House of Commons Hansard #87 of the 39th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was income.


Income tax ActPrivate Members' Business

1:50 p.m.

Macleod Alberta


Ted Menzies ConservativeParliamentary Secretary to the Minister of Finance

Mr. Speaker, I appreciate the opportunity to speak to Bill C-445, a proposal for a refundable tax credit for shortfalls in pension income, which has been introduced by my good friend, the member for Richmond—Arthabaska.

The intention of the member's proposal is somewhat laudable. It seeks to assist Canadians who have seen their retirement incomes negatively impacted by a failed business. Unfortunately, it is fundamentally flawed to such a degree that we cannot support it.

The biggest problem with Bill C-445 is its annual cost, as was referred to previously by my colleague in a question, which is estimated to be approximately $10 billion. Clearly, were Bill C-445 to be enacted, it would have a negative impact on Canada's fiscal position.

This proposal also raises serious concerns with respect to pension and tax policy, while also failing to take into account the multitude of prudent ways we are improving Canada's retirement income system. Again, as previously mentioned, Bill C-445 relates to the tax treatment of pensions and savings, an area that this Conservative government has recognized as a key priority, an important element for economic growth as well as an improvement for living standards.

As I am sure the House is well aware, our Conservative government has implemented an ambitious and aggressive agenda to reduce the tax burden on Canadians by cutting corporate taxes and personal income taxes, cutting the GST and many more. Tax cuts have prompted Canada's competitiveness and improved our standard of living, but tax cuts also spur investment while creating jobs, encouraging economic growth and allowing the freedom for Canadians to save.

Personal savings provide Canadians a means to invest in their own future and improve their standard of living. Savings also bring the peace of mind that comes with the knowledge that funds will be available in the event of an emergency or for future endeavours like starting a small business, purchasing a home, or a child's education.

Our Conservative government has taken major steps to improve incentives for Canadians to save. Most significantly I would point to the introduction in budget 2008 of the tax-free savings account, commonly known in the House as TFSA, whose introduction has been heralded in nearly all corners as an exceedingly positive initiative, perhaps the single most important personal savings vehicle since the introduction of RRSPs in 1957.

Indeed McGill University Professor William Watson praised it as a “great step forward for the country...almost all Canadians will now be able to shelter all their savings from tax”.

TFSA will be a flexible, registered, general purpose account that will allow Canadians to earn tax-free investment income. As the TFSA matures over the next 20 years it will permit over 90% of Canadians to hold all of their financial assets in tax efficient savings vehicles in combination with existing registered plans. In 20 years, relative to the size of today's economy, the tax relief provided by the TFSA will grow to over $3 billion annually.

In addition to the landmark TFSA, our Conservative government has introduced a number of tax measures to improve the pension and RRSP system, such as: doubling the amount of eligible income that can be claimed under the pension income tax credit to $2,000, the first increase since 1975; increasing the maximum age to 71 by which Canadians must convert their RRSPs to registered retirement income funds and begin receiving pension payments; permitting employers to offer more flexible phased retirement programs in order to retain older, experienced workers and ease succession planning pressures; increasing the age credit amount; and permitting pension income splitting. The cumulative effect of these important measures represents nearly $1.6 billion in tax relief every year for pensioners and seniors.

Clearly, this Conservative government has worked to improve the tax treatment of pensions and RRSPs and to make our retirement income system even more effective in meeting the needs of Canadians, and we will do more. However, we must make certain that policies are prudent and consistent with sound pension and tax policy principles.

Regrettably, Bill C-445's proposal to introduce a refundable tax credit for pension shortfalls is neither the most prudent nor the best way to promote the security of pension benefits. It would create undesirable economic incentives for pension plan sponsors and would be an improper use of the tax system. As well, it would be exceedingly costly and unfair in its application.

I will now expand on the points to which I have just alluded.

Bill C-445 would go far beyond its proposed intent. It would not provide a refundable tax credit in respect of shortfalls in pension income but would instead effectively provide a refundable credit on the full amount of pension benefits received by most retirees.

