House of Commons Hansard #42 of the 35th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was children.


Interim SupplyPrivate Members' Business

5:50 p.m.

The Acting Speaker (Mrs. Maheu)

The House has heard the hon. member's request. Is there unanimous consent?

Interim SupplyPrivate Members' Business

5:50 p.m.

Some hon. members


(Motion withdrawn.)

Interim SupplyPrivate Members' Business

5:50 p.m.


Guy Arseneault Liberal Restigouche—Chaleur, NB

Madam Speaker, seeing that under Private Members' Business one of the bills on the order of priority has been withdrawn and there normally are ten, I was wondering if I could seek unanimous consent of the House to allow my bill to take that spot on the priority list.

Interim SupplyPrivate Members' Business

5:50 p.m.

The Acting Speaker (Mrs. Maheu)

The House has heard the request. Do we have unanimous consent?

Interim SupplyPrivate Members' Business

5:50 p.m.

Some hon. members


Interim SupplyPrivate Members' Business

5:50 p.m.

An hon. member


Interim SupplyPrivate Members' Business

5:50 p.m.

The Acting Speaker (Mrs. Maheu)

We do not have unanimous consent.

Income Tax ActPrivate Members' Business

5:50 p.m.


Beryl Gaffney Liberal Nepean, ON


That, in the opinion of this House, the government should amend the Income Tax Act so that child support payments are no longer considered taxable income for their recipients.

Madam Speaker, I am very pleased to stand in the House this evening to speak to the following motion:

That, in the opinion of this House, the government should amend the Income Tax Act so that child support payments are no longer considered taxable income for their recipients.

This motion holds a great deal of interest throughout the country.

In 1942 Canada introduced a taxation policy on child support payments which allowed the payers to deduct the full amount of the payment from their income while the recipients must include the full amount in their income calculations. The policy has been criticized as discriminatory to women because it places an unfair tax burden on the custodial parent, usually the mother. Evidence shows in theory and in practice that this criticism is valid. This situation can be partially explained by historical changes, more specifically in patterns of the lives of men and women in Canada over the last 50 years.

When the policy was introduced in the 1940s it was designed to provide relief to the taxpayer burdened with both a wartime increase in taxes and the obligation of spousal and child support. The father was typically the only income earner and therefore the sole taxpayer in the separated family. It was logical at that time that tax relief be awarded to him. It was assumed the mother would still pay no tax.

Today, most single mothers have earned income and pay taxes on this income whether or not they receive support. What are the changes that have occurred in our society since this tax policy was implemented in the 1940s? First there have been demographic changes. The phenomenon of lone parenthood affects many more people today than in the past. Due to divorce and remarriage, lone parenthood is not always a lifetime, permanent situation. Rather is a phase of life of varying duration experienced by many parents. While lone parenthood itself may not be a permanent situation, the consequences have a lasting impact on women and children, particularly where the period of lone parenthood is lengthy and income is subsequently inadequate.

As well, the practical support networks of extended family and community which usually provided financial and other forms of support have shrunk due to urban development and increased mobility.

Second, there has been a number of social changes. Today violence against women is being recognized as a societal problem that takes many forms and influences many aspects of women's daily life.

When negotiating a separation or divorce agreement many women are left in a very vulnerable position. Often they simply wish to get out of their relationship and to get on with their lives. This often creates pressure to capitulate to inequitable settlements in order to end confrontation and avoid long drawn out custody battles. Returning to court later to seek a variance of child support is usually economically prohibitive for women and can carry many of the same dangers as the initial negotiation.

The report by the Royal Commission on the Status of Women in 1970 was the first study to examine the economic and social disadvantage of women in Canada. Since then many other studies have overwhelmingly identified and described the feminization of poverty and its direct relationship to the unpaid work involved in raising children and other tasks related to human maintenance.

Third, policy changes over the years have had a significant impact on the situation of women, families with children and in particular lone parent families. There has been decreasing support for families with children through the tax transfer system over the past two decades. The value of deductions and credits for children as a proportion of income has been steadily reduced. The reduction of the number of tax brackets from 10 to 3 today has also had an impact on families and on the tax treatment of child support.

Often after a divorce it is very difficult to find work with adequate pay to meet the needs of the children in the household. Therefore, mothers are forced to rely on social assistance. Social assistance policies in Canada however are not designed to take into consideration child support. Dollar for dollar of child support payments are deducted from the mother's social assistance cheques leaving her in a disadvantaged position of having little money for her children.

Fourth, there have been a number of economic changes in our society which impact on the taxation of child support. Perhaps the most significant change is the steady increase in the number of women, including those with children, participating in the labour force. However, they are still paid at the lower end of the pay scale.

After divorce family resources are often inadequate to continue to meet children's needs, yet it is the single mother who continues to be solely or primarily responsible for the financial needs of children because of the extremely high rate of default and child support awards.

