House of Commons Hansard #20 of the 37th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was treaties.

Topics

Question No. 18
Routine Proceedings

12:15 p.m.

Kenora—Rainy River
Ontario

Liberal

Bob Nault Minister of Indian Affairs and Northern Development

With regard to specific treaties being made between the crown and aboriginal bands or communities in the Maritimes, the British crown signed a number of historical documents with the Mi’kmaq, Maliseet and Passamaquoddy people between 1725 and 1779. These historical documents are commonly referred to as treaties, but only three of them, the two LaHeve treaties of 1760-61 and the Cope treaty of 1752, have been formally recognized by the Supreme Court of Canada as having the constitutional status of treaties.

In response to part (a) of the question, it is important to consider the geographical boundaries and political structures of the Maritimes in the 1700s. In the Marshall decision, the Supreme Court of Canada noted that “...the British signed a series of agreements with individual Mi’kmaq communities in 1760 and 1761 intending to have them consolidated into a comprehensive Mi’kmaq treaty that was never in fact brought into existence. The trial judge found that by the end of 1761 all of the Mi’kmaq villages in Nova Scotia had entered into separate but similar treaties”. It is important to note that during the colonial period, Nova Scotia was considered to include modern day New Brunswick.

Regarding parts (b) and (c) as they relate to the Supreme Court of Canada decision on Marshall, only the 1760-61 treaties were recognized by the Supreme Court of Canada as treaties under s. 35 of the Constitution Act, 1982. The 1760 LaHeve treaty was signed on March 10, 1760 in Halifax. The 1761 LaHeve treaty was signed on November 9, 1761 in Halifax.

In addition, the other “historical documents” that have been identified from various archival sources are virtually identical to the LaHeve treaty of 1760 with the exception of the February 23, 1760 agreement with the Saint John (Maliseet) and Passamaquoddy Indians, which contained similar promises but also renewed previous peace and friendship treaties with the crown.

Copies of the following 1760-61 documents were provided to the House of Commons Standing Committee on Fisheries and Oceans, by the Department of Fisheries and Oceans in May 2001:

Renewal of 1725 Articles and 1749 Articles, with the delegates of the Saint John and Passamaquoddy, at Chebucto (Halifax) Harbour, 23 February 1760; Treaty dated 10 March 1760 with Chief Michael Augustine of the Richebuctou Tribe; Treaty with Chief Paul of LaHeve Tribe at Halifax, 10 March 1760; Treaty with Claude René, Chief of Chibennacadie and Muscadoboit, concluded at Halifax, 10 March 1760; Treaty with the Merimichi Tribe, concluded 25 June 1761; Treaty with Chief Claude Atouash of the Jedaick Tribe, concluded at Halifax, 25 June 1761; Treaty with Etiene Apshobon of the Pogmouch Tribe, Halifax, 25 June 1761; Treaty with Joseph Argimaut, Chief of Mesiguash Indians, Halifax, 8 July 1761; Treaty with Chief Jeannot Picklougawash on behalf of the Pictouk and Malegomich Tribes, 12 October 1761; and Treaty with Chief Francis Mius of the LaHeve Tribe, concluded at Halifax, 9 November 1761.

In part (d) reference is made to “Marshall or Halifax treaties”. It is assumed this is in reference to the LaHeve treaties of 1760-61, which were considered by the Supreme Court of Canada in the Marshall decision. Therefore, with respect to which bands or communities are covered by these treaties, the Government of Canada is of the view that while modern day first nations are the most likely successor groups of the original signatory groups, it is impossible to determine a direct correlation between the application of treaties to modern day first nations.

It is important to keep in mind that the passage of time has meant that there have been changes to the composition of some of the signatory groups. We recognize the difficulty in connecting the signatories of historic treaties to particular contemporary first nation communities. This may be due in part to migration of first nations, intermarriage, government policies creating bands and other initiatives such as the centralization of reserves. However, since the court found that all Mi’kmaq communities participated in the treaties, members of modern communities are likely beneficiaries of these treaty rights.

