Debates of Nov. 28th, 1997

Income Tax Conventions Implementation Act, 1997

[John Herron, Progressive Conservative, Fundy Royal, NB]

Mr. Speaker, I rise today to speak to Bill C-10, an act to implement tax conventions between Canada and the states of Sweden, Denmark, Iceland, Kazakhstan, Lithuania as well as amending income tax conventions between Canada and the countries of the Netherlands and the United States of America.

My party supports the agreements and the intent of this legislation would ratify in terms of income tax conventions between Lithuania, Sweden, Kazakhstan, Iceland and Denmark to avoid double taxation and the prevention of fiscal evasion.

However, the Progressive Conservative Party raised concerns earlier in the House surrounding the retroactive charges this legislation holds for the 1984 Canada-United States Tax Convention Act that was amended in 1995 by this Liberal government.

The facts in the matter are the following. Part VII of this bill is intended to uphold the promise made by the finance minister on April 9, 1997, a promise made during a host of pledges laid out by his government just days before the federal election was called.

Initially, the reaction by the affected groups to the announcement was extremely positive. However, now that the legislation has come forward, there are still some serious problems that have yet to be dealt with.

First, let us take a look at how the Liberals came to this point. Right off the top, I want to be on the record commending the Liberals for admitting they made a mistake. However, the Liberals, after changing the tax protocol in 1995 and setting the legislation effective January 1996, have now conceded they were wrong and are retroactively setting January 1, 1996 as the date effective for the current legislation, giving credence to the saying “if you do not succeed at first, try, try again”. Although they are trying, unfortunately they have unsatisfactorily succeeded here.

The proposed increase from 50% to 85% inclusion of social security benefits is ambiguous because the government has stated, more often than not, that under American tax protocol Americans are taxed at 85%. However, that 85% is a maximum and in fact the majority of the people who fall under this provision are still taxed at a 50% inclusion rate in the United States. In fact, on page 4 of the U.S. Social Security Publication 915, it states:

The taxable part of your benefits usually cannot be more than 50%. However, up to 85% of your benefits may be taxable, only if the following situation applies to you: the total amount of one-half your benefits and all other income is more than $34,000.

Those are American dollars not Canadian. I would never suggest that we follow the American lead, but just for information it would be interesting to know what the income tax bracket threshold would be for people required to pay over 50%. When asked in committee, the officials could not give an equivocal answer.

Furthermore, this increase does not take into account that in the United States social security premiums are taxed when earned and not taxed deferred as is the CPP in Canada.

Second, the Minister of Finance has stated publicly to those affected that the social security aspect of the third protocol was revenue neutral. If this is the case, why is the new change increasing the inclusion amount by 70%?

Third, I have noticed that the retroactive change would not cause Canadians to pay back taxes to Revenue Canada and those owed money would be paid dually. For this I congratulate the government. However, it is unfortunate that a consistent policy cannot be followed. The reason I mention this is that recently caucus colleagues of mine have had calls from constituents involving a very similar situation.

The situation involved contract buyout packages whereby a mistake by the government—notice in both instances a mistake by the government was the cause of the problem—miscalculating Treasury Board's buyout of the formula caused hardships to thousands of Canadians. However, unlike C-10, in this particular incident the people were required to pay back the money to the government.

The incident I am referring to is the forces reduction plan carried out by the Department of National Defence. Why were people adversely affected by this defence buyout when the Department of Finance is capable of writing off debt? These constituents were given just 30 days to make arrangements for payment on debts ranging anywhere from $100 up to $1,500 before interest started to accumulate.

The former defence minister applied to the Treasury Board to have the debt remitted last January and that request was denied in March. One month later, the Minister of Finance announces the contents of C-10 and is able to find money to retroactively pay these retirees. I realize the two instances are separate and need to be handled on their own merit. However in my opinion the same standards should have been used for military service personnel.

