Mr. G. R. Pearkes (Nanaimo):
Mr. Speaker, over a period of a great many years young Canadians have been leaving this country in small numbers to join the Royal Navy, the British regular army and the civil service of Great Britain. In the past, every year, opportunities have been offered to the senior cadets of the Royal Military College to take up commissions in the royal engineers and other regiments of the British army.
On June 5, 1946, a convention was signed dealing with the question of dual taxation. Under article X of that convention it was arranged with the United Kingdom government, and Canada agreed, not to tax pensions paid by the government of the United Kingdom to persons who were residing in Canada. Of course that applied not only to Canadians who had left Canada and had seen service with the British forces, but also to immigrants from the United Kingdom who were in receipt of pensions. I believe a reciprocal condition applied whereby any Britisher who had served in the Canadian forces, and was in receipt of a pension and retired in the United Kingdom, would not be taxed by the United Kingdom authorities. Of course I am not referring to the disability pensions, because disability pensions are not taxable either in this country or in the United Kingdom.
However, I feel that that convention has not worked out in the best interests of Canada or of Canadians. In the first place, very few Canadian pensioners are now living in the United Kingdom, but we have quite a large number of Canadians who have served in the forces of the United Kingdom, or the services of the United Kingdom, and have returned to Canada, and we have a very large number of United Kingdom pensioners who have immigrated to this country.
Unfortunately the regulations place a very great hardship upon the British pensioner who is now resident in Canada, because he is liable to the United Kingdom income tax
if he is in Canada, and he is assessed on a formula which takes into account the sterling value at the current rate of exchange for any Canadian dollar income enjoyed by that pensioner over and above his pension. The effect of devaluation has been, of course, to increase the amount of any such dollar income in terms of sterling, and thus to increase the liability of the pensioner to the United Kingdom income tax. At the same time the pensioner has received a blow on the other cheek as the result of devaluation which, of course, reduces the dollar value of the net amount remitted to him.
The imperial pensioners who have income in Canada have therefore been subjected, since last September, to a twofold reduction in their net income. They are in fact taxed by the British government on their pension and by the Canadian government on the Canadian income, and the rates of taxation in both cases are based on the total income.
I have a case in my constituency of a warrant officer who had served for 27 years in the British army and the Royal Air Force. His pension did not come within an income tax bracket in so far as the British tax is concerned, but he has come to Canada and he is earning a living here. The net result is that his earnings here have placed him in a bracket whereby his British pension becomes taxable in Great Britain; and in every case where a British pensioner is working in this country it raises his tax group both in Great Britain and probably in Canada as well, and in consequence of the devaluation which took place last September, these people are under very considerable handicaps.
Of course the British rate of taxation on income tax is much higher than the Canadian rate. On the British income tax rates anyone with an earned income of $2,000 would be taxed, if he were a single person, at $392. If he were married with two children he would be taxed, under the British rates, at $148; whereas, under the Canadian rates, if he was a single person he would be taxed only $150, and would not be taxed at all if he were, married with two children. Then, if we go to higher brackets, we take the case of the British taxpayer who has an earned income of $4,000. If he were single he would have to pay $1,112, whereas if he were married with two children he would have to pay $847. On the other hand, the Canadian with the taxable earned income of $4,000 would have to pay, if single, approximately $510 and, if married with two children, he would have to pay only $269.
I know these regulations are in accordance with the convention signed in 1946. My object
The Budget-Mr. Pearkes in speaking briefly tonight is to ask the minister if he will consult with the British authorities to see if something cannot be done to alleviate the difficulties of our own Canadian men who, at the request of the British authorities twenty or thirty years ago, left this country and rendered a service in the forces of the United Kingdom. I would ask also whether something cannot be worked out with the United Kingdom authorities to see if those pensioners from the United Kingdom who have taken up residence here in Canada cannot have some easement of this heavy burden of taxation placed upon them because of this dual taxation convention, which has not worked out to the best advantage of Canada and Canadians.
Subtopic: ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE