Finance Committee on Nov. 21st, 2012

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

I request a recorded vote.

[The Chair, Conservative, James Rajotte]

Okay. We will take the vote on LIB-35, a recorded vote.

(Amendment negatived: nays 10; yeas 1 [See Minutes of Proceedings])

Shall clause 20 carry?

[Scott Brison, Liberal, Kings—Hants, NS]

I request a recorded vote.

[The Chair, Conservative, James Rajotte]

It will be a recorded vote.

(Clause 20 agreed to: yeas 10; nays 1 [See Minutes of Proceedings])

(On clause 21)

I will move to clause 21.

I have one amendment in clause 21, LIB-36.

Mr. Brison, perhaps you could be somewhat more specific to the amendment you're introducing.

[Scott Brison, Liberal, Kings—Hants, NS]

Certainly, Mr. Chair.

Acquisition of property by partnerships in section 97 of the act sets out rules that apply when a partnership acquires property from a taxpayer.

Subsection 97(2) of the act sets out rules that allow a taxpayer to transfer certain types of property on a tax-deferred basis to a Canadian partnership. Subsection 97(2) is amended to make it subject to new subsection 97(3), which is described as follows. The amendment applies in respect of dispositions made after March 28, 2012.

All of us at this committee want to clamp down.... This deals with tax avoidance. The broader issue, and probably the more important one, is outright tax evasion. I think we're not doing enough to actually focus on the issue of tax evasion.

Again, Mr. Chair, other countries have done work on this. Mr. Mai and Senator Percy Downe have done a lot of work on this. We have identified that we have not done an adequate job on what really is more of a tax evasion issue rather than tax avoidance.

My concern is that these types of actions may make somewhat of a difference but actually do not have the same level of impact of simply a targeted, focused, and well-resourced effort by CRA. Ms. McLeod, the parliamentary secretary for CRA, is here. This is something I would argue Ms. McLeod's department deserves more resources for. If Ms. McLeod's department had more resources, they would be able to have a multiplier effect in terms of collections from those who would have sheltered money through international tax havens. I think that ought to be the focus.

It has not been clear, Mr. Chair, at this committee that this is going to have a significant impact if, in fact, the resources are not going to be there to really focus on what is the bigger prize and the bigger challenge and issue, and that is outright tax evasion and the use of foreign tax havens. Frankly, that's where the focus ought to be.

I go back to this partnership issue. We have heard from tax experts on this and there are various opinions out there, and I quoted earlier Vern Krishna, who is well known in terms of his views on this issue. There is some ambiguity in terms of the effect of these changes, some ambiguity as to whether or not they will have unintended consequences. I want to cite Mr. Krishna's piece one more time. This is an issue that ought to be considered important by all members, the issue of taxpayers' rights.

It is well settled that one is entitled to arrange one's affairs so as to attract a minimum amount of tax. We usually identify this principle with a decision of the House of Lords in IRC v. Duke of Westminster, where Lord Tomlin said:

Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow tax-payers may be of his ingenuity, he cannot be compelled to pay an increased tax.

That's about tax avoidance.

The bigger issue is that of outright tax evasion. At a time when you say you want to clamp down on tax evasion, you can't cut the resources of the agency that's actually in charge of enforcing that.

I think the context of this clause has to be considered at a time when we're seeing a reduction of the resources of our public servants, our professionals at CRA. I think that's important.

[Some hon. members]

Oh, oh!

[The Chair, Conservative, James Rajotte]

Order.

[Scott Brison, Liberal, Kings—Hants, NS]

I appreciate the applause from my Conservative colleagues. I am absolutely delighted. It's so nice to see the minister here, because earlier today we were told by Conservative members that he wouldn't be able to appear before the committee. This is really nice.

The Minister of Finance, I assume, Mr. Chair, is going to be distributing whatever he has here on an non-partisan basis, or this could be a very long night.

The issue here, Mr. Chair, and I'm glad the minister is here to listen in on some of this—

[The Chair, Conservative, James Rajotte]

Thank you so much, Mr. Brison. He'll have to listen to your next intervention.

If there are no further comments on LIB-36, we'll have a recorded vote on Liberal 36.

(Amendment negatived: nays 10; yeas 1 [See Minutes of Proceedings])

Shall clause 21 carry?

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

We would like a recorded vote.

[The Chair, Conservative, James Rajotte]

Okay, it carries, on division.

[An hon. member]

We asked for a recorded vote.

[The Chair, Conservative, James Rajotte]

A recorded vote? Okay, but as Mr. Jean pointed out, Mr. Brison, it does have to be asked for immediately after I ask.

(Clause 21 agreed to [See Minutes of Proceedings])

(On clause 22)

I have the following amendments on clause 22: LIB-37, LIB-38, LIB-39, LIB-40, LIB-41, LIB-42, LIB-43, and LIB-44.

We'll go to Mr. Brison.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you, Mr. Chair.

Again, the broader and more important issue is not simply tax avoidance through partnerships, but the broader issue of tax evasion and the use of foreign tax shelters. We have said repeatedly that this is an area in which other countries have done a better job of clamping down on some of the foreign tax shelters.

We have seen in the past, in 2005, an investment of $30 million yield over $2 billion in tax revenues from simply enforcing rules that already exist to clamp down on those foreign tax havens.

