Bill C-377 (Historical)

An Act to amend the Income Tax Act (requirements for labour organizations)

This enactment amends the Income Tax Act to require that labour organizations provide financial information to the Minister for public disclosure.

Income Tax Act

[Shelly Glover, Conservative, Parliamentary Secretary to the Minister of Finance]

Mr. Speaker, I stand here before the House as a very proud 20-year union member of the Winnipeg Police Association, and I support the bill wholeheartedly because it is fair and it is transparent.

I congratulate the member for South Surrey—White Rock—Cloverdale for his work on the bill. Since being elected in 2004, that member has been a very effective MP in the House and a great representative for his constituents. He also founded the all party parliamentary border caucus and he has been an important voice on border issues.

It is clear that today's bill has been very well researched, is highly informed and has already generated widespread support. I will share of that feedback later in my speech.

I would first like to briefly summarize the bill. Bill C-377 requires labour organizations to publicly disclose their finances. They would be required to produce standard financial information that would then be posted on the Canada Revenue Agency website.

This requirement would be similar to the one that already applies to charities. Members of labour organizations and the general public would therefore be able to assess the efficacy, financial integrity and health of all unions.

I encourage all Canadians to visit www.c377.ca, the website created by the member for South Surrey—White Rock—Cloverdale in order to inform Canadians about this bill. Canadians can also download the petition, sign it and forward it to their neighbours to show their support for Bill C-377.

We all recognize that labour organizations play a key role in Canadian society by supporting workers' health and safety and ensuring that their members are appropriately compensated. However, we also acknowledge that the government provides substantial support to labour organizations through their tax-exempt status. Many have suggested that because the government provides financial support to these organizations, Canadians are entitled to accountability.

As we know, our Conservative government has been a strong supporter of great accountability. Our Conservative government introduced the Federal Accountability Act and other legislation designed to increase transparency in government agencies and crown corporations.

Bill C-377 would force labour organizations to make public certain information in order to allow their members and all Canadians to better assess the efficacy, financial integrity and health of labour organizations. In that regard, it is important to reiterate that charities that benefit from a similar tax exempt status have been required to publicly disclose this kind of information for decades.

As this bill goes through the legislative process, the Standing Committee on Finance will be able to give it a more thorough examination in order to ensure that it will achieve its objectives as effectively and efficiently as possible. To that end, the Standing Committee on Finance will hear from a number of groups with various perspectives. Many Canadians have already expressed their opinions regarding this bill.

It is important to share some of these insightful and well-informed opinions with the House and with all Canadians. Indeed, support for this bill extends well beyond partisan lines and has come from academics, labour, business, and everyday Canadians.

Even a former Liberal cabinet minister has voiced his support for Bill C-377. I want Canadians to listen to what a minister in Paul Martin's Liberal government had to say about this legislation. This is what Jean Lapierre, a former Liberal MP and cabinet minister from Quebec, had to say on the CTV news program Power Play:

Frankly, here in Quebec we have had that debate about the lack of transparency of a lot of unions. Frankly, I agree with that bill because I think now every organization has to be transparent. The unions, a lot of times, have acted like they were private clubs. And so I think everybody should go to more transparency and I think that the initiative is welcomed by the membership and also by the public at large because why would you hide your financial statements if you get all those tax credits and what have you. So no, I think it's long overdue.

This is what Louis Fortin, a certified human resources professional and associate researcher at the Montreal Economic Institute, said about this bill:

This bill will allow unionized employees to have a better understanding of the way in which the money from their union dues is managed and spent. Even though they already have the right to ask their representatives for [financial statements], union members could have easier and anonymous access to this information thanks to this new law.

Jasmin Guénette, vice-president at the Montreal Economic Institute, has also added that Bill C-377 is “good news for Quebeckers, who are 94.6% in favour of the detailed disclosure of unions' financial information, according to a recent Nanos poll”.

Niels Veldhuis and Amela Karabegovic, two economists with the Fraser Institute, from whom we will likely hear at the finance committee, have written extensively regarding the issues raised in this bill. They wrote a detailed op-ed in the National Post about this issue in the fall and offered some very interesting points. Let me quote in detail a somewhat lengthy passage from the op-ed that explains why this bill is so important for Canadian workers in particular:

The provision of publically disclosed information about the financial status of unions enables workers to assess more accurately the financial position, activities and performance of their representatives. The public disclosure of financial information allows workers and interested parties to determine the appropriateness and effectiveness of union spending. The increased transparency that comes from public disclosure is also essential for accountability and provides an incentive for union leaders to manage membership dues properly.