The evidence is overwhelming. Given the number of changes that have occurred over the last 50 years it is paramount that we revisit the 1940s policy of the tax treatment of child support payments. We must ask ourselves if this policy is still, or for that matter, whether it has ever met its original goal of providing tax relief to the tax burden and encourage the payment of child support.

The rationale that the deduction for child support payers automatically requires inclusion as income by the recipient does not hold water. While they were married the father's support of the children was not income to the mother. While they were married the father's support of the children was not deductible. Likewise, now that they are divorced the custodial mother does not get to deduct what she spends on the children. The parents have now gone their separate ways. Why should the father's support of his children now become taxable income to the mother?

Child support payments were not income to the custodial mother prior to the 1940s because they did not fit the income tax concept of income. The Oxford Dictionary defines income as money received during a certain period as wages or salary. Child support in the custodial mother's hands is not new wealth from the production of labour or capital. It is simply the father's payment for his share of his children's expenses.

The most important rationale for the reduction-inclusion treatment is that it will encourage higher support payments by shifting income from a higher tax paying parent to a lower tax paying parent. This is expected to cause a surplus tax saving available to increase child support payments.

The policy expects that the father's tax savings will always be greater than the mother's tax liability. Because of this the non-custodial parent should be able to pay the custodial parent's increased taxes through what is commonly referred to as a tax gross-up added to the child support payment. Then the policy assumes there will still be an additional surplus tax saving which can also be used to increase child support.

However, as we all know, theory and reality do not always produce the same end results and this is definitely the case with the deduction-inclusion policy.

First, although the father's tax saving may be greater than the mother's tax liability, neither the Income Tax Act or family law legislation requires the father to pay the mother increased tax liability. The report of the federal-provincial-territorial family law committee of May 1992 entitled "The Financial Implications of Child Support Guidelines" noted that while tax consequences should be an element of every child support determination, there is evidence to suggest that these calculations are not routinely made. If the father does not use his tax savings to pay the mother's tax liability, the consequences are very serious.

Let us use another example. A support order has determined that the father's fair share of the children's expense is $10,000 for the year. Under family law principles, this determination is based on both parents sharing the cost of raising the children. The mother is also independently contributing to the children's support.

This $10,000 child support award should be grossed up by about $2,600 to reflect the mother's increased federal and provincial taxes. The grossed-up award then to the father should be $12,600 for the year. The father can pay the extra $2,600 because he has a tax savings from the deduction. The custodial mother needs the extra $2,600 to cover her tax increase from having to include the support in her income.

Let us consider what will happen if the gross-up is not added to the award. The mother still must pay the $2,600 in taxes. She will now be left with only $7,400 from the father's support payment. There will be a shortfall from the original $10,000 that the judge has awarded her. The onus for this shortfall is on the custodial mother and this causes hardship for the children. The father, on the other hand, still gets the benefit of the full tax savings.

A further flaw in the deduction-inclusion policy is the use of tax bracket differentials to deliver overall tax savings. This perspective is examined in great detail in a report entitled "Child Support Policy: Income Tax Treatment and Child Support Guidelines" by Ellen Zweibel and Richard Shillington.

Zweibel and Shillington note that there is an overall tax saving only when the non-custodial father's tax savings on support exceed the custodial mother's liability on support. The Zweibel and Shillington report found that a tax saving only occurs in 51 per cent of the cases and no saving occurs in 49 per cent. Furthermore, when a saving was realized, that saving was minimal.

The study revealed another troubling effect of the deduction-inclusion provisions. So far in this discussion we have been assuming that the non-custodial parent's tax savings will be greater than the custodial parent's tax liability thus creating a surplus tax saving. What happens if this is not the case?

If the mother's increased tax liability is greater than the father's tax savings, the system works against the separated family. The father can no longer pay the mother's increased tax liability from his tax savings.

In the Zweibel and Shillington report, 20 per cent of the cases fell into this category. Not only did the system fail to produce the possibility of a higher award, the system actually worked against them to decrease their already scarce resources.

The final rationale holds that the savings that occurs through the deduction-inclusion gross-up policy is supposed to benefit the children by generating further revenues for their support. Again reality must step in. Even when the saving is realized, the money sits in the hands of the father parent and there is nothing to say that he will forward that money to his ex-wife for the children.

This policy ignores that child support is a very contentious issue and that non-custodial fathers seeking to minimize their

payments may not readily agree to either a gross-up or to a further sharing of any tax saving above the gross-up.

This is not just a tax issue but one of wider social injustice which affects the well-being of Canada's children and subsequently Canada's future. Article 2 of the United Nations Declaration on the Rights of the Child states:

The child shall enjoy special protection and shall be given opportunities and facilities, by law and other means, to enable him or her to develop physically, mentally, morally, spiritually, and socially in a healthy and normal manner and in conditions of freedom and dignity. In the enactment of laws for this purpose the best interest of the child shall be the paramount consideration.

