October 31, 1949

INCOME TAX

DEDUCTION OF UNION DUES

CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

Co-operative Commonwealth Federation (C.C.F.)

Mr. Stanley Knowles (Winnipeg North Centre):

Mr. Speaker, I appreciate the desire expressed by the Minister of Public Works to go into supply at least some time today

Income Tax Deductions so that one item of the Department of External Affairs can be called. Before Your Honour leaves the chair, however, there is a grievance concerning which I should like to speak, in the hope that I can bring the matter to the attention of the government with sufficient force that the Minister of Finance (Mr. Abbott) will do something about it.

Early in this session I directed a question to the government concerning the matter of trades union dues, with particular reference to the question of their deductibility for income tax purposes. The reason for my question was that this matter was the subject of a decision by Mr. Justice Angers of the exchequer court on June 8 of this year, following which certain announcements were made by the officials of the income tax department which I felt were discriminatory against trade unionists. On September 27, my question to the government was answered by two ministers, the Minister of Finance and the Minister of National Revenue (Mr. McCann). I indicated at the time that the orders of the day did not permit the remarks or further questions that I might like to make in reply to their answers, and I said I would raise the matter at a later date. It is for that reason I am rising now.

As hon. members are aware, there was a period of time, particularly during the years 1945, 1946, 1947, when lawyers, doctors and teachers were permitted to deduct their professional fees from their income before computing their income tax. This right was accorded to those people under the provisions of section 6 (1) (a) of the Income War Tax Act. That section reads as follows:

6. (1) In computing the amount of the profits or gains to be assessed, a deduction shall not be allowed in respect of (a) disbursements or expenses not wholly, exclusively and necessarily laid out or expended for the purpose of earning the income;

The section is put in the form of a double negative, but turning it into the positive it means that if anyone can show that certain expenses were wholly, exclusively and necessarily laid out or expended for the purpose of earning the income, they can be deducted. Since it was possible for doctors, lawyers, and teachers to claim that their professional fees were necessarily laid out in order to pursue their profession, they were allowed to deduct those fees.

During those same years trade unionists felt that the same right should be accorded to taxpayers who pay trade union dues. This position was taken particularly by trade unionists in closed shops or in what has, in the meantime, come to be known as the Rand formula type of shop. Despite the fact that trade unionists contended that their case was comparable with the case of doctors, lawyers

and teachers, the income tax department refused to allow the claim of trade unionists in those years. One particular trade unionist, Mr. Cooper by name, of the city of Winnipeg, a moving picture projectionist, made his claim upon the income tax department for the deductibility of his trade union dues for the taxation year 1945. Having been turned down, he went through the procedures prescribed in the act.

When after Mr. Cooper had done his best but the income tax department stood firm and refused to grant him the right to deduct the fees he had paid in 1945, he took the case to the Exchequer Court of Canada. The documents in the case were actually given to the exchequer court by the income tax department on February 3, 1948, and on April 23, 1948, Mr. Cooper filed his statement of claim. The case was heard on September 7,

1948, and judgment was rendered on June 8,

1949. When that judgment was given by Mr. Justice Angers, it was in favour of Mr. Cooper. He was given the right to make the deduction that he had sought, and was also awarded the costs of the action in full.

The result of that decision by the exchequer court establishes clearly that during the years 1945, 1946 and 1947 trade unionists had, legally, the right to deduct their fees for income tax purposes. But, although the decision of the court established, retroactively, that trade unionists really had that right back in 1945, 1946 and 1947, they were in fact denied the exercise of that right during those years because the income tax department interpreted the Income War Tax Act the other way.

Topic:   INCOME TAX
Subtopic:   DEDUCTION OF UNION DUES
Permalink
PC

Gordon Graydon

Progressive Conservative

Mr. Graydon:

They had it; then the government took it away from them.

Topic:   INCOME TAX
Subtopic:   DEDUCTION OF UNION DUES
Permalink
CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

Co-operative Commonwealth Federation (C.C.F.)

Mr. Knowles:

That is precisely what happened.

Topic:   INCOME TAX
Subtopic:   DEDUCTION OF UNION DUES
Permalink
PC
CCF

Angus MacInnis

Co-operative Commonwealth Federation (C.C.F.)

Mr. Maclnnis:

You had better ask the government.

Topic:   INCOME TAX
Subtopic:   DEDUCTION OF UNION DUES
Permalink
CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

Co-operative Commonwealth Federation (C.C.F.)

Mr. Knowles:

That is for the government to answer. The act made it clear that people who laid out moneys wholly and necessarily for the purpose of earning an income could deduct those expenses from their taxable income before computing their income tax. The income tax department ruled that in the case of doctors, lawyers and teachers, that provision included the right to deduct their professional fees.

Topic:   INCOME TAX
Subtopic:   DEDUCTION OF UNION DUES
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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

Not if they were on salary.

Topic:   INCOME TAX
Subtopic:   DEDUCTION OF UNION DUES
Permalink
CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

Co-operative Commonwealth Federation (C.C.F.)

Mr. Knowles:

I beg the minister's pardon.

Topic:   INCOME TAX
Subtopic:   DEDUCTION OF UNION DUES
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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

No.

Topic:   INCOME TAX
Subtopic:   DEDUCTION OF UNION DUES
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CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

Co-operative Commonwealth Federation (C.C.F.)

Mr. Knowles:

In 1945, 1946 and 1947 they were permitted to do so. If necessary, I can quote some of the minister's words back at him. The minister knows that the matter was brought to a head by the Bond and Rutherford cases where lawyers contended that they had the right to make that deduction even if they were on salaries.

Topic:   INCOME TAX
Subtopic:   DEDUCTION OF UNION DUES
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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

And that was upheld by the court.

Topic:   INCOME TAX
Subtopic:   DEDUCTION OF UNION DUES
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CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

Co-operative Commonwealth Federation (C.C.F.)

Mr. Knowles:

And that was upheld by the court. So that is the way the matter stood during the years 1945, 1946 and 1947.

Topic:   INCOME TAX
Subtopic:   DEDUCTION OF UNION DUES
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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

I am sure I am right when I say that the income tax department interpreted the law as not permitting the deduction of professional dues such as lawyers' fees to the bar society or union dues by men who were on salary. In the Bond and Rutherford cases the courts held that the legislation was broad enough to permit such a deduction. The law has been amended to bring into effect what was for years considered to be the law and what has been the law in England for years.

Topic:   INCOME TAX
Subtopic:   DEDUCTION OF UNION DUES
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PC

Gordon Graydon

Progressive Conservative

Mr. Graydon:

It is very technical, is it not?

Topic:   INCOME TAX
Subtopic:   DEDUCTION OF UNION DUES
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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

It is very technical, but the law is that such deduction should not be allowed. Salary and wages have always been net income.

Topic:   INCOME TAX
Subtopic:   DEDUCTION OF UNION DUES
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PC

Gordon Graydon

Progressive Conservative

Mr. Graydon:

I do not think the government is right-

Topic:   INCOME TAX
Subtopic:   DEDUCTION OF UNION DUES
Permalink
CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

Co-operative Commonwealth Federation (C.C.F.)

Mr. Knowles:

If I may, Mr. Speaker, I should like to have the floor.

Topic:   INCOME TAX
Subtopic:   DEDUCTION OF UNION DUES
Permalink
LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

I just wanted to correct a statement of fact.

Topic:   INCOME TAX
Subtopic:   DEDUCTION OF UNION DUES
Permalink

October 31, 1949