As I mentioned earlier, even unions have come out in favour of this bill. I am a union member, darn proud of it, and I support this bill 100%. Let me share with the House and Canadians what some of Canada's labour unions have been saying publicly about Bill C-377. For instance, this is what Lerona Lewis, president of McGill University's largest on-campus union, the Association of Graduate Students Employed at McGill which represents over 3,000 members, had to say: “You can go online to look to see what was spent, when it was spent, and so on...transparency is something we believe in anyway”.

Even media commentators are in favour of this legislation. This is what Windsor Star columnist Chris Vander Doelen had to say about it:

[Bill C-377] would require unions to file all their income and expenses, with the Canada Revenue Agency posting the results online just as they do for charities. Seems fair to me, since it's my money, and since unions are currently tax free, at a cost of hundreds of millions of dollars annually in forgone government income that could go to pay for, say, health care.

Of course, the member for South Surrey—White Rock—Cloverdale is counting on many Canadians to support his efforts to increase transparency and accountability. I look forward to the results of the work done by the Standing Committee on Finance on this proposal.

Once again, I am a proud union member of the Winnipeg Police Association. I support this bill because it brings fairness and transparency to this issue. Any members on that side of the House who claim to be against transparency and against fairness ought to explain why the heck they are sitting in the House of Commons. That is what the business of this House is all about, fairness and transparency for all Canadians.

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

Mr. Speaker, in spite of the protest of innocence by the member for South Surrey—White Rock—Cloverdale, let there be no doubt at all that this is a frontal attack on the labour movement in this country. It is also an indirect but very clear attack on a number of other rights that Canadian citizens and residents have in this country: the right of association; the right, quite frankly, to privacy; and the right to freedom of speech within the right of association. The bill undermines all of those rights, if not completely doing away with them in some cases.

To stand in this House, as the member for South Surrey—White Rock—Cloverdale just has, to say this is all about accountability and transparency and not about ideology is totally false.

Let us understand the context of the bill. The Bush Republicans did the same thing in the United States. However, they did not go nearly as far as the bill before us does. I have two quotes on the ideology, strategy and tactics behind this. The first is by Newt Gingrich, one of the leading members of the ideological right in the United States, who said that requiring detailed disclosure on union advocacy activities would “weaken our opponents and encourage our allies”.

Another right-wing U.S. activist, Grover Norquist, said:

Every dollar that is spent [by labour unions] on disclosure and reporting is a dollar that can't be spent on other labour union activities.

This was designed from an ideological standpoint, and in the case of Canada, from a big business, multinational standpoint. The support behind the bill comes from that same group, and that is what is driving it. This is not about accountability and transparency. The level of hypocrisy of the government in this regard I think speaks clearly to that. This is an attack on the labour movement in this country.

The bill, to a certain degree, is modelled after the legislation at the federal level in the United States, but it goes much further. For instance, the law in the United States only covers the national unions and the national association of unions. In Canada, it would cover every single union organization, even some of the trusts they have set up around health and safety and the environment and a number of activities they carry on for which they have trust funds. It would cover every single one of those organizations, including the small union local, several of which I have in my riding and that have an executive of four or five people with no full-time staff.

The member is being disingenuous at the very best with the House when he suggests this is not much more than what unions already have to prepare by way of reporting. That is absolutely false.

I repeat, the bill in the United States does not go nearly as far as this one does. However, even in the United States the national unions found they had to assign two people to it for almost half the year to do the additional reporting the bill required.

I cannot be much clearer than this in estimating the consequences of this, just as some of the labour movement cannot be much clearer, because the bill before us would allow for more information to be required of unions by way of legislation. Of course, we have not seen those regulations and would not see them for some time. However, just in terms what is being required of unions to report, it would increase dramatically the amount of reporting they have to do.

There is another pattern that I see here. I happened to be in Russia when Putin was still the head of the government, where he had developed a strategy that required a lot of human rights groups, a lot of NGOs, to do an excessive amount of reporting. It was phenomenal. I will give the member from Surrey credit for not going quite as far as Putin did in that legislation. However, it was clearly designed to undermine the human rights groups in Russia because of the amount of material they had to report.