It is our children who now bear the immediate consequences because the current system is not providing the effects it was intended to produce. If the current policy is not changed it is the children who will go on paying the consequences every day, not just in some cases and not by accident, but deliberately by our failure to redesign an outdated tax mechanism.

The causes of child poverty have been linked to family breakdown, at least in part, in many areas of the world including Canada. Average family incomes for single parent families headed by women are significantly lower than those of two parent families. When parents separate the cause of maintaining two households will mean that at least some members of the family will suffer from reduced income.

Unfortunately the predominant pattern is that women, who are the vast majority of custodial parents, and their children experience a marked decrease in standard of living while men who no longer live with their families experience an improvement in their material circumstances.

The Divorce Act sets out to maintain a similar standard of living for both parents after separation or divorce. Yet the standard of living for custodial parents and their children tends to decline as much as 73 per cent, whereas the non-custodial parents rises as much as 42 per cent.

When a father makes a child support payment he is transferring money he has earned toward the care and maintenance of his children. There is no difference between a parent living with their spouse and providing them with grocery money, paying for piano lessons or shoe laces than there is for a parent living separate from the their spouse or a parent of their children and making the same financial contribution.

There is no similar tax exemption for married persons or persons living common law whereby one or both of the spouses provides financially for the family. If the children were living with anyone other than the parent and those caretakers were receiving financial support, they would not be obliged to claim it as personal income and be taxed accordingly and that is happening in this country all the time.

I have demonstrated to the House this evening the failings of the Income Tax Act on child support payments. I will run through six predominant areas.

First, I have demonstrated how Canadian society has changed demographically, socially, politically and economically. The deduction-inclusion policy on child support payments has been in existence since 1942. It is time that it be revisited and revamped to fit today's Canada.

Second, the taxation principle which holds that where a deduction has been claimed there must be an inclusion is false, absolutely false.

Third, tax subsidies from the deduction-inclusion principle only exist in some cases and it is often very minimal. Furthermore, there is no provision to ensure that where a savings exists that money is forwarded to the children to improve their standard of living.

Fourth, history has demonstrated that the availability of a tax deduction for the non-custodial parent has not proven to be an incentive for the support payer to make payments in full and on time. I believe that was one of the reasons that they instituted that in the first place.

Fifth, the standard of living for custodial parents and their children tends to decline while the non-custodial parents tends to rise. Taxing support payments works contrary to any efforts to raise these households out of poverty.

Finally, child support payments should be seen for what they are, a continuation of the non-custodial parent's obligation to the raising of their children.

Canada's tax policy taxes child support payments, unlike what we see in the United States, Australia, Britain, Sweden and in many other countries. While the average child support order covers less than half the minimum cost of raising a child, the government deems it fair to take up to one-third or more of support payments that are meant to feed and cloth children. It is time that we as legislators in the House of Commons, in the Parliament of Canada stood up and put a stop to this and bring justice and fairness into our tax system, particularly as it relates to the future of our children.

Income Tax ActPrivate Members' Business

6:15 p.m.


Gilbert Fillion Bloc Chicoutimi, QC

Thank you, Madam Speaker, for giving me the opportunity to speak on this motion which I care about on the tax treatment of child support payments.

First, I must relate some important facts which justify my speaking in this House and which I think are extremely significant, on the economic situation of women who are single parents.

In Canada, 10.7 per cent of all families are headed by a single mother. A brief from the Canadian Advisory Council on the Status of Women presented to the federal-provincial-territorial committee on family law in December 1992 gives us the following picture: 82 per cent of one-parent families are headed by women; in 1986, 56 per cent of single mothers had an income below the poverty line; the percentage of poor children raised in single-parent families headed by women more than doubled between 1979 and 1988, from 17.9 per cent to 39.1 per cent. That is frightening! Seventeen per cent of children are poor; 35.5 per cent of them live in single-parent families headed by a woman.

I am not telling you anything new when I say that in most cases child custody is given to women and their income is less. This issue of pay inequity has been and continues to be a subject of debate. Clearly, the inequality of women in our society in general is felt even more strongly by women who must raise their children alone.

Studies on child support payments show that they do not cover even half of the actual expenses incurred and that usually the spouse with custody of the children must make up the difference. We cannot close our eyes to such a situation and therefore we must turn towards legal mechanisms to ensure the viability of families.

The United Nations has declared 1994 the International Year of the Family. Celebrating the family also means being aware of changes in it and ensuring that every member of the family can live in dignity if the family is separated or breaks up.

Family law has undergone major reforms over the years. This is not pure coincidence. The family is evolving, it is changing and rules of law must be adjusted to the new reality.