For these reasons, the Government of Canada has determined that the most appropriate course of action is to enter into a dialogue with the 34 Mi’kmaq and Maliseet first nations in present day Nova Scotia, New Brunswick, Prince Edward Island and Quebec to consider the implications of the Marshall decision.

Parts (e) and (f) of the question are unanswerable since only the two LaHeve treaties of 1760-61 and the Cope treaty of 1752 have been formally recognized by the Supreme Court of Canada as having the constitutional status of treaties. In addition, the Government of Canada maintains that while modern day first nations are the most likely successor groups to the original collectives that signed the treaties, it is impossible to determine a direct correlation between the application of treaties to contemporary first nations. As for which bands are not covered by treaties, part (g), the question is unanswerable due to changes in the composition of some of the signatory groups over the years. Nonetheless, the Government of Canada has drawn from the observations of the Supreme Court of Canada in its decision on Marshall and has determined that working with the 34 Mi’kmaq and Maliseet first nations on the implications of this decision is the most appropriate course of action.

Question No. 19
Routine Proceedings

12:15 p.m.

Progressive Conservative

Bill Casey Cumberland—Colchester, NS

With respect to reports of a breach of security committed by Russell Sanford who designed software that provided access to the Department of National Defence (DND) computer system: ( a ) what steps have been taken since that breach was discovered to ensure that the computer system is secure; ( b ) how many times had DND’s computer system been breached by hackers before this incident; ( c ) how many times has the computer system been breached by hackers following this incident; and ( d ) was classified material downloaded or copied in any incident to date, when the computer system was compromised by the hacker?

Question No. 19
Routine Proceedings

12:15 p.m.

Markham
Ontario

Liberal

John McCallum Minister of National Defence

In response to (a), a DND/CF Internet web server was hacked. Since the department’s Internet site became operational, protective measures have been in place and are constantly upgraded to ensure the security and integrity of the systems. These measures include firewalls and anti-virus programs as well as careful monitoring. In response to (b), there were none. In response to (c), there were none. In response to (d), the department’s Internet websites that were targeted are public sites and do not contain any classified information. At no time were the department’s internal or mission critical systems at risk.

Question No. 19
Routine Proceedings

12:15 p.m.

Liberal

Bryon Wilfert Oak Ridges, ON

Madam Speaker, I ask that the remaining questions be allowed to stand.

Question No. 19
Routine Proceedings

12:15 p.m.

The Acting Speaker (Ms. Bakopanos)

Is that agreed?

Question No. 19
Routine Proceedings

12:15 p.m.

Some hon. members

Agreed.

The House resumed consideration of the motion that Bill S-2, an act to implement an agreement, conventions and protocols concluded between Canada and Kuwait, Mongolia, the United Arab Emirates, Moldova, Norway, Belgium and Italy for the avoidance of double taxation and the prevention of fiscal evasion and to amend the enacted text of three tax treaties, be read the second time and referred to a committee.

Tax Conventions Implementation Act, 2002
Government Orders

November 1st, 2002 / 12:15 p.m.

NDP

Pat Martin Winnipeg Centre, MB

Madam Speaker, I am pleased to share our views, on behalf of the NDP caucus, on Bill S-2.

The member from the Alliance, who spoke on the bill, has already mentioned that the bill originated in the Senate. The NDP is critical of that very fact. We believe that bills should originate in the elected chamber of the House of Commons, not in the unelected Senate. We will make that point every time we see a bill coming forward that is marked S rather than C.

The NDP will have no trouble voting for Bill S-2. We recognize there are seven tax treaties that are designed and speak to the issue of fairness, and try to minimize the duplication of taxation for Canadian citizens working abroad. The reciprocity would exist for others who are signatory to that treaty to have the same fairness and rights were they working in this country.

We recognize that it is necessary for cooperation between this country and our trading partners. We believe that tax treaties enhance the trading relationships that we have with other countries around the world. We recognize the benefit that treaties like this have in giving opportunities to share information between the two countries, for example, administrative information that can aid, assist and benefit the relationship that exists between these very countries. We recognize the need for us to deal with the issue of double taxation.

