Motion No. 1
That Bill C-253, in Clause 2, be amended by deleting lines 10 to 24 on page 1.
Motion No. 2
That Bill C-253, in Clause 2, be amended by replacing lines 8 and 9 on page 2 with the following:
“(b) the RESP lifetime limit minus the total of all contributions made by the taxpayer into a registered education savings plan in previous taxation years.”
Mr. Speaker, I am pleased to speak today. If I may, I will take the opportunity to congratulate you on what I believe is a very well deserved citation by all your colleagues in the House as the most honourable of our members. I realize that you have said you will be leaving at some stage, but clearly you are just coming into your own stride and I suggest that you may want to reconsider that position.
Bill C-253, now at report stage, is an act to amend the Income Tax Act in relation to the deductibility of RESP contributions by the contributor.
As colleagues know, I have proposed two amendments to this bill as a result of changes in the RESP regime created by the 2007 budget. People who are watching and in fact listening will know that there were changes made subsequent to changes in the RESP regime, as well as with respect to the last budget.
I will discuss these changes and the necessity of my amendments in a moment, but I note that registered education savings plans allow taxpayers to accumulate funds for their children to use toward the high costs often associated with obtaining post-secondary education.
Technically, an RESP is a contract between an individual, the subscriber, and a person or organization, the promoter. I should point out that the subscriber or the person acting for the subscriber generally makes contributions to an RESP, and the contributions, as we know, earn an income. The subscriber names one or more beneficiaries, one's child or children who are eventually going to attend post-secondary institutions, and agrees to make these contributions ultimately for them.
These contracts are then registered with the Canada Revenue Agency. From a tax perspective, which should be known, contributions made to an RESP are not deductible by the subscriber. Further, leftover funds in an RESP, after amounts are paid to a beneficiary, that are returned to the subscriber are not included in the subscriber's taxable income. Instead, contributions that are paid to a beneficiary of an RESP become taxable income of the beneficiary.
Before the 2007 budget, subscribers were limited in both the annual and the lifetime amounts they could contribute to an RESP. I should point out that after the 2007 budget implementation act, Bill C-52, was passed in the first session of this Parliament, the RESP annual limit was removed and only the RESP lifetime limit remained.
What that meant was the occasion to necessitate an amendment, and an amendment to Bill C-253 put forward by the House of Commons Standing Committee on Finance created a deduction for the subscriber, the contributor, for the taxable income for contributions made to an RESP.
This deduction, however, was limited to the RESP annual limit as defined in the former provisions of the Income Tax Act and prior to the passage of the budget in 2007.
Finally, Bill C-253 ensured that leftover funds in an RESP that are returned to the subscribers become taxable income of the subscribers themselves. The amendments I have proposed simply remove the proposed provisions in the bill that contain a reference to the RESP annual limit.
Bill C-253 nonetheless retains the tax deduction for contributions made to an RESP, but this annual deduction amount is now limited by the RESP lifetime limit, rather than the RESP annual limit.
That annual limit, for the benefit of all my colleagues here, will remain, and under the pre-RESP regime it was certainly there, at $50,000. A provision, paragraph 2(4)(2.01)(b), is also added for accounting purposes to ensure that contributions made in previous years are taken into account in determining the annual contribution deduction so that the RESP lifetime limit is not exceeded.
Members will know that in my last speech on Bill C-253 I made it abundantly clear that existing provisions of the Income Tax Act as concerns RESPs provide harsh penalties for anyone who tries to use an RESP as a tax shelter. Let us be clear on that. One cannot use this as an RESP shelter, much in the same way that the guidelines exist with respect to RRSPs.
While I will not rehash the details as I have only a limited amount of time, I must point out and will again repeat that should a beneficiary of an RESP, a child, not attend a post-secondary institution, in this case the funds accumulated in that RESP account are returned to the contributor and the moneys earned beyond the actual contributions made are indeed taxed. They are taxed significantly.
The tax rate, so everyone will know, would be 20% over and above the regular tax paid on the income. Like many other people, I feel that rate more than adequately deters anyone from using the RESP as some scheme or tax shelter. The lifetime limit of $50,000, in addition to the 20% penalty, further detracts from the usage of an RESP as a vehicle to avoid taxes.
I also mentioned in my previous remarks the soaring costs of post-secondary education in Canada. I did put a great deal of emphasis on that then and it clearly has not changed. By some estimates, there is now a cost of over $100,000 by the year 2010 for a four-year degree program.
That is a lot of money. I cannot see how families are going to be able to make ends meet without having some kind of opportunity, one that does not take away from the public treasury but in fact contributes to the development of our young by providing them access to post-secondary education in a way that uses the existing system but builds and improves on it.
There is also the issue of the fact the RESP is not being used by a majority of Canadian families to offset the rising cost of post-secondary education. I should point out, as all of this has been taking place in the past, that we have seen a number of examples where Canadians have not had the benefit or the opportunity of ensuring their positions and their ability to become more meaningful members of society in terms of adequate attention to education. It has not been made available, as we can certainly see by the fact that many have not had an opportunity to provide the savings.
While a large number of savings opportunities exist for parents and families, they are always, frankly, after-tax opportunities. Therefore, I am looking to Parliament to look much deeper, to use an existing system that I believe works for all Canadians. I believe we need a system so that Canada is able to meet the competitive edge, as so many are pointing out we will need to do in order to provide a continuous education and a reformed idea in terms of our education system. We need to allow young people and people throughout the course of their lives to make the kinds of transitions that I think are very much a necessity in terms of building a modern, adaptable and flexible society.
In the two minutes I have left, I would also like to point out that a few other areas have come to our attention very recently. One is with respect to the ability of many of our universities to continue to attract high calibre and state of the art types of equipment and technologies and to bring in professors and staff who will allow our young people to benefit at our universities and at any post-secondary level of education and to get the very best. To do that, I note, we are living in an increasingly competitive international market. It can hardly be blamed on our universities, colleges or polytechnical schools if they do not have the ability to bring in these people without higher tuition fees.
The reality is that post-secondary education is not accessible to a vast majority of our students. For a good many, it is a challenge that they will never be able to take on.
I was speaking earlier with a few members of this House who are concerned about this limit. With the amendments I am proposing here today, which affect the annual limit for contributions, I wanted to do everything I could. In the end, the clerks informed me that it would be impossible for me as a backbencher, through a private member's bill, to amend a budget that was adopted by a vast majority of members. Thus, I cannot repeal the legislation to change the limit, which is currently set at $50,000. However, the principle remains.
Access to higher education is limited to some 20% of students. That number should be 100%. This bill proposes ways to improve the system to ensure that people can contribute to their RESP. I look forward to hearing other members' comments.