Second reading of Bill C-377, An Act to amend the Income Tax Act (requirements for labour organizations)Published on 4 November 2014 Hansard and Statements by Senator James Cowan (retired)
Hon. James S. Cowan (Leader of the Opposition):
Honourable senators, I rise to join in the debate at second reading of Bill C-377.
This is a debate I had hoped we had seen the last of. Certainly it has been many months — indeed, it has been more than a year — since we thought we had disposed of this bill. Now, all these months later, we find ourselves back at square one — the parliamentary equivalent of Groundhog Day. While Bill Murray’s character in that movie was forced to relive the same day until he had changed for the better, we’re being forced to redo our consideration of the bill in the hope that we will agree to change for the worse. That would be a mistake, colleagues.
We did our job well in June 2013. In our very best traditions, the Senate reached across party lines and said “no” to a bill that was, and still is today, a very bad bill. It is, as colleagues on both sides of this chamber said at the time, a bill that is unconstitutional, violates fundamental Canadian values of privacy and indeed fundamental rights under the Charter of Rights and Freedoms. It is deeply flawed in drafting and, as a number of provinces told us, would wreak havoc with labour relations across the country. Each of these would have been reason enough to reject the bill altogether, or at the very least to amend it, as we did. Taken together, we knew as a chamber we had to act, and act we did. It was a proud moment for this institution.
How is it that the bill is back before us in its original form? The proverbial “bad penny” returning to the chamber that thought it had abolished the penny? Let me take a few minutes to remind colleagues how we got to this unusual stage of proceedings.
The very first time this bill came to our chamber from the other place was on December 13, 2012, the day before we rose for the Christmas break. The sponsor of the bill spoke to it the day after we returned, and we proceeded to have what I think all of us would agree was a serious, thoughtful debate. Significant questions and concerns were raised, and we all looked forward to investigating those issues in committee and to hearing the views of interested Canadians.
Our Standing Senate Committee on Banking, Trade and Commerce then held extensive hearings and received numerous submissions. The committee heard from five provincial governments, various trade unions, professors, the Privacy Commissioner of Canada and groups representing Canadians from across the country — doctors, nurses, screenwriters, accountants, teachers, police officers, airline pilots and the insurance industry.
After this extensive examination, the committee prepared a very unusual report. Let me remind everyone what it said:
While the Committee is reporting Bill C-377 without amendment, it wishes to observe that after three weeks of study — hearing from forty-four witnesses and receiving numerous submissions from governments, labour unions, academics, professional associations and others — the vast majority of testimony and submissions raised serious concerns about this legislation.
Principal among these concerns was the constitutional validity of the legislation both with respect to the division of powers and the Charter. Other issues raised include the protection of personal information, the cost and need for greater transparency, and the vagueness as to whom this legislation would apply.
The Committee shares these concerns.
The Committee did not offer any amendments because these substantial issues are best debated by the Senate as a whole.
As the committee hoped, the Senate, as a whole, embarked on a serious, substantive and thoughtful third-reading debate. Numerous amendments were proposed from colleagues on both sides of the chamber. Then, in the best tradition of this place, in a strong bipartisan — indeed, multi-partisan — vote, we voted to amend the bill and send it back to the other place for their consideration.
Our efforts were widely praised as an example of the good that can be achieved by this chamber when we approach our work in an independent and open-minded fashion. Indeed, I know many of us have pointed to our work on Bill C-377 in just this way.
In the wake of the Supreme Court decision in Reference re Senate Reform, we have had extensive debates here about the role of the Senate. The original sponsor of Bill C-377 in this place, Senator Eaton, spoke in one of those debates. In reminding us of the importance of our acting independently, she praised our amendment of Bill C-377 as an example of the chamber properly exercising that critical independence. This is what she said on March 26:
We should not, must not, and cannot allow ourselves to become a rubber stamp of the House of Commons. We’ve seen the tacit indignation that can arise when, as a chamber, we choose to exercise our prerogative and push back proposed legislation.
We saw it first-hand last year with respect to our deliberations around Bill C-377, a private member’s bill about union transparency. The other place had reported and passed the bill without amendment. However, our study of its provisions concluded that there were serious concerns over the constitutional validity of the proposed legislation both with respect to the division of powers and the Charter. Other issues raised include the protection of personal information, the cost and need for greater transparency, and the vagueness as to whom this legislation would apply.
