act to amend the Old Age Security Act (application for supplement, retroactive payments and other amendments), standing in the name of the member for Alfred-Pellan; and Bill C-445, An Act to amend the Income Tax Act (tax credit for loss of retirement income), standing in the name of the hon. member for Richmond—Arthabaska.

I would encourage hon. members who wish to make arguments regarding the need for a royal recommendation in the case of Bill C-490 and Bill C-445, or in the case of any of the other bills now on the order of precedence, to do so at an early opportunity.

I thank the House for its attention.

The Chair has notice of a question of privilege from the hon. member for Ajax—Pickering. I will hear him now.

Income Tax Act

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

moved for leave to introduce Bill C-445, An Act to amend the Income Tax Act (tax credit for loss of retirement income).

Mr. Speaker, it is a privilege to introduce this bill today on behalf of thousands of retirees who have been cheated because their employer failed to assume its obligations with respect to their retirement plan, or because it stopped fulfilling those obligations.

In particular, there is the case of retirees from the Jeffrey mine in Asbestos, in my riding, Richmond—Arthabaska, and retirees from Aciers Inoxydables Atlas in Sorel-Tracy, in the riding of my colleague from Bas-Richelieu—Nicolet—Bécancour, whom I would like to thank for his support in this matter.

I would also like to thank my colleague from Chambly—Borduas, who met with these retirees, and drafted this bill with them—which is important to note—to provide a refundable tax credit for the loss of retirement income.

Of course, I hope to have the support of all members of this House to help these retirees, who have become victims, recover part of the money they have lost.

(Motions deemed adopted, bill read the first time and printed)