House of Commons Hansard #50 of the 38th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was tax.


Budget Implementation Act, 2004, No. 2Government Orders

1:10 p.m.

The Acting Speaker (Mr. Marcel Proulx)

The question is on the motion. Is it the pleasure of the House to adopt the motion?

Budget Implementation Act, 2004, No. 2Government Orders

1:10 p.m.

Some hon. members


Budget Implementation Act, 2004, No. 2Government Orders

1:10 p.m.

Some hon. members

On division.

Budget Implementation Act, 2004, No. 2Government Orders

1:10 p.m.

The Acting Speaker (Mr. Marcel Proulx)

Accordingly, the bill is referred to the Standing Committee on Finance.

(Motion agreed to, bill read the second time and referred to a committee)

The House proceeded to the consideration of Bill C-10, an act to amend the Criminal Code (mental disorder) and to make consequential amendments to other Acts, as reported from the committee with amendments.

Criminal CodeGovernment Orders

1:10 p.m.

Ottawa—Vanier Ontario


Mauril Bélanger Liberalfor the Minister of Justice and Attorney General of Canada

moved that the bill as amended be concurred in at report stage and read the second time.

Criminal CodeGovernment Orders

1:10 p.m.

The Acting Speaker (Mr. Marcel Proulx)

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

Criminal CodeGovernment Orders

1:10 p.m.

Some hon. members


(Motion agreed to)

Criminal CodeGovernment Orders

1:10 p.m.


Mauril Bélanger Liberal Ottawa—Vanier, ON

Mr. Speaker, I believe if you were to ask it, you would find unanimous consent to see the clock as being 1:30 p.m. so that we can move on to private members' business

Criminal CodeGovernment Orders

1:10 p.m.

The Acting Speaker (Mr. Marcel Proulx)

Is it agreed?

Criminal CodeGovernment Orders

1:10 p.m.

Some hon. members


Criminal CodeGovernment Orders

1:10 p.m.

The Acting Speaker (Mr. Marcel Proulx)

The House will now proceed to the consideration of private members' business as listed on today's order paper.

Income Tax ActPrivate Members' Business

1:10 p.m.


Jeff Watson Conservative Essex, ON

moved that Bill C-265, an act to amend the Income Tax Act (exemption from taxation of 50% of United States social security payments to Canadian residents), be read the second time and referred to a committee.

Mr. Speaker, I am proud to announce that yesterday morning my wife, Sarah, delivered a beautiful son, Thaddaeus David, into the gentle hands of our midwife, at home with my children gathered around.

For much of my day I had the pleasure of spending time appreciating things of value, the nurturing help of my two daughters, Sophie and Emma, to their labouring mother, to my new son's big hands and long toes, and the quiet whisper of “Hi” from his 22 month old brother, Elijah, welcoming him to the family.

It is not only the start of life that is worth reflecting upon. Today my thoughts turn to men and women in their golden years. I am pleased to rise and speak to Bill C-265, an act to amend the Income Tax Act to grant an exemption from taxation of 50% to Canadian residents who collect U.S. social security as a basis of their retirement incomes.

The bill represents a near eight year promise kept to seniors in the riding of Essex to restore tax fairness. It also gives hope to tens of thousands of seniors across Canada from British Columbia to Ontario, from la belle province to the Atlantic, who have experienced the same plundering or their retirement income.

The bill is a reincarnation of two bills that were previously before the House which were sponsored by my distinguished colleague from Calgary Southeast who fought tenaciously, though unsuccessfully, to prevent a 70% tax hike on vulnerable Canadian seniors in 1997.

The bill would also gives form to the aspirations of my New Democrat colleagues from Windsor West and Windsor—Tecumseh who joined the House after the tax increase passed into law and who desire and have worked to see tax fairness restored to these seniors. I understand the member for Windsor West will be speaking shortly and I thank him for his support.

Together we have demonstrated an ability to work cooperatively across party lines. It is this cooperation in a minority Parliament that gives us and the seniors who we represent the most realistic opportunity to see the tax relief they deserve.

For government members opposite, it is my hope that they will support this measure.

My own quest to see tax fairness began with the stories of real people. They moved me to act for justice. I believe their stories will move all members of the House to endorse Bill C-265.

At issue here is the 70% tax increase in 1997 to Canadian seniors collecting U.S. social security. Bill C-265 seeks to reverse this tax hike by lowering the amount included for taxable income from 85% to 50%.

I am new to this chamber. In fact more than one-third of my colleagues are new to this chamber, so to understand how we arrived here I must take a couple of minutes to relive some painful history.

Canada and the United States signed the Canada-U.S. Tax Convention Act in 1984. Among other things, the act addressed the flow of social security benefits across the Canada-U.S. border, that is, t it dealt with the taxation of CPP or QPP and our OAS benefits received by persons resident in the U.S. and U.S. social security benefits received by persons resident in Canada. The tax treaty gave the power to tax benefits to the country of residence rather than the country paying the benefit.

