Bill C-253 (Historical)

An Act to amend the Income Tax Act (deductibility of RESP contributions)

This enactment amends the Income Tax Act to provide that contributions to a Registered Education Savings Plan are deductible from a taxpayer’s taxable income.

Income Tax Act

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Mr. Speaker, I am pleased to speak to Bill C-253, which amends the Income Tax Act with respect to registered education savings plan contributions. The Bloc Québécois firmly supports this bill. We believe that it will make education more accessible to more young people. This is especially true in Quebec, given the cost of education.

In Quebec, there are great distances between regions and between educational institutions. Given that these institutions are located in areas that are often very far from students' homes, it is important to improve access to education for a great many students in Quebec.

Obviously, higher education is expensive for families. Often, young families will take this into consideration when deciding whether or not to have another child, because they know that education is extremely costly. The more we improve funding for students and the easier we make it for them to take advantage of such a system, the more we will promote not only population growth, but access to education by students in Quebec.

This bill was referred to the Standing Committee on Finance, where members of the Bloc Québécois expressed several concerns about it. One concern stands out: this must not become a tax loophole. Rich families and people with very high incomes must not be allowed to use this tax deduction as a shelter. That would turn it into a regressive measure for middle-class families and middle-income earners.

The amendments proposed by the member for Pickering—Scarborough East seek to address this problem by setting a lifetime contribution limit, but they do not set a yearly limit.

My colleague from Jeanne-Le Ber, who proposed a subamendment to the Liberal member's proposal, gave an example that I will repeat to illustrate the potential downside of this proposal.

This is a concrete example based on the situation that would arise from the existing Liberal amendments. For example, a taxpayer earning $150,000 in a single year can contribute $50,000 to a registered education savings plan in that same year. The taxpayer would get a tax refund of $14,500. Then over the next five years, the taxpayer's child could withdraw up to $10,000 per year from the plan, tax-free. In the end, the government would be giving $14,500 to people with a lot of money to begin with, people who earn a lot.

That is the kind of situation the Standing Committee on Finance discussed, the kind of situation the Bloc Québécois does not want to see. My colleague from Jeanne-Le Ber moved a subamendment to the amendment proposed by the member for Pickering—Scarborough East because the Bloc Québécois supports the bill in general but is against creating a situation that takes advantage of middle-income individuals and families. My colleague's proposed amendment would set an annual deductible contribution limit of $5,000. If the subamendment is passed, the Bloc Québécois will support the bill as amended by the Liberal member.

[Chris Warkentin, Conservative, Peace River, AB]

Mr. Speaker, Bill C-253 is an excessively costly and irresponsible modification to the registered education and savings plan. It would do little to support access to post-secondary education here in Canada.

Before discussing my concerns with this piece of legislation, I would like to provide a brief overview of the current RESP program and how it attempts to encourage savings with post-secondary education.

Currently, over $600 million annually is provided to tax and grant assistance to encourage RESP savings. This is done through numerous ways.

First, contributions attract a Canada education savings grant, or CESG, of up to $7,200 per beneficiary. Second, income in the plan accumulates tax-free, and grants and withdrawals are taxed in the hands of the students. This is usually when their incomes are low and as a result their tax bills are usually quite modest. Third, further additional support is provided for low income individuals through an enhanced CESG and a Canada learning bond. These measures cumulatively aim to provide a substantial incentive to save.

This Conservative government, in its past two budgets, has advanced measures to expand access to RESPs and has introduced additional flexibility for students. Budget 2007 raised the lifetime RESP contribution limit to $50,000. It eliminated annual contribution limits and raised the maximum amount of a CESG that can be received in a year to $500. The budget also provided part time students access to RESPs, recognizing the reality that many students, either by choice or by necessity, work while they learn.

Budget 2007 measures represented a significant but prudent revamping of the program and one that was greeted favourably. Maclean's called them “all smart, progressive ideas that are rightly applauded”, while the Victoria Times Colonist declared them “positive changes”.

