Bill S-3 (Historical)

Tax Conventions Implementation Act, 2010

An Act to implement conventions and protocols concluded between Canada and Colombia, Greece and Turkey for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income

This enactment implements the most recent tax treaties that Canada has concluded with Colombia, Greece and Turkey.
The treaties implemented reflect efforts to expand Canada’s tax treaty network. Those treaties are generally patterned on the Model Double Taxation Convention prepared by the Organisation for Economic Co-operation and Development.
Tax treaties have two main objectives: the avoidance of double taxation and the prevention of fiscal evasion. Since a tax treaty contains taxation rules that are different from the provisions of the Income Tax Act, it becomes effective only after being given precedence over domestic legislation by an Act of Parliament such as this one. Finally, for each of those tax treaties to become effective, it must be ratified after the enactment of this Act.

Tax Conventions Implementation Act, 2010

[Jim Maloway, NDP, Elmwood—Transcona, MB]

Madam Speaker, I want to follow up with another question for the member.

I was watching the committee hearings on television last night regarding Mr. Jaffer and the whole argument about whether he did or did not look to Belize as a tax haven. When I look at the list that I have here of all of the 80-some countries with which we have agreements, I do not see any of the tax havens on the list. I do not see the Cayman Islands or Belize on the list. I do not see any of these other countries.

Why would the government not be looking at establishing these sorts of treaties to avoid double taxation and tax evasion? Why would we not be working with some of these countries that are known tax havens to rein these countries in a little more and also demand that they have proper bank rules set up in those countries?

I know the United States is putting a lot of pressure right now on Switzerland to make its banking system more transparent in light of some of the computer tapes that have been sold over the last year that have ended up in the German government's hands and it is chasing the German tax evaders who are hiding money in Switzerland.

It seems to me that if we are going to get at the problem of tax evasion, we should be getting some tax agreements perhaps with some of these tax havens so that we can start chasing some of this money that is evading us.

What does the member think of those observations?

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Madam Speaker, my colleague from Elmwood—Transcona speaks to the essence of the government's presentation. Is it believable or is it just going for low-hanging fruit on tax treaties and economic activities? I think it is going for the low-hanging fruit.

Of course it is difficult, but the government is not about to make difficult decisions. The difficult decisions require work. The government must be able to go to the large corporate investors in many of these offshore accounts that are free of taxation and tell them that they can make all the money in the world in our country but that some of it must stay here. It must tell them that they cannot hide the money, that they cannot take it with them when they go to the other world and, therefore, they should not take it with them when they go across the ocean.

What he wants, of course, is something that the government is not prepared to do, which is to face up to the big boys and say that we should build this country together and that no one should just come, take, pillage and then leave. That sounds a little socialist but it is a question of responsibility and community involvement, and the Conservative government opposite does not understand what that means.

[Daniel Paillé, Bloc, Hochelaga, QC]

Madam Speaker, earlier, I heard our Liberal colleagues talking about broken election promises. As members will recall, during the last election campaign, the Conservatives promised two things: they promised to put international treaties before the House prior to ratification and to give the provinces a role in concluding treaties pertaining to their jurisdictions. But as we can see, and as the hon. member mentioned earlier in response to one of his Liberal colleagues, the Conservative Party made promises during the election campaign, but as soon as it took power, it forgot all about them.

We are not comfortable with this bill because it comes from the Senate, and we have to wonder what the Senate has to do with any of this. Earlier, the Parliamentary Secretary to the Minister of Finance said that we look to some senators for guidance. I realize that many of them have had successful careers and are knowledgeable, but what good is this knowledge in the upper chamber if it wastes away from lack of use?

Bill S-3 would implement tax treaties between Colombia and Canada, Greece and Canada as well as Turkey and Canada. One interesting aspect is that this seems to be a pure, unadulterated bill, unlike Bill C-9, which is a mishmash of things, odds and ends, that the government sent to us in parliamentary committee. We will be studying those 888 pages clause by clause this afternoon. I do not know what time we will finish. But this bill is focused strictly on avoiding double taxation and exchanging information. That is very important.

We in the Bloc Québécois will take our roles as parliamentarians seriously, and we will be diligent in our work. We have studied this bill and, because we encourage diligent and serious examination of issues, when it comes time to vote, we will do our jobs as parliamentarians. We want to see this bill further studied in committee. This is very important to us because we often hear that the Bloc is systemically opposed to everything, that we are here just to stonewall, as some token Quebeckers in the Conservative Party seem to enjoy saying or erroneously suggesting. I am obviously not insulting anyone here in the House by saying that because they are not here. The Bloc Québécois will vote in favour of this bill because we believe in looking at things carefully.

