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.
Subtopic: DEDUCTION OF UNION DUES