In light of those concerns and the consideration they were given here in this place, we did not pass the legislation. It was sent back to the other chamber, and rightfully so.
Senator Eaton had it exactly right. No originator of a bill, be they government or private member, usually likes it when any amendment is made to their legislation. As our colleague accurately described, indignation was indeed expressed, in some quarters, about what we had done. Nevertheless, as Senator Eaton said, it was the right thing to do. We did our job.
To finish the story, it was on June 26, 2013, that we amended Bill C-377 and ordered that a message be sent to the other place informing them that we had passed their bill with amendments, to which we desired their concurrence. However, colleagues, Parliament was prorogued before the other place had an opportunity to consider our amendments. They never had an opportunity to read our observations and consider the many issues raised in our debates. It is as if our message and amendments simply disappeared into outer space.
Colleagues, I believe the members of the other place should have the opportunity to consider and pronounce upon our amendments. The many Canadians who took the time to present their views to our committee, whose voices were reflected in our committee’s observations, in our debates here in the chamber and then in the amendments themselves deserve to have their contributions considered by the other place.
My own preference would be to once again quickly send our amendments down the hall for consideration, without first having to go through the whole process here all over again. I’m curious whether the new sponsor of the bill in this chamber, Senator Runciman, would be agreeable to such an approach.
I ask because nothing has changed since June of 2013. The bill itself is exactly the same. No new senators who might wish to add their voices to the debate have been appointed.
We have, of course, lost some senators, including Senator Segal, who put forward the amendment we adopted. But, as he told the Canadian Press recently, Bill C-377 was:
. . . badly drafted legislation, flawed, unconstitutional and technically incompetent when it was amended last time. Unamended, it has not now become perfect simply because one senator retired to do other things.
I read with great care Senator Runciman’s second-reading speech. His central argument in support of Bill C-377 was that Ontario law, unlike federal law, does not restrict third-party spending during an election and that he believed that unions used this to help defeat the provincial government, of which he was a member — and that was back in 2003, over a decade ago — and then, as we know, to help elect successive Liberal governments in Ontario since that time.
I can certainly sympathize with frustration when one’s party of choice has lost election after election. I’ve been there. I’ve done that. I have a few T-shirts to prove it. But seriously, colleagues, it really is quite a jump from that to Bill C-377. Indeed, arguing that the federal Parliament needs to legislate because Ontario provincial election law is not what we believe it should be demonstrates just how far Bill C-377 would, and apparently is intended to, encroach upon provincial jurisdiction. I’ll return to the constitutional issue later.
As I studied Senator Runciman’s speech, I was struck by what wasn’t there. There was no attempt to argue that circumstances have changed since we last considered Bill C-377. No new arguments were raised to answer the many, very serious concerns with the bill held by senators at that time on both sides of the chamber.
So what were those very serious concerns? Senator Runciman’s decision not to raise or deal with them doesn’t mean that they no longer exist, or that they were magically resolved while our attention was diverted elsewhere. I’d encourage colleagues to reread the excellent debates we had last year to be reminded of what is at stake. For now, I’ll just take a few minutes to remind honourable senators of just a few of the very troubling problems we found.
As all of us recall, Bill C-377 would require extensive public disclosure by so-called “labour organizations,” a term defined so broadly that it appears to encompass not only all labour unions, from large internationals to tiny locals of just a few people, but also professional organizations. Doctors Nova Scotia and Doctors Manitoba, neither of which is a trade union, testified that they believe they would be caught. Indeed, even employers’ associations would seem to be captured by the definition in the bill — even Merit Canada, which is the true author of this unfortunate legislation, would likely be caught.
Many Canadian organizations are now waking up to the fact that they will likely fall within the scope of the bill, even though they are not a labour union in any way, shape or form. And they are beginning to contemplate just exactly what this will mean for them and everyone they deal with: the paperwork, the red tape, the cost and the public disclosure of private — including competitive — information.
The breadth of the disclosure mandated by this bill is unprecedented in Canadian law. Every labour organization and labour trust — and I’ll return to that in a moment — is required to file electronically a set of statements which are then posted on the Internet for all to see. The basic disclosure obligation is set out in paragraph 149.01(3)(b). It requires every labour organization and labour trust to file, and I quote from (3)(b):
. . . a set of statements for the fiscal period setting out the aggregate amount of all transactions and all disbursements — or book value in the case of investments and assets — with all transactions and all disbursements, the cumulative value of which in respect of a particular payer or payee for the period is greater than $5,000, shown as separate entries along with the name of the payer and payee and setting out for each of those transactions and disbursements its purpose and description and the specific amount that has been paid or received, or that is to be paid or received, and including . . . .