Budget 2008 continued along the path with even further enhancements to increase the time limit over which individuals may contribute to an RESP and the time that the plan may remain open. The later change was especially important, as noted by taxation expert Jamie Golombek. He said:

With people staying in school longer, and with many post-secondary degrees—such as medical or law degrees—requiring years of study, the current RESP time limits were no longer sufficient.

Jointly, these measures will both enable families with more than one child and students pursuing an education over an extended period of time to have the ability to utilize RESPs.

The Conservative government's revamping of the RESP program represents a concrete demonstration of our commitment to improve post-secondary access through an improved and expanded RESP program.

I note that Bill C-253 was originally given first reading near the beginning of the 39th Parliament on May 4, 2006. At that time, I am sure that the hon. member of the Liberal Party could not have envisioned that this newly minted Conservative government would undertake such positive modifications to the RESP program in the budgets of both 2007 and 2008.

Nevertheless, we have taken action, and that action has and will have direct ramifications for the already exorbitant costs associated with the already flawed piece of legislation, namely Bill C-253. Moreover, Bill C-253 changes the system and would not improve the RESP program.

Further, neither of the amendments under debate today would take care of such concerns either. For instance, the amendments proposed by the member for Pickering—Scarborough East and the member for Jeanne-Le Ber would make contributions taxed in the hands of the contributor when withdrawn from the plan rather than being effectively tax-free, as is currently the case.

The most serious concern with Bill C-253 remains cost, which, when first proposed in 2006, was estimated to be a whopping $800 million annually, but has since mushroomed an additional $100 million to a massive $900 million annually.

The estimated massive $900 million cost can be broken down into two components. First, it represents an increased tax assistance on current contributions and would cost over $650 million annually. In other words, the measure proposes to spend about $650 million before generating a single dollar in additional RESP savings.

Second, an additional $250 million cost is expected from the contribution of the tax relief provided through the deduction. This is not an isolated instance of Liberal members introducing a proposal with no consideration of cost. Rather, it is part of a larger pattern of reckless and fiscally irresponsible proposals since the 2006 federal election. These have been brought forward by the Liberal Party and its many leaders. They are proposals that would immediately push Canada back into deficit and rack up a $62.5 billion and counting deficit, and push that onto our debt.

I ask the member for Pickering—Scarborough East how he plans to pay for Bill C-253? I personally believe the hon. member to be a good man and a good member of the House, but I am concerned that he might be proposing something that would inevitably cause Canadians to have their taxes raised.

I am wondering which programs he might propose that we otherwise would have to cut and if he is really prepared to see Canada go spiralling into a deficit to address this bill.

We ask these questions rhetorically, really, because we all know that Canadian taxpayers may eventually have to foot the bill for yet another instance where the Liberals have engaged in fiscal irresponsibility. Unlike such fiscal irresponsibility, our Conservative government acknowledges that we need to be prudent during global economic uncertainty. We cannot make such unrealistic proposals that would force Canada to go into a deficit situation.

Outside of the various serious concerns related to the cost of Bill C-253, there are still some technical flaws. The most obvious of them would be the pre-2006 contributions and how they would be withdrawn. In effect, under this bill, contributions that never received a tax deduction would be taxed when they are withdrawn. We cannot support this costly bill and we ask the House to defeat it.

At the same time, we ask for the House's support for the measures brought forward in budget 2008, a budget that builds on our record of investing in the best educated, most skilled, and most flexible labour force in the world.

Budget 2008 introduces a new consolidated Canada student grant program. All federal grants will be integrated into one program that will provide more effective support to more students for more years of study, thus assisting Canadian families who struggle with the cost of higher education.

The new Canada student grant program will be simple, transparent and broad-based, providing certainty and predictability for Canadian families. The reaction to budget 2008 has been overwhelmingly positive among students, leaders and universities.

