moved that the bill be read the third time and passed.
Mr. Speaker, as you have indicated, this involves tax treaties with a number of countries including Denmark, Iceland, Kazakhstan, Lithuania, Sweden and The Netherlands, but most important or certainly most in the news has been the amendments involving our treaty with the United States of America. This important amendment is taking place in terms of social security benefits which are paid by the American government to people living in Canada.
The effects of this tax apply basically to about 60,000 Canadians. About one-third of these are low income residents of Canada who are still in receipt of U.S. social security benefits.
Under the current law the Americans are entitled to withhold 25.5% of these social security payments they make to people living in Canada. Where these recipients, approximately 20,000 of them, lose out is if they were taxed at ordinary Canadian income tax rates on these benefits, their tax rates, because they are in lower income brackets, would be much lower. Therefore, this blanket withholding of 25.5% by the Americans is a detriment to these particular residents of Canada.
This is why we have undertaken on their behalf to renegotiate this treaty to ensure that they can be taxed not by the source country, the United States, by way of withholding, but in Canada where they would be taxed on their net income. Many of these low income residents of Canada will end up paying no taxes whatsoever.
For recipients of U.S. social security benefits who are in higher tax brackets, there will also be a relieving position which comes about because only 85% of the benefits will go into taxable incomes, rather than 100%. This is mirroring the way the United States would tax its residents on this income.
This bill has gone through the House for second reading where it received great support from all sides. It has gone to both committees where they have sent it back unamended. It is of course important that we enter into these new treaties with new trading partners so that Canada can continue to be at the forefront of avoiding double taxation and encouraging international investment, international flows of currency, international jobs, but particularly in terms of our provisions dealing with the Americans.
It is very important that we make these relieving provisions so that we can get on with the job of making sure that these people are treated fairly by both the United States and Canada as it relates to their social security benefits.
I would like to repeat what the hon. member for Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques said about getting the co-operation of all parties because the main purpose of this bill is to remedy a fundamental inequity for low income persons.
We expect that as soon as this passes—and we certainly hope to have the unanimous support of all members of the House—that it will be signed into law very quickly and receive royal assent. We understand that the United States has done all that is necessary except receive presidential signature on this bill. As soon as it goes through, we would expect that within a few weeks, or in as short a time as possible, refund cheques will be sent out. Revenue Canada will be co-operating with the U.S. revenue authorities to track down every person who might have been unfairly prejudiced over the last two years by these provisions.
We expect, with the support of all members, to be able to correct this inequity and to make sure that the taxpayers in Canada who have been unfairly prejudiced are going to get their refunds.
I thank all members of this House for their splendid co-operation on this excellent bill.