Further, the rule was that only one-half of the benefit went into a taxpayer's income. For example, a Canadian collecting $15,000 benefit from the U.S. was taxable on only $7,500. This situation existed under the first and second protocols of the Canada-U.S. tax treaty up to December 31, 1995.

However something horrible happened to Canadian seniors. The Liberal government of the day entered into negotiations with the U.S. to change the tax treaty producing a third protocol. Taxing benefits moved from the resident country to the source country. Canadian seniors collecting U.S. social security were told shortly before Christmas 1995 that effective January 1, 1996, the U.S. would be withholding 25.5% of their benefits. This changed seniors' retirement assumptions entirely. Many low and modest income seniors were forced from their homes because they could no longer afford them. Moreover, they could not file a U.S. tax return to be taxed on a net basis. There was no way to avoid being taxed at 25.5%.

It was not the Grinch who stole Christmas 1995 from 85,000 Canadian seniors. It was their Liberal government in Ottawa.

However, rather than roll over, these seniors banded together to fight. A grassroots group was born in Essex called CASSE, Citizens Asking for Social Security Equality. It was an idea that soon drew thousands of seniors to rallies. It was not a glamorous army of idle rich seniors either. They came in wheelchairs and they came in walkers. One senior did not even have return bus fare because her fixed income was slashed. They gave the Liberal government every reason to go back to the U.S. to renegotiate the tax treaty.

After pressure on the then finance minister, on April 9, 1997 a fourth protocol was reached with the U.S. that restored taxation of benefits to the resident country as it had existed prior to December 31, 1995 under the second protocol.

The Liberals faced this issue and CASSE during the federal election in 1997. Seniors were told the new protocol would be revenue-neutral and should be supported. The issue was supposed to finally be over.

What the fourth protocol did not restore however was the 50% inclusion rate for taxable income that existed under the second protocol. Instead, it set the rate at 85%, a whopping 70% more than the pre-1996 rate. It was a crushing blow to seniors hoping to see their retirement income restored.

The fourth protocol was ratified by our members in the Bloc, not because it was fair but because it held the promise of retroactive tax rebates to affected seniors. The rebates proved to be few however because the 85% inclusion rate was also retroactive. Today, without those same urgencies but with the same need for justice to be swift, the bill gives Bloc members of Parliament the opportunity to fully restore tax fairness to Quebec seniors. I urge them to seize the moment.

During debates to ratify the fourth protocol, seniors were told many things by the government. The deputy prime minister of the day said that the move to the 85% inclusion rate would be revenue-neutral. Finance officials testified that that would not actually be the case. Of the hundreds of seniors affected in my region, I still have yet to meet even one who has received a rebate.

During these debates in 1997, seniors were told by the then finance minister, now Prime Minister, that the U.S. was moving quickly to ratify, so he and his government had no control over the inclusion rate. Federal finance officials testified before a Senate committee that Canada could have set the Canadian inclusion rate at zero if it wished.

During these debates seniors were told, believe it or not, to be grateful, that after all, Canadians collecting CPP in Canada have 100% of their benefits taxable. What the government failed to admit to seniors was that residents in the U.S. collecting CPP or QPP were treated far better than they were. In fact, a senior collecting Canada pension plan or Quebec pension plan in the U.S. has to earn about $59,000 Canadian before they have any income included at the 85% rate. The social security benefits worksheet provided to me by one of my constituents is absolute proof of that.

What seniors in Canada were not told by the Liberal government was that seniors in the United States pay no tax unless they are the richest of the rich. Eighty per cent of those collecting CPP or QPP in the U.S. pay no tax at all. A paltry six per cent pay at the 85% rate. By comparison, every senior in Canada collecting U.S. social security has 85% of his or her income taxable above the basic and perhaps the age exemption. Seniors at modest and the lowest income levels pay tax in Canada. If the inclusion rate had been restored to 50%, most seniors in Canada would have paid little or no tax.

Worst of all, during the debates of the fourth protocol, seniors in Canada were told to be grateful for their 70% tax increase because they had a public health system they never paid for. My predecessor in the riding of Essex not only argued this in this House, but she argued that the inclusion rate should have been 100%. It is right in Hansard . I could not believe what I read.

I would like to remind the House who these seniors are. These seniors are the women who waited six years alone or with small children while their husbands went to war to fight for Canada. These seniors are the men who sacrificed six of their productive years to the cause of freedom. After the war, these men and women married, built homes, paid for and raised money for hospitals, ambulances and schools. They built churches and helped build their neighbours' homes and barns. They spent every dollar they earned in neighbourhood grocery stores. They clothed their children with clothes from the local department store. They bought the cars their neighbours built. They volunteered in rural fire halls.

In my area these men and women helped start Windsor Medical, the first public health system in the province of Ontario. Liberals think these seniors should be happy for their inclusion rate not being 100% because they get a public health system? No, the government should be grateful these seniors built this country.