My party believes the avenue the finance minister has used to rectify the third protocol mistake he initiated two years ago is flawed. These retired individuals do not deserve a 70% tax grab by the finance minister who, while wavering on tax cuts, seems to have no problem with tax hikes for retired people, as evidenced by Bill C-2 and Bill C-10.

Some constituents have even commented on the fact that 15% is non-taxable. These constituents have asked for the bill to included a minimum of 15%. I understand it is improper to make any change to new legislation, but that is something the government should revisit in the future.

[Rob Anders, Reform, Calgary West, AB]

Madam Speaker, Bill C-10 makes me angry for several reasons. First, the Liberals tried to convince people this was merely a technical change. They tried to hide the fact that it was a tax grab. Second, the Liberals tried to force the bill through committee so that nobody would be able to recognize it as the tax grab it was before it was okayed in parliament.

I will now talk about Mr. Farrel Mok. He receives a disability pension from the United States. He is legally blind. He has recently undergone a liver transplant and his medication costs are very high. Prior to 1996 Mr. Mok's pension was treated as tax exempt, but that is no longer the case. Under the third protocol there was a 25.5% tax at source. He was totally unprepared for the tax grab the government quickly imposed without warning in the new fourth protocol.

Mr. Mok says the disability pension is his major source of income and he is incapable of working. The imposition of the tax on his revenue has caused “tremendous hardship” as described by Mr. Mok. The fourth protocol will cause even greater hardship since he now must include 85% of his pension in his taxable personal income.

Mr. Mok says that although his situation is bad he knows that others are much worse and that it will be even harder for persons who receive disability pensions and are residents in health care facilities. These people are in danger of being forced to leave the facilities because they will no longer be able to afford the cost of the care.

It basically goes to some of the tenets of what the Liberal Party stands for in this regard. They are arrogant and out of touch. They are elitist because they think they know better. When it all comes to naught and we scratch below the surface, they are tax and spend Liberals.

Under the second protocol Canada taxed about 50% of what was coming in, in U.S. social security benefits. Then under the third protocol it was split between the two governments. They both had a crack at roughly 25% of the money that was coming in. Now with the fourth protocol we have not only gone back to the process whereby Canada has full jurisdiction on this taxation so it can once tax 50% but the Liberals have upped it. The Liberal government has upped it to 85%.

The taxman had the whole arm of seniors. Then that was changed by the third protocol and the taxman shared the arm. The United States got half of it and the Canadian tax man got the other half. Under the fourth protocol the Canadian taxman has the first part of the arm he had to begin with and the part the United States used to have before. Since it has been tacked up to 85% he is taking an extra share of what the seniors have left. That demonstrates exactly what is going on with Bill C-10, the tax protocol.

I have heard people across the way say that the bill has been out there for two years. There is nobody to blame for the bill being out there for two years but the Liberals. Liberal tax increases have been out there since Confederation. I wish people would finally realize what is going on.

I have some questions about legislation as it comes before the House. These are litmus tests which I believe can be applied to most legislation that comes before the House. The first question is who wants it. The 45,000 to 50,000 seniors who receive their social security benefits from the United States do not want an 85% inclusion rate.

Let us look at some of the other stakeholders. Is it the 50,000 people across the boarder in the United States who receive OAS and some of our Canada pension plan benefits? No, they do not want it either. If it affects people who collect social security benefits in the United States, there is a good chance that it will have impact on Canadians in the United States who are collecting some of their benefits. That is a total of 100,000 people who do not want it.

The only other stakeholder in the group is the Canadian government, the taxman, the finance minister and the revenue minister. They are the only people who want it.

Then we have to ask who will pay for it. The American government will not pay for it. The Canadian government will not pay for it. The people who pay taxes are the seniors who planned on receiving the benefit and not having it taxed at an 85% inclusion rate. That is who will pay for it. It will be on the backs of seniors.

Once again the Liberals have brought in 37 tax increases. The Canada pension plan increase is the 38th. The government has a record of tax increases since it took office in 1993. Once again the taxpayer will pay for it.