The College Student Alliance said budget 2008, “--shows that the federal government is keeping an eye to the future and our future leaders of tomorrow--”; the Canadian Federation of Students added, “--the government has responded to a long standing call by students and their families--”; and the Association of Universities and Colleges of Canada declared, “We are pleased that the budget has announced important initiatives--”.

Budget 2008 represents prudent, responsible and effective action from this Conservative government while Bill C-253 represents $900 million in Liberal fiscal irresponsibility, the type of which we have come to expect from the Liberal Party and its current leader.

It is reckless Liberal spending that Canadian taxpayers cannot afford. At the end of the day taxpayers may be forced to foot the bill for this reckless Liberal spending and Liberal deficits. I hope not.

The House resumed from November 28 consideration of Bill C-253, An Act to amend the Income Tax Act (deductibility of RESP contributions), as reported (with amendment) from the committee, and of the motions in Group No. 1.

Motions in Amendment

[Mario Silva, Liberal, Davenport, ON]

Mr. Speaker, I am pleased to add my comments to this very important debate on education and the tools that are required by families to make sure that their children have the financial requirements needed to receive a post-secondary education.

This bill, Bill C-253, that has been put forward by my hon. colleague from Pickering—Scarborough East is a very important piece of legislation. It is, I think, worthy of this House's attention. Also, we hope that we will have it go forward, both to committee and then to the Senate.

Bill C-253 is an act to amend the Income Tax Act respecting the deductibility of registered education savings plans, RESPs, contributions.

There is nothing more important than the future prosperity of Canada's youth and having a highly educated workforce. All of us in this House, on a number of occasions, have spoken of the importance of higher education and the importance of education for our young people. It is unfortunate that so many of our young people are getting themselves into debt.

I was looking at some statistics that I would like to share with this House. The average undergraduate tuition fee has almost doubled, from $2,023 in 1993-94, to $4,025 in 2003-04. An increase in tuition fees is partly responsible for an increase in student debt.

It is a terrible shame that in a country like Canada where we have incredible wealth and resources that so many young people are in debt.

I have always compared Canada as sort of in the middle between Europe and the U.S. Many of the western European countries have almost free education. It is not the case of course for all of them because some of them do have high fees for their education. However, overall Canada is the middle ground between the European system and the American system, which is very costly.

I was speaking to a colleague of mine at Oxford, where I am taking a masters degree in international law. She told me that tuition fees for her children would be about $200,000 at the end of four years. It is an incredible amount of money to pay for one child to go to school and if a person has four children, which she does, it is an enormous burden. She said she will be working until she dies in order to help her kids pay for the outrageous tuition fees.

We are not in that situation in Canada, and I thank God for that, but we are not quite like the European model, which has a very generous education system which allows their young people to attend higher levels of education.

We have to do more as a government, as a society, as legislators, to make sure that our young people are getting the tools, the resources they need, for higher education and to make sure that it is affordable higher education as well.

Because of the soaring costs of education, more Canadians are unable to attend institutions of higher learning and that is deeply concerning, especially in a society like ours which requires highly trained individuals to meet the demands of the labour force.

It is projected that by 2010 a four-year degree program could cost in excess of $100,000. That is certainly getting more closer to the American model and that is very worrisome because that American model is one that we do not want to emulate. It is extremely costly and it is a huge burden to families for their children's education. They have many burdens and obstacles in the U.S., from health care to education and many other issues.

We cherish our friendship with our American neighbours, but there are many things they can learn from us, and on this aspect they can certainly learn a great deal.

I commend my hon. colleague from Pickering--Scarborough East for putting forward this important and valuable private member's bill to hopefully address some of these concerns. We realize that it is impossible to have all these concerns and issues addressed. We also need our provincial partners assisting us.

All of us know that Canada is one of the few members of the Organization for Economic Cooperation and Development that does not have a federal minister of education. Most countries around the world, certainly most western democracies, have a federal minister of education.