Canadian seniors who received U.S. social security more than paid their fair share. The government was wrong in 1997 to raise their taxes 70%. It is still wrong today, and it still needs to end this injustice.

That was yesterday for today's seniors. Let me talk about seniors today. We will find many of them in mobile homes dotting communities in British Columbia, Ontario, Quebec and the Atlantic. We will find others in tiny apartments or nursing homes living alone. Many have been forced to decide between paying for prescriptions or paying for utilities.

One woman in my riding has since survived cancer of the colon and of the right eye. Many are in wheelchairs because they can no longer walk. June, in the town of Harrow in my riding, told how her husband died recently of a heart attack. He died still under the stress of being unable to pay their bills. Now June is left to struggle with only her meagre social security and under the 70% tax increase from the government.

I can also talk about letters of great hardship, but valiant determination to fight by seniors in Quebec. I can talk about letters with horrifying stories. Joan and Ivan in Amherstburg in my riding told me that the 70% tax increase by the Liberals has “turned the golden years to sickness, sadness and bitterness”.

I urge ministers and even the Prime Minister to come with me on Monday to visit seniors in Viscount Estates in my riding of Essex. These are not sprawling mansions on hundreds of rolling acres in the countryside. Viscount Estates are not million dollar homes fronting on Lake St. Clair. Viscount Estates is mostly a mobile home community.

In the recent election, I knocked on every door there. I heard every terrible story. Not all seniors started their lives in Viscount Estates, but many ended up there because of the third protocol. They were promised by the Liberal government that the fourth and current protocol would make life better. Not one of the seniors still alive has moved out of Viscount Estates.

There are a couple of sad realities. The same seniors who had to leave their modest homes for mobile homes did not have the means to hire fancy lawyers to fight for them. They still do not. Nor can they launch full colour, glossy ad campaigns on billboards, in print or on TV. Instead, they have spent eight long years in suffering silence.

The other sad reality is that many are no longer alive to fight. The more than 85,000 affected seniors have been whittled away by disease and age. Eight years without reversing the 70% tax increase is not a strategy for justice and fairness. It is a wait and die attitude by the Liberal government.

My colleagues do not take my word for this. I urge my colleagues to pass Bill C-265 at second reading so that seniors from the west and the east, from Ontario and Quebec, those who can still make the trip to Ottawa, may come and tell their stories themselves.

My colleagues on the government side of the House pledged to lower taxes for low and middle income Canadians. These seniors will not believe it until you support a measure like Bill C-265. It will have a modest impact--

Income Tax ActPrivate Members' Business

1:25 p.m.

The Acting Speaker (Mr. Marcel Proulx)

May I remind the hon. member that all comments are to be made through the Speaker.

Income Tax ActPrivate Members' Business

1:25 p.m.


Jeff Watson Conservative Essex, ON

I apologize, Mr. Speaker.

My colleagues on the government side of the House pledged in the throne speech to lower tax for low and middle income Canadians. These seniors will not believe it until they see the government support a measure like Bill C-265. It will have modest impact to the treasury, but maximum impact to vulnerable seniors, and it will end a disgraceful chapter in Canada's tax industry.

It is my sincere hope at the end of this process that no fewer than 154 of my colleagues from all sides of the House, Conservatives, députés du Bloc, New Democrats and Liberals, will join me to help seniors like Olive Smith, Bill and Bette Sands, Roy McMillan and June regain their dignity.

Income Tax ActPrivate Members' Business

1:30 p.m.

Scarborough—Guildwood Ontario


John McKay LiberalParliamentary Secretary to the Minister of Finance

Mr. Speaker, the government opposes the bill because it creates its own inequities. Let me tell members why.

Let us take seniors, living in the estates to which the hon. member referred, who are receiving a Canada pension plan amount, for simplicity's sake, let us say $100. That $100 is included in their income tax return for the purposes of calculating their income tax liability. Now their next door neighbours who are fortunate enough to receive social security payments from the United States already get a $15 benefit on that same $100. Therefore, that $100 comes to those seniors living right next door to the others who do not receive Canada pension plan and who only have to include $85 in income for the purposes of the calculation. The hon. member's bill proposes that instead of including $85 in their income, that they only include $50 in their income. Not only is there an issue of fairness here, there is an issue of even greater inequity than presently exists.

The current protocol of 15% was negotiated between the countries so that there would be some reciprocity in terms of recognition between Canadians living abroad, in the United States in particular, and receiving Canada pension plan. They too get a $15 discount and that reciprocity is given to Americans living here receiving U.S. social security and paying taxes here.

In fact, the fairness issue is really quite clear. There is a significant inequity between people living side by side, one receiving a Canadian pension and being a resident here and another being a resident here and receiving an American pension. Therefore, I fail to understand the thrust of the hon. member's speech and his bill. I put it to him that he is not only building on an inequity that exists, he is creating a further inequity between pensioners.

Income Tax ActPrivate Members' Business

1:30 p.m.


Jeff Watson Conservative Essex, ON

Mr. Speaker, I remind the hon. parliamentary secretary that his government created an inequity when it negotiated the protocol. The 85% represents a maximum threshold for inclusion. I go back to these statistics again.

The purpose of a Canada-U.S. tax treaty, as I would understand it, is so residents in each country have some equitable treatment. That 85% inclusion rate is a maximum in the United States. Only 6% of those collecting Canada pension plan or Quebec pension plan who are resident in the United States actually have 85% of their income included for taxation. In Canada 100% are included at 85%.

If the Liberal government wants to create a situation of equity, perhaps it could grade in the same type of situation. However, the reality is there is another way to skin the cat. If those who are collecting Canada pension plan are simply being taxed too high, we could also lower their taxes to be equal with others.

Income Tax ActPrivate Members' Business

1:30 p.m.


Rob Nicholson Conservative Niagara Falls, ON

Mr. Speaker, I want to congratulate the member for Essex. He is picking up on a real injustice that has taken place in Canada and that affects about 85,000 Canadians. I want to point out that a lot of those Canadians live in border communities. The hon. member is from the Windsor area. Hundreds of those individuals live in the Niagara Falls, Fort Erie and Niagara-on-the-Lake area. They are very much disadvantaged and hard done by.

What the parliamentary secretary did not point out was that those social security premiums those individuals paid all those years were not tax deductible against their American income tax. In fact, Canadians working in the United States were taxed at the very highest rate, much higher than if they had been residents of the United States. They were taxed at the highest rate. They did not get a deduction for the social security premiums, unlike his example of the individual who collects Canada pension plan. That individual did get those deductions all the way through. The 50% inclusion rate was a matter of being fair. What was unfair, was that it was changed.

He and all members of the Liberal Party know that this was very unfair to people who had planned their lives and their retirement upon getting American social security and then the tax changed from 50% to 85%. This is why I applaud and completely support the initiatives by the member for Essex. These people should not have to wait until there is a Conservative government. It should be done now. It should be done in this Parliament. This should be rectified. They do not have to wait until the Conservatives are the government of the country again.

Income Tax ActPrivate Members' Business

1:35 p.m.


Jeff Watson Conservative Essex, ON

Mr. Speaker, I applaud my hon. colleague. My thoughts are on the people back home who are watching. I am thinking of Olive Smith who had to watch and care for her bedridden husband until he passed away recently. She is living in Viscount Estates. I do not think she finds the government's position on opposing this bill any amount of comfort.

An injustice was committed by the government. I am of the opinion that we do not raise taxes on people after they have already retired. That is what the government did. It is cruel, it is heartless and it needs to be overturned today.

The best thing to do would be for the government to include it as a line item in its upcoming budget. Barring that, I believe we will have the support from the opposition parties in the House to finally correct an injustice.

It is a shame that the government cannot bring itself to recognize it has perpetrated a cruel injustice on tens of thousands of seniors who live in mobile homes, apartments and nursing homes. It is a travesty. I should not be here today to do this. The government should have had its own responsibility in order and done this back in 1997. However, I am glad I am here today to ensure that this happens.

Income Tax ActPrivate Members' Business

1:35 p.m.


Michael John Savage Liberal Dartmouth—Cole Harbour, NS

Mr. Speaker, I am pleased to take part in the debate on Bill C-265.

I would like to first congratulate my colleague from Essex and his wife on the birth of their son. I had the chance to meet them early in our respective careers as parliamentarians at an orientation session, and I wish them both the very best.

Bill C-265 proposes to extend the exemption from tax granted to U.S. social security benefits from 15% to 50%. The government does not support this bill. The 15% exemption that already exists is a concession negotiated in a treaty that already represents some departure from basic tax policy principles. Extending the exemption to 50% would exacerbate the situation.

I believe that it would be helpful for members of the House to have the benefit of some history regarding the taxation of social security benefits as set out in the Canada-U.S. tax treaty and why it is that we have agreed to the 15% exemption.

The history has been complex and the current state of affairs represents the delicate balance between competing interests, a balance which the Conservative member's bill ignores. The Canada-U.S. tax treaty included rules for the taxation of social security benefits paid by one country to residents of the other since 1984. The evolution of these rules has progressed in three distinct phases.

Between 1984 and 1996, the treaty contained a residence-based taxation rule. Only the country of residence was allowed to tax social security benefits. During this time a resident of Canada receiving U.S. social security benefits would only pay tax to Canada. There was however a 50% deduction in computing taxable income in respect of those benefits because at that time the U.S. only taxed a maximum of 50% of U.S. social security payments. This represented a tax advantage over Canadian benefits, which were fully subject to tax.

In addition, U.S. residents receiving Canadian benefits were not subject to Canadian tax and so benefited from the 50% maximum inclusion rate in the United States. One consequence of this was that high income U.S. taxpayers did not pay the tax on old age security benefits, which applies to incomes above a certain level.