This is because, as drafted, the proposed credit would be based on the difference between the pension benefits payable to an individual from a registered pension plan and the amount of benefits received by the individual from a retirement compensation arrangement. As a result, the proposed credit would be extremely costly. In fact, it would cost about $10 billion annually. I am assuming that this is why the Speaker ruled earlier today that this private member's bill does require a royal recommendation. I would concur with his decision.

Such a costly measure clearly would not be supportable. Let us make no mistake: it would put Canada into deficit and would put at risk the fiscal health of future generations of Canadians. Regardless of whether Bill C-445 has been drafted properly, its underlying objective is to provide a government-backed guarantee for pension benefits. This would not be good tax or economic policy and would not be fair to the taxpayers of the country.

The tax system is not intended to ensure or compensate individuals for the loss of pension benefits due to the underfunding of pension plans. Indeed, the proposed refundable credit would set a significant precedent for government compensation of shortfalls in expected retirement income in other situations.

Let us consider the example of an RRSP saver or an individual in a defined contribution pension plan who does not achieve the pension income he or she expects because of poor investment performance. Bill C-445 would mean he or she could request that a similar credit or other compensation be provided to help offset such shortfalls.

There are a number of other significant concerns with the proposal. For example, it would effectively mean that the federal government would provide compensation for shortfalls in pension income for provincially regulated plans. Moreover, providing a government-backed guarantee is not the best way to protect pension benefits.

The best way of ensuring that promised pension benefits are secure is to have healthy plans with good supervision. Providing any kind of guarantee or compensation for pension benefits, whether through the tax system or otherwise, is potentially costly for taxpayers. In addition, it raises issues of fairness, given that the costs would be borne by all taxpayers while the benefits would accrue only to a minority of those participating in pension plans.

Therefore, I urge members not to support this fundamentally flawed proposal.

Income tax ActPrivate Members' Business

2 p.m.


Rodger Cuzner Liberal Cape Breton—Canso, NS

Mr. Speaker, I am happy to join this debate. I cannot help but make the comparison between what our Conservative government is doing and the same approach that the American Republicans have taken with their interventions abroad. With the $10 billion price tag on this piece of legislation, I think the government wants to “shock and awe” my Bloc colleague into pulling the bill out of the House. I do not think that is going to work in this House.

This is a very important issue. Certainly it is important to make sure that seniors, Canadians who have worked their entire lives, are able to retire with some degree of health, support and dignity. I want to commend my colleague from Richmond—Arthabaska for bringing this legislation forward.

As has been brought up in previous interventions and in the parliamentary secretary's speech, there are aspects of the bill that are of much concern. Certainly, our finance critic is not comfortable with a couple of areas of the bill, and I would like to bring them forward later on in my address. Finance officials also have concerns with how the bill reads and if it is as focused as it should be.

Nonetheless, I want to state on the record that I think it is important to bring this bill forward to committee so that these issues are addressed in committee. That is where we will able to have a full hearing. That is where we will be able to tap into the advice and recommendations from expert witnesses. We think that is where the bill belongs. We will be supporting that.

As I understand it, the bill deals with defined benefit pensions. When seniors retire, they anticipate that the defined package is going to be there for them, but let us say that they are not able to have the income they anticipated, for whatever reason. That certainly would have an impact on lifestyle and on people's ability to provide for themselves and their families.

The bill provides for a 22% tax credit for any lost income. If a person thought he or she was going to be drawing $35,000 and was only able to draw $30,000, then that 22% tax credit would be applied to the $5,000 difference, for about $1,100.

I think this bill deserves to be brought forward and looked at in committee. The member for Burlington made his intervention and talked about all the great tax room that has been given by the government since it came to power, but I will give the government just a little reminder.

I will use this opportunity in debate to remind the government of one tax increase, and that would be the tax increase on income trusts. We all remember income trusts. We remember the Prime Minister, through the 2005 election campaign, looking into the eyes of Canadians and promising outright that there would be no increase in the tax applied on income trusts. Therefore, Canadians felt confident and very comfortable in putting their money into those income trusts, but we know what happened.

