Manitoba MLAs get charitable tax credit for giving salary increase back to province

A pledge by Manitoba's Progressive Conservative caucusto effectively freezepay for its membersmeans MLAs will receive charitable donation tax receipts, CBC News has learned.

The Tory caucus decided earlier this year itsMLAswouldwrite chequesto the Government of Manitoba returning a mandated 1.6 per cent pay increase. The plan to issue tax receipts for those donations will allow MLAsto avoid paying taxes on theincreases returned to the province.

The bump in pay wasdeterminedby an independent salaries commissioner.

A total of more than $70,000 will be given back to the government by PC MLAs for this coming fiscal year, the party said.

In March, the PC caucus announced all 39 of itsMLAs would hand back their salary increases to show support for austerity measures introduced by the Tory government. "We know that we can make a difference only if we lead by example," Premier Brian Pallister said at the time.

What was not announced at that point was how the process would work.

• Manitoba MLAs take voluntary salary freeze

CBC News obtained a letter written by former PC caucus member Steven Fletcher before he was booted from the Tory team in June. In it, the outspoken MLA forAssiniboiablasted his then-team members for what he called " a scheme" that dominated several caucus meetings.

"We cannot talk about anything else, but when it comes to our salaries there is no end to the questions," Fletcher wrote to Finance Minister CameronFriesenon April 3.

"Shockingly there is then a scheme developed to minimize the cost to each MLA using charitable tax receipts," the letter reads.

"It is abhorrent to claim a charitable receipt," for the donated pay increases, Fletcher said.

"The Province of Manitoba is a qualifieddoneefor purposes of receiving federal and provincial charitable donations under section 149.1 of the Income Tax Act (Canada)," a statementfrom Manitoba Finance to CBC News said.

"A Manitoba charitable donation tax credit receipt is issued for the amounts donated by an MLA to the province for a tax year, such as those associated with COLA [cost-of-living adjustments]. The tax credit can then be claimed on the 2017 income tax return. This is consistent with how charitable donations by all other taxpayers would be administered."

Won't benefit financially from receipts: PCs

PC caucus spokesperson James Teitsma, the MLA for Radisson, toldCBC News the use of charitable receipts was the best way to allow the caucus to keep its promise for a pay freeze.

"We think this is the clearest demonstration of our commitment and that's what we wanted to ensure as a team together, and so we could maximize the benefit back to the taxpayer," Teitsmasaid.

He said issuing the charitable donationtax receipts for the returned salary will not allow MLAs to benefit financially, beyond covering the tax they would have paid for income they sent back to the province.

The NDP also frozeMLA salaries in 2011, but chose to impose the freeze with a line in budget legislation. The Tories' wage freeze was voluntary, and wasn't imposed on members of other parties.

Teitsmasays the Tories didn't want to force MLAs from other parties to take a freeze.

"We wanted to be able to demonstrate clearly to Manitobansthat we were prepared to take a leadership position as a caucus and put it out to the other caucuses and members to respond," Teitsmasaid.

The three Liberal members in the Manitoba Legislature also decided to effectively freezetheir salaries bysending theirextra pay elsewhere.

"We as a caucus decided to donate our scheduled pay raise to a charity of choice, which we felt could address the critical needs of Manitobans. It was a clear decision during a time of cutbacks by the PC government," theLiberal caucus said in a statement.

Opposition calls pay freeze a 'stunt'

Opposition NDP MLAs alsofollowed the PC caucus' lead, donating their pay increases and takingthe charitable tax credit. But the New Democrats say they didn't like the process at all.

"We were concerned about it and we called it a stunt right off the hop," saidFort Garry-RiverviewMLA James Allum.

"We called the financial officials in. We asked for different options because this didn't seem correct and we were told quite clearly, [the pay return] is Mr. Pallister's decision, this is what the government was doing and we had to abide by these rules."

AllumsaidFletcher's letter to the PC caucus about the charitabledonation receipts raises more questions.

"Mr. Fletcher says [members of the PC caucus]couldn't ask any other questions except to talk about how they were going to deal with their own wage freeze. That's not fair to the people of Manitoba and we would invite the premier to come clean. What else have we not heard about?" Allumsaid.

Fletcher declined to comment on his letter because it was submission in a lawsuit he has brought against the province,challenginga law that forbids him from joining another party's caucus.

• Ousted PC backbencher Steven Fletcher plans legal challenge for right to cross the floor

Fletcher's lawyer, Bill Gange, says his client's concern isclearin his letter and the idea of issuing tax receipts for donated salary increaseswas never made clearto the public.

"The letter sets out Steven's horror that anybody would even be considering that," Gangetold CBC News. "He specifically said, 'Lookguys, I'm not going to ask for, or accept, a charitable receipt.'"

The Canadian Taxpayers Federation has also criedfoul about the issuing of the tax receipts.

"This is about leadership more than money," saidToddMacKay, the Prairie director of the organization.

"The reality is we have to trim costs across government.The best way to do that is to just rip the bandage off. If you are going to trim your salary, just do it. Don't fool around. If you do shenanigans like this you are just complicating it and mixing the message. Just get it done."

• Click here to read the letter