Trade between Canada, Colombia, Greece and Turkey affects the revenues of the Government of Canada, but it also affects the revenues of provincial governments and of Quebec. There was no consultation about that. We do not even know how much this will cost. It will cost something, obviously, but we have no idea what it will cost the government.

Of course, for Quebeckers with companies that do business abroad—and I used to work in companies that did business abroad—tax conventions are attractive. I will always remember when I made my first foray into politics in 1994 in the Government of Quebec. At the time, my employer and immediate superior was Pierre Péladeau, who was president of Quebecor Inc. I was his executive vice-president of acquisitions.

He told me that if I went into politics in the Government of Quebec—I became Minister of Industry, Trade, Science and Technology—I should try to do as little harm as possible. That was how he liked to talk. Pierre Péladeau was a believer in the popular KISS principle, which recommends keeping things simple. To keep things simple, I will try to remember this man I loved working with.

This bill opens loopholes and revolving doors, and we will want to ask questions in committee or here in the House. For example, how is it that Canadian companies can register elsewhere to avoid paying their fair share here? We are concerned that there may be loopholes.

This bill is also supposed to fight tax evasion. Earlier, an NDP colleague wondered whether the current government really wanted to fight tax evasion. That is disturbing. We have to wonder which countries are tax havens and whether they have agreements with the Government of Canada. This is something that needs to be looked at. I still believe that we are being presented with a done deal, but we still need to examine a number of provisions in the bill.

For example, in subclause 1(d) of the General Definitions in Schedule 1, which pertains to the agreement between Canada and Colombia, the term “person” is defined as including “an individual, a trust, a company, a partnership...”.

On page 29, in subclause 1(c) of the General Definitions in Schedule 2, which pertains to the agreement between Canada and Greece, the term “person” includes an individual, a trust and a company. There is no mention of a partnership. This is the sort of question we could ask, but the agreement is a done deal. We have to take it or leave it.

Moving on with general definitions. In that same paragraph of the agreement with Turkey, the term “person” is defined as an individual, a trust, a company and an estate. As a parliamentarian, I would like to ask a question before signing this kind of agreement. Why are estates not mentioned in the agreements with Greece and Colombia, but they are mentioned in the agreement with Turkey? What does that mean? It is our job as parliamentarians to know what that means. There may be good answers out there, but I have not had a chance to get any. The parliamentary committee will try to get those answers.

There are currently 87 conventions between Canada and other countries, but only one contains the ideal standard of information exchange recommended by the OECD: the Canada-Netherlands convention. It is all a bit vague when it comes to other countries, and that raises a question.

Canada is apparently in talks with 14 other countries: Anguilla, Aruba, the Bahamas, Bahrain, Bermuda, Gibraltar, Guernsey, the Cayman Islands, the Isle of Man, Turks and Caicos, the British Virgin Islands, Jersey, Saint Kitts and Nevis and Saint Lucia. But there have been delays. Until these agreements are signed, people will continue to take full advantage of tax havens. That is the important thing here.

Let us look at three random cases: Bermuda, the Cayman Islands and Barbados. There are no conventions with these countries. They say negotiations are ongoing, but between 2000 and 2008, Canadian investment in those countries rose from $30 billion to $90 billion.

Can anyone tell me what it is about those three countries that caused investment to triple in the absence of tax conventions? Some might suggest that 300% divided by eight is 37% growth per year. As a financier and former university and HEC professor, I would say that that is not how it works. We have to consider compound interest. That is still 15% growth per year. Investment rose from $30 billion to $90 billion. Can anyone tell me what it is about those countries that supports that volume of international trade?

There are other countries as well. We remember the enthusiasm of President Sarkozy, who had the political will to act quickly, to sign and to condemn tax havens. He condemned what is known as the grey list. Who is currently on this list? Belize. My NDP colleague spoke about Belize earlier. In fact, it seems that some Conservatives do business in Belize. It would seem so. It is still on the list along with the Cook Islands, Dominica, Grenada, Liberia, the Marshall Islands, Montserrat, Nauru, Niue, Panama, Saint Lucia, Vanuatu, Brunei, Costa Rica, Guatemala, the Philippines and Uruguay. They are all on the grey list. What are they waiting for? Canada does not have agreements with these countries and therefore why not take full advantage.