We do not have a federal minister of education because that responsibility rests in provincial hands and that is, of course, a relic of our historical past, a relic of our Constitution, which put the issue of education strictly in provincial hands. We can have arguments about whether that was a good thing or a bad thing, but at that time it was needed to probably deal with issues both linguistic and religious.

In today's society one would wonder if there should not be some type of minister at the federal level, if not a minister of education than at least somebody who would have authority and responsibility for post-secondary education. We need some coordinated efforts. We need a minister who could, in fact, deal with provincial members and his or her counterparts to address the ever rising costs of tuition in this country.

All of us in the House are deeply concerned, but we need a coordinated effort. This legislation would be one piece of the pie, a tool we could say, that would go a long way toward addressing the concerns that we have. Clearly, it is not enough. A lot more has to be done.

Rising student debt is deeply troubling. I am the official opposition's critic for the Treasury Board and I do not know if it was a pleasure, or a burden, to look through the estimates. It was quite tedious work. Going through the estimates, I noticed that the government is spending huge sums of money, in fact millions of dollars, to go after students for not paying their loans. We realize that students have to pay their loans, but it seems a bit ludicrous to spend millions of dollars when the government has not ceded to students across this country.

The millennium scholarship fund was brought in by the previous Liberal government under the leadership of the Right Hon. Jean Chrétien. The prime minister at that time envisioned this as a great opportunity for many young people, especially those who are disadvantaged in our society, to receive this type of funding in order to assist them to attend post-secondary education.

Millions of dollars have gone into my riding of Davenport for students' post-secondary education through the millennium scholarship. I am very pleased that scholarship was put into place. I am hoping that the government will see the benefits of this scholarship program and renew it because it does need to be renewed.

Students across this country are calling for the government to renew this important fund that has helped thousands of students across this country to deal with some of the financial burden facing them in post-secondary education.

Bill C-253, An Act to amend the Income Tax Act (deductibility of RESP contributions) is an important piece of legislation that the House should support. I congratulate my hon. colleague from Pickering--Scarborough East for his efforts on behalf of students across this country. I hope this will pass so that future generations can benefit from this important piece of legislation.

[Brian Masse, NDP, Windsor West, ON]

Mr. Speaker, it is a pleasure to speak to this issue and support my colleague from Pickering—Scarborough East with whom I have served on the industry committee for a number of years. I applaud him for this bill. I personally support the bill.

It does not completely address the current post-secondary education affordability situation for our youth, but it is one tool that could be effective in allowing more contributions and better planning for families. That is important.

In the riding of Windsor West we have the St. Clair College of Applied Arts and Technology which has been very successful, not only in terms of training young people, but also in making sure they have the right tools to succeed in employment. We also have the University of Windsor which is well known for its law programs, as well as other different types of institutions which have been successful in the past years. However, successive governments have attacked young people far too much by downloading the cost of education onto the backs of young people. The recent budget was another example of that.

Until there is a real fix, Bill C-253 would at least provide an opportunity for people to plan to save in order to gain access to education. The New Democratic Party has been calling for an overhaul of the education system. That is important. This country has lagged behind the developed world and other G-8 nations in providing affordable education. In fact it is one of the biggest scandals that has happened.

Our youth are being fettered by the tax cuts and benefits that have been given to other people. Training has been put entirely on the backs of our youth. There are record tax cuts for the oil and gas industry and the banks. At the same time students are expected to pick up the full cost to get their training and degrees, which do not pay a wage at the end of the day and they have to pay off their loans. That is unacceptable.

Government members should be embarrassed and ashamed for their obstruction attempts on this bill. It has gone through several machinations at committee. I was a participant at one of those committee meetings and I saw that the government members were trying to do anything they could to unplug any type of benefit.