The bill, to some degree, is modelled after the same type of experience, which has had the effect in Russia of destroying a number of the groups. Some have gone underground because they could not do the reporting.

Therefore, we have two nice models here, that of the right-wing Republicans in the United States and that of Putin in Russia. In both cases, they are very clearly attacking those specific groups. In the U.S. it is the labour movement; in Russia it is the human rights movement and those NGOs.

The other point I want to make in terms of the context of this is that it is quite clear, including from the survey the member mentioned, that the information is available and the Canadian public and union members are not aware of it. In addition to that, according to the Fraser Institute, which analyzed the U.S. legislation, the information required was extensive and highly complex. Again, here I would point out that the bill before us would at least double the amount of information that unions in Canada will have to provide.

The Fraser Institute, in September 2006, when it looked at the legislation and its effect in the U.S., stated that due to the large amounts of information available:

It is very difficult and time-consuming for an average person to easily obtain a realistic idea of the financial performance of a union—

Thus, while the U.S. legislation does disclose a great deal, it does not do so in a way that facilitates analysis and comprehension by average, interested citizens.

When the labour movement did the analysis, what happened there, as was the intention right from the beginning, was that large corporations wanted to know about the organizing activities of the labour unions that might be trying to organize the work force or the collective bargaining process. They got the information and used it extensively. This was really private information that in the past had never been disclosed and they used it against the labour movement, quite effectively in a number of cases.

In this case, Bill C-377 goes much further in terms of organizing activities. It even requires the disclosure of expenses with regard to whom they hired as their lawyer. That part of the bill is going to get struck down by a court fairly early on; no court in this land is going to allow that part of it to stay. The bill simply does not accomplish the purpose the member talks about, because it is so complex in terms of the amount of detail that unions will have to give. That was the U.S. experience, and ours is going to be even worse if we go ahead.

However, the people who are really after this, the people supporting the bill, the large corporations and the right-wing in our country, would be able to do so because they have the resources to use this data effectively to thwart organizing drives and other campaigns that a union may take on. That is what it is designed to do. It has been a very effective mechanisms in the United States to in fact accomplish that, and it is going to be even worse here. That is what this bill is all about.

It is important to appreciate as well that the Canadian people understand that information from the current reporting is available to all union members, either by way of provincial legislation or union constitution. Again, we have a problem with the bill because it probably extends itself into provincial territory, which will probably result in part of it to be struck down as well. Seven of the ten provinces require this information to be given to union membership. Every union constitution that I am aware of also requires consolidated financial statements to be given and made available to every single member of that union.

Let me finish with one final point and that is about the costs, which I believe the member is being disingenuous about with the House. There would be a huge increase in red tape from this file. If the government in fact follows through to enforce this, the number of people it will have to hire, we estimate, is somewhere in the range of at least a hundred people. A whole new data system would also have to be developed to analyze all of the data. We are talking of tens of millions, if not into the hundred million dollar range on an annual basis, of what it is going to cost.

If the government does not follow through, the information would simply be available and the big corporations would be able to use it against unions. That is what it is all about. One way or another, it would have the effect that the member wants, which is to give his “allies”, as Newt Gingrich put it, this information to fight their enemies.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

moved that Bill C-377, An Act to amend the Income Tax Act (requirements for labour organizations), be read the second time and referred to a committee.

Mr. Speaker, it gives me great pleasure to speak to my Bill C-377.

Labour organizations play a valuable role in Canadian society, representing and defending the rights of workers.

Four million, three hundred thousand Canadians are currently union members, and millions more have been during their working lives.

There are thousands of Canadians in my riding of South Surrey—White Rock—Cloverdale, British Columbia, who pay dues to labour organizations. Because of the valuable role unions play in the lives of many Canadians, our federal tax system has provided benefits to support the work of unions. Key among those benefits are a 100% tax deductibility for the union dues that workers pay and tax exempt status for the labour organizations themselves.

I would like to put the value of the dues deductibility into perspective. The federal government forgoes $795 million in tax revenue each year for union and professional dues. The majority of this amount is claimed by union members, probably in the range of $400 million to $500 million. This is a substantial public benefit. I believe it is only right for the public to know how that money is being spent. Therefore, my bill would require the public disclosure of the finances of labour organizations.