The Constitution splits legislative powers in these fields between the federal and provincial governments. Divorce and corollary measures such as custody and support are regulated by the Divorce Act of 1985.

From a tax point of view, the Income Tax Act provides that, in calculating his income for a taxation year, a taxpayer must include any amount received during that year in the form of allowance or support payments. Conversely, a taxpayer can deduct any amount paid as allowance or support. This is the deduction-inclusion rule.

Many requirements must be met before the amount can be paid or received, and before it can be deductible or taxable. In fact, there are six of them.

The amount must be paid or received as support payment or other type of allowance. It must be paid or received in compliance with a decision from a court of competent jurisdiction, or in compliance with a written agreement. It must be paid or received to support the needs of the recipient, of the children of the marriage, or both. The alimony or allowance must be payable regularly; the spouses or former spouses must be separated by virtue of a divorce, legal separation or written separation agreement. The spouses must live separately at the time the payment is made or received and also the rest of the year.

As you can see, many requirements have to be met before a payment can be made. Once all these conditions are fulfilled, the deduction-inclusion rule comes into play. This tax policy is also based on four principles which the Minister of Finance explained in the report of the federal-provincial-territorial committee on family law.

It is a tax principle that when a deduction is claimed by a taxpayer regarding an expense, the recipient must pay tax on the amount. Recipients of alimony payments must be taxed the same as other taxpayers receiving the same income from other sources. The tax deduction granted to the payer makes the idea of providing support more palatable. Finally, this tax treatment is a form of subsidy which benefits children, since it is an incentive for the payer to provide more support.

Let us go back to each of these points. First, let us look at the deduction-inclusion rule. One approach points to a variety of approaches. For instance, Australia treats support payments as a debt or a non-deductible obligation. In the United States, however, a distinction is made between child support and spousal support. The non-custodial parent pays income tax on child support payments but spousal support is deductible.

These examples indicate the range of variations in terms of tax policy. The deduction-inclusion principle benefits only families where the support payer is in a higher tax bracket than the recipient. Is tax policy fair when it is based on income disparity? Should we not focus our support on low-income single parent families?

Canadian society has changed tremendously since 1942, when the first tax provisions on support payments were introduced. The number of tax brackets has been considerably reduced, and creditors and debtors may be subject to the same tax rates, although one may have a higher income than the other. Finally, if the non-custodial parent has a lower tax rate that the custodial parent, the total amount of taxes paid will be higher.

The tax deduction granted the support payer, which was thought to be an incentive for people to pay support payments, did not have that effect. Support mechanisms had to be put into place when women experienced problems collecting these pay-

ments. In 1974, the Law Reform Commission estimated that in as many as 75 per cent of all cases, people defaulted on their payments.

It is obvious that single parent women-and I am aware my time is running out-are particularly vulnerable economically, and we can turn this situation around to some extent by providing for a tax scheme that would meet their needs.

The government could give this question serious thought and do so quickly. It should revise concepts that are very damaging to the economic security of women who are single parents.

The Bloc Quebecois is therefore in favour of amending the Income Tax Act so that child support payments are no longer considered taxable income for their recipients.

Income Tax ActPrivate Members' Business

6:25 p.m.


Jim Silye Reform Calgary Centre, AB

Madam Speaker, the motion we are debating today, that in the opinion of the House the government should amend the Income Tax Act so that child support payments are no longer considered taxable income for the recipients, serves one major and very useful purpose. It draws attention to one of the major problems of single parents, mainly women, and the high cost of raising children.

This issue should be discussed in the House and all its related problems and solutions pointed out. This I will do further on in my speech.

This motion implies that somehow the current income tax laws on alimony and maintenance payments are unfair, contribute to the problem and therefore should be amended. On this point I disagree as do the majority of my colleagues in the Reform Party.

The logic is that since the money is paid to a parent in support of raising children, by taxing this income governments are taxing our children.

This particular logic is fundamentally flawed and the alternatives suggested by this motion may result in children being even worse off.

Under the current Income Tax Act, section 60(b) and (c), the supporting parent is permitted to receive a tax deduction for alimony and maintenance payments while the receiving parent is required, under section 56(1)(b) and (c), to include the receipt of such payments as income if the amount was received under an order or decree made by a competent tribunal in accordance with the laws of a province.

Therefore we are assured that tax is being paid by one parent and the income is not double taxed.

In addition, the receiving parent is given a child tax credit similar to any other parent raising children.

Therefore the alternative in this motion, which suggests a complete overhaul of sections 60 and 56 of the Income Tax Act, may result in less moneys going to the recipient.

Revenue Canada argues that it gives tax breaks to parents who make support payments to compensate them for the loss of dependent deductions lost after a divorce.

In other words, the support recipient now receives the child tax credit and the personal tax exemption which was being deducted by the supporting parent.