It is important to note that we are passing on a legacy of debt and a problem that relates to our overall productivity in our society. Students come out of university and college having worked hard, having done everything they could to get the grades necessary to be competitive. They made a choice about which institution they wanted to go to. They made a financial commitment and they come out of the post-secondary institution literally with mortgages that they have to pay off. It is unacceptable. On top of that, the current government and the past one let the creditors become predators. Students are paying high interest rates. It is unacceptable.

We can look toward other nations that have increased their productivity by lowering the cost of post-secondary education. That is one of the most effective things we could do to make sure we have a trained society.

We hear all the rhetoric from the current government and the previous government about a new emerging economy but they will not do anything to improve the accessibility to the necessary training. We need to help put the skills into the hands of our young citizens. They are the future providers of our country which continues to need the development to sustain our quality of life.

This bill is an opportunity to do something. It is important to note that besides the government's trying to stop this bill from going forward, the Conservatives were the ones who stole half a billion dollars from students in the student debt program which we negotiated with the Liberals in a former deal, because the Liberals never passed the legislation and procedures to get the half a billion dollars to the students. The Conservatives took that debt money, and they still owe $500 million to students across this country to lower their debt. The Conservatives took that from them.

Not only have the Conservatives not provided the proper programs or structure related to having affordable education and the payment of it after that, they actually took money away from students. They took it away from them and put it toward other priorities such as corporate tax cuts, or whatever those priorities might be, and at the same time we are witnessing our young people treading water in our education system.

What does it mean? From experience, I remember the first interview I had when I was first elected in 2002. I was asked what I would do with all the money I would be making as an MP. I said that the first thing my wife and I would do is pay off our student loans, and that is what happened. My wife and I had worked every single year. I had actually worked since age 9. We worked all the way through university. My wife has a couple of post-secondary degrees. However, we still had to borrow some money to get by and to afford our education.

That is the normal experience and that is what is happening right now. Students are misunderstood and the government does not even get it. Those people who actually have to pay for their education are working. They are working one and two jobs. They work not just during the summer, but during the year. They are learning and providing for themselves, and trying to reduce their debt burden for the future.

The Conservatives have instituted and helped provide the lightest coverage of the last 10 years of a system that has downloaded onto the backs of young people an awful burden with significant social consequences. As a result people come out of school with a larger debt load. It is okay for students to have to borrow, but not the government. They actually have to pay the interest on their debt.

People in my riding and across the country with this debt burden are paying the interest on their loans, which is being compounded. At the same time, they cannot buy a home. They cannot buy a new car. They cannot start the lifestyle they want at this point in time because they are paying off that debt. It is unnecessary.

We have a challenge in this day and age. There has been a lot of debate in the House of Commons over the last couple of years about pensions. I know right now that the people I serve in my community have a lot harder time getting a job with a pension.

When individuals begin their education, they have to go to school longer to get higher qualifications, which not only takes a longer period of time, but costs more money. These people are finishing later in life. They are delaying starting a family. They are delaying purchasing their first home and so forth, and they do not have the money to invest in their own retirement because they are paying off all that debt. The government is passing on that burden to them and it is doing it with no sense of accountability. That bothers me.

Here in this bill there is a modest attempt to deal with the situation, to provide some tools to those who can actually afford it and who will be successful for themselves and their families. That is why it should be supported.

I cannot understand for the life of me why the government does not understand that right now. It does not understand the value of education. It does not understand the value of having people come through an educational stream and not having a huge debt burden after that.

In the current economic situation, there is a good chance people will require more training. More people now go back to school for training, whether it be college or university, after they have a degree than ever before. They are picking up new skills. They are picking up new types of knowledge. That is important for our productivity and how we will be measured against our competitors across the globe.

We should be encouraging that. An educated civil society that is able to respond to the new economic challenges is an important feature, but it has to be coupled with being affordable to those individuals.

Instead, we have other priorities. Earlier this evening, the Conservatives talked about wanting to create a new bureaucracy for public-private partnerships. They will shovel $25 million into a new bureaucracy so they can sell off Canada as it currently exists, and future projects. It is done straight from ideology. They could reverse those resources and put them toward education. They could put them toward a whole series of other things. They are more concerned with those things. and that is troubling.

