Mr. Speaker, I recently asked the government if it would consider amending the Income Tax Act by making a subtle change so that business fines, penalties and levies would not be considered legitimate business expenses and, therefore, tax deductible. It was my argument that when the Income Tax Act was first put together and approved, surely Parliament never intended that breaking the law would be considered tax deductible.
When it first came to my attention in 1999, when the supreme court ruled that this was in fact the case, that fines and penalties could be tax deductible, I was shocked. We cannot deduct our parking tickets or speeding tickets, but if a business gets fined $1 million for dumping PCBs into the Red River in my home province of Manitoba it can deduct that on its income tax providing it was done in the course of operating its business or its enterprise. Most Canadians would be horrified to learn that.
It is my argument that Parliament surely never intended that. However the act is silent on the issue and therefore the supreme court, when it had to deal with it, had no alternative but to say that under the current act a business can deduct its fines.
Surely there are other good arguments reasonable people can see here. It undermines the deterrent value of a fine if that fine can be reduced simply by filing it in our income tax. A business in British Columbia , for example, was fined $270,000 for an offence, wrote the money off on its income tax and received $125,000 back. A business might even get more back depending on its tax status in that particular year.
When the courts dealt with the law, they pointed out that if the act was silent on it then they had to ask whether Parliament was aware of the situation and whether it deliberately left the act silent on the issue.
Justice Bastarache reasoned that Parliament could not have intended to permit the deduction of fines under the taxing statute because that would have had the effect of undermining the effectiveness of the fine under the penalizing statute. In other words, the taxation statute would be undermining the impact of the statute under which the person was fined. It would be a contradiction. However the court ruled that the fines do stand.
Parliament has had the opportunity to deal with the issue of writing off fines as tax deductions. In 1994 we stopped the practice of allowing bribes to be deducted as a business expense.
We should note that in 1969 the United States passed legislation to specifically deny any penalty or fine ordered under law as a tax deduction. The United Kingdom and other countries have done the same. Therefore I was not satisfied with the answer I received from the government on this issue.