This confirms an important accounting principle that is the very basis of the Income Tax Act that where a taxpayer claims a deduction in respect of an expense, the recipient should pay the tax on it.

Herein lies the major problem to the motion before us today. Who will pay the tax on the child support payment if it is no longer considered taxable income for the recipient?

As alluded to before, it is logical to argue that if it were non-taxable for the recipient then Revenue Canada would make it non-taxable for the parent making the payment.

Then my question would be would this result in lower maintenance payments by the supporting parent?

Would this motion, if adopted, generate less revenue to the recipient than the status quo?

The rationale for the current system is simple and sensible. First, the spouse who claims the child tax deduction should also be the one responsible for claiming the income associated with raising the child.

Second, if this money were not to be taxed at all it would create a situation in which separated families are given preferential treatment under the Income Tax Act to that granted to complete families, especially if the receiving spouse is also allowed the child tax credit.

Third, the tax deduction makes the payment of child support more attractive and enticing for the supporting parent to make despite the statistics mentioned by the former member of the Bloc Quebecois. This is a major concession on the part of Revenue Canada because there are no limits to the amount. All that is needed is an agreement.

Fourth, the current arrangement can have an income splitting effect whereby between the two parties less tax is paid overall and more money is available for the child.

Fifth, good, bad or indifferent, whatever the point of view, the current system maximizes the support payment for maintenance.

Having stated why the current system is probably as good as can be expected, I would like to address some of the problems that the motion tries to correct.

First, the real problem is that support recipients spend the money without paying taxes.

Second, as of March 1, 1992 approximately 75 per cent of non-custodial divorced parents who had been ordered to make child support payments were in arrears.

Third, this forces support recipients to turn to social assistance, costing taxpayers money that otherwise should have been paid by the non-custodial parent.

Fourth, insufficient funds either to pay the taxes or care for the child creates stress and extra concern for the custodial parent.

Fifth, in many instances supporting spouses leave the province in order to avoid paying child support. Since it is a provincial responsibility to administer the child support and alimony system authorities are virtually helpless. The result is an increase in welfare costs to the provinces.

What are some of the solutions? We argue against the motion but what can we contribute in the House to help solve this very important problem?

We could leave the current system in place and encourage the courts to recognize better the financial needs of the recipients and the high cost of raising children. We could change the federal-provincial laws to allow interprovincial tracking of non-payers. We could initiate a campaign of shame on those parents who wilfully avoid payments to support their children and reminders to support recipients to remit some taxes periodically throughout the year to reduce the lump sum requirement at tax time. We could lower the tax rate for everyone by lowering government spending. That could be a tough sell in the House.

Unless there is an agreement between the two parents the non-custodial parent does not get the maintenance deduction. Therefore both parties when in divorce court should be made aware of the tax consequences before final agreement is reached. The support recipient should seek more equity through the support system itself and not through the tax system.

In the 1992 federal budget a new child tax benefit was created. It was designed to aid in the fight against child poverty by targeting federal moneys to those families in financial need. The motion helps point out a problem in society but the Income Tax Act did not cause the problem. It was caused by human error on the part of parents for whatever reason. The solution lies in public awareness and education for divorcing couples so that they do not make deals at the kitchen table or, if they make deals at the kitchen table, they are cognizant of the impact of their decisions.

The reality is taxable support payments are better than no support payments. Income tax is far too complicated and too intrusive when involved in dictating through tax preferences our social behaviour. Our entire taxation system should be reviewed, reformed and simplified.

In conclusion, a flat tax for Canada would help solve our social program funding with higher personal exemptions, improve the tax system through simplification, and, for members across the way, create more jobs because taxpayers would have more disposable income.

Income Tax ActPrivate Members' Business

6:30 p.m.


John Murphy Liberal Annapolis Valley—Hants, NS

Madam Speaker, I am pleased to have the opportunity to speak today on this important motion. I would like to take the opportunity to congratulate the hon. member for Nepean for bringing forward this issue to the House of Commons.

The motion before us addresses the changing social and economic nature of Canadian society, namely the increasing number of single parent families and the difficulty these parents face in providing for their children. I support the motion because I believe that by addressing the issue of child support payments we are also addressing the broader fundamental problem of child poverty.

Our government has made a commitment to invest in people and to create opportunities for all Canadians. All our economic and social policies have aimed to achieve this objective. I believe the motion before us is consistent with that goal. It gives us the opportunity to ensure that children of lone parent families are provided with the resources necessary to live successful and productive lives.

The level of child poverty in Canada is unacceptably high. Recent statistics show us that 1.2 million children in our country are living in poverty. Canada's poor children live extremely disadvantaged lives. These children often live in poor housing conditions. They have a greater likelihood of experiencing unemployment in their families and have far less access to quality child care.

