Here’s a fun exercise for law students. Revise a Bill to make it better align with what the Bill’s supporters claim is the purpose of the law. We can use Bill C-377, the anti-union disclosure law amending the Income Tax Act that was shot down by Liberal and Conservative Senators the last year. That Bill is back in the identical form that was rejected by the Senate. This time, the Tories have moved to fast track the Bill so there can be limited debate about it.
By way of refresher, Bill C-377 is a Private Members Bill introduced by a Conservative backbencher named Russ Hiebert. It
singles out unions for special adverse treatment in the form of a requirement to prepare and submit over 20 detailed documents describing every payment over $5000, the name of the person who received the money, how union employees spend their time at work, and so on and so on. The objective is to drown unions in paper work and administrative expense, and then to arm the antiunion lobbyists who pushed the Bill with reams of information to comb through looking for something they can use to criticize unions.
Private Members Bills usually go no where, but the majority Harper government has been using them to backdoor controversial Bills, since they require less debate in Parliament.
Bill C-377 has been rightly condemned by fair and sensible politicians of all political stripes as a transparent partisan attack on a type of organization that is a thorn in the side of the Conservatives. The Senate, including all Liberal and many Conservative Senators, engaged in an unprecedented rebellion against the Bill when it reached them last year, effectively shutting it down.
Russ Hiebert has argued in defence of his controversial Bill C-377 that organizations “that receive public funding” in the form
of tax subsidies and tax exemptions should be required to publicly disclose their finances and activities in detail. Note that the argument isn’t that union members should receive an accounting of their union’s finances, a point that I think most people (including me) agree with. Hiebert can’t rely on an argument about the need to protect or inform union members, because the relationship between a union and its members is not a matter for tax law. It is a labour law matter, which (except for the 10% or so of Federal workers) is dealt with under provincial law. And indeed every province already has legislation governing what unions must disclose to their members. Bill C-377 is about informing the public, the so-called ‘taxpayer’, not union members. The supposed rational behind the law is that unions receive “public funding” in the sense that they receive tax exemptions and union members receive tax deductions on their union dues.
Hieber and his political and antiunion lobbyist allies have argued that all Bill C-377 does is extend to unions what other organizations are already required to disclose. But he knows that is patently false. What the Senate emphasized in shooting down the Bill last time, beyond the fact this Bill will cost taxpayers tens of millions of dollars to police largely useless information, is that lots of organizations receive tax exemptions and other government subsidies. We taxpayers give far more ‘public funding’ (special tax preferences and subsidies) to businesses. We fund luxury boxes at the Air Canada Centre for Leafs games, expensive wines, and first class travel for corporate execs, and yet the public doesn’t get to see a breakdown of those costs. We give huge public subsidies to companies that turn around and layoff workers, but those companies aren’t subject to reporting like that in C-377. Charities receive the same tax treatment as unions, but they need only submit a relatively simple and straightforward statement of accounting, nothing so onerous as Bill C-377. We lawyers must pay law society fees in order to practice, and those fees are tax deductible, but the law societies aren’t subject to reporting obligations like those in Bill C377. Why not?
Since the rationale for the Bill is that the ‘taxpayer’ has a right to know how organizations that “receive public funding” in the form of special tax exemptions spend their money and otherwise behave, then let’s get to it. There is no defensible explanation as to why the reporting requirements should apply to only one type of such organization (who the Conservatives just happen to not like). As a ‘taxpayer’, I have a right to know how businesses, charities, and professional bodies are spending my money too. Go after all of them, don’t cherry pick.
So, for fun, try to revise Bill C-377 to better achieve the stated purpose of the law: to require full public disclose by organizations that receive “public funding” in the form of subsidies or special tax benefits, including unions, but also the many other organizations that also receive ‘public funding’, including charities, businesses, and professional associations. My quick draft is below (and here in a pdf version), but you can try your own.
How do you think the business community and Conservative politicians would react to this revised Bill?
Would they maintain their common speaking points: “Who could be against public disclosure? What do these organizations have to hide?”
The business community would go absolutely ballistic, don’t you think? They’d argue that this is Big Brother government at its worst, imposing unbelievable red tape and expense for limited or no public benefits whatsoever. Some would argue that the Bill amounts to a gross invasion of privacy. Others would argue that the tens of millions of dollars the tax office would need to police these forms would be much better spent on chasing down tax frauds and evaders, or building schools, hospitals, and infrastructure. And wouldn’t they be correct?
(Revised to treat unions like other organizations)
An Act to amend the Income Tax Act (requirements for organizations that receive public funding or tax exemptions) (requirements for labour organizations)
Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:
INCOME TAX ACT
1. The Income Tax Act is amended by adding the following after section 149:
149.01 (1) The following definitions apply in section 149 and in this section.
“business” means any public or private corporation, partnership, sole proprietorship, or other organization that receives any form of government subsidy or tax exemption or that claims a tax deduction as permitted by this Act.
“charity” means any corporation incorporated for a religious, educational, charitable or public purpose.
“labour organization” includes a labour society and any organization formed for purposes which include the regulation of relations between employers and employees, and includes a duly organized group or federation, congress, labour council, joint council, conference, general committee or joint board of such organizations.
“labour relations activities” means activities associated with the preparation for, and participation in, the negotiation of collective bargaining agreements and the administration and enforcement of collective agreements to which the labour organization is a signatory.