There then follows more than 20 subparagraphs detailing some of the information required to be disclosed by this extraordinarily broad opening paragraph. I say “some of” the information required to be disclosed, because the introductory paragraph that I just read ends with the words “and including.” As colleagues know, these are open-ended words. They mean that the list that follows is not necessarily complete. The list contains examples of things that are definitely included. But something that falls outside the enumerated paragraphs may nevertheless have to be disclosed if it falls within the very general opening words of the section.
Let me give you one example of the impact of these opening words. Members of the other place amended the bill because they wanted to restrict the public naming of Canadians which would now be required. They wanted the requirement to apply only to certain subsections in the long list to which I’ve referred. The problem, colleagues, is the way they drafted the amendment. They added a new subsection (7) at the end but didn’t change the opening words, with its overarching obligation to name every payer and payee who paid or received more than $5,000. There’s no question in my mind that the intent of the amendment was to limit the obligation, but it’s not clear that, as drafted, it succeeded. The then Privacy Commissioner was asked about this when she testified before our Banking Committee. She and her senior general counsel agreed that “there is an ambiguity” because of the way the amendment was drafted.
This points out a problem that many Canadians have identified with private members’ bills, which is that the drafting, not having been done or scrutinized by Justice lawyers, can have problems. In this case, because of the rules limiting debate on private members’ bills in the other place, there was no substantive study or debate on the amendments which were brought forward at report stage. These questions were simply never discussed. Fortunately, in this chamber, we’re not so limited by our rules and are therefore in a position to act as a “chamber of sober second thought,” as stated by the Fathers of Confederation, or, as the Supreme Court put it so well recently, as a “complementary legislative chamber of sober second thought.”
Returning to Bill C-377, we have a bill which would require detailed statements about all transactions and all disbursements for every payer and payee, who may or may not have to be named, where the cumulative total is more than $5,000. And all of this is then to be posted on the Internet for the world to see.
Our former colleague Senator Segal put it well when he said:
At the disclosure level that is now in the bill — $5,000 — a two-year supply of coffee, a used car, a new computer system or printer, or the replacement of plumbing or a boiler at a union headquarters would qualify for explicit disclosure. Is this all that CRA has to do?
Under this bill, every small business that has a contract for more than $5,000 with a labour union must have the value, purpose and description of that contract posted on the Internet for its competitors to examine and then undercut. Is this the way to help our small- and medium-sized businesses to thrive, or foster fair competition in our economy, to force some businesses, simply because they happen to do business with a labour organization, to open up confidential details of their private business contracts to their competitors?
There will be two tiers of businesses in this country: those who don’t do business with labour organizations, who get to keep their competitive information private, and those that do, who we will punish by undermining their future competitiveness.
Turning to the more than 20 subparagraphs that I mentioned earlier, they cover everything from accounts receivable; accounts payable; loans exceeding $250 that were extended to officers, employees, members or businesses; loans payable; description, cost, book value and sale or purchase price for every sale and purchase of investments and fixed assets; aggregate amount of disbursements on “administration” and a separate category for aggregate amount of disbursements on “general overhead.” Can anyone tell me what is encompassed by each of these undefined terms? And this is just a partial list of what will now need to be provided.
Subsection (vii) is particularly problematic. Not only is there an obvious punctuation error, but the names of countless individuals identified must be posted on the Internet, with their salaries, for the world to see. Here’s what it says:
. . . a statement of disbursements to officers, directors and trustees, to employees with compensation over $100,000 and to persons in positions of authority who would reasonably be expected to have, in the ordinary course, access to material information about the business, operations, assets or revenue of the labour organization or labour trust, including gross salary, stipends, periodic payments, benefits (including pension obligations), vehicles, bonuses, gifts, service credits, lump sum payments, other forms of remuneration and, without limiting the generality of the foregoing, any other consideration provided . . . .
