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.