This residence-based rule was seen to be unfair. There were calls to change the rules so that all recipients of Canadian benefits were taxed in the same way regardless of residence, and so the rules were changed.

In 1995 Canada and the United States agreed to replace the residence-based rule with a source-based rule. In other words, the new rule would allow only the country from which the payment arose to tax that benefit. The result was that a Canadian resident receiving U.S. social security benefits was taxed only by the United States.

In addition, the maximum inclusion rate under U.S. law had risen over time from 50% to 85%, so a U.S. citizen in receipt of U.S. benefits would be subject to ordinary U.S. rates on a maximum of 85% of that income. If the recipients were Canadian residents, they would either pay U.S. rates or, if they were U.S. citizens, they would be subject to a final withholding tax. This rate was computed as 85% of the standard U.S. withholding rate of 30%. This was a final tax and was non-refundable.

For high income Canadians this tax was usually acceptable since, if they had to pay tax in Canada on this income, their marginal rate of taxation would likely have been higher than 25.5%. However, for low income taxpayers who otherwise rely on the progressive nature of the Canadian tax system to fairly distribute the tax burden, the 25.5% withholding tax constituted excessive taxation and caused, in many cases, severe hardship.

These taxpayers, had they been subject to tax in Canada on this income, would have paid little or no tax. Because they were subject to U.S. taxation, a quarter of their income was lost.

Conversely, U.S. residents receiving Canadian benefits under this rule could choose between the 25% withholding tax or, if they filed a tax return in Canada, graduated income tax at ordinary rates. For low income U.S. taxpayers, this meant they paid little or no tax.

At that time there was a great discrepancy in the taxation of these benefits to the detriment of many low income Canadian seniors. Canada and the U.S. recognized this unfair treatment and we came together again to change the rules.

To relieve hardship on low income Canadians, we agreed to restore residents only taxation. The current rule provides that social security payments are taxed as if they were payments from the home country's benefit plan. A Canadian recipient of U.S. social security is treated as if the payment were from CPP, QPP or OAS.

United States recipients of QPP, CPP or OAS are treated as if they were receiving U.S. social security benefits. This meant that Canadians receiving U.S. benefits could avail themselves of the graduated rates of our tax system and were no longer subject to a flat 25.5% withholding tax. As mentioned, the maximum inclusion rate in the United States had changed from 50% to 85%.

As a concession to the United States, we agreed to the 15% exemption for these benefits to match the maximum inclusion rate in the U.S. However, any rationale for returning to a 50% exemption based on an analogy to the U.S. rules disappeared once these rules were changed. That is the history of the taxation of social security benefits between Canada and the United States. That is pretty exciting too.

As the history reveals, it is a complicated issue. It also shows that any rule will advantage some over others. What is important is to find a rule that makes sense, that is fair, and that avoids imposing hardships on taxpayers who are least able to adapt to such hardships.

We have such a rule. While some higher income taxpayers may complain that they were better off under the previous regime with a U.S. withholding tax, the concerns regarding low income taxpayers were more urgent. Many of these taxpayers were simply not in a position to absorb a high withholding tax.

While a 15% exemption is a departure from the basic principle that individuals in similar circumstances should pay a similar amount of tax, it represents an agreement stemming from a process of careful negotiation. Extending this exemption to 50% would be completely out of line with tax policy and would fail to take into account the history of how the current exemption was reached. I therefore ask hon. members to join me in not supporting this bill.

Income Tax ActPrivate Members' Business

February 4th, 2005 / 1:40 p.m.


Robert Bouchard Bloc Chicoutimi—Le Fjord, QC

Mr. Speaker, I must inform you immediately that the Bloc Québécois supports Bill C-265. I want to congratulate the member for Essex for his initiative in introducing this bill. I also want to congratulate him for something else: his wife, Sarah, has given birth to a son weighing 9 pounds, 15 ounces. Congratulations to the member for Essex and his wife, Sarah.

As my party's Canada Revenue Agency critic, I am pleased to speak in support of this bill. I hope that the House will support it, since it aims to restore equity and justice for those concerned.

In short, this bill rolls back the tax rate from 85% to 50% for Canadians and Quebeckers receiving social security from the United States. People might think, at first, that this bill is not very important. However, it affects approximately 85,000 Canadians and about 10,000 Quebeckers.

In the past, a number of bills have amended various measures on benefits paid to Canadian and Quebec taxpayers. A number of agreements between Canada and the U.S. have been negotiated and become law.

First, I want to talk about the most recent, and fourth, agreement on this, which was signed in July 1997 with a number of other countries, including the United States. Under this protocol, only the countries of residence were able to tax social security benefits. Since then, Canada has been able to tax American benefits paid to residents of this country, and vice versa.

The problem is that it gave Canada, under the U.S. Social Act, the right to increase the tax rate from 50% to 85%. Bill C-265, before us today, seeks to correct this injustice. The Bloc Québécois supports it, because it rectifies an error the Liberal government made in 1997.