As drafted, the subsection would require disclosure of disbursements to officers, directors and trustees, and to employees earning more than $100,000. That’s clear enough. But what about the phrase:
. . . persons in positions of authority who would reasonably be expected to have, in the ordinary course, access to material information about the business, operations, assets or revenue of the labour organization or labour trust . . . .
Is it actually clear to everyone, or better yet, is it clear to anyone in this chamber, who is to be included in these words, and perhaps more importantly, who can safely be left out?
Many people would presumably have “access” to “material information about the business . . . of the labour organization or labour trust.” That could include anyone who has access to a filing cabinet, where normal documents concerning day-to-day operations are kept. What is meant by “persons in position of authority”: Authority over what, or whom? Clearly it is someone other than officers, directors or trustees as they have already been covered.
Clearly they include people who earn less, even substantially less, than $100,000. Why would we pass a law requiring the posting on the Internet of the names and salaries of every middle-level employee of a Canadian labour organization? Would we want the names and salaries of all our friends and family members posted on the Internet? If not, why would we pass a law forcing any Canadian associated with a labour organization to do so? Is this the kind of Canada we want?
The bill goes on to require public disclosure of how all these same people — officers, directors, trustees, employees earning more than $100,000 and this vague class of middle-level employees — spend their time. Labour organizations and labour trusts will be required to file statements estimating the percentage of time spent on each of “political activities, lobbying activities and other non-labour relations activities.”
Colleagues, when representatives of a union meet with the Minister of Labour to try to avert a strike, are those meetings considered by this bill to be lobbying or some other “non-labour relations” activity? Frankly, I would have thought a Minister of Labour would want to encourage union representatives to meet with her on a regular basis, not only when a strike may be looming. Who would we have the minister meet with, if not representatives of labour organizations?
In the interest of balance, should we pass a law requiring all cabinet ministers to file a statement estimating the percentage of time spent on partisan political activities, riding activities and time spent lobbying ministerial colleagues? It’s absurd.
And the bill doesn’t end there. Under subparagraph (viii.1), labour organizations are required to file a statement estimating the percentage of time spent on, again, “political activities, lobbying activities and other non-labour relations activities” by employees and contractors — contractors, colleagues. Labour organizations are to report on how third parties, over whom the labour organization presumably has no control, spend their time.
Honourable senators, here’s an example: A local union hall has a contract for cleaning services with a private cleaning company. It is the only such contract with a union that this outside company has. But the union hall will now be required to provide detailed information about this cleaning company to the Canada Revenue Agency. Are we really comfortable with that proposition?
Another example is Helmets to Hardhats, which Senator Day knows well. It is an organization that provides careers in the construction trades for returning veterans. It is a partnership with Canadian building trade unions, employers and government. What disclosure will be required of them as they work to assist our veterans?
A proposed subsection was added at report stage in the other place that takes the absurdity of the bill even further, if that were possible. It says:
(5) For greater certainty, a disbursement referred to in any of subparagraphs (3)(b)(viii) to (xx) includes a disbursement made through a third party or contractor.
Colleagues, how can we impose an obligation on one organization to be responsible for reporting on payments made by third parties, who by definition are not within their employ or control? How are they to be expected to know this information, let alone be in a position to publicly disclose it? But if they do not disclose it, they will be fined $1,000 a day upon conviction.
The list of disclosure obligations goes on and on, describing any and every activity imaginable. Just in case anything may have been missed, it ends with these words:
(xx) any other prescribed statements;
In other words, colleagues, the government can meet behind closed doors and require disclosure of anything else they decide they want: for instance, why not the name and address of every union member? The government could require disclosure of the breakfast menu at the union local to ensure they are not on a taxpayer-subsidized gravy train. There is no limit placed on this regulation-making authority, and there is nothing that anyone could do except comply or face the prospect of being fined $1,000 a day.
Honourable senators, I have never seen any bill that is so intrusive into the private affairs of Canadians. As I mentioned earlier, it is not at all clear that as drafted this bill is limited to unions. The general counsel for Doctors Manitoba told our Banking Committee:
. . . detailing each of those transactions may force us to disclose personal health, financial or otherwise private information about our members to the public, putting us in the awkward position of complying with this legislation by virtue of having to violate other legislation.
Interestingly, when the Minister of National Revenue was asked in the other place to produce the same information listed in Bill C-377 with respect to the people in the Canada Revenue Agency who administer its searchable charitable database, the minister replied:
. . . the Privacy Act precludes the CRA from disclosing personal information about its employees.