When we look at the OECD nations and what they are doing, they are being very successful at making sure that students and people in their society are receiving good training and good skills. They are well educated and they are productive. It is not just when they are young, but they can return to those institutions like mine, St. Clair College and the University of Windsor, and pick up additional competitive skills and get back out into the labour force and make Canada successful.

Why the government does not understand that it is a value-added commodity for our productivity that will allow us to compete is beyond me. The Conservatives would rather put the burden on the shoulders of a few people and expect them to get by. That is unacceptable.

I would encourage members to support the bill because once again, it is at least something to fight back with on this issue. Once again, we cannot allow the government to continually download this burden of debt on to individuals and their communities.

It is a cycle of failure to allow post-secondary education costs to continually escalate through the ceiling and, at the same time, not provide students with the resources to be successful.

[Gurbax Malhi, Liberal, Bramalea—Gore—Malton, ON]

Mr. Speaker, I am pleased to have the opportunity to support Bill C-253, An Act to amend the Income Tax Act (deductibility of RESP contributions). I would like to commend my hon. colleague from Pickering—Scarborough East for his efforts in promoting this bill and for his dedication to expanding access to post-secondary education in Canada.

This issue is of particular importance to the many young families in my riding of Bramalea—Gore—Malton. In these families I see much joy, laughter and hope, but at the same time I see parents who are concerned for the future. They worry that the rising cost of post-secondary education will hurt their children's ability to get the training they need to succeed in the increasingly competitive global economy.

Every parent wants what is best for their children. However, the day to day costs of running a household and raising a family all too often push to the back burner the task of planning for the future. The purpose of this legislation is to make payments into registered education savings plans tax deductible in order to give Canadians an increased incentive to invest their hard-earned money in their children's post-secondary education. By doing so, the process of education planning will be made easier for Canadian families.

The current trend of sharply rising tuition fees has made planning for education after high school more important than ever before. According to the most recent numbers from Statistics Canada, the average cost of tuition at Canadian universities rose by almost 400% between 1988 and 2007. Residence, textbooks and other fees are also going up, adding to the undue financial stress felt by post-secondary students and their families. The increase in fees over the past 20 years has been far beyond the rate of inflation and is part of a trend that seems likely to continue for the foreseeable future.

The Canadian Alliance of Student Associations estimates that a four year degree and associated fees will cost approximately $77,000 for students commencing their studies in 2010. By 2020, the same degree will cost over $130,000. Incredibly, these are only the estimated costs for undergraduate programs, not for professional and graduate degrees. Students who decide to pursue a career in medicine, dentistry or law can count on paying even more in order to obtain their qualifications.

Current government grant and scholarship programs only go part of the way toward helping students cover the extraordinary cost of education after high school. Although there are a number of federal and provincial programs intended to counteract the increasing cost of post-secondary education, not all students who need help qualify for government financial assistance. Many young people are unable to attend a post-secondary institution, not because they are unwilling or academically unable, but because they are essentially forgotten under the current student assistance regime.

Under the present student aid system, there exists a middle income gap. In this gap are families with incomes high enough that their children do not qualify for need based grants and loans but not high enough to pay for their children to attend university. The middle income gap is a considerable barrier to post-secondary education for many students and could be offset by encouraging increased investment in RESPs.

Even for those who qualify for financial assistance, loans can only be considered a stop-gap measure. While federal and provincial student loans help some families cope in the short term with the rising cost of education, this increased reliance on loans as a funding mechanism is leading to an alarming level of student debt.

Statistics Canada reports that between 1999 and 2005 the amount of student debt held by Canadians rose by 15.8%. In the same period, the overall amount of debt held by individuals and families in Canada increased by an astonishing 47.5%.