As I mentioned earlier, several thousands of Quebeckers left their families to go work in the United States, often for years, and were punished by the provisions of this legislation. These are people who, in many cases, were close to their roots and did not want to leave their country for the United States.

The 1997 amendment to the act made it possible for the federal government to generate substantially higher revenues on the backs of seniors and the vulnerable. However, it is important to understand why Bill C-265 has been introduced in the House today and how it corrects a past error.

Historically, there have been four protocols which modified the income tax convention, providing that social security benefits would only be taxable in their country of origin. At the time, social security benefits in the United States were exempt from income tax. It was only in 1984 that they were taxed in the United States for the first time. Thus, the total taxable amount of benefits rose from 0% to 50%, depending on the taxpayer's net income.

Families and individuals on low incomes usually paid no tax on their benefits.

After that came the second protocol amending the Canada-U.S. Tax Convention Act in March 1984. This made social security benefits taxable in the country of the taxpayer's residence. It was at that time that 50% of benefits were made tax exempt. For example, an American citizen residing in Canada was taxed on 50% of the benefits received from the U.S.

Later, a third protocol was signed in March 1995 giving the source country the exclusive right to tax social security benefits. That meant that the United States taxed social security benefits leaving its territory and being paid to a resident of Canada at a rate of 25.5%, while that taxpayer was not taxed in Canada on benefits received from the U.S.

To return to this fourth protocol which amended the tax agreement; as I said before, it was signed in July 1997. It provided that benefits paid under U.S. social security legislation to a resident of Canada would be taxable only in Canada, as if they were benefits under the Canada Pension Plan or Quebec Pension Plan.

Under this agreement, the tax rate is 85% of the payments made to Canadian residents. Note that in the United States, the tax rate depends on the net income of the taxpayer. For example, for a single taxpayer living alone, the tax rate varies from 0% to 25% for a net income of $0.00 to $25,000. Furthermore, if this same taxpayer receives social security, he will be taxed at a gradual rate for any amount exceeding $18,000.

The protocol states that payments made pursuant to social security legislation in Canada to a resident of the United States are taxable only in the United States. Essentially, the purpose of Bill C-265 is to reduce from 85% to 50% the tax rate on United States social security payments received by Canadian taxpayers.

It is now 2005. For 20 years now we have been trying to find a fair and equitable solution for all Quebeckers and Canadians dealing with this problem.

I want to remind the House that there are thousands of Quebeckers and Canadians living, for the most part, near the border and who are subject to the impact of Canado-American tax reforms. This is a costly measure, but it is insignificant compared to the thousands who have sacrificed their lives and their families to work far from home. These people wanted to stay here and keep their identity.

I also want to remind the House that, between the two governments, there are different tax measures. That is why we support this bill to close the gap between Canada and the United States.

We support lowering the tax rate on benefits paid to Quebec and Canadian taxpayers, from 85% to 50%, because it corrects a certain injustice. That is why I once again congratulate the member from the riding of Essex for having introduced Bill C-265, which we will support.

Income Tax ActPrivate Members' Business

1:50 p.m.


Brian Masse NDP Windsor West, ON

Mr. Speaker, I am pleased to rise this afternoon to debate Bill C-265. I am pleased to say the New Democratic Party will be supporting the bill. I would like to commend the member for Essex for his diligent work on this file.

I would also like to extend my congratulations to him and his wife Sarah and the rest of his family on the birth of their son David. It is difficult to commute between Ottawa and Windsor. It is stressful on a young family. However, there is better representation in the House when there are members here are at different life stages. I am glad he is doing that with his family here.

I want to tackle another important element of this file. There have been some eloquent presentations about the history of the treaty and how it has changed over time. The bottom line is that after all is said and done, this is about justice for a group of citizens who at a time when they are most vulnerable have found that the rules have changed.

I cannot understand why the government cannot say it made a mistake. I cannot understand why it cannot admit it had a negotiation problem and failed Canadians. I cannot understand why it cannot change this. The government did that today with respect to the Canadian flag lapel pin being made in China. When the Liberals were answering questions the other day, they knew that was not the actual fact and they came back today and changed it. I give them credit for that.

We should judge our society by the way we treat our most vulnerable individuals and it is those individuals we are talking about today. We are talking about people who have saved for their retirement, have planned for their golden years, and have now had the rules changed out by a deal in Washington and by a government in Ottawa. It affects their ability to live and prosper and to be effective members of our community. This is unacceptable.

It has been pointed out that Canadians across the country are affected by this, which is true. I have heard from people in Winnipeg, Nova Scotia, British Columbia and Quebec. I have heard the same story every time. These people were expecting something to be delivered in terms of their income but suddenly the rules changed and their lives changed dramatically. Some of these people lost their homes. Some of them lost their self-esteem. They lost their ability to contribute to such things as their grandchildren's education or to other family initiatives. They can no longer do this because their income has been lowered. This has affected them in many ways. It is insulting.