This time it is particularly insidious because it is not hitting all taxpayers. The government is going after a small group of taxpayers, 50,000 senior citizens. They are the ones who will pay the bill. Those people who have worked and helped build the country are being taxed at an 85% rate of inclusion when it used to be 50%. The Liberals have the audacity to claim it was somehow a technical change and not a net tax grab. When taxes go from 50% to 85% it is a huge tax grab, tax hike. Shame on the Liberals for calling it a mere technical change.

Who will slip through the cracks? The Liberal said they would give a tiggly-wiggly rebate to some people. What about the people who moved? What about the people who die? What about those people who were not on the government records for the rebate? Those are the ones who will slip through the cracks.

The Liberals think that by putting through the legislation and calling it a technical tax bill somehow they will be able to pull the wool over the eyes of Canadians and slip this through. My alternative is not to impose an 85% inclusion tax rate. That is the Reform solution. The government does not need more money. It spends it unwisely.

[An hon. member]

Oh, oh.

[Rob Anders, Reform, Calgary West, AB]

If the member across the way would like to engage in a debate about how poorly his government spends tax money, I would do it. I raise it now because it is relevant to the debate.

Who slips through the cracks? The 50,000 seniors are the ones who will get nailed by this measure. We should be concerned about them and not the revenue minister or the technicalities.

Does it solve the problem it was intended to address? What was the problem? There was a complication. Both the United States and Canada had joint jurisdiction in taxing social security benefits. Under the second protocol Canada had a crack at 50%. Under the third protocol the United States and Canada both had relatively equal cracks at roughly 25% each. That was complex and proved to be too problematic so people were calling for a change. They asked for it to be taken back to the time when Canada had full jurisdiction.

Then the Liberals agreed to do that, but rather than moving back to the 50% they had in the second protocol, they brought in a tax hike and hit everybody with 85%. Does it solve the problem of the complexity? Yes, it makes sure Canada has sole jurisdiction. Only the Canadian taxman, the finance minister and the revenue minister on the Liberal benches will get the money. It no longer goes to the United States.

However, they solve the problem by bringing in a tax hike, a built-in 70% top up in terms of what was coming in before as revenue. It is the 37th tax increase the government has implemented since it took office in 1993.

Surely, if there are problems with a bill, the Liberals should be running with their tails between their legs, realizing this is a tax grab that they will be nailed for.

The list gets worse. Now it comes to how much it will cost. The seniors affected say it will impact them to the tune of about $2,000 each. It could be much more for many of them. If we take that round number and multiply it by 50,000, we are talking about millions of dollars which the government is milking from a small select group of seniors. It applies to anybody who makes more than $7,000 a year. This impacts a wide spectrum of seniors.

Of those 50,000 people collecting U.S. social security benefits, those who make more than $7,000 per year will be impacted by the Liberal tax grab. Anyone who makes beyond the basic tax exemption will be nailed by members across the way.

They have the audacity to claim that this is a technical tax hike. It is not. It is impacting on every person of the 50,000 who qualify for U.S. social security benefits above the basic tax exemption of $7,000. It is tough for me to imagine how one would be able to live on $7,000, but some seniors obviously do it. Government members say that anybody who makes more than $7,000 will be taxed at an 85% rate of inclusion on their U.S. social security benefits. Shame on them.

They did not have the courage to raise this issue before the election. No, they dillied and they dallied. They brought it in as one of their first measures after they formed the government.

Why did they bring it in right after they secured their mandate in an election? Why did they raise CPP premiums? Why did they do these things? It is because they know these things are unpopular. It is a classic example of government reserving tax hike decisions until after the election.

When they were campaigning in Windsor where it will impact a lot of seniors I did not hear the Liberals talking about how they would suck tax money out of seniors who live in that neck of the woods. They did not have the courage to do it. They knew it would impact on votes, the bottom line for Liberals. They left the decision until after the election. Just like the CPP tax hike, they are bringing it in right on the heels of the election. They are hoping seniors will forget by the time it comes around to the next election.