“labour trust” means a trust or fund in which a labour organization, business, charity, or professional body has a legal, beneficial or financial interest or that is established or maintained in whole or in part for the benefit of a labour organization, business, charity, or professional body its members or the persons it represents.
“professional body” means any organization representing a profession for which membership dues are collected.
(2) Every labour organization, business, charity, professional body, and every labour trust shall, by way of electronic filing (as defined in subsection 150.1(1)) and within six months from the end of each fiscal period, file with the Minister an information return for the year, in prescribed form and containing prescribed information.
Content of return
(3) The information return referred to in subsection (2) shall include:
(a) a set of financial statements for the fiscal period, in such form and containing such particulars and other information as may be prescribed relating to the financial position of the labour organization business, charity, professional body or labour trust, including:
(i) a balance sheet showing the assets and liabilities of the labour organization business, charity, professional body or labour trust made up as of the last day of the fiscal period, and
(ii) a statement of income and expenditures of the labour organization business, charity, professional body or labour trust for the fiscal period;
(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:
(i) a statement of accounts receivable,
(ii) a statement of loans exceeding $250 receivable from officers, employees, members or businesses,
(iii) a statement showing the sale of investments and fixed assets including a description, cost, book value, and sale price,
(iv) a statement showing the purchase of investments and fixed assets including a description, cost, book value, and price paid,
(v) a statement of accounts payable,
(vi) a statement of loans payable,
(vii) 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 business, charity, professional body 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,
(vii.1) a statement with a reasonable estimate of the percentage of time dedicated by persons referred to in subparagraph (vii) to each of political activities, lobbying activities and other non-labour relations activities,
(viii) a statement with the aggregate amount of disbursements to employees and contractors 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,
(viii.1) a statement with a reasonable estimate of the percentage of time dedicated by persons referred to in subparagraph (viii) to each of political activities, lobbying activities and other non-labour relations activities,
(ix) a statement with the aggregate amount of disbursements on labour relations activities,
(x) a statement of disbursements on political activities,
(xi) a statement of disbursements on lobbying activities,
(xii) a statement of contributions, gifts, and grants,
(xiii) a statement with the aggregate amount of disbursements on administration,
(xiv) a statement with the aggregate amount of disbursements on general overhead,
(xv) a statement with the aggregate amount of disbursements on organizing activities,
(xvi) a statement with the aggregate amount of disbursements on collective bargaining activities,
(xvii) a statement of disbursements on conference and convention activities,
(xviii) a statement of disbursements on education and training activities,
(xix) a statement with the aggregate amount of disbursements on legal activities, excluding information protected by solicitor-client privilege,
(xix.1) a statement of disbursements (other than disbursements included in a statement referred to in any of subparagraphs (iv), (vii), (viii) and (ix) to (xix)) on all activities other than those that are primarily carried on for members of the labour organization or professional body or labour trust, excluding information protected by solicitor-client privilege, and
(xx) any other prescribed statements;
(c) a statement for the fiscal period listing the sales of investments and fixed assets to, and the purchases of investments and fixed assets from, non-arm’s length parties, including for each property a description of the property and its cost, book value and sale price;
(d) a statement for the fiscal period listing all other transactions with non-arm’s length parties; and
(e) in the case of a labour organization, business, charity, professional body, or labour trust having its headquarters situated outside Canada, a statement in the prescribed form and containing such particulars as may be prescribed showing
(i) amounts paid or credited to the labour organization business, charity, professional body or labour trust in the fiscal period by, on behalf of or in respect of taxpayers resident in Canada, and
(ii) expenditures made by the labour organization business, charity, professional body or labour trust in the fiscal period inside or outside Canada and recorded separately in the accounts of the labour organization business, charity, professional body or labour trust as being directly related to its operations in Canada.
Communication of information
(4) Despite section 241, the information contained in the information return referred to in subsection 149.01(2) shall be made available to the public by the Minister, including publication on the departmental Internet site in a searchable format.
(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.
(6) Subsection (2) does not apply to
(a) a labour-sponsored venture capital corporation; and
(b) a labour trust the activities and operations of which are limited exclusively to the administration, management or investments of a deferred profit sharing plan, an employee life and health trust, a group sickness or accident insurance plan, a group term life insurance policy, a private health services plan, a registered pension plan or a supplementary unemployment benefit plan.
(7) Subsection (3) does not require the reporting of
(a) information, regarding disbursements and transactions of, or the value of investments held by, a labour trust (other than a trust described in paragraph (6)(b)), that is limited exclusively to the direct expenditures or transactions by the labour trust in respect of a plan, trust or policy described in paragraph (6)(b);
(b) the address of a person in respect of whom paragraph (3)(b) applies; or
(c) the name of a payer or payee in respect of a statement referred to in any of subparagraphs (3)(b)(i), (v), (ix), (xiii) to (xvi) and (xix).
2. Section 239 of the Act is amended by adding the following after subsection (2.3):
Offence: section 149.01
(2.31) Every labour organization business, charity, professional body or labour trust that contravenes section 149.01 is guilty of an offence and liable on summary conviction to a fine of $1,000 for each day that it fails to comply with that section, to a maximum of $25,000.
COMING INTO FORCE
3. This Act applies in respect of fiscal periods that begin after the day that is six months after the day on which this Act is assented to.
Published under authority of the Speaker of the House of Commons