This measure is in line with the greater transparency that we are demanding from government departments, public agencies and native reserves. It is in line with the public disclosure required of other Canadian institutions that benefit from significant public funding.

For instance, public disclosure has been required for Canadian charities since 1977. The filings of charities are easy to find on the Canada Revenue Agency website.

I have based my requirements for public disclosure for labour organizations on the long existing provisions for charities in the Income Tax Act. With the passage of the bill, the public would be empowered to gauge the effectiveness, financial integrity and health of any labour union. This is something that Canadians want. According to a Nanos poll taken on Labour Day of last year, 83% of Canadians and 86% of union members want public financial disclosure for unions.

I would like to take a couple of minutes to run through the various provisions in the bill.

Clause 1 is the heart of the bill and can be considered in three parts.

First, there are three new definitions that would give greater clarity to terms already used or proposed in the bill. They are “labour organizations”, “labour relations activities” and “labour trust”.

Second, comes the lengthiest part of the bill: the statements of income and expenditures that must be submitted annually to the Minister of Revenue by labour organizations.

I have received plenty of input concerning the statements that would best illustrate how unions use their public benefits to help their members. The list is a long one, reflecting the often complex financial character of unions and the broad range of activities they undertake as they represent and serve their members.

Among these activities may be organizing, collective bargaining, education and training, conferences, political activities and lobbying. The required statements would also include disbursements to directors and to staff. As Jim Stanford, economist for the Canadian Auto Workers, recently pointed out, these figures are already published by the CAW. I believe that this level of detailed public disclosure would increase the confidence of Canadians that the public subsidy for labour organizations is warranted.

Third, subclause 1(4) would require that the information submitted be made available to the public by the minister, including posting on the Canada Revenue Agency website.

Clause 3 would have this act come into force six months following royal assent.

Since this bill was announced last fall, it has been interesting to receive feedback from various sources including union leaders themselves. First is a comment from Lerona Lewis, president of the Association of Graduate Students Employed at McGill, representing over 3,000 employees. She said her union already publicly discloses. She said, “You can go online to look to see what was spent, when it was spent, and so on”. And she says transparency is “something we believe in anyway”.

Ken Georgetti, president of the Canadian Labour Congress, sees things a little differently. He agrees with public disclosure generally, saying, “We're not opposed to transparency. We're more than happy to supply [the member for South Surrey—White Rock—Cloverdale] or anyone else with our financial statements and our balance sheets as corporations file”. However, he goes on to say that, because my bill would ask for more detail than is currently requested from other institutions, “it's not fair and it's not equal”.

Mr. Georgetti may be correct that it is time to review the public disclosure requirements for other types of institutions receiving public benefits to determine if they also need improving. The finance committee is looking at the question of increasing the level of transparency for charities. However, this private member's bill deals specifically with labour organizations which have never been subject to public disclosure, unlike charities, that have been subject to public disclosure for over 35 years.

Mr. Georgetti also raises a concern that compliance with this bill may be costly for unions. I disagree for three reasons. First, unions already file detailed financial returns with the CRA, providing much of the information that would be required by this bill. This is a point Mr. Georgetti has acknowledged. Second, this bill would not require audited statements. Therefore, filing would not impose any additional outside expense on labour organizations. Filing could generally be prepared by their own bookkeeping or financial personnel. Finally, because of bookkeeping software and electronic filing, the cost of compliance with these sorts of requirements has dropped considerably from where it might have been in generations past.

The government's document production cost will be minimal once the electronic production system, the database and the website are in place.

Members do not have to take it on faith, though. We have an independent and qualified watchdog in the form of the parliamentary budget officer, who examines private members' bills and gives feedback on their estimated costs. I believe that the PBO's analysis will confirm that this bill would not create significant costs to the government.

The comments from other Canadians are also interesting. A columnist for The Windsor Star, a strong union town, is supportive of the bill. He only regrets that it is not retroactive, as he would like to see how his union dues have been spent in the past. The communications director of the Alberta Union of Provincial Employees, David Climenhaga, said the following of unions:

Many publish their complete audited financial results, in spite of the fact this is not required by law, and distribute them to 100 per cent of their membership. Any member of the public, of course, may access that information. Such complete openness seems to do them no harm.

Mr. Climenhaga suggests that the same level of transparency be extended to think tanks and private corporations that benefit from tax breaks and subsidies.

