Mr. Speaker, it is a pity we have to move on to other things, because we were having a very interesting and lively debate. We will now proceed to something more technical dealing with child support payments, a subject which is rather important in itself.
This issue arises in a context of developments to which society must adjust. Broken families are more and more prevalent and, even though it may not be desirable, the government must adjust itself to these new circumstances.
The motion presented by the hon. member for Nepean reads as follows:
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 is a very interesting motion, but we should nonetheless consider both sides of its potential impact. Some of my colleagues have already mentioned that the Bloc would support this motion. That is what we will do.
But I would like to make a point. Under the current system, the parent who must make support payments-that is the father most of the time-can deduct those payments for income tax purposes. The mother who receives support payments must include them in her own taxable income.
The first goal, naturally, is to avoid double taxation and to tax the income in the hands of the recipient. Another consideration would be to allow the taxpayer with the lowest income to include the payments in his or her income in order to lower the tax amount. Those are commendable goals but they create in fact a deep feeling of injustice.
The one question that should be asked is: Who is the recipient of the support payments? They are paid to the mother and she must include them in her income. In fact, it is income that is used and should be used for the children, and, in most cases, it is used for the children. It is often insufficient, however, since it must take into account the ability to pay of the spouse or of the person who is making the alimony payments. And the person who receives the payments must pay income tax on it.
This creates a feeling of injustice because, in reality, the income should go to the child. Does the child have to pay or support income tax, finally? The child has no income, and this could be the problem. Should we really make this income taxable?
This may be where we should improve on the proposal. Insofar as the person receiving the alimony payments is not required to pay income tax or to declare these payments, we should make sure that, in establishing the amount of alimony, a judge is not influenced by a change in the tax system.
Take for example the case of a person receiving alimony of $6,000 a year or $500 a month; the person would receive a gross income of $500, and a net income of let us say $400, which would allow for $100 in income tax. We could be in a situation where a judge would take the new tax rules into account and say: "I will ask the spouse to pay only $400. He will pay tax only on $400 and the beneficiairy will receive the same amount as before".
We would then be in a neutral situation for the person collecting alimony. I do not think this is the purpose of the motion presented by the member for Nepean. I think that its objective is to ensure that the gross amount that is paid becomes a net amount, and that the spouse who is giving child support bears the tax burden, as if in fact that spouse was still part of the couple and should pay for children's expenses.
We could say: "Yes, but in fact, the simple thing to do would be not to tax either side". That is dangerous, because that would easily encourage a transfer of income from one spouse to the other, so that a good part of the income would become non-taxable. That is not really desirable. A part of the income must continue to be taxable.
The question we must ask ourselves is: Must the children support a part of that tax? For the government, taxing the spouse who is giving child support payments would have a stimulating effect on the income since that income is often higher that the one that gets the spouse who is receiving those payments. On the other side, that might encourage single-parent families. That should be examined.
There is also an aspect in this issue that should not be overlooked. A good part of the problems does not stem necessarily from the tax treatment, but often from the incapability for a spouse who is entitled to child support payments to actually get them.
We all know or are often told that an ex-husband or ex-wife may often have one or several unreported incomes. We all know that the underground economy is thriving and that a spouse can avoid paying alimony. In such cases, it is very difficult to do something about it and proceedings are long and expensive. We are looking at a group of people who do not take their responsibilities seriously. I am not saying everybody is like that. Despite the fact that their family is apart, many people remain very much concerned about the development of their children and take their responsibilities seriously.
In some cases, however, things are much more difficult. We should insist on the protection of ex-spouses, and in particular ex-wives because there are much more ex-wives who experience problems with alimony payments from their ex-husbands. I think these are issues that should not be dealt with separately. They should be integrated as a whole. In that sense, I think it is a good proposal but, as I said, we should take that into consideration.
After checking this afternoon, according to information we received, it would appear that judges tend to take the tax treatment into consideration before allowing an amount to an ex-spouse. That being said, if they do that now, chances are that they will continue to do that in the future and that they are going to take into account the amendments brought to the Income Tax Act.
We should clarify things so as to avoid an adverse impact from this measure. I understand that it is only a motion and that we want to set out a principle. I think that we all have to agree on that principle. Even the members from the Reform Party who said they were against the motion recognized that principle. They are not opposed to it. However, they said that they had
problems with the technicalities. That is possible, but that does not mean that there is no way to improve them.
The member from Nepean thoroughly researched her motion. She talked about the origin of the alimony, which began in the 1940s, and the way it operates for income tax purposes. She was perfectly right when she said that the context or the legislation never made any progress over the years. She talked about the principle of deduction/inclusion since it is possible to make a deduction on one hand, and on the other hand, to include the amount that has been deducted in the other income which is not correct and which, according to several people, seems quite unfair.
In that sense, I think that knowing that she has the support of this side of the House, she should now go one step further than what is proposed in her motion and talk to the minister of Revenue and the minister of Finance.
I am sure that the Department of Revenue reviewed the matter. When this was debated earlier in the House, someone mentioned that, in the United States, no distinction is made between the portion of the alimony used for the expenses that a woman must incur by the very fact that she has children, and the portion of the alimony used for the expenses directly linked to the children. There are two categories subject to different tax treatments. Perhaps this is an alternative worth considering, an interesting approach. One should also look at what is done elsewhere. There are certain things which are easy to do and which would allow a fairer system. This is the meaning of her proposal.
Finally, in introducing this motion, the member has been guided by deeply humane motives. We are going to support her proposal, but we must go one step further in the technical details so as to ensure that what we want to put forward will not have adverse effects.