Mr. Speaker, I want to say a few words on Bill C-10 that implements tax treaties and tax conventions with a number of countries such as Sweden, Lithuania, Denmark and the former Soviet Republic of Kazakhstan. It also amends tax treaties or conventions with the United States and the Netherlands.
The bill is fairly lengthy and detailed. For the most part the NDP agrees with what is being done. Primarily it is a housekeeping bill. It prevents double taxation in many cases. It also prevents fiscal evasion by citizens. In the main we support the direction in which the bill is going.
We do have one major concern and that is with part 7 of the bill. That is the amendment to the convention with the United States. It concerns over 80,000 people who receive social security benefits from the United States but who reside in Canada. What is happening to them is unfair because it is being done retroactively. That is the part of the bill which we as parliamentarians should look at changing.
Until 1996 when Canadians received social security payments from the United States, and a lot of these people reside in the area of Windsor, Ontario, they were taxed on 50% of their social security payments.
That is a system that was in use in this country for many years. It was under that understanding and under that law that people made their retirement plans and did the financial planning for their families. That is what it was based on.
Then in November 1995 the government introduced Bill S-9 in the Senate. That bill introduced a very important change. The Canadian government would not collect taxes on social security payments but instead there would be, in effect, a withholding tax taken off the paycheques of Canadian citizens by the American government. The withholding tax rate is 25.5%.
That was a big drop in income for many citizens. It happened very quickly, without proper consultation, maybe without any consultation with these citizens.
There was a lot of legitimate protest after the passage of that bill because it unfairly attacked the incomes of 85,000 Canadians who had done their retirement planning and had based their livelihood on a set of rules in place when they were working in the United States.
The protest continued for a fair amount of time. Last April the government made the announcement that there would be change. Indeed that change has been made in the bill which is before the House today.
Now instead of the United States taking off the withholding tax of 25.5%, the government in the country where the citizen resides will be taxing the citizen on the social security payment; in other words, the Canadian government in this case. On the flip side of the coin, the American government will tax American citizens receiving the Canada pension plan or the Quebec pension plan.
What the government did not do was go back to the pre-1995 taxation level which was on 50% of the social security payments. Instead the government will be taxing 85% of the social security benefits, 85% instead of the previous 50%. One could make the argument that this is, in many cases, better than it was a year or so ago but it is still not nearly as good as it was prior to 1995. This is very unfair. This was done without properly consulting the people who are affected.
There is an organization called CASSE, Canadians asking for social security equality, which is involved in this issue. It has lobbied on this issue. It made this issue an important one, particularly in the Windsor area for the election of June 2.
These citizens were not properly consulted. They certainly did not approve the change. For these people the change is not good enough. They did their planning based on the rules. The rules were changed after the game was played. Now we are in the world series and all of a sudden there is a lot of interest in baseball. If a team wins or loses that is nullified because the rules were changed after the game was played. It is extremely unfair.
The very least the government should do is grandfather this particular part of the bill so it will not affect people who are already retired. Those people have already planned their lives. They have already purchased their retirement home. They have already budgeted for their groceries and clothing. It should be grandfathered so it does not affect the people who have retired.
Like many other tax bills, if the government wants to go in this direction and it can make a case, then of course it is not unfair in terms of people who are still working not being notified because the rules are there. It is a different situation altogether. We can then argue, of course, whether a tax on 85% is too high or too low.
The first option is to go back to the way the rules were prior to 1995. These people should be taxed on 50% of their social security income. The second point I want to make is that, at the very least, it should be grandfathered so that retirees will not have the rules changed after they have done their planning.
I also want to make a couple of other remarks about the bill before us today and the general issue of tax fairness in this country. I remember the 1993 election campaign when the Liberal Party talked about abolishing the GST, about getting rid of that goods and services tax. All of a sudden the party was in power and there was no action on that.
I want to urge the government, something which our party has been doing, to eliminate the GST entirely from children's clothing and books. That would be a good step in the right direction toward tax fairness. It would reduce taxes by about a billion dollars in a targeted sense on many people who are the least able to pay for taxes in Canada. At the same time it would also stimulate some employment in terms of circulating more money in the economy. That is the kind of thing that should be done.
I was rather amused this morning as I listened to the Reform Party critic for national revenue as he waxed eloquent in the House about the need for tax fairness, to get rid of tax grabs and tax increases. You would think he was thinking about all those ordinary people, those ordinary citizens, those mainstream Canadians who have difficulty making a living in Canada.
On October 1 in Parliament that member was asked the following question: “Mr. Speaker, does the hon. member really believe we have tax fairness in this country, that the Conrad Blacks and other wealthy people pay their fair share of taxes?” He replied that they, meaning the Conrad Blacks and other multimillionaires, “pay more than their fair share of taxes”. What a shame, they pay more than their fair share of taxes. The Reform Party thinks that Conrad Black and multimillionaires are overtaxed in this country, that they are paying too much and that if we reduce taxes for them we would have to up the tax bite on ordinary citizens living right across this country. I think that is utterly disgusting for a democratically elected party in the latter part of the 20th century.
We are seeing some real hypocrisy coming from that side of the House when they pretend to be concerned about senior citizens and about the people in the Windsor area and across this country who are seeing their taxes increase by the bill that is before the House today. People who are watching the House of Commons proceedings should be aware of where the Reform Party really stands and who it really speaks for. It speaks for the extremely wealthy, the multimillionaires in this country, the people who have a lot of money. Reformers want them to have more tax breaks and to hell with the ordinary citizens of Canada.