Further, according to Campaign 2000 of the Child Poverty Organization with which I met this morning, poor children can expect to have a shorter life span, suffer from illness, require an increasing amount of emergency food assistance and are more likely to drop out of school.

The rate of child poverty in single parent families in 1991 was about 61 per cent. In other words, three of every five children living in a single parent family lived in poverty. On average poor single parent families need an extra $9,000 a year just to reach the poverty line. These figures are particularly true for female custodial parents. After divorce, custodial mothers experience a dramatic increase in the economic burdens and income earning limitations linked to child rearing responsibilities.

Close to about 60 per cent of all female lone parents live in poverty. Although this group represents only 3 per cent of all Canadian households they bear 17 per cent of Canada's total poverty burden. This problem must be addressed by all members of the House.

In my riding of Annapolis Valley-Hants there are approximately 2,300 female lone parent households. I have had the opportunity to speak with many of these parents. They have raised many of the same arguments placed before the House today. It has become increasingly difficult over time for single parents to provide adequately for their children. For custodial parents, a single portion of the support payment is lost to taxes. As a result support payments often do not meet the needs of children the payments are intended to assist.

In light of these statistics we must ensure that children of lone parent families do not suffer the consequences of inadequate levels of child support. Unless we address the problem the same children will continue to suffer the consequences of a system that is not providing the effects it was designed to produce.

When the inclusion-exclusion tax policy was developed in 1942 its purpose was to ensure that as much money as possible was going to children of single parent families. By taxing the custodial parent who is generally in a lower tax bracket rather than the child support payer, more money was left over in those times to meet the needs of the children.

However much has changed since 1942. We must ensure that our laws reflect these new social and economic realities. There are more single parent families now than we had in the past. The majority of these single parents are women who after divorce suffer a decline in their standard of living.

Presently there are only three tax brackets as opposed to ten in 1942 as we heard earlier. There is a greater likelihood therefore that both parents earn the same tax bracket. This negates any tax savings that would have been generated in the earlier years.

Upon divorce, family resources are often inadequate to continue to meet the needs of the children or the two households that must be maintained. Therefore by taxing already low child support payments we are in effect taking money away from the families and the children who need it the most.

As the motion indicates child support payments should not be taxed. Instead these payments should be seen simply as a continuation of the obligation of support payers toward their children. By adopting the motion we could help ensure that single parents and their children are not unfairly targeted by a system that is no longer working as it should.

In 1989 an all-party resolution was unanimously adopted calling for the elimination of child poverty by the year 2000. While many faces in the House may have changed since then we must continue to support this commitment. I believe the motion offers all members of the House an opportunity to renew our fight against child poverty.

In closing the motion alone will not bring an end to child poverty, but I believe that by supporting the proposed change we can take concrete steps to ensure more money is being directed to those children who need it the most.

Income Tax ActPrivate Members' Business

6:40 p.m.


Pierre De Savoye Bloc Portneuf, QC

Madam Speaker, I will be brief and to the point. First of all, I would like to congratulate the hon. member for Nepean for her marvellous initiative. This issue has been talked about for a number of years by heads of single parent families but today, finally, a motion is introduced in this House. I hope it will lead to a rapid solution to this problem.

I was already familiar with this issue, but the hon. member for Nepean brought us facts and findings which have made me even more aware of the perverse impact of the taxation of alimony payments for the custodial parent.

I believe that the materials she quoted and the facts she presented, which clearly demonstrated that indeed children in the present situation have less than they had previously, will convince our colleagues in the Reform Party to revise their position and adopt a frame of mind more in tune with the 1990s and shortly the year 2000.

I will conclude by congratulating again the hon. member for Nepean and hoping that this House will strongly endorse the motion and that the government will act upon it without delay.

Income Tax ActPrivate Members' Business

6:40 p.m.


Beth Phinney Liberal Hamilton Mountain, ON

Madam Speaker, for many Canadians the taxation of child support payments remains the great divide between their responsibilities as caregivers and their capacity to meet these obligations.

As members of the House of Commons, we will have to face this inequality and to bring in fairness.

Current tax laws state that child support payments paid by the non-custodial parent are considered as tax deductible, while the payments received by the custodial parent are lumped into his or her taxable income. On the face of it this law runs against the grain of decades of Liberal policies designed to support families and children.

Let me offer the House some of the history that fosters the current state of injustice. Present tax laws concerning child support payments were enacted in the 1940s. Society and government have been radically altered since then, but tax laws have not been altered. There is no question that the time has come to bring these laws up to speed with the modern era. We as a government must take action to modify these laws not only to bring about greater fairness but to reflect the needs of custodial parents today and in the coming years.

It is no exaggeration to say that the unfairness of the federal income tax system is driving custodial parents into bankruptcy and depriving their children of thousands of dollars in support payments.

