Mr. Speaker, perhaps I am in the wrong debate in this House. I thought that C-10 was going to be discussed. However I heard a lot of comments about CPP and Bill C-2 over the last couple of speakers; harmonized sales tax, which I thought was a rather interesting comment; RRSPs; and capital tax, which was really quite interesting but does not have a lot of bearing on Bill C-10.
I particularly enjoyed the comment about housing prices in the city of Winnipeg. I do not know how it relates to C-10 but I can tell the hon. member who brought it up that in fact in Brandon our housing prices are 15% higher than those in the city of Winnipeg. They are perhaps not quite to the level of those in Vancouver but that is okay.
I would like to bring this back to C-10. The issue quite frankly is very relevant to me. My constituency has a very large seniors population as do a number of constituencies throughout this country of ours, but my riding in particular through demographics has identified a very large seniors population.
It never ceases to amaze me that when the government tries to fix a wrong it does it for the right reasons but unfortunately when the legislation is brought forward the wrong seems to be exacerbated in some areas which it has been with Bill C-10.
In an attempt to respond to the protests of CASSE and CARP, which is the Canadian Association of Retired Persons, on the non-refundable 25.5% U.S. withholding tax imposed on social security payments to Canadian residents under the 1995 tax protocol which was brought in by the existing government, the finance minister announced on April 9, 1997 the signing of a new tax protocol with the U.S. Following ratification this protocol will be effective retroactive to January 1, 1996, the implementation date of the contentious 1995 protocol. Under the new protocol, the taxation power in respect of social security payments to Canadians will be returned to Canada while the U.S. will again assume power to tax CPP and OAS receipts of their residents.
Initially the finance minister's announcement brought great joy locally as it appeared we were returning to the 50% inclusion rate that prevailed prior to January 1, 1996. Further, the finance minister announced that upon ratification of the new protocol, refunds would be available to those Canadians whose tax in 1996-97 social security payments would be reduced under the new protocol. Apparently the two governments are working together in this regard.
CASSE's joy however turned to bitter disappointment when it was learned that under the finance minister's new system the income inclusion rate for the social security would now be 85%. This represents a 70% increase in the rate of taxation of social security jumping from a 50% inclusion rate to an 85% inclusion rate for everybody but those retirees who are not taxable having under $11,000 in income.
This new inclusion rate will also be retroactive to January 1, 1996 for the purposes of determining refunds, although no one will be required to pay more tax for 1996 and 1997 than the U.S. withheld. Low income Canadians who have been hit by the 25.5% U.S. withholding tax should not have to wait for both the ratification of the new protocol and then until the summer of 1998 for the processing of their return seeking a refund for tax withheld in 1996 and 1997. Retired people in this income bracket need the money now. Our government should undertake to do that forthwith through the GIS system.
The finance minister told CASSE that the first change to a withholding tax system was revenue neutral. No numbers however have been released as to the revenue earned by the Canadian government in the old system or what revenue was realized in imposing withholding tax on OAS and CPP to U.S. residents or what revenue will be realized under the new system in the 1997 protocol. These numbers are necessary for any policy debate in this area and we should be pressing the Minister of Finance to reveal these numbers immediately.
Not having the numbers means that we do not know whether the 70% increase in tax on social security first effectively occurred with the imposition of the withholding tax system in the 1995 protocol or with the changes announced with the 1997 protocol or a combination of both.
However, if the finance minister's budget is not based on the 1997 protocol just signed which affects 1998 and subsequent years, our party should be prepared to roll back in taxes immediately that portion of the revenue increase caused by the 1997 protocol.
Finally, after the year fiscal year 2000 when our budget moves into a surplus, which I believe very strongly should be this fiscal year, we should undertake to return to the old system of the 50% inclusion rate which reflects the fact that contributions to the U.S. system are made out of after tax dollars and that under the finance minister's protocol, cross border workers are being doubly taxed on their retirement income.
I would like to commend the government for recognizing the mistake that was made in 1995. I would further like to state that it is a sight for sore eyes that while it recognizes the mistake it made, it actually decided to do something about it. I wish I could commend the government further, however a few important items seem to be missing from this discussion.
The Progressive Conservative Party will not support this bill with the pittance of information that we seem to have here and without a much more significant, in depth discussion to determine the real effects of this bill on retired people.
The finance minister stated previously that this is a revenue neutral bill. The minister has further entered into a tax treaty increasing the income inclusion from a 50% inclusive rate to an 85% inclusion rate. The remove of the withholding tax is a step in the right direction.
The PC Party understands that some income earners, especially the lower income earners, may actually see a decrease in their level of taxation. This is another step in the right direction. The Progressive Conservative Party further notes that some income earners will see a huge increase in their levels of taxation. We in this House do not condone that action.
It is unfortunate today that after seeing the government recognize and correct the mistake in a positive and progressive manner, it must dig further into the pockets and raise tax levels like this. I hope this bill is in fact revenue neutral as the finance minister would have us believe.
It is with dismay that the PC Party must rise against this bill. However, I hope that through more in depth discussion and some changes we will be able to see a corrected mistake that will actually reduce taxation levels rather than raise them.