Shouldering such a large amount of debt is stressful not only for individual families but also for the economy as a whole. In a society with more debt than any that came before it, parents must be given the chance to plan for the future in order to avoid saddling students with tens of thousands of dollars of debt before they even enter the workforce. Enabling young people beginning their careers and starting families to embark on their adult lives with a lower amount of debt is a worthwhile goal, one this bill can help to achieve.

Of course, care must be taken so that RESPs do not become attractive to dishonest individuals looking for an easy tax shelter. Fortunately, even with the changes proposed in the bill, adequate regulations are in place to discourage individuals from abusing the RESP system.

Education assistance payments can only be paid out in the event that the beneficiary is enrolled in a qualified program at a post-secondary institution, is unable to enrol in a post-secondary program due to medical incapacitation, or is deceased. Furthermore, in the event that the beneficiary does not attend a post-secondary institution and the subscriber withdraws accumulated income payments, a 20% penalty is levied in addition to the usual tax payable on the income. Finally, although the monthly limit on contributions has been removed, the lifetime contribution limit of $50,000 ensures that RESPs are not attractive to individuals simply looking for a tax deferral vehicle.

This bill is not intended to completely solve the problem of access to post-secondary education. Continual efforts must also be made to expand need and merit based initiatives such as the millennium scholarship program, and to increase access to government student loans. But for families who would otherwise find it difficult to commit to minimum monthly RESP contributions, this bill would make it easier to invest in their children's future.

By raising the rate of participation in RESPs, more Canadians will be able to afford the education they need for the jobs of today and the future. Registered retirement savings plans use similar tax incentives to encourage Canadians to plan for life after work. It is time to give the same advantage to families planning their children's education.

Although the government seems determined to provide the wrong kind of tax incentives for Canada's future, I hope my colleagues across the floor will join me in supporting this legislation. We have before us an opportunity to empower ordinary families. By supporting this bill, Parliament can help Canadians secure a bright and prosperous future for their sons and daughters and for the country as a whole.

In my riding of Bramalea--Gore--Malton, there are many new immigrants who cannot afford to send their children to university. If we pass this bill, all people will be pleased and at least they will have an opportunity for their children to attend university in the future.

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

Mr. Speaker, my colleague has always spoken very positively about the need for education, the need for students in Canada to have access to good education and, in our discussions in the foreign affairs and international development committee, the need to incent young students coming from other parts of the world to get their education in Canada.

However, we have some very grave concerns with Bill C-253, which initially contemplated that the deduction would be limited to an RESP annual contribution limit of $5,000, indexed after 2006. However, budget 2007 eliminated the RESP annual contribution limit and raised the lifetime contribution limit to $50,000 from $42,000.

Amendments to the Income Tax Act to implement these changes were made in Bill C-52, which was assented to in June 2007, to which the hon. member has alluded.

These changes were extremely well received. Indeed , Peter Lewis, chair of the Registered Education Savings Plan Dealers Association of Canada, called the changes “a very positive leap forward for Canadian families”. He went on to say:

These improvements will benefit all Canadian families, and provide even greater incentive to invest in their children's college or university education. And that's good for everyone.

We sincerely commend [the] Finance Minister...for recognizing the value and importance of encouraging families to save for post-secondary education.

The proposed amendments adjust the bill to reflect the elimination of the RESP annual contribution limit. The effect of the proposed amendments would be to allow a taxpayer to claim a deduction for RESP contributions of up to $50,000. The amount of the deduction would be reduced by the total RESP contributions made by the taxpayer in previous years.

As we have stated in analysis provided previously, the behavioural impact is uncertain. If the RESP contributions were to increase by 20%, the total fiscal cost of Bill C-253 would be $765 million per year, including a CESG cost increase of $85 million per year.

The proposed amendments, if adopted, would not allow RESP contributors any more leeway in allowing up to an annual $50,000 deduction for their contributions.

While it is uncertain how much this would exactly increase total RESP contributions and the specific long term costs of Bill C-253, it is likely the proposed changes could again increase the cost of the deduction in the early years following implementation.

Therefore, we will not be supporting Bill C-253.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

moved:

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.

Speaker's Ruling

[The Deputy Speaker, NDP, Bill Blaikie]

There is a ruling by the Chair relevant to Bill C-253, An Act to amend the Income Tax Act (deductibility of RESP contributions). There are two motions in amendment standing on the notice paper for the report stage of Bill C-253. Motions Nos. 1 and 2 will be grouped for debate and voted upon according to the voting pattern available at the Table. I will now propose Motions Nos. 1 and 2 to the House.

The House proceeded to the consideration of Bill C-253, An Act to amend the Income Tax Act (deductibility of RESP contributions), as reported (with amendment) from the committee.

Finance

[Brian Pallister, Conservative, Portage—Lisgar, MB]

Mr. Speaker, I have the obligation and the honour to present, in both official languages, the 18th report of the Standing Committee on Finance in relation to Bill C-253, An Act to amend the Income Tax Act (deductibility of RESP contributions), with amendments.

As is my privilege, I would like to go on record as saying that I believe this is not the committee's best work. I believe that in hindsight many members of my committee will, on further consideration, regret the conclusions they draw within this report.

[The Chair, Conservative, Brian Pallister]

Committee members know I prefer that we start on time and not punish those who are here by making them wait, so let's get started. Welcome back to the fold.

Welcome to Mr. Tweed. It's nice to have you at committee, and Madam Davidson. Thank you both for being here.

Pursuant to the order of reference of Wednesday, November 8, 2006,

the committee will now proceed with the clause-by-clause study of BillC-253, An Act to amend the Income Tax Act (deductibility of RESP contributions).

(On clause 1)

Monsieur St-Cyr.

[Brian Pallister, Conservative, Portage—Lisgar, MB]

Mr. Speaker, it is with mixed emotions, both honour and some regret, that I present today, in both official languages, two reports, the first being the 11th report of the Standing Committee on Finance in relation to Bill C-253, An Act to amend the Income Tax Act (deductibility of RESP contributions).

This report was made necessary by the need to delay the consideration of Bill C-253 and we are asking for an extension to do so because of all the urgent business, such as income trust discussions, that has been before the finance committee over the last number of weeks.

Mr. Speaker, I have the honour to present, in both official languages, the 12th report of the Standing Committee on Finance, relating to Bill C-305.

The report deals with the exemption from taxation, 50% of United States social security payments to Canadians residents. Again, this report was made necessary because of the ongoing incredible workload of the finance committee and the need for us to have an extension to deal with this until a later date.

[The Chair, Conservative, Brian Pallister]

Order.

Committee members, allow me to review quickly the work schedule for committee members and their staff.

First of all, in terms of orders of business for the coming week, next Tuesday, February 6, we will be dealing with a draft report on income trusts. I'm going to endeavour to get the room fifteen minutes earlier so that you can come in and read the draft prior to beginning discussion, just to expedite the process of dealing with the draft report.

Next Thursday, February 8, we have private members' bills. We have Bill C-294, Bill C-253, and Bill C-305 to deal with at that point in time.

Following that, very likely beginning on Tuesday, February 13, we will be dealing with Bill C-37, the Bank Act review, which should encompass a fair bit of the committee's time over the next while. I would suggest to you, committee members, that you forward names of witnesses to the clerk's office. Begin that process now and we'll give you some deadlines later on, but give some thought to Bill C-37, the Bank Act review, as soon as you wish.

At this juncture, Mr. McCallum, I believe you have a motion that you'd like to bring forward. I'd like for us to deal with it now if we could.

Income Tax Act

[The Acting Speaker, Conservative, Andrew Scheer]

It being 5:30 p.m., the House will proceed to the taking of the deferred division on the motion at second reading of Bill C-253 under private members' business.

Call in the members.