I speak on behalf of seniors in Windsor, for those people who are being taxed beyond the second and third protocols. I hope these people remember and take it out on the Liberals in Windsor who did not stand up for them or talk about it previous to the election. They brought it in on the heels of their mandate. I hope they lose their seats for what they have done to seniors in Windsor and across the country who will be taxed at an 85% rate of inclusion, 70% higher than they were taxed under the second protocol. Shame on the Liberals.

[Susan Whelan, Liberal, Essex, ON]

Madam Speaker, I want to correct the record. The hon. member obviously does not have his facts correct. The 85% inclusion policy was announced in April, before the election.

As the member from Essex county, just outside Windsor, it was in my campaign brochure for everyone to see. They knew exactly what they were voting on. I wanted to ensure my constituents knew we had gone to bat for them and that we had incurred a change they wanted.

It does not only affect seniors. It also affects disabled Canadians. On average they receive $6,000. Overall those earning low incomes will pay less tax under the new proposal than they did under the 25.5%. Some will pay no tax. The majority will be better off.

I think Reform Party members should get their facts straight.

[Rob Anders, Reform, Calgary West, AB]

Madam Speaker, once again I am going to apply that litmus test question to that Liberal MP across the way with the quavering voice because she knows exactly what she did to those seniors.

The question is who wants it. I cannot personally believe that she had seniors in her riding begging for an 85% inclusion rate. I can believe that seniors in her riding were asking for a simplification. There is no way they were asking for that rate to be jumped from 50% to 85%. Shame on her.

That is a 70% jump in the rate and I bet my bottom dollar that not a single senior went to her office or spoke in a town hall or read her literature and said “by Jove, I want to see a jump in the rate I pay on this”. Shame on her.

[Susan Whelan, Liberal, Essex, ON]

Madam Speaker, with all due respect to the hon. member, I think he should be aware that I have discussed this with thousands of people in my riding. I have knocked on doors and talked about the issue. And no, no one would like to see it go from 50% to 85%. However, we want to treat all Canadians on parity.

All Canadians, especially those seniors he talked about who use our health care system who live in Canada, should pay their fair share of taxes. An 85% inclusion rate still recognizes that 15% of it is not taxable. They live in Canada and they use our health care system. So their neighbours are going to pay on 100% of their income and they are going to pay on 85% because we are recognizing that they paid tax dollars on that.

I believe that the majority of my constituents know and believe they want to be treated fairly and equitably with their neighbours. In case the hon. member is not aware, I have direct family members who are affected by this. We have discussed this. They have told me they want to pay their fair share of taxes. They do not want special treatment. As well, some of my family members are going to be under the amount that will have to pay taxes and they do not deserve to pay taxes, disabled Canadians, and they will be getting their money back, and the sooner the better.

The longer the Reform Party holds this up, and that is exactly what it is doing by delaying and delaying, these people will not get their cheques. I say to the hon. members across the way please support this bill and get it back on track.

[Rob Anders, Reform, Calgary West, AB]

Madam Speaker, I have just heard the admission I need. She made it right here in the House. She said no senior stood up and asked her for an 85% inclusion rate. Yet we have the government bringing this bill forward.

That says to me, it screams it out loud, I asked the question in the House but she just admitted it here, the only people who want it are her, the revenue minister and the finance minister.

While she has consulted with seniors, and nobody asked for an 85% inclusion rate, she stands here with pride in the House today and bellyaches about how she wants to see an 85% inclusion rate, how it is fair, but that nobody asked for it, nobody demanded it, nobody wanted it.

The only people who want are this Liberal MP and some of the people she is defending in terms of the finance minister and the revenue minister. In terms of equity, where is the equity when those people in the United States were putting in their tax money? They were being taxed at the point of source. They were being taxed on putting money into this fund and now they get taxed again on taking it out, but this time it is by the Canadian government. They got taxed by the United States going into it and they are getting taxed at an 85% inclusion rate by this government, by the Liberals, on the way out.