On Halloween 2006, the Conservatives pulled the plug. They put the tax on the income trusts. Within two days, $25 billion of money earned by and invested by Canadians was lost from the markets.

Probably thousands of people were directly impacted by this broken promise, by this intervention of a 37.5% tax placed on income trusts. Thousands of Canadians were impacted, and probably millions indirectly, because most pension plans were invested in income trusts. Certainly CPP, which impacts or will impact every Canadian, was heavily invested in income trusts, so it did have an impact on all Canadians. We want to remind the government of that tax increase and the broken promise.

The Saskatoon StarPhoenix summed it up for me with regard to the reality of the income trust tax when it stated: “It's a huge impact for seniors. If you worked 40 years to create that nest egg and in a short time you lose one-quarter of that wealth, it's like going back to work for 10 more years”.

That is what was said: “like going back to work for 10 more years”. I know seniors, the people who contributed to this country, the people who paid taxes all the way through, the people who are looking to retire with a little dignity. They deserve better. They deserve more.

Here we are talking about Canadians who have pension plans or who have had the opportunity to contribute to RRSPs and prepare a little for their retirement, but I want to remind the government about something else, too, because its members go to great lengths about some of the steps they have taken to help seniors.

The Minister of Human Resources was at committee the other day and he almost separated his shoulder from patting himself on the back. He talked about increasing the amount for someone who receives the guaranteed income supplement. He talked about raising the ceiling as to how much he or she can earn. He thought this would be good for the labour market.

It may have a minimal impact on the labour market, but he talked about how great it is for seniors. How many people who receive the guaranteed income supplement will that have an impact on? Some 4% of Canadians who receive the guaranteed income supplement are able to go to work. So really what the government has done is fail the 96% of Canadians who receive the guaranteed income supplement. They will receive no benefit whatsoever from that intervention.

What really scares me and my colleagues on this side of the House is the rise in food prices and the rise in gasoline prices. We see the cost of living going up, but we do not see any action on the other side to help those seniors who are most vulnerable. We have seen that this measure fails 96% of the seniors receiving GIS.

Mr. Speaker, this coming fall--and mark my words, you will go back and refer to this in Hansard--we are going to have seniors in this country who will be up against it. We are going to see seniors who will have to decide if they will fill their fuel tank, fill their cupboards or fill their prescriptions. It is going to become that stark. The government has to do something.

Certainly I believe we will be able to bring these issues forward when the bill goes to committee for study. We do have some concerns. We will see what the bill looks like coming out of committee.

There are concerns that were shared with me by the critic and members on this side. We want to know if through this bill the government will guarantee all pension funds. Will this act as a disincentive for employers or employees to properly and fully contribute to and manage their funds? That is an important question. Hopefully the expert witnesses will be able to shed some light on that.

For Canadians who do not have a defined benefit package or pension plan, we want to ask if it is fair for them to subsidize this. This is a question that has to be asked.

We want to find out if the bill is worded properly. Does it ensure that it targets only retirees with these pensions?

We do not know if this bill is a proper solution, but it does merit further consideration. We have every confidence that the standing committee will bring forward the appropriate witnesses. We will get answers to these questions and hopefully from those answers we will find out whether or not the bill deserves further support.

Income tax ActPrivate Members' Business

2:05 p.m.


Wayne Marston NDP Hamilton East—Stoney Creek, ON

Mr. Speaker, I rise today to speak to Bill C-445, An Act to amend the Income Tax Act, specifically to provide a tax credit, which we have been hearing about in this debate, for the loss of retirement income. It was introduced by the member for Richmond—Arthabaska and I appreciate that member's concern for the workers of his province and how this bill may help all workers across our country.

However, before I get into my remarks, recently in this debate we heard from the Conservatives a list of all of the things that they have done for seniors. I have one more thing for them to put on their list and that is the $1 billion they owe seniors from the CPI mistake that was made a number of years ago. Each and every senior who is owed that $500 for each year should be addressed by the government and should receive the money. If they owed the government money, they certainly would have somebody knocking on their doors.

Back to Bill C-445, it would grant a refundable tax credit equal to 22% of the reduction in pension benefits experienced by beneficiaries, other than trusts, of registered pension plans who suffer a loss of pension benefits, normally when their pension plan is wound up in whole or in part. It applies to both defined benefit and defined combination plans. This bill certainly will catch the ear of Stelco workers in Hamilton who went through the CCAA bankruptcy protection recently. They saw the sale by their employer of their company and all the insecurity about their pension and benefits. They had to deal with this stress for two years.

Seniors who have already retired and those who are about to retire have worked hard. They have played by the rules all of their lives and now they need their pension plans. They need their income to retire in dignity and respect. They too often find their retirement benefits reduced through no fault of their own.

I will not suggest this bill would address fully the problems they will face but it offers some modest fairness for retirees.

In addition to Bill C-445, we in the NDP call on the federal government to explore other options to help retirees which should be based on the premises: that all workers deserve decent pension coverage, that all workers deserve to get the pension they have earned, that we show respect for today's and tomorrow's retirees, that retirement investments must work for and not against workers, and that the government has a national job strategy so that dignified retirement is possible.

A recent polling of Canadians found that 73% are worried about not having enough money to live on after retiring. Canadian workers worry about the solvency of their private pensions. They worry about the adequacy of both CPP and public income supports.

They know, for instance, that inflation does far more damage to retirees than any other group of Canadians. Over 250,000 seniors today live under the poverty line, under that cutoff point. Too many retirees are living in poverty. It is the responsibility of the government to protect seniors and not leave them hung out to dry.

A particularly alarming statistic is that one-third of seniors, most of whom are women, have little income outside of OAS and GIS, and have an average annual income of around $12,000. How are these seniors expected to live in dignity on barely $1,000 a month?

How are they expected to afford to stay in their family homes or expensive senior retirement residences or afford the cost of living and utility bills, not to mention the high price of gasoline for those who can still afford a car?

How are they expected to afford the medications each month, especially since the government will not provide a national pharmacare program? How are seniors expected, after all of those expenses, to meet the high cost of food?

Since the middle 1990s, according to the National Advisory Council on Aging, seniors' income levels have reached a ceiling and are no longer keeping pace with the rest of Canadians. In fact, the mean income of seniors rose only $4,100 compared to other Canadian households, which rose $9,000 between 1997 and 2003. Thirty per cent of families today have no private pension assets at all.

In this age of insecurity and tremendous job loss in our manufacturing sector, as well as the pulp and paper sector, the federal government must look beyond today and beyond the next election cycle. It is time for some long range planning in conjunction with our defined pension plans as to how to support workers in their retirement years.

In my riding of Hamilton East—Stoney Creek, I hear repeatedly about the moneys owed to seniors that I spoke about before. Regarding the error in the cost of living, we should imagine what a $500 per year repayment would do for somebody with an income of $12,000 per year and what it would mean to them.

The Conservative government has handed corporate Canada $14 billion in tax breaks each and every year, and only a pittance to seniors. When seniors owe tax to the government, they have to pay or they are charged interest that compounds daily. However, when the government owes money to seniors, it simply dismisses those seniors and tells them that they do not matter.

The Conservatives tout their two point cut to the GST and the $60 billion they took out of the fiscal capacity of the Government of Canada to respond in a reasonable way to the plight of seniors. Seniors across Canada have to choose between buying medication and eating. That is disgraceful and the government should be ashamed.

The government should cancel the corporate tax cuts and use the money to give seniors a reasonable raise in their CPP benefits. The Conservatives should follow the lead of the NDP and start a national prescription drug program for all Canadians.

The Conservatives should follow through on the promises they already made to seniors and implement the seniors charter, created by my colleague from Hamilton Mountain.

In June 2006, nearly two years ago, the House passed the NDP's seniors charter, which called for the government to work with the provinces to rectify decades of underfunding of seniors programs. The seniors charter called for the recognition of older Canadians as creative, active and valued members of our society.

The charter would have enshrined the right of every senior living in Canada to the following: income security, through protected pensions and indexed public income support that provides a reasonable state of economic welfare; housing, through secure, accessible and affordable housing; wellness, through health promotion and preventive care; health care, through secure, public, accessible, universal health care, including primary care, dental care, home care, palliative care, geriatric care and pharmacare; self development, through lifelong access to affordable recreation, education and training; government services, through timely access to all federal government programs and services, including family reunification.