The Income Tax Act actively discriminates against custodial parents by forcing them to pay tax on the support they receive from estranged spouses.

Across Canada there are almost one million single custodial parents. Of this number more than 750,000 are women. This issue like too many others involves the continuing suffering of disadvantaged women and children. We cannot remain unmoved by the adversity imposed on these Canadians by our tax regime.

The Income Tax Act much be changed to reflect the needs of women heading single parent families in this country.

Nations the world over have decided to make absent parents more responsible for their children. Foreign governments have taken the initiative to change their child support tax laws so that the parent who has left the home has a greater financial responsibility to the custodial parent and child.

When we look at our neighbours to the south we do not see the inequities encountered in Canada. In fact, the taxation laws concerning child support payments in the United States are the reverse of our own.

In the United States child support payments are deemed to be non-taxable income for both the payers and the recipients. If I may say so, this seems to be a more logical and equitable way to handle the issue.

In Britain the child support tax laws have only recently been changed and the government intervention has only recently moved to lessen the plight of single mothers. Nearly all absent parents have been tracked down in England and forced to pay an amount derived from an originally applied formula. This formula makes child support a top financial priority, placing great emphasis on the parent's income and the cost of raising the children while sanctioning few excuses for delinquency.

The British system emulates that of the United States by not taxing child support payments. Britain's approach to this issue has emerged as one the world's toughest. This government must join the worldwide march toward tougher child support laws and take immediate action.

In 1991 Statistics Canada revealed that there had been a 34 per cent increase in lone parent families in the previous ten years. By comparison, the number of two parent families with children rose by just 6 per cent over the same period. The end result is that lone parents accounted for 20 per cent of all families in the year 1991, up from 17 per cent in 1981.

One child in five resides in a single parent household. Moreover, these statistics clearly show that children are hit the hardest by the obsolescence of tax laws concerning child support.

The facts are plain and simple. Female lone parents remain consistently less likely than other parents to be employed and there have been sharp drops in employment levels of lone parent women during the recessions in the early 1980s and the 1990s.

Lone parent families have lower incomes than two parent families. In 1990 the average income of female headed lone parent families at $22,000 was just 38 per cent of the $57,000 earned by dual parent families with children.

These numbers demand action by this government. When we are struck by the appalling state of the current child tax laws we must ask ourselves why this issue has not been dealt with before.

It is clear that the current tax laws have created inequities between the payers and the recipients of child support. The tax treatment of child support payments makes a very complicated issue out of one that should be as straightforward and simple as possible. No other country treats the taxation of child support the way Canada does.

We know who the victims of the current state of child support tax laws are. It is a statistically proven fact that single women and their children are being financially devastated and socially marginalized.

They are the ones who bear the economic consequences of divorce and separation. If the current policy is not changed it is the children of single parent families who will go on paying, not just in some cases and not just by misfortune, but by our deliberate failure to recognize the problems with our existing tax laws.

Modernizing our primitive treatment of child support payments is an issue that must be remedied through the tax system. Better child support guidelines and enforcement mechanisms are essential and must be addressed within the justice system.

We must acknowledge the problems of current legislation and pass the measures necessary to improve the situation.

Let me now introduce some of the proposed improvements to the current tax law. We should remember that the combined impact of income tax and child support policies must be measured by its impact on the standard of living of the affected family.

There are a number of changes that could be affected through federal legislation and policy measures. The avenues this government needs to explore are several. The Income Tax Act could develop child support guidelines that reflect the cost of raising children and that are compatible with revamped tax treatments of child support payments.

This act would support the efforts of lone parent families in Canada, specifically the single mother. We could follow the lead of the American tax system and not include child support payments in the calculation of our taxable income. This would treat child support costs in the same manner for tax purposes for custodial and non-custodial parents. This would also result in equal treatment of child support costs in families in which parents live together and in those in which parents are separated or divorced.

As insurmountable as these problems may appear, we must attempt to reform the existing tax on child support payments which, quite frankly, is the government's punishment to those women who, for whatever, reason have separated from their spouses.

The current law is extremely limited as a means of distributing tax relief for the benefit of children and in most cases it is detrimental. Women and children are its victims. I hope all members will join the women and men in this House who hope to right this injustice.

Income Tax ActPrivate Members' Business

6:50 p.m.

The Acting Speaker (Mrs. Maheu)

We have about a minute left.

Income Tax ActPrivate Members' Business

6:50 p.m.


Rey D. Pagtakhan Liberal Winnipeg North, MB

Madam Speaker, I too am delighted to rise in support of the motion of my Liberal colleague, the member for Nepean.

The motion states:

That, in the opinion of this House, the government should amend the Income Tax Act so that child support payments are no longer considered taxable income for their recipients.