The government has said it had to do this because one individual was paying more than another. I have not had a single complaint from anyone anywhere suggesting that seniors are ripping off the tax system. I do not know where that notion came from. I do not know who thought it up. I do not know if members of the Liberal Party are just listening to the bureaucrats.

Where are the throngs of Canadians who are saying our seniors are ripping off the Canadian tax system and that those seniors had better be brought into line? Through all the discourse on this issue, from all the correspondence I have received, and all the new stories about this, I have never heard that. It makes absolutely no sense and it is insulting.

There is a history in the House of Commons of waffling on this issue. This has not come just from the Conservatives, the Bloc, the NDP, or the Liberals. Some of the Liberals have flirted with the idea of fixing this, but for whatever reason they have not found the political courage to tell the civil servants to fix this, that they laid the boots to these people. The Liberals should tell them to stop doing this and fix it.

The member for Windsor--St. Clair, who was speaking in the House of Commons on February 23, 2001, said:

Mr. Speaker, both the finance minister and the Deputy Prime Minister acknowledge the problem yet have chosen to do nothing about it. When will the government take action to address the gross injustice faced by the Canadians asking for social security fairness?

The secretary of state responded:

Mr. Speaker, I assure members this is an issue we have under consideration and we are pressing for changes.

The Liberals were pressing for changes back in 2001. What happened to that political courage? What dissipated at that moment in time that we did not see something fixed by 2005?

The government could do that now. It could fix it now. The Liberals have control over that. They would only be congratulated by members of the opposition who are unified in this. We will drag the government there kicking and screaming. One way or another we are going to fight for this. We are going to make it really painful if the government does not restore the fairness and justice for our seniors.

Back in history it was some of the Liberals' own members who said, “We are pressing for changes”. Where are those members now?

The hon. member for Windsor--St. Clair followed it up with another question in the House of Commons:

Mr. Speaker, when this session of parliament began I called upon the Deputy Prime Minister to explain his government's inaction in addressing the concerns of thousands of Canadians faced with crippling taxes on their U.S. social security benefits. The Deputy Prime Minister, the Minister of Finance and the Secretary of State for International Financial Institutions have all promised that they would take some action. Yet five months later nothing has been done. When will they move on this issue? When can we expect a response from them?

Answering this question was my predecessor, the member for Windsor West, the right hon. Herb Gray:

Mr. Speaker, as I pointed out in a letter to my hon. friend, I believe in February--

That is correct. He had the date correct:

--I have raised this matter with the Minister of Finance. He assures me that he and his officials are looking into it.

They were looking into it. They could have changed it then. It got lost again. I do not know why. It does not make any sense, especially when his colleague at the time said, “We are pressing for changes”.

Where was the direction to the department to say that changes were necessary? We saw that today when the Minister of Public Works went back and said, “Those lapel pins should be made in Canada”. We shut down a Canadian business. It was wrong. He went back and told them because he had the courage to do so. He came to the House of Commons and said, “We were wrong”. Why can that not be done for our seniors as well?

Once again the side by side analysis is insulting because I do not know of any seniors in Canada who are clamouring for support to make sure unfair taxation happens to their neighbours.

I would like to refer to another question, again by the member for Windsor--St. Clair. He said:

Mr. Speaker, the former Deputy Prime Minister and the former Secretary of State for International Financial Institutions assured the House on a number of occasions that action would be taken....There is still no action. When will it be addressed?

The hon. Prime Minister, who was the minister of finance at the time, said:

The fact is that this is part of a treaty with the United States and we are bound by the provisions of that treaty. Canada negotiated that treaty under this government and improved it substantially.

That is wrong. We knew that answer was wrong. There I think we saw the drift of things. We know that there was testimony at the Senate committee. This is a quote from the Senate committee:

It would be possible to provide further exemptions...if that were thought to be appropriate. It would not be necessary to seek agreement with the United States on that.

We know that the testimony contradicts that.

In summary, I would like to once again say to the member for Essex that I am glad he has brought forward Bill C-265. I think the government has a lot of accounting to do for itself with regard to its treatment of seniors, but this is an opportunity for it to correct things.

Once again, how is the government going to be able to validate its argument? Others believe this is unfair to them. What we do know is that it affected a lot of people and everybody wants this corrected. The people who are affected, their neighbours, their friends, their families, none of them object to that, and none of them will object to this bill.

Income Tax ActPrivate Members' Business

2 p.m.


Dick Harris Conservative Cariboo—Prince George, BC

Mr. Speaker, as the member for Windsor West just said in his presentation, we are going to continue the fight for the passage of Bill C-265. We are going to continue to press the Liberals to live up to their thus far broken promises of two elections ago.

We are going to continue that fight led by my colleague from Essex, a brand new MP who has a fire burning in his belly for the seniors who are a particular part of this bill. We are going to be joined by the NDP and the hon. member for Windsor West, who is leading the charge on behalf of that party, and by the Bloc Québécois. We are going to continue this fight because what we are dealing with is an attempt to rectify one of the cruelest tax grabs in the history of this country, a tax grab put onto over 80,000 seniors in this country by the Liberal government when the current Prime Minister was the minister of finance.