Think about that, colleagues: The government is prohibited by law from disclosing the same information about its employees that we would be demanding labour organizations and labour trusts to disclose about their employees. Of course, irony upon irony, it is those CRA employees who will be administering and enforcing the disclosure provisions of Bill C-377 — insisting that labour organizations make public for the world to see on the Internet information that they are prohibited by law from disclosing about themselves.
Last spring, a question was placed on the Order Paper in the other place asking how many staff in the Prime Minister’s Office earned salaries over $150,000 annually, over $200,000 and over $250,000. It also asked about bonuses paid to those staff. Notice, colleagues, it didn’t ask for names or individual salaries but just how many staff were in each category — significantly less information than is asked for in Bill C-377. The Prime Minister’s Parliamentary Secretary, the notorious Paul Calandra, tabled the following response on March 6, 2014:
Mr. Speaker, in processing parliamentary returns, the government applies the Privacy Act and the principles set out in the Access to Information Act, and the information requested has been withheld on the grounds that the information constitutes personal information.
So there is the protection of the Privacy Act when it relates to people who work for the Prime Minister, but open season when it relates to people who work for a labour organization. How does Senator Runciman, who proudly reminded us of his union background when he moved second reading of the bill, defend such a proposed new law?
The Privacy Commissioner was very clear when she testified about Bill C-377 before our Banking Committee. She said that naming individuals as proposed in this bill would be
. . . a significant invasion of their privacy. By not restricting web searches in some way, given the power of web searches these days and the ultimate replicability of information on the web, since the web never forgets and people have the right to be forgotten and other issues like that, I think I would have problems with the bill. I would have problems with it.
In addition to privacy concerns, our committee also heard that the bill could actually endanger lives, posing potential harm to the very security of our police who work to keep us safe. Here is what Tom Stamatakis, the President of the Canadian Police Association, told our Banking Committee about the security risks that his members would face if Bill C-377 is passed. He said:
A person on my executive board in Vancouver is a sergeant in the Combined Forces Special Enforcement Unit in British Columbia. The sole function of that unit is to target organized crime groups, outlaw motorcycle gangs, and identify gangs engaged in serious criminal activity. Their main function is to surveil gang members and their activities with a view to successfully prosecuting them. Bill C-377 would put this individual in a situation where at the very least his name would be published. In this day and age with technology the way it is, it probably would not take much for someone to do something.
How do those who support Bill C-377 respond to this concern about the safety of our law enforcement officers? Or is the goal of disparaging unions more important than the personal security concerns of those sworn to protect us?
Bill C-377 would also require labour organizations to disclose information protected by solicitor-client privilege, a fundamental and critical privilege in our legal system. The Federation of Law Societies of Canada, the national coordinating body of the 14 provincial and territorial governing bodies of the legal profession in Canada, came before our Banking Committee in May of 2013 to express its grave concern about this.
I mentioned that the disclosure obligations set out in the bill apply not only to labour organizations but also to labour trusts. Ralf Hensel, General Counsel and Director of Policy for the Investment Funds Institute of Canada, testified before our Banking Committee in June 2013. Let me read to you what he said:
Labour trust is cast in so broad a manner that we believe on a fair and reasonable interpretation it captures any trust or fund offered to the public in which there is a single unit holder or beneficiary who is a member of a labour organization. That fund would then be subject to the bill’s full disclosure requirements.
At its essence, then, any mutual fund that has just one investor who is a member of a labour organization would be tainted and therefore subject to the bill. Whether the tainted fund would need to report on the personal investments of only those who are members of a labour organization or all the investors in that fund is not entirely clear, but we cannot believe that requiring public reporting by public mutual funds on the personal investing and savings activities of investors, whether or not members of labour organizations, was the intent of the drafters and promoters of this bill.
Generating and filing the specified reports will itself be an unwarranted administrative burden for fund companies, but that burden pales in the face of the activity necessary to ascertain initially and on an ongoing basis every investor’s relationship, if any, with a labour organization — every current investor —
He had earlier testified that there were 12 million such investors in this country.
— and every new investor in every series of every fund managed by every firm, which is a lot of “every”s. There are over 9,000 series of funds.
He concluded by saying:
This is a Herculean effort to be required.
Mr. Hensel might use the term “Herculean effort.” “Nightmare” is the word that springs to my mind.