What is a tax haven? The OECD has established criteria for identifying them. We have agreed on 0.08 as the legal alcohol limit for driving a car. I can say that the taxation rate is 0.0 when looking for tax havens. That means that there is no or nominal taxation. When you go to a country and ask about the corporate tax rate or the tax rate on capital gains, and you are asked in turn what tax rate and told 0.0, that should be a sign.

A lack of transparency is the second sign. It is like opening files and there is no system of record-keeping. Organizations specialize in not keeping records.

Lack of diligence is the third sign. It is expressed by administrative, legal or bureaucratic barriers or evasive answers when responding to our questions.

There is no transparency, no diligence and no taxation.

I find the fourth sign interesting: a total absence of economic activity associated with the investment.

I would like to go back to the three examples cited earlier. Canada's foreign investment in three countries went from $30 billion to $90 billion and we wonder what is in those countries.

There is nothing. Well, there are beautiful beaches, beautiful people and beautiful places, but in terms of industrial activity, there is nothing.

When a company that does metal and chemical processing invests in Barbados, we have to wonder what that country has to accommodate that. If there is nothing, along with a 0% tax rate, no transparency and no diligence, that is the perfect example of a tax haven.

In the 1950s, there was a sign on the way into Montreal meant to attract American investments in Quebec where, supposedly, labour was cheap and docile. Older people may remember it. Mr. Duplessis boasted about it. In a tax haven, you would see a sign that says that taxation is very cheap and very flexible. It is very docile. That is what a tax haven is all about.

Consider Barbados as an example. It is said that the tax laws in that country include a specific section for international business corporations. An international business corporation is a corporation that is registered in Barbados, but that conducts most of its business outside of Barbados.

Very few conditions have to be met to be there. The business has to be registered in Barbados, have its head office there, hold one annual meeting there—which can be a teleconference—keep records of a board of directors there and employ a local resident as the manager. How interesting: a job is created. However, the manager does not have to have any power. Accordingly, the board of directors recruits a manager from Barbados and tells that person they have no power and that is just fine.

How are the companies taxed? The maximum tax rate is 2.5% and the minimum tax rate is less than 1%, which is not much more than zero. They are exempt from capital gains tax, exempt from exchange controls and they can import anything they like duty free. One small detail: the average salary of a manager of a foreign subsidiary in Barbados is $1,500 a year. That same Barbados branch manager simply has to find 1,000 jobs at $1,500 each and he or she is the manger of 1,000 companies. It is a great way to earn a very good living.

I will close by talking about the road to healthy co-operation. We are told, of course, that things are improving and that this occurs less and less. Attempts are made to have tax agreements with countries, but under what conditions? We are told a country will be removed from the list if we can have access to real, valid information, if there is no banking secrecy, if access to information is relatively easy and if taxpayers' rights are protected. What happens if there are a dozen agreements? The trick is to have a dozen agreements with lenient countries and then continue to operate as a tax haven.

We are voting in favour of the bill. I know that my colleague from Alfred-Pellan will address some of the Bloc's other concerns, but we are voting in favour of the bill in order to be able to go over it with a fine-toothed comb.

With all due respect, it would have been better if the agreements had been submitted to the House beforehand and with input from the Government of Quebec.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Madam Speaker, I listened carefully to my hon. colleague's speech. I know that he is very familiar with parliamentary procedure, because in a case like this, we would usually hear from the government representatives in charge of care of finance or international trade. He said that this is the procedure today.

I would like to know whether he has any advice for the members and ministers who will be examining this Senate bill. Since senators cannot sit in this House, the ministers or members who currently take care of financial and trade matters will probably be able to explain to us how Bill S-3 will close the loopholes he mentioned in his speech.

[Daniel Paillé, Bloc, Hochelaga, QC]

Madam Speaker, that is what is disappointing. I know we cannot name members who are absent, and the list would be too long in any case. The Parliamentary Secretary to the Minister of Finance, a man I respect a lot and who I am getting to know, made a speech, but we must move forward and carefully examine the issues. They cannot simply introduce a bill and say that everything is fixed.

We signed an accord with Liechtenstein, but tax evasion is still tolerated. In 2009, the Minister of Veterans Affairs, the former revenue minister, made a big deal of saying that he had a list of 106 Canadian taxpayers who were using Liechtenstein as a tax haven, but this list was criticized by someone at a German bank.

When it comes down to a witch hunt like that, I would say that we need to take things seriously. We need to thoroughly examine the issues and the accords we are presented with, to ensure that they are complete and detailed, and that there are no loopholes.