It would create a seniors advocate to: conduct public education and awareness initiatives on the rights of seniors; ensure that all new and revised policies and programs affecting seniors receive public input from older persons; require that all new policies and programs affecting seniors are announced with specific timelines for implementation; act as an ombudsman for seniors with respect to all government services and programs in making recommendations as appropriate that assist seniors; and that would advocate and report annually to Parliament on government policies and programs affecting seniors, including the effectiveness of federal funding related to the needs of older persons.

I wonder how many members present have had to eat cat food. I read an article on how seniors choose cat food because of its low price in order to get some protein because they simply cannot afford to purchase groceries. That is one of the great shames in this country. We have to do better. The government has to do better for our seniors and this is a national disgrace that can no longer be ignored.

Income tax ActPrivate Members' Business

2:15 p.m.


Louis Plamondon Bloc Bas-Richelieu—Nicolet—Bécancour, QC

Mr. Speaker, it is also a pleasure for me to speak at second reading to Bill C-445, which was introduced by my colleague for Richmond—Arthabaska and which I was honoured to second. I would first like to thank him for all the work he has done with me to prepare this bill. I would also like to thank the member for Chambly—Borduas, the Bloc Québécois researchers and the officers of the House of Commons who advised us on the legal aspects and the drafting of the bill.

I would like to congratulate the member for Richmond—Arthabaska because he expressed in his speech the very thoughts of the former employees of Atlas Steels and the Jeffrey mine. These people were treated unfairly and they were victims. This request is not based on a whim. They want to redress a wrong. He explained the financial blow dealt to these individuals who had already retired in the belief that their pensions were guaranteed for the rest of their lives.

I would like to thank the NDP member who spoke just before me. He definitely extended the debate to the complex issues faced by seniors, including health. From the outset, he said he was prepared, together with his party, to support the bill. I thank him. As for the few questions he may have, we will attempt to reassure him when we study the bill in committee.

I would also like to thank the Liberal Party critic whose speech was very clear. From the start, he said that this bill deserved to be referred to committee. He said he had questions, and I understand that. He is entitled to have questions. But I think that he did not completely understand the purpose behind this bill.

The member for Richmond—Arthabaska, the member for Chambly—Borduas and I would be very happy to answer his questions and to appear before the committee. The former employees are also prepared to come and work with us, including Mr. Saint-Michel and the Jeffrey mine retirees' representative, Mr. Fréchette. They will come to explain the situation and I do not think they will have any problem answering the Liberal critic's questions. I thank him for supporting this bill. These two pledges of support, along with the support of all the Bloc members, ensure that this bill will be sent to committee so that it can move to the next stage.

However, the Conservative member's statement surprised me. I did tell several Conservative members from Quebec about this bill. I am not judging them, but it seems they may have forgotten to inform the parliamentary secretary, who spoke earlier. Talking about $10 billion shows that either he is trying to get people worked up about this or he has gone crazy. Imagine: $10 billion! We are talking about some 260 workers in one place and about 900 in another. The total per year would be $1.7 million. These people are not going to live forever. Every now and then, some of them die. They are not young, and a few years from now, this will not cost the government anything. Yet he was saying that it would cost $10 billion. Where did he get that number from?

Perhaps his speech was influenced by the combined deficit of all public and private retirement funds in Canada. If all of those people lost their jobs and were covered by this bill, it would cost $10 billion. What kind of logic is that? It does not make sense. This is a matter of a few million dollars, and we are asking the government to fix an injustice. As I said earlier, it is not as though these workers acted on a whim. We have to demonstrate compassion for workers who have been deprived of income to which they had a legal right.

These people, like all workers, including the members of this House, paid contributions out of their income. The employer also paid, of course. Those contributions went into a fund and, all of a sudden, one third of the money was taken away without giving the retirees a say in the matter.

