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Submission to the House of Commons Standing Committee on Finance Regarding Bill C-377 An Act to Amend the Income Tax Act (Labour Organizations)

Posted: Friday, 26 October 2012

The Canadian Labour Congress (CLC) is the national voice of 3.3 million workers in Canada. The CLC brings together Canada’s national and international unions along with the provincial and territorial federations of labour and 130 district labour councils whose members work in virtually all sectors of the Canadian economy, in all occupations, and in all parts of Canada.

Introduction

When Bill C-377 was introduced, the bill’s sponsor, the Member for South Surrey-White Rock-Cloverdale said in the House of Commons on February 26, 2012, “[l]abour organizations play a valuable role in Canadian society, representing and defending the rights of workers.”

The bill he introduced is an attack on those very same labour organizations that have for the past 130 years in Canada, defended the rights of workers and fought for good working conditions, fair pay and benefits, a healthy and safe workplace, an end to discrimination and for the legitimate role of Canadian workers and their families in our society. Justice Ivan Rand wrote in his influential 1946 award that “as the history of the past century has demonstrated, the power of organized labour, the necessary co-partner of capital, must be available to redress the balance of what is called social justice: the just protection of all interests in an activity which the social order approves and encourages.”1

Unions in Canada operate under many different pieces of legislation that grant important rights to represent workers in collective bargaining but also mandate significant responsibilities and obligations. Labour laws across the country require that strike votes be by secret ballot, collective agreements need to be ratified by members, union members have a right to financial information and the union owes a “duty of fair representation” to everyone in the bargaining unit, whether or not they are a union member.

Unlike the private sector and the crown corporation sectors with their appointed “bosses,” union presidents and executive officers are elected by the memberships they represent and are accountable to those members. This accountability exists for local unions in the community, and provincial organizations, as well as national and international union levels.

Beginning with the unions that represent workers at the workplace level, and including parent unions and federations of labour, the labour movement is the largest member-based organization that is democratic, accountable and transparent with its members. Bill C-377 is based on a faulty understanding of how unions operate and is an unwarranted intrusion into their autonomy.

An alternative approach to this was outlined by Nicholas Stern, Chief Economics and Senior Vice-President for Development Economics, World Bank, in 2000, when he suggested that cooperation with unions is better policy:



“... with sound labor policies in place, governments, employers, an organized labor can work together in many ways to foster higher productivity growth and lower unemployment, while securing for workers a greater share in the benefits of growth.”2

What the government should be doing is working with employers and unions in a cooperative environment to develop strong economic and human resource strategies rather than using private members’ bills to weaken the labour movement.

The sponsor of the bill justifies his bill by saying that unions are subsidized by the taxpayers since union members are able to deduct their dues from their taxable income. He suggests this is a unique benefit for unions. This is incorrect. The same section of the Income Tax Act that permits deduction of dues also allows any taxpaying Canadian citizen who is a member of a professional organization such as medical associations, bar associations, and professional engineer societies to deduct their professional fees. Both union dues and professional fees are considered an employment expense. It is the individual union members, doctors, lawyers and other professionals who receive this benefit, not the organizations to which they belong. By singling out unions for special treatment, and excluding professional organizations, the bill does not meet the basic test of fairness.

Since labour organizations have no profits upon which to pay income tax, they are not required to file income tax returns notwithstanding that the bill’s sponsor says they do. The suggestion that unions do not pay tax is false and misleading. They do pay all required taxes, including municipal taxes, the appropriate sales tax (HST, GST or PST) and any capital taxes required by provincial governments. In justifying the bill, the sponsor also said that he based his “requirements for public disclosure for labour organizations on the existing provisions for charities in the Income Tax Act.” Again, another false and misleading statement. The information required of charities is much less detailed and more highly aggregated with significant protection for the privacy of individuals and contractors. This bill would require unions to provide even more detail than current legislation requires either charities or publicly traded companies to file with the Canada Revenue Agency (CRA).

Compared to registered charities, Bill C-377 imposes significantly more onerous and costly obligations on labour organizations. Charities have a threshold for simplified reporting, whereas even the smallest labour organization is expected to meet the extensive reporting requirement contemplated by Bill C-377. Certain information disclosed by registered charities is not made publicly available; for example, information about non-resident donors in Canada is reported, but not made public, as are transfers to qualified recipients. Bill C-377 requires that all information contained in the annual information return be disclosed.

Read the full submission here.

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