That is obviously what we will look at in parliamentary committee. We will probably see that this type of bill has some loopholes. I will be happy to use my experience to help them find these loopholes.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Madam Speaker, I would like to congratulate my colleague from Hochelaga on his speech. He managed to make this normally dry subject interesting. Thanks to his extensive experience in economics, he was able to broaden the point of view we might have regarding such a bill.

He mentioned that this bill originated in the Senate. One senator said that the purpose of the bill was to lower taxes, not only for individual Canadians, but also for businesses. The bill's aim is rather clear.

This tax conventions bill relates to three countries whose economies are weaker and taxation lower than Canada's. Accordingly, this will have an impact on government revenues, as the member for Hochelaga mentioned. Regarding these three countries, I wonder if the member could elaborate on the economic losses that this bill could cause.

[Daniel Paillé, Bloc, Hochelaga, QC]

Madam Speaker, I would like to thank my colleague, whom I work with on the Standing Committee on Finance, for having made such a dry file interesting. It is true that taxation and finances can seem dry when we delve into these kinds of details.

As I sometimes jokingly say, no one is coming to blows over bills like this on Holchega's buses. However, these issues are very important, and I have a passion for making dry topics interesting.

My colleague's comment is very interesting because the three countries we are talking about have sizable economies, but they are in no way comparable to Canada. They will not be the ones losing out, but the Government of Canada will probably lose even more, as will we, while we are still here.

These are the kinds of evaluations we would like to have before the agreement is signed and not afterwards; otherwise, the only thing we can do is say yes or no. We do not have an opportunity to improve the agreement. And I am sure that we could improve it.

The only thing we can do is say no. But saying no means that there would be no agreement and no exchange of information. It also means that these loopholes in the law and these tax havens will continue to be used.

We are between a rock and a hard place, but it is the government that has put us there and we will study this project honestly and rigorously in committee. I am sure that the opposition parties will work with us and I hope that the people of the Conservative Party, the members in power, will become interested in this topic, which, I know, is dry but very interesting.

[Thomas Mulcair, NDP, Outremont, QC]

Madam Speaker, I am pleased to speak to Bill S-3, An Act to implement conventions and protocols concluded between Canada and Colombia, Greece and Turkey for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

The first thing I want to say is that the bill's alphanumeric designation is a clear indication that it comes from the Senate of Canada. We have to say that the Conservatives talk out of both sides of their mouths when it comes to the Senate's status as an undemocratic and unrepresentative institution.

In the House and at rallies in Alberta, they rail against the Senate, but when it comes to signing treaties, which are the most important expression of our international diplomacy, they do not hesitate to introduce bills like this one in the Senate rather than the House. This is another fine example of the Conservative government's hypocrisy.

What is more, as the bill's title indicates, this bill is supposed to avoid double taxation and tax avoidance or fiscal evasion, as the bill title states.

I will start by talking about double taxation. Because there are many countries in the world and we live in a world in transition that is increasingly open to trade in goods and services, many people spend part of their professional lives in different countries. This sort of treaty is valuable in that it prevents people from being penalized and having difficulty working and crossing borders. We do wonder, though, whether it will really do anything to prevent tax evasion.

My colleague, the member for Hochelaga, just gave several examples, including Liechtenstein, which is very high on the list of opaque countries, to say the least.

According to the OECD, there is $6 trillion in opaque countries, that is, $6,000 billion. This is not far off the estimate of $10 trillion to $12 trillion that the Tax Justice Network, an extraordinary English organization, came up with. These figures are very close.

Madam Speaker, I must ask your consent to share my time with my friend and colleague, the member for Sault Ste. Marie. I was asked to remind you.

[The Acting Speaker, NDP, Denise Savoie]

Order.

Does the hon. member have unanimous consent to share his time with the member for Sault Ste. Marie?

[Some hon. members]

Agreed.

[Thomas Mulcair, NDP, Outremont, QC]

Madam Speaker, I would like to thank all of my colleagues, especially those who are kind enough to remind the members that they are supposed to ask for that at the beginning of their remarks.

As I said, the numbers are breathtaking. These are sums of money earned by individuals and companies—both real people and corporations—in jurisdictions like our own where there are institutions that guarantee the rule of law, competent courts untainted by corruption, police forces, educational institutions and so on. All of that costs our society money to ensure the peace, order and good government we have enjoyed here in Canada for 150 years. Then, once they have earned money thanks to these institutions that cost all taxpayers money, they are rich enough and organized enough to get their money out of this country and stash it away in opaque—non-transparent—jurisdictions. In other words, they do not pay their fair share of the cost of the social institutions that helped them get rich.

