Mr. Speaker, I will take this opportunity to say a few words about Bill C-28, the budget implementation act.
I do not know if it is common knowledge but my riding of Winnipeg Centre is the third poorest riding in the country by whatever economic measurement we use, either by the incidence of poverty per the percentage of people living in poverty or by the average family income. By either of those measurements I am not proud to say that my riding of Winnipeg Centre, the core area of the inner city of Winnipeg, ranks third in the country. In fact, 47% of all the families in my riding live below the poverty line and 52% of all the children in the core area of Winnipeg live below the poverty line. It is even more severe in using that family income measurement.
I do not say this to complain or file a grievance of any sort but only to emphasize that we watch the introduction of new budgets with great interest. When so many of the people in my riding are marginalized or live close to the margin, government spending becomes key and paramount in their quality of life issues.
We looked forward to a return to social spending within the last budget with some optimism. As my colleague from Winnipeg North Centre, the riding next to mine, pointed out very capably and passionately, the budget was a great disappointment in many respects if we were looking for a return to social spending, but I am not going to dwell on that.
With the limited amount of time I have, I would like to point out two anomalies in the income tax system that could have been addressed and should have been addressed in the budget. Both are outrageous and both are unfair, especially to lower income, marginalized people such as those living in poverty in my riding.
First, surely Parliament never intended that breaking the law should be tax deductible when the Income Tax Act was crafted. Because of a 1999 Supreme Court ruling, businesses incredibly can deduct fines, penalties or levies from their taxes as a business expense provided the penalty was incurred in the course of earning income. Most Canadians would find that absurd. I find it outrageous. It is not only bad public policy to reward bad behaviour but it undermines the deterrent value of a fine, surely, if the guilty parties can have their fines automatically reduced by writing them off on their income taxes. It is crazy.
I have been badgering the government for years to plug that outrageous tax loophole. The whole issue could be resolved with a simple amendment to the Income Tax Act to make it clear that any fine or levy imposed by law on a taxpayer is not to be considered a tax deductible expense.
That is what the United States did 35 years ago and we have failed to do it. As a result, it is open season for anyone who incurs a fine, and that fine can be quite broad. In fact, chartered accountants across the country are advertising this on their web pages. Fully 36 chartered accountant firms we have found are advertising this on their websites. “Penalties, fines, we can help”, it says, “it should be noted that the Supreme Court is very clear that this case is not limited to the situation that it originally ruled on”. They say that other penalties incurred for the purpose of earning income, including GST penalties, provincial sales tax penalties, parking fines and it goes beyond that to workplace safety and health violations, environmental pollution, environmental degradation fines are tax deductible. They should not be.
I asked the revenue minister to address this issue back in 2002 as soon as I learned about it. It was actually the attorney general of Manitoba who wrote me and said “Can this be true? Can this be for real? Are you telling me that fines are tax deductible?”
I could not believe it, so I investigated it and sure enough, it was true. I asked a question of the revenue minister back in 2002. I cannot find the question now but I said that I could not deduct my parking tickets, so why could a business deduct its fines? At the time the revenue minister, to her credit, agreed and was reasonable about it. She virtually agreed with me that this had to be looked into because it did not sound right.
Six months passed and the government did nothing about it, so I asked her again. This time she hedged the question and said that it was really a matter for the Minister of Finance. I asked the Minister of Finance when he was going to correct this outrageous tax loophole. He said that we would be pleased with this year's budget, that the answer to my question would be found in this year's budget. Well, it was not there. The government decided not to plug that outrageous tax loophole.
Here is an example. Last November the courts penalized Canada Steamship Lines with the largest fine ever issued for ship source pollution, but the deterrence value of this fine clearly is undermined because our income tax laws allow CSL to write off the penalty as a business expense. We do not know if it will because that is private tax information and we do not have access to that information, but it could and many others do.
I can see why the former finance minister was loath to plug this outrageous tax loophole, but what about the current finance minister? What excuse does he have to not plug this outrageous loophole? That offends me and I raise it now and serve notice to members on the government side that I am not going to let this issue die.
I tried to introduce a private member's bill to this effect. The House leader blocked it, saying that to deny this tax loophole to criminal behaviour was tantamount to raising taxes and therefore it was a money matter, and therefore a ways and means motion was needed to precede the private member's bill. What an absurd argument, but it was upheld by the Speaker, I regret to say. That is the first issue that should have been addressed in the budget.
The second thing, with the little time I have left, is that many people would be surprised to learn that the highest taxed Canadians are not millionaires, nor are they people who make over $100,000 a year. People who make over $100,000 a year are in the highest category at 46%. We should know that, as that is the bracket in which MPs find themselves. The highest taxed Canadians are actually low income seniors whose earnings are so low that they qualify for the guaranteed income supplement.
Here is what happens to low income seniors. Anything they earn above the basic deduction is taxed at 26%, but dollar for dollar they lose their guaranteed income supplement at a rate of 50%. We are talking low, low income here. If seniors are lucky enough to enjoy some dividends from small investments they may have made during their lives which supplement their retirement incomes, but they are receiving some guaranteed income supplement, they are losing that at 50%, plus they are being taxed at 26%, for a total of a 76% tax bracket.
Low income seniors are in the highest tax bracket in the country and that is wrong. They are arguably the poorest people in society. Anybody who is poor enough to qualify for the guaranteed income supplement is very poor. However, because of an anomaly in the Income Tax Act, they are paying taxes at 76% on any dollars they make above the basic tax exemption. That is absurd. That is as outrageous as the tax write-off for business corporate fines.
Both of those things could have been and should have been addressed in the budget. We made the government aware of both of those issues and it consciously chose not to address them.