Here is another scenario that I have heard. Right now, many employers top up pensions of employees beyond the caps that are permitted under the provisions of the Income Tax Act, and they pay for those top-ups from the company’s general revenues. If a company has employees — even just a few — who are members of a union, then that union could be said to have a “beneficial or financial interest” in the “fund” which pays those pension top-ups, that is, the company’s general revenue fund. And under the definition of “labour trust” in this bill, this would mean that the company’s general revenue fund is now a labour trust with all the disclosure obligations of the bill. Colleagues, what if the employer in question is a provincial government, and instead of those top-ups being paid out of general corporate revenues, they are paid out of the Consolidated Revenue Fund? With this scenario, the nightmare only gets worse.
Colleagues, these are just a few of the problems that were identified in our study of the bill last year and others that are continuing to be raised and that convinced us collectively that the bill could not proceed without significant amendment.
I am not aware of any person or entity, public or private, anywhere in Canada required by law to make the kind of public disclosure that we would be demanding with Bill C-377. The Prime Minister’s Office is not required to make this kind of public disclosure. Charities are not required to make such disclosures. Neither are political parties. Public and private corporations, which have their own lucrative tax writeoffs, are not required to make such disclosures. On what possible basis can we demand that level of disclosure from labour organizations and labour trusts?
The sponsor of this bill in the other place, Mr. Russ Hiebert, told our Banking Committee that the public has a right to the information that would be disclosed under Bill C-377 because of the tax benefits enjoyed by labour unions under the Income Tax Act — things like full income tax deductibility for members’ dues payments. He said:
The fundamental premise behind Bill C-377 is that the public is providing a substantial benefit and they should know how that benefit is being used.
Colleagues, think about that — and think about what precedent we would be setting if we pass this bill. We would be saying that anyone who claims a tax deduction under the Income Tax Act is opening himself or herself up to demands for the full public disclosure of their activities.
Every single individual Canadian taxpayer claims personal income tax deductions. How far are we going to take Mr. Hiebert’s logic? Just as union dues are tax deductible, so are the professional fees paid by lawyers, engineers and doctors to their provincial regulatory bodies. And then there is the direct flow of public taxpayer funds to businesses.
Two business professors at the University of Regina, Sean Tucker and Andrew Stevens, wrote about this in the National Post. They began by describing a typical engineering firm that might be receiving federal government benefits under the federal Youth Employment Strategy, or the Scientific Research and Experimental Development Tax Incentive Program, or the Canadian Innovation Commercialization Program, all under the government’s economic action plan.
Professors Tucker and Stevens ask the logical question:
Why should businesses that receive the same or a greater degree of support through the tax system be treated any differently than trade unions?
The business equivalent of Hiebert’s law would require this firm to publicly disclose senior management salaries and all transactions over $5,000, with both the payer and payee being identified. But, the extent of accountability would reach even further under Hiebert’s bill.
The government would define and require reporting on over a dozen categories of business-related activities and demand senior managers to disclose on all political and lobbying activities. The costs associated with reporting would be borne by the business and non-compliance would result in a fine of $1,000 per day. And, because the scope of disclosure mandated by C-377 is not proportional to the size of the public benefit, all businesses would be treated equally.
The thought of legislation targeting businesses may seem far-fetched. Most certainly it would be contentious if a future federal NDP government were ever to consider it. However, Hiebert already provided a blueprint for such a law. . .
Those are the two professors.
Let’s be clear, colleagues. Bill C-377 is not really about who must account for a taxpayer-subsidized benefit. Bill C-377 is an anti-union bill. It is designed to bury labour unions in so much paperwork that they will not be able to represent their workers as fully and capably as they do now. Why labour unions? The conclusion being reached by many Canadians is that it is because unions have been less than enthusiastic about how this government has handled labour relations. Bill C-377 is really a message to Canadians that it is no longer safe to disagree with the Government of Canada. It’s a message that if you disagree, then the heavy arm of the law can and will be brought down upon you. The bill uses the Income Tax Act, but no one should be, and frankly no one is deceived by that.
This is not about anything that anyone could ever imagine would come under a law about the paying of income tax. Bill C-377 takes the Income Tax Act and twists it into a weapon to be deployed against those who disagree with the government — a Trojan Horse with CRA officials the reluctant warriors in its hold. Today, this weapon is being unleashed against labour unions, but who will be next? Who will be the next target?