This is not just about cheating on taxes. This is about swindling the society that helped them get rich. That is what we need to tackle, and it is hogwash to suggest that such a treaty will curb tax evasion. That is not true. All we have to do is review the list of jurisdictions that have signed similar conventions with Canada to see that we are still signing agreements with problematic countries.

That brings me to another major concern about Bill S-3. This bill covers three countries. The issue I am about to raise has nothing to do with Greece or Turkey, but it does have to do with Colombia, and we believe that including that country in this treaty is a poison pill. The government knew exactly what it was doing when it included Colombia in a bill that also covers two countries that are not problematic in this regard.

All members are aware of our fierce opposition to the Canada-Colombia free trade agreement. There is a reason for it and it is not difficult to understand. If Canada is prepared to sign a free trade agreement with another country because it says that how we do business, deal with people, train our professionals, our way of being and our values are fairly similar, the other party must respect our basic values such as the respect for human rights. Unfortunately, this is not the case with the current government in Colombia.

That is at the root of our fierce opposition to the free trade agreement with Colombia, proposed by the Conservative government. We will vote in favour of the principle of Bill S-3. This bill could make it possible, for example, for a young Greek couple, working one half of the year in Canada and the other in Greece, to avoid double taxation. That is reasonable. However, we want to make it clear right now that although we are voting to send Bill S-3 to a parliamentary committee, once it gets there, we will do everything possible in terms of House procedure to split the bill, to amend it and to use every means available to remove the part concerning Colombia. That is understandable because we have to be consistent.

Therefore, while recognizing that there may be a young Colombian couple in the same situation, we will continue to work with the authorities in that country and with groups trying to raise the bar for human rights. Let us be clear, we cannot, on the one hand, express our fierce opposition to a free trade agreement with Colombia and, on the other, agree to the signing of this type of treaty. Consequently, it can be expected that the NDP will do everything possible, at the parliamentary committee, to split the bill and remove the part concerning Colombia or, once again, to amend it.

[John Cannis, Liberal, Scarborough Centre, ON]

Madam Speaker, I listened very carefully to the hon. member's comments. He referred to Colombia, Greece and Turkey and his resistance with Colombia because of human rights. One-third of island of Cyprus is illegally occupied by Turkish forces. There are 1,600 Greek and Turkish Cypriots still unaccounted for with regard to laws, properties, et cetera.

If that is not a violation of human rights on behalf of Turkey, what would he say to his Greek Canadian and Greek Cypriot constituents?

[Thomas Mulcair, NDP, Outremont, QC]

Madam Speaker, I would tell my many Greek Canadian friends that Canada has a very proud history on Cyprus as a peacekeeper and a peacemaker. I find it sad to hear a member of the Canadian Parliament simply affirm that one side is right and the other is wrong.

Canada has always done all in its power to ensure that peace is maintained on Cyprus, which is the case today. Unfortunately, the belligerent words he has just spoken, affirming in the House that one-third is illegally occupied, shows that he is incapable of understanding that, in these historical questions, there are always two sides to a story.

[John Cannis, Liberal, Scarborough Centre, ON]

Madam Speaker, the incapability and ignorance is on that member's side. If he understood what I was trying to tell him, he would ask himself, “If I am singling out Colombia on human rights, why am I not singling out Turkey for doing exactly the same thing?”

With Bill S-3, we are trying to show these nations the way forward by moving them toward tax avoidance and tax evasion so they can produce and input into their economies to make for a better tomorrow. I am sad that he does not have much knowledge on the Cyprus issue. I will ensure his constituents know about it.

[Thomas Mulcair, NDP, Outremont, QC]

Madam Speaker, one of the more interesting lessons from Canadian history involves Thomas D'Arcy McGee, who was being pushed to take a side with the Fenians. He stood up and said that when we arrived in this country, we would assert our values and do the best that we could to share those values with the rest of the world.

His belligerent tone, his threatening manner and the fact that he ended with a threat to me simply shows he is incapable of any perspective with regard to the situation in another country. I would much rather use the experience and the expertise that Canada has on the world stage to continue to bring peace to areas like Cyprus than stand in the House and argue with another member who says that he will attack me in my riding for not sharing his view that only one side is right and the other side is completely wrong on an issue as complex as Cyprus.

I am so proud to be a Canadian. I am so proud that we have used our expertise and experience on the world stage to help in a place as troubled as Cyprus. I am also very pleased, as a citizen of the world, that Cyprus now knows peace. Unfortunately, there will always be those who maintain a belligerent attitude, who try to stir the pot and do not understand that our top priority in the world has to be to work for peace.