Mr. Speaker, I am pleased to rise and speak to a subject of ever-increasing concern here in Ottawa and in the eyes of the population. Post-secondary education, and particularly its accessibility, is a very topical issue.
The Bloc Québécois is in favour of the principle of this bill because it is an improvement over the current provisions of the Income Tax Act, which governs the registered education savings plan—RESP—program.
To summarize the bill briefly, a registered education savings plan is created from contributions out of after-tax income. Such contributions do not entitle contributors to a tax deduction, as is the case for contributions to a registered retirement savings plan or RRSP, but the investment income that is earned on the contributions accumulates in the RESP and is tax-free. The investment income is taxed only when it is withdrawn from the RESP. If the savings are withdrawn to finance the beneficiary’s post-secondary education, the investment income will end up in the hands of this beneficiary.
The problem is that not everyone can afford to make contributions to a registered education savings plan, since a substantial income is necessary in order to do so. People prefer to contribute to an RRSP rather than an RESP.
This bill, if passed, will make it possible for parents and families to benefit from a tax deduction, as they do with an RRSP.
Putting such a measure in place would come with a cost, of course, but it would foster the growth of our society and have an undeniably positive impact on its development.
Bill C-253 has numerous shortcomings. It nevertheless remains that it is an improvement as far as the RESP program is concerned.
During the first reading of this bill, my colleague from Jeanne-Le Ber identified the bill’s chief shortcomings in his speech. I would like to do a quick review of the RESP program and the advantages for society of passing such a bill.
Although the registered education savings plan program has been around for 30 years, the federal government has given it special attention of late. In 1998, the federal government created the Canada Education Savings Grant, the CESG. This is a grant of a maximum of 20% of the contribution made, which provides the beneficiary with an extra $400. This means that, when a parent or grandparent contributes $2000, $400 will be added to the RESP of a child under the age of 18.
Bill C-253 is a continuation of the improvements that began a few years ago. According to the statistics for 2002, the participation rate for the registered education savings plan was only 6% in Quebec; that is right, I said 6%, while it was about 10% in Ontario and in British Columbia.
At present, a large number of parents and grandparents do not contribute to a registered education savings plan because it does not constitute a deduction from an individual’s taxable income. In addition, some people do not have the financial resources to do so.
Therefore, people prefer to put their money into registered retirement savings plans. However, it is a good bet that more people would like to benefit from a RESP if there were an income tax deduction similar to the deduction for RRSPs.
What the bill seeks to do is to target an often-neglected group of taxpayers, who are already asked to make more than their share of sacrifices in our society. I am talking about the middle class; the class that includes the largest number of Canadian citizens. What this bill offers is greater accessibility to post-secondary education.
The education of our children and our grandchildren is often a cause for worry and concern not only for parents, but also for the expanded family, the grandparents, aunts and uncles. Many of them fear that they will not be able to pay the increasingly higher costs of post-secondary education. The introduction of an incentive for the contributor and the beneficiary represents an investment by the government in today’s young people and gives hope to a great many young parents, young families and grandparents.
On the other hand, if the beneficiary does not pursue post-secondary studies and no other beneficiary is designated, the contributor can receive the income from the investment under certain conditions. The funds could be transferred to a registered retirement savings plan without penalty, up to a maximum of $50,000 if the individual’s RRSP contribution ceiling allows. Otherwise, a 20% income tax deduction would be made on the withdrawal and the amount that could not be transferred to an RRSP would have to be added to the individual’s income for the year. We are talking here about only the accumulated investment income within a registered education savings plan because the capital is not subject to income tax.
It is certain that the adoption of such a bill could be very costly for taxpayers because, at present, those who contribute to a registered education savings plan are not able to deduct that contribution from their income. Therefore, those households with higher incomes will benefit even more from such a measure and low-income families will see little or no advantage. However, no program is perfect and Bill C-253 represents an excellent incentive to parents and families.
In summary, I would say that this bill would enable an individual making a contribution to an RESP to deduct that contribution from income, which is almost identical to the practice for an RRSP. In closing, I want to congratulate the member for his bill and thank him for his interest in the education of our children and our grandchildren.