Let’s be clear about something else: Legislating that CRA officials have to administer and enforce the provisions in this bill means that those officials will have less time for the enforcement of other provisions of the Income Tax Act. The CRA officials who appeared before our Banking Committee were very clear on this. In the words of one official, “there would be, at the very least, an opportunity cost. There would be other activities that we would forego.”
We have all heard our colleague, Senator Downe, press the government repeatedly about the need to go after the very significant sums of tax owed to Canadians taxpayers but hidden offshore. Canadians learned a few days ago from the government’s own Public Accounts that last year alone tax cheats cost federal revenues $220 million, and CRA has so far recovered only $2.2 million with hopes of collecting another $9.2 million. In other words, approximately $210 million is owing to the CRA that may never be collected. The government’s budget cuts have meant that the CRA has already downsized several times, trying to make do with less. Do we want CRA employees investigating and collecting the hundreds of millions of dollars owed in unpaid tax taxes? Or do we want them to spend their time checking whether a particular union local of six members fully disclosed to the world at large all its spending on education and training, as required under subsection 18?
Complying with this bill is going to require enormous sums. Our Banking Committee heard estimates of tens of millions of dollars to trade unions. Tens of millions of dollars for new paperwork that the Harper government will now be demanding.
If the objective of this bill is to ensure that labour unions are transparent and accountable about their financial affairs, it is the case now. As witness after witness told our committee, Bill C-377 is a solution in search of a problem.
Labour unions are already required, by law in most provinces and by their own constitutions, to provide their members with financial information and that is how it should be. A corporation is responsible to its shareholders and a labour union is and should be responsible to its members. Senator Runciman took issue with this because, in his words, “Disclosure provisions are in place in only 8 of Canada’s 14 tax jurisdictions, and they are limited in their scope and vary from province to province.”
This brings me to a critical problem with Bill C-377, namely that it’s an attempt by the federal government to impose on the provinces its own view of what provincial legislation should be, and that is unacceptable.
This is not a situation, colleagues, where provinces have been silent or where there is a legislative void waiting to be filled. The provinces have spoken. The problem is that this federal government does not like what the provinces have said. Several constitutional experts testified before our Banking Committee that Bill C-377 is an unconstitutional intrusion into the areas of provincial legislative responsibility under the division of powers in our Constitution. Bruce Ryder is a constitutional law professor at Osgoode Hall Law School. He taught constitutional law for more than 25 years.
This is what he told the committee:
I am here to share the bad news that Bill C-377 is beyond the legislative jurisdiction of the Parliament of Canada. Its dominant characteristic is the regulation of the activities of labour organizations, a matter that falls predominantly within provincial jurisdiction to pass laws in relation to property and civil rights pursuant to section 92.13 of the Constitution Act, 1867. If Bill C-377 is passed by Parliament, it will be declared unconstitutional and of no force and effect by the courts.
Professor Ryder was not alone in his opinion. Other constitutional experts expressed the same view, and so did several provinces that sent representatives or wrote to the committee. Five provinces, large and small, with governments of all political stripes — Liberal, NDP, Parti Québécois and Conservative — said this bill is not constitutional, it’s not needed and in fact it would disrupt labour relations in the province. A provincial minister who flew to Ottawa to testify before our committee described the bill as “a grenade in the room of collective bargaining.”
Senator Runciman focused his remarks on an opinion submitted to the committee by former Supreme Court Justice Michel Bastarache, now in private practice. Not surprisingly, he neglected to mention that the former Justice’s opinion was decidedly a minority — one might say, a maverick or even dissenting view — and in fact was a paid opinion, bought by Merit Canada, who I suggest is the true author of this bill.
Mr. Bastarache argued that the bill is constitutional because:
Insofar as the new provisions address matters of fiscal transparency or fiscal integrity, they can properly be characterized as falling under Parliament’s power to make laws in relation to “the raising of money by any mode or system of taxation” under 91(3) of the Constitution Act, 1867.
Professor Ryder was so disturbed by this reasoning he took the unusual step of writing to the committee. This is what he wrote:
Senators should be deeply concerned about the extraordinary breadth of the power to impose substantial financial reporting costs on provincially regulated organizations that this line of reasoning about the taxation power gives to Parliament.