Of course, usually the member introducing a private member's bill is granted the privilege of introducing and speaking to his or her bill before any other members. Unfortunately, as members will be aware, the member for Windsor—Tecumseh jumped the gun and started the debate before this allotted hour under the guise of a point of order. Despite the positive comments of various union leaders, union members and others who I have just referenced, the NDP House leader suggested last fall, in debating my earlier bill, that he was very disturbed by the idea of public accountability for labour organizations. He stated that this bill was a matter of ideology. I would ask him if the introduction of public disclosure for charities way back in 1977, 35 years ago, was a matter of ideology.

If there is an ideology, it is based on the principle that organizations that receive public benefits should be accountable to disclose how they use those benefits. Does the member believe that charities should no longer have to publicly disclose their spending? What about government departments, crown corporations or even members of Parliament? Where does the opposition to this bill logically lead? As I stated earlier, I believe that public disclosure would increase the confidence of Canadians that the several hundred million dollars in public benefits they provide to unions each year is money well spent. Does the NDP not agree that public disclosure would indeed prove this?

Further, the member complained about the additional costs he believed disclosure would cause unions to incur. As I mentioned, using tax software and electronic filing, the costs to labour organizations would be quite minimal. Filing is not a new activity for unions. Unions already file tax returns each year. Much of the information proposed to be collected under this bill is already required. The difference, of course, is that this information would be made public. However, that difference alone would create no cost for labour organizations.

The member has raised the concern that the filing requirement could be onerous for small locals of perhaps a few dozen members. That is again not so. Small locals are, by definition, small spenders and may not have spent anything in several of the categories mentioned in the bill. What can be easier than putting a zero on several pages of an electronic form? I believe that the experience of charities over the last 35 years is instructive. The process has not bogged down charities, which, unlike unions, are often run by volunteers alone. The process has not cost them significant sums of money, and the same would be true for labour organizations.

The debate on this bill is just getting under way. Some have already taken a position on it. I would encourage those who have already stated opposition to the bill to consider the following facts. The bill would not tell union leaders how to spend their money or restrict them in any way. The bill would not place a substantial burden or expense on unions. Unions are already engaged in responsible accounting. Many unions are already publicly reporting this financial information to members and others. Finally, all unions are already filing much of this information with the Canada Revenue Agency through their tax returns.

Simply put, this bill would require that information to be made public. As I said before, people want to know how unions use their public benefits.

I believe that asking for that type of transparency is legitimate. Both the public and MPs can learn more about this bill on a dedicated website I have set up. The address is www.c377.ca.

I would encourage all members of this House to consider the merits of this bill and support it going forward for further study at committee.

[Scott Reid, Conservative, Lanark—Frontenac—Lennox and Addington, ON]

How long was the current version of Bill C-377 available? It says the first reading was on December 5. So it would have been on Tuesday....

Obviously I feel quite convinced about, and am not changing my opinion of, the votability or constitutionality of the bill. But I do think that Mr. Toone has a point about the length of time. If there were a constitutional problem, I suspect it would have been of a somewhat technical nature requiring that we not merely look at the words of what was actually a very generally worded section of the Constitution, but also at the jurisprudence of it. It's a good point that maybe we do need to give ourselves a bit longer—not much time, but it's worth thinking of.

[The Chair, Conservative, Harold Albrecht]

—in a future House, in a future spot.

Are all in favour of Bill S-206 proceeding? Seeing no objections, so ordered for Bill S-206.

Next is Bill C-377. I'll ask our analyst to comment on it.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

moved for leave to introduce Bill C-377, An Act to amend the Income Tax Act (requirements for labour organizations).

Mr. Speaker, it is my privilege to introduce a bill that would amend the Income Tax Act for labour organizations.

Labour organizations play a valuable role in society, representing and defending the rights of workers to health and safety on the job and ensuring that they have proper compensation for the work they do. As a result of the valuable role that they play, our government has provided substantial benefits through the Income Tax Act to support the work of labour organizations.

This bill would amend the Income Tax Act to require the public disclosure of labour organization finances. Public disclosure will help the public better understand how the benefits that are provided are being utilized. This is in line with the increased transparency we have introduced for government departments, agencies and native reserves. It is also in line with the public disclosure required of charities and political parties, which also receive substantial public benefits through the tax system.

I want to note that public disclosure is strongly supported by the Canadian public and by union workers themselves.

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