However, this fund was supposed to be guaranteed. If hon. members who retire were suddenly told, a year later, that their pension was being cut by one third, I think the reaction would be violent or at least very noisy. An injustice has been done and we want to correct it. The people suffering this injustice worked hard for many years. They have managed to build up a strong claim and a bill was born out of this claim.

Like my colleague from Richmond—Arthabaska before me, I would like to pay tribute to Pierre Saint-Michel and Gaston Fréchette and their two teams. They looked for a legal way to provide the workers with partial compensation for their losses. Today, after consulting experts, legislative drafters and House experts, they have finally found a solution to recover some of the loss. They will get that solution if every member of this House sets partisanship aside and understands the need to be compassionate and provide these people with social justice. This gesture, which would cost the government barely a few million dollars in the early years, would allow these people to obtain some compensation for their losses.

Today, I am calling on the Conservative members from Quebec to influence their government. I have chosen to sit as a sovereignist MP with a vision of Quebec sovereignty. They have chosen to sit within a party in power that claims to better defend the interests of Quebec. Well, ladies and gentlemen, now you have the opportunity to prove it.

I am calling on the members for Lévis—Bellechasse, Beauport—Limoilou, Pontiac, Beauce, Jonquière—Alma, Lotbinière—Chutes-de-la-Chaudière, Louis-Hébert, Roberval—Lac-Saint-Jean, Mégantic—L'Érable, Charlesbourg—Haute-Saint-Charles and Louis-Saint-Laurent. They have said they might have some influence. Perhaps the critic and parliamentary secretary who spoke earlier might change his mind when the second hour of debate takes place in early June.

I hope this bill will be referred to committee by a unanimous vote. I ask them to use their influence. It is time for these members to prove they do have some influence and to act to change the parliamentary secretary's speech and their party's vision.

The Liberal members have agreed to refer this bill to committee, and I thank them. The NDP members have also agreed, and I thank them. Of course, the Bloc Québécois will support this private member's bill, and I ask the Conservative members to do the same.

I repeat, this is not a partisan gesture, but an act of human compassion and social justice. I therefore ask that all members support this bill and that, during the next hour of debate in early June, there be only speeches in support of this bill in this House so that we can act to reassure these people following the injustice they suffered a few years ago.

Income tax ActPrivate Members' Business

2:25 p.m.


The Acting Speaker Conservative Royal Galipeau

The hon. member for Kitchener—Conestoga has the floor for 10 minutes but he has advance notice that it will only be for 2 minutes today.

Income tax ActPrivate Members' Business

2:25 p.m.


Harold Albrecht Conservative Kitchener—Conestoga, ON

Mr. Speaker, perhaps once you hear the beginning of my speech, you will want to extend the time to allow me to get in my entire speech.

Bill C-445, which is sponsored by the member for Richmond—Arthabaska, is a proposal for a refundable tax credit to deal with shortfalls in pension income. From the onset, I will state that we do not support this proposal as it is fundamentally flawed.

First and foremost, the largest issue with Bill C-445 is cost, which the Department of Finance estimated to be approximately $10 billion. Clearly, supporting a proposal with a cost of this magnitude would be fiscally irresponsible and it would threaten Canada's fiscal health.

Furthermore, the proposal also raises serious issues with respect to pension and tax policy and ignores the present state of Canada's retirement income system. Bill C-445 touches on a matter of importance to all workers, the security of their pensions.

This government recognizes that the security of workers' pension benefits is a key element in ensuring the effectiveness of Canada's retirement income system. It has been recognized that Canada has a diversified retirement income system based on a mix of public and private pensions. The old age security and guaranteed income supplement programs, along with the Canada and Quebec pension plans, are considered to be the pillars of that system, ensuring a minimum level of income in retirement for Canadian seniors.

Income tax ActPrivate Members' Business

2:30 p.m.


The Acting Speaker Conservative Royal Galipeau

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. When we next return to the study of Bill C-445, there will be eight minutes left for the hon. member for Kitchener—Conestoga.

It being 2:30 p.m., this House stands adjourned until Monday next at 11 a.m., pursuant to Standing Order 24(1).

(The House adjourned at 2:30 p.m.)