We heard a lot of presentations earlier and I agree that the motion raises the issue of fairness. Is it fair to tax support payments earmarked for children? In that question is inherent as well the question are we committed to the children of our country, the children who are the future resource that will help build our nation even stronger, the children who cannot vote but nevertheless who need our help? We have a duty and an obligation to support them.

As well, this motion is a commitment to single parents and our commitment to eliminate poverty in this nation as this House did on November 24, 1989, unanimously adopted. In conclusion, I would like to state that we have an obligation to our nation's children, to support them and make child support payments no longer taxable in the hands of the recipients.

Income Tax ActPrivate Members' Business

6:50 p.m.

The Acting Speaker (Mrs. Maheu)

The time provided for the consideration of Private Members' Business has now expired.

Pursuant to Standing Order 93, the order is dropped to the bottom of the list of the order of precedence on the Order Paper.

A motion to adjourn the House under Standing Order 38 deemed to have been moved.

Income Tax ActAdjournment Proceedings

6:55 p.m.


Réal Ménard Bloc Hochelaga—Maisonneuve, QC

Madam Speaker, I understand that you are giving me the floor regarding a question I asked the Deputy Prime Minister, on February 18, about the POWA Program.

I will remind the House that, on February 18, I asked the Deputy Prime Minister what her intentions were regarding the support program for workers affected by collective lay-offs. The POWA Program is a joint federal-provincial program 70 per cent of the cost of which is covered by Ottawa and the remaining 30 per cent is paid by the provinces. At that time, the Deputy Prime Minister was, unknowingly I believe, in the wrong when she said that this program was in some way connected with the Canada Labour Code, which is totally false, of course.

I rise today to point out that the POWA Program, which replaces the Workers Assistance Program created in 1988, discriminates against workers in the Montreal area. Everybody knows that, under the terms of this program, for workers to be eligible for benefits, which are half-way between unemployment insurance and social assistance, there must be a certain number of workers laid off. In the Montreal area, with a workforce of over 500 000 people, the administrative agreement says that at least 100 workers must be laid off for them to be eligible for benefits.

However, with its clothing and textile sectors, the industrial fabric of Montreal is such that most businesses that would apply for the POWA Program have a workforce of between 20 and 30 people. It is so true, so disturbing and alarming, that 83 per cent of all applications made by Montreal companies under the POWA program, the Program for Older Worker Adjustment

which is, let me remind you, a joint federal-provincial program, have been rejected.

This goes to show, Madam Speaker, that this is a very discriminatory program. I would like to remind the House that the members for Saint-Léonard and Saint-Henri-Westmount have tabled petitions on that subject. They decided to represent the workers so that the government, Tory in those days, would remedy the situation.

There is an enormous consensus in Montreal. The mayor, unions, employers, and naturally workers, all pray that a much-wanted and almost urgent modification be implemented very soon. At the end of my speech, the minister suggested I table a private member's bill. You all know how much I always make it my duty to please the Deputy Prime Minister so I am happy to announce that I will indeed be tabling a private member's bill. As concerns the respect for workers, the challenge is now to find out if the government majority will be consistent, will stand by the Bloc Quebecois, will support that bill and make sure it is votable so that we can put an end to that unacceptable discrimination as the various sectors of the Montreal community have requested.

Income Tax ActAdjournment Proceedings

6:55 p.m.

York North Ontario


Maurizio Bevilacqua LiberalParliamentary Secretary to Minister of Human Resources Development

Madam Speaker, the hon. member stated that the program for older worker adjustment, known as POWA, discriminates against Montreal.

I would like to make a very strong case that it is not the case at all.

The program for older worker adjustment is a program designed to help older workers who have been involved in major permanent layoffs and who have little chance of finding re-employment.

Major layoffs are defined according to the size of the community. In larger communities such as those of over 500,000 inhabitants a major layoff would involve at least 100 workers. In smaller communities such as those with a population of under 10,000 a major layoff would involve at least 20 workers.

POWA does not discriminate against Montreal compared with other cities. The same guidelines are applied across the country.

The POWA eligibility criteria were negotiated with the government of Quebec and are contained in the Canada/Quebec POWA framework agreement. Similar POWA eligibility criteria are contained in the other federal-provincial agreements.

POWA criteria were developed to take into account the economic significance of the layoffs for the local community and to reflect the fact that older workers who are laid off in smaller communities have fewer re-employment opportunities than workers in the larger labour market.

Under POWA 441 major layoffs have been designated in the province of Quebec. Annuities have been purchased for 3,842 eligible older workers. The federal and Quebec governments have spent $160 million to purchase these annuities.

Income Tax ActAdjournment Proceedings

6:55 p.m.

The Acting Speaker (Mrs. Maheu)

It being 7.03 p.m. the House stands adjourned until tomorrow at 2 p.m., pursuant to Standing Order 24(1).

(The House adjourned at 7.03 p.m.)