My view, shared by other constitutional scholars whose opinions were cited in committee hearings in Parliament, is that the courts will see through the ruse of using the Income Tax Act as a Trojan horse for an unconstitutional attempt to regulate all labour organizations.
Colleagues, the argument presented by former Justice Bastarache is an extremely dangerous one.
As I told this chamber in June 2013, every citizen, as a taxpayer, is subject to the Income Tax Act. Under this argument, Parliament would have the jurisdiction to pass any legislation mandating any conceivable behaviour of them simply by using the Income Tax Act as justification — regulating the behaviour of public schoolteachers, accountants or truck drivers, all of which are provincially-regulated activities under our constitution, simply because they are taxpayers.
Colleagues, in June of last year, the Senate spoke with a powerful, cross-partisan, independent voice. We spoke up for the provinces we represent, five of which told us that the bill is not constitutional.
We spoke up for the Canadian value of privacy, against a bill that would force the public posting on the Internet of private citizens’ salaries for all neighbours, friends, relatives and co-workers to see.
We spoke up for principles of basic fairness. One newspaper referred to Bill C-377 as “a witch hunt.” In 2013, we stood as a chamber and refused to participate in that hunt.
I’m very disappointed that the government has chosen to bring this bill forward for debate. When it sat on the Order Paper for a full year, I hoped that it would die a well-deserved death. But, colleagues, if we’re going to be forced through the government’s version of Groundhog Day, let’s make sure we do the job properly.
If there’s no will to fast-track our earlier amendments to the other place, let’s bring back the witnesses who testified so powerfully in 2013, as well as others, to ask them whether they have reconsidered their serious concerns; to hear from them as to whether we were wrong to amend the bill as we did; and to determine whether, in fact, we should reconsider our own position. Our committee will, once again, need to conduct a thorough examination because the people who will be impacted by Bill C-377 deserve the opportunity to be heard.
Bill C-377 has received an unusual amount of public attention for a private member’s bill, reflecting, I believe, its unprecedented scope and nature. National and local media have followed its progress closely since it arrived in our chamber.
Colleagues, we spoke with a strong voice last year, and it was heard and welcomed across the nation. Canadians are watching and listening to see whether we will speak up once again in their defence. We must not let them down.
The Hon. the Speaker pro tempore: Continuing debate.
Hon. Elaine McCoy: May I take the adjournment?
Hon. Serge Joyal: I had a question.
Senator McCoy: I defer to you, Senator Joyal.
Senator Joyal: Very quickly, because I know it’s late.
You were a lawyer, Senator Cowan. When I was listening to you with the opinion that former Justice Bastarache put forward, that it is through the income tax power that you can regulate the union, in my opinion, when the constitutionality of a measure like Bill C-377 is raised, the first question that any court will ask is the pith and substance of the legislation. In other words, what is it that the legislation seeks to achieve? Is it essentially to raise money? A bill to raise money has a certain logic. It will establish a scale of taxes in relation to a certain number of elements.
But a bill that, under the guise of raising a tax, wants to regulate all kinds of other elements that have no bearing on the revenue that you want to draw from the measure, is no more a financial bill. It’s no more a taxation bill. It’s essentially an intrusion into a domain that is not covered by a measure that seeks to raise money.
I’ve not studied the bill at length, but, in listening to you, I have the clear perception that the legal argument, or the constitutional argument, that it is a financial measure doesn’t meet the test of pith and substance. The Supreme Court is full of decisions in relation to that.
Did you pay attention, in preparing your notes, in relation to that argument?
Senator Cowan: Thank you, Senator Joyal. I think that’s precisely the point. I think that a court wouldn’t simply take the government’s word as to what the purpose of the bill was. They would look to see what the pith and substance were, what the true, essential purpose of the bill was.
I think, as Professor Ryder and a number of his other colleagues said — I think he mentioned that there were 25 some colleagues — the true purpose of this bill is to regulate labour relations, which is, under the property and civil rights provision in the Constitution, a matter of provincial jurisdiction. In his view — and it seems sensible to me — this peripherally affects the Income Tax Act, but that’s not its true purpose. The true purpose, they say, is to regulate labour relations, which is a provincial responsibility.
There were five provinces, as I mentioned, that made their views known to our committee and said that this is unconstitutional and an unwanted interference in the jurisdiction of the provinces. I agree with you, sir.