Again, Mr. Chair, I would ask the committee to delay these changes such that we have an opportunity to consider this in the broader context of what we should be doing from a public policy perspective to ensure that we tackle what ought to be a priority. I don't think we're doing a good enough job on it.

Again, I reference the work Mr. Mai and Senator Percy Downe have done on this.

It does not make sense, Mr. Chair, at a time when we face budget deficits. We were told by the finance minister recently that they wouldn't be balancing the books until 2016-17. We learned from the Prime Minister a couple of days later that in fact that was wrong and that the books would be balanced by the next election. Regardless, I acknowledge these are challenging times in terms of trying to get back to the balanced budget days of Liberal governments of the past. Those were the good old days when budgets were balanced, the federal debt was paid down, and that kind of thing.

This is important for the minister and the committee members. We're being entirely constructive in suggesting that investments in CRA, in the department Ms. McLeod represents, that enable them to clamp down on tax evaders will yield a far greater reward for taxpayers and for the fiscal framework than some of these measures. This is something we would hope the committee would consider. We would have hoped that the government would have considered it as well.

Mr. Chair, I think we all agree on issues of tax fairness. I don't want to rib my Conservative colleagues over this, but the reality is that we do need a broader look in Canada at reforming our tax system. We have not had a significant study of our personal tax system in Canada since 1971. If you were to try to sum up in a word what has changed in the Canadian economy since 1971, the word would be “everything”, not just in the Canadian economy, but in the global economy. Other countries have reformed their tax systems to build, in some cases, fairer and also more competitive tax systems.

We speak about the issue of income inequality. Governor Carney has raised this as an issue. It's also an issue we should consider when we're looking at tax policy in the overall design of our tax system. I think when we consider measures, whether you're talking about PRPPs or about income splitting, there's only so much money to go around. There's only so much tax expenditure. We ought to take a serious look at real tax reform in Canada. That's where we should be focused.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Brison.

Mr. Mai, go ahead.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you, Mr. Chair.

I would like to begin by thanking my colleague Mr. Brison for all the praise he is giving me about my work in tax evasion. I agree with him that we are working very hard in that area. Ms. Glover also mentioned that, and I thank her for it.

I also want to thank the committee for accepting my motion, which calls for us to study everything related to tax evasion and tax havens. I think this is a step in the right direction.

Although my colleague Peggy Nash said this bill contained many things we disagreed with, in this case, we do agree with what has been set out in this bill. Mr. Brison just spoke about how important any kind of tax evasion is for people and how much it affects them. So it is a matter of fairness and equity.

I think this is a step in the right direction when it comes to things like transfer pricing. That is why we will vote against the Liberal amendment, since it aims to slow down that application. We truly think that, in this case, a step in the right direction is being taken.

We fully agree with Mr. Brison's statement that, on the one hand, the government says that it is clamping down on tax evasion, and on the other hand, it is cutting Canada Revenue Agency's budget. We know that the tools are insufficient. The Auditor General's report shows that the Canada Revenue Agency unfortunately does not have sufficient resources to deal with everything involving non-filers. We understand that more resources are needed. The government has decided to cut Canada Revenue Agency's budget, and that is a step in the wrong direction. Nevertheless, we support the measure introduced.

So we will vote against Mr. Brison's amendment.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Mai.

I will go to Mrs. McLeod, please.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Mr. Chair, I am sure anyone watching this on television might be appreciative of a deviance from the soliloquy we've had going tonight, so I thought perhaps with Mr. Mai's interjection, I would also add a few points.

It's really important that we have all recognized tax havens as a significant issue.

I do think you were deviating a little in terms of you continue to have amendments here that are just stalling the closing of tax loopholes. When you talk about tax fairness—

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Chair...

[The Chair, Conservative, James Rajotte]

Mrs. McLeod has the floor.

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Chair, I have a point of order.

Did Mrs. McLeod call me a deviant? I'm very sensitive.

[The Chair, Conservative, James Rajotte]

I know you're very sensitive. I appreciate that, but I don't think she meant that in any way.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

I meant “deviate”. I'm sorry.

[The Chair, Conservative, James Rajotte]

Mrs. McLeod, you have the floor.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

What we are looking at is amendment after amendment that actually go against the points he's making. It really speaks to 3,000 amendments being strictly a stall, a delay tactic, really not serious in intent.

I hope when we do head into the tax haven study, which all of us are very keen to do, that we do it with the intent to have good accomplishments. To be quite frank, these are important measures in a budget implementation bill that are in there to close tax loopholes, and really it's quite, quite surprising that the Liberals are continuing to have amendments that go directly opposite of what he's suggesting.

I do need to talk a little in terms of the CRA and our work with the tax havens issue. In actual fact, the auditors who are specialized in overseas tax evasion haven't been reduced at all. They've been doing an excellent job and they've been refocused in terms of working with the RCMP and with the Public Prosecution Service of Canada. We really have picked up the ball that the Liberals left very.... I don't think they did much at all in all their years in office.

We've done tremendous work in terms of moving forward and we've certainly been lauded. Can we do more? Absolutely, but again, I think we really need to keep our dialogue tonight focused on what the actual amendments are to the proposed legislation.