Once again I just want to drive it home for the seniors in Windsor. They said it in the House today. Nobody asked for an 85% inclusion rate but this government is doing it to them anyhow.

[Susan Whelan, Liberal, Essex, ON]

Madam Speaker, I believe the hon. member has confused the record once again. What the seniors in Windsor and Essex County said, and very clearly at the meetings I was at, is that they did not want a 25.5% withholding tax. They wanted that system changed. We told them up front that they cannot go back to the 50%. We have to do something new. We sat down with them and worked out the numbers.

Originally the majority of the people from the case group thought the 85% inclusion rate was fair because it benefited low income and middle income seniors. The people who are going to be affected or are going to have perhaps higher taxes than under the 25.5% are those who are in the upper income the hon. member speaks on behalf of.

Anyone in the middle or lower income under an 85% inclusion rate will pay little or no tax and will pay a lot less tax than under the 25.5% withholding tax. We cannot go back three steps. We have to move forward.

We were dealing with a 25.5% withholding tax. We have to go into the future and that is what we are doing.

I can guarantee we are fighting on behalf of low income and middle income seniors and all seniors so they are on parity with their Canadian neighbours, where as the Reform Party stands today and the numbers will show that it is only fighting for the rich.

[Rob Anders, Reform, Calgary West, AB]

Madam Speaker, if that member across the way has the audacity to say that people who make $7,000 a year above the basic tax exemption or better are the idle rich, shame on her.

Every person, every senior of those 50,000 who makes more than the basic personal exemption of roughly $7,000 pays that 85% inclusion rate; 85% if you make more than $7,000. Shame on her.

For somebody making $8,000 in a U.S. social security benefit, for her to claim those people are the idle rich when they make more than $7,000 on that and are going to pay 85% rate of inclusion, when it was 50% before, shame on her. How dare she stand before the House and call somebody who makes $8,000 the idle rich.

[The Acting Speaker (Ms. Thibeault)]

Is the House ready for the question?

[Some hon. members]

Question.

[The Acting Speaker (Ms. Thibeault)]

Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[Some hon. members]

No.

[The Acting Speaker (Ms. Thibeault)]

All those in favour will please say yea.

[Some hon. members]

Yea.

[The Acting Speaker (Ms. Thibeault)]

All those opposed will please say nay.

[Some hon. members]

Nay.

[The Acting Speaker (Ms. Thibeault)]

In my opinion the yeas have it.

And more than five members having risen:

[The Acting Speaker (Ms. Thibeault)]

Pursuant to Standing Order 45, the recorded division stands deferred until Monday, December 1, 1997 at the ordinary hour of daily adjournment.

The House proceeded to the consideration of Bill C-5, an act respecting co-operatives, as reported (with amendment) from the committee.

Canada Co-Operatives Act

[The Acting Speaker (Ms. Thibeault)]

There are two motions in amendment standing on the Notice Paper for the report stage of Bill C-5.

Motion No. 1 will be debated and voted on separately.

Motion No. 2 will be debated and voted on separately.

I will now propose Motion No. 1 to the House.

[Jim Peterson, Liberal, for the Minister of Industry]

moved:

Motion No. 1

That Bill C-5, in Clause 85, be amended by replacing lines 28 to 30 on page 49 with the following:

“(b) subject to subsection (8), appoint a director to fill the vacancy.”

[Eugène Bellemare, Liberal, Carleton—Gloucester, ON]

Madam Speaker, I am very pleased to rise today to speak at report stage of Bill C-5, an act respecting cooperatives. I am also pleased to report to the House on two supplementary amendments which came after the adjournment of deliberations on Bill C-5 by the Standing Committee on Industry.

The need for two more technical amendments became apparent just after the committee adjourned its hearings. We would like to put forward these amendments now.