Mr. Speaker, I am happy to speak about this issue today. I also had the opportunity to talk about Bill C-265.
This is not the first time a bill on taxing social security payments has come before this House. In November 2004, my Conservative colleague was on this side of the House, and we shared his joy when his spouse gave birth to a child. Naturally, we congratulated him.
Today, I congratulate him on again raising this issue by introducing Bill C-305. The purpose of this bill is to reduce the tax rate from 85% to 50% for Canadians and Quebeckers who receive United States social security payments.
At first glance, this bill might not seem very important. But this issue affects thousands of Quebeckers and Canadians. For over 20 years, we have been looking for an equitable way to solve the legislative problem facing Quebeckers and Canadians.
Why could Canadian and Quebec citizens who receive payments from the American government not benefit from the same conditions as American citizens who receive a pension from the Canadian and Quebec governments?
To help members understand where we are at today, I will give some background on this issue. Four protocols have been negotiated between the United States and Canada. I want to talk about the fourth protocol, signed in July 1997 with a number of other countries, including the United States. Under this protocol, only the country of residence is able to tax social security benefits. Since then, Canada has been able to tax American benefits paid to residents of Canada and Quebec.
The problem is that the protocol gave Canada, under the U.S. Social Security Act, the right to increase the tax rate from 50% to 85%. Bill C-305, before us today, would correct this situation.
The Bloc Québécois supports the bill, because it rectifies an error the previous government made in 1997. Several thousands of Quebeckers left their families to go work in the United States, often for years, and have been 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 legislative amendment enabled the federal government to bring in a lot more revenue at the expense of a population that could be considered vulnerable and economically weak. It is important to understand why Bill C-305 is now before the House and how it corrects a past blunder.
As I mentioned, historically, four protocols have modified the Canada-United States tax convention. In 1980, the income tax convention provided that social security benefits are taxable only in the originating country. It was only sometime later that the benefits were initially taxed in the United States.
The portion of benefits deemed taxable rose from 0% to 50%, depending on the taxpayer's net revenue and when the benefits were paid.
Modest income families and individuals were generally exempt from paying taxes on their benefits. In March 1984, a second protocol modified the Canada-U.S. tax convention. This agreement made social security benefits taxable only in the taxpayer's country of residence. From then on, 50% of the benefit amount was exempt from taxation.
For example, an American citizen residing in Canada was taxed on 50% of the benefits received from the United States. Bill C-305 is designed to return to this situation.
A third protocol was signed in March 1995. It gave the country paying benefits under social security legislation the exclusive right to tax those benefits.
This means that the United States taxed social security benefits paid to Quebec and Canadian residents at a rate of 25.5%, while Canada did not tax benefits received by American taxpayers.
Finally, the fourth agreement to amend the tax treaty 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, except that 15% of benefits were made tax exempt in Canada.
Under this agreement, the tax rate became 85% of the payments made to Canadian residents.
However, the last agreement provides that the benefits paid under Canada's social security legislation to a resident of the United States are taxable only in the United States.
Essentially, the purpose of Bill C-305 is to reduce from 85% to 50% the tax rate on United States social security payments received by Canadian taxpayers.
For over 20 years now we have been trying to find a fair and equitable solution for all Quebeckers and Canadians dealing with this problem.
Thousands of Quebeckers and Canadians live near the border and have been suffering the never-ending repercussions of these tax reforms over the past 20 years.
Of course, this measure does not come without a price, but it is a small price to pay considering the thousands of people who have sacrificed their lives and their families to work far from home and their loved ones. These people wanted to stay here and keep their identity.
We, the Bloc Québécois, support lowering the tax rate on benefits paid to taxpayers, from 85% to 50%, because it corrects certain injustices. For this reason, I would like to congratulate the hon. member for his bill, which we will support.