Mr. Speaker, I am going to tell you a little Christmas story if I may. I know you like Christmas. I just want to explain how the Liberal government, when the current Prime Minister was the minister of finance, spoiled Christmas and devastated Christmas dreams in 1995 for over 80,000 Canadians. I will be quoting as I tell this story.

During the Christmas season of 1995, most Canadians were enjoying Christmas, preparing for that special day when the family would get together and they would talk about how blessed they were to be living in such a great country, although yes, it is difficult to get by for some Canadians, including our seniors who are existing on pensions.

In this case they were seniors who had spent some time living in America, had qualified for social security benefits, and had moved back to Canada for whatever reason, but they were getting pension benefits. And particularly for those seniors, over 80,000 of them, here is what happened to them. They received a Christmas letter that shattered their lives.

It is important to point out that these were Canadian seniors who had already retired. They had already spent many years looking down the road to see how their retirements from their working days were going to be. They had made plans. They had set aside funding to supplement whatever pensions they were going to get, and for all intents and purposes, they had their plans all set.

They were on fixed incomes and they were going to receive pensions: first, a social security pension from the U.S., and second, a pension from the Canadian pension plan. They were quite satisfied to live with the fact that 50% of what they were receiving from the United States was going to be taxed in Canada. They were quite satisfied with that. They were getting by because they had made plans.

Suddenly they got a letter in December 1995 from the U.S. social security administration stating that beginning on January 1, 1996--and we must remember that this was December 1995--there would be a 25.5% non-refundable withholding tax applied to their benefits. This came out of the blue. Why? Because the Canada-U.S. tax treaty had been amended to allow the country that issues the benefits to collect the tax. We are talking about maybe three weeks' notice about this after they had spent years planning how their retirement incomes were going to go. We are talking about three weeks' notice that a tax increase was coming to these seniors who were living on their pensions and whatever other personal savings they had been able to put away. This was a life-changing thing.

The current Prime Minister, who was the finance minister back in those days, is the same minister who promised tax fairness to every Canadian in the 1993 red book. However, as the current Prime Minister says, he used some expletives in describing the red book, which I will not do in the chamber because it is not allowed, but he admitted that he wrote the red book and that fair taxation was in the red book. This is another example of a broken promise. He wanted to beat the crap out of seniors with punishing taxation measures and have them only three weeks' notice.

It was in December 1995 when they would have received it and it was to go into force on January 1, 1996. It did go into force and it caused severe hardship to this particular group of 80,000 and some seniors.

In 1997 or thereabouts the protocol changed again. Most seniors listening to the election promises of the Liberals prior to the 1997 election believed that they would revert back to the original 50% inclusion.

What happened was that the new protocol now said that Canada would collect all the taxes but that instead of the 50% threshold, it would be increased to 70%, up to 85% of what they were getting in social security payments. This represented a huge tax grab and would further destroy the financial plans of these 85,000 or so seniors.

I think it is important to point out that all the time that this was going on, the current Prime Minister, who was the minister of finance at that time, was also talking about closing some offshore tax havens, which he did. However, while he was beating up on this group of seniors with this punishing amendment to how the taxes between the two countries would be collected, he was closing some of the offshore tax havens for shipping but managed to leave open the Barbados connection to which most of his ships were registered. This multi-millionaire created a tax haven to unfairly collect tax refunds and tax exemptions that most Canadians could never in their wildest dreams imagine would happen to them, unless of course they were the finance minister making the rules.

I am very proud of the member for Essex who has made a commitment to the seniors in his riding. There was so much pressure on these seniors that they had to band together and form an organization in order to add a little more clout to what they were saying. The group is called seniors asking for social security fairness. I guess fairness is the word.

The member for Essex has spent a lot of time discussing this discriminatory tax protocol with them. He understands their plight and he understands how the sudden imposition of a new tax level has caused them a lot of distress, which is something they do not need in their golden years.

I congratulate the member for Essex who, given the demonstration since he came to this Parliament, will be around for many years and for many Parliaments to come. He is a dedicated young man and one who has just added a new member to his family but here he is today fighting on behalf of about 85,000 seniors who have been victims of this very discriminatory, unfair and cruel tax grab perpetrated by the Prime Minister of Canada, who was the finance minister back when this all took place.

I thank the NDP, the Bloc Québécois and all our caucus members. I hope all those over there who know this is right will have the courage to support the bill brought forward by the member for Essex.

Income Tax ActPrivate Members' Business

2:15 p.m.

The Acting Speaker (Mr. Marcel Proulx)

The time provided for the consideration of private members' business has now expired, and the order is dropped to the bottom of the order of precedence on the order paper.

It being 2:15 p.m. the House stands adjourned until Monday next at 11 a.m., pursuant to Standing Order 24(1).

(The House adjourned at 2:15 p.m.)