We would hope that our government would take steps to minimize the risk of such a thing happening to Canadian people working abroad. We would point out though that there are a number of ways that the treaty could have been crafted to deal with the issue of double taxation. We do not know who has the exclusive authority, and perhaps this will become clear as the bill moves further along, regarding double taxation, for example, exclusive to the source country, or exclusive to the country of residence of a person being taxed or some combination of the two. One of the points that has come to our attention is that there is a lack of clarity on that issue as it tries to deal with the issue of double taxation.

The other point of note, as the parliamentary secretary who introduced the bill pointed out, the withholding tax rates are of some concern to those involved. We are satisfied that Bill S-2 would address the issue that interest, dividends and royalties that are subject to withholding taxes would be taxed at a rate which used to be 25% and would now be reduced to about 5% in some countries to a high of 15%. This is a general reduction of taxes for those who are having funds withheld due to interests, dividends or royalties. That may have an effect on Canadian artists and musicians who have royalty cheques coming from other places. The tax rate would be harmonized now at a rate lower than they are being taxed currently. We would see that as mildly beneficial to some Canadians and therefore we would be pleased to support it.

I would like to thank the finance critic for the Bloc Quebecois for expanding the debate somewhat, because I think it is an opportunity for us to speak to the larger picture of the treatment of taxation when we are dealing with international trading relationships. He spent much of his speech pointing out that we must be careful that we are not enhancing tax havens, in other words disadvantaging our own country by unduly promoting tax situations in other countries which may in fact be detrimental to our own revenue streams here in this country.

He used the example of Barbados as a popular Canadian tax haven and he pointed out that the Government of Canada's own website was offering offshore investment opportunities as an idea for minimizing a person's taxes. It strikes me as strange that the Government of Canada would do anything to enhance and promote people's tax avoidance by putting money offshore.

I was pleased he raised that, because even though today we are dealing with a tax treaty that deals with seven tax treaties, I believe, with countries like Kuwait, Mongolia, the United Arab Emirates, Moldova, Norway, Belgium and Italy, we can have a much larger debate about the treatment of tax havens and certainly the government's unwillingness to protect revenue that rightfully belongs in Canada and should be spent in Canada.

Again, we have pointed out the contradiction that we have revenue shortages and program cutbacks that need an injection of revenue. We are even contemplating the possibility of raising taxes to meet those needs, yet we are willingly letting revenue slip out of the country and, if the hon. member is correct, even promoting money slipping out of the country which should rightfully be going to programs.

I would like to draw attention to one case that I have quite a lot of personal knowledge of, that is, the tax avoidance of the Bronfman family. I will use the name even though during the court cases the name of the family was not used. Ten years plus a few months ago, the Bronfman family transferred billions of dollars in family trusts out of the country and got special dispensation not to pay any capital gains tax on those billions of dollars. Had the Bronfmans paid an ordinary rate of capital gains on that money, it would have been $750 million of revenue for the Government of Canada. The statute of limitations on this kind of thing is 10 years. In the ninth year, when people in the general public became aware that it was the Mulroney government that allowed this transfer of Canadian funds out of the country without any capital gains being paid on it, they tried to intervene in the courts. They called it “operation loophole”.

The reason I have some personal knowledge of it is that a constituent of mine is the person who appealed to the Federal Court for the right to intervene on behalf of Canadian taxpayers to encourage Revenue Canada to enforce the law for the benefit of all of us and to charge the taxes that were owing to the country. His name is George Harris. I think he is a Canadian hero. For two years he fought tooth and nail and made an enormous personal sacrifice in terms of time and resources to go through all the stages of Federal Court and was blocked every step of the way. The Government of Canada tried to stop him from filing that appeal.

The case went to the Supreme Court of Canada because the case was won at the various preliminary stages. It went all the way to the Supreme Court of Canada, with the request that the Government of Canada enforce its own revenue laws. Ultimately the case was lost in the highest court of the land. The Bronfman family got away with it and Canada lost $750 million worth of revenue.

We had members of the Canadian Health Coalition come before the finance committee stating what they thought the needs were for the health care system for this year alone. They were not blue-skying it. They say that $1.1 billion is required immediately to plug some of the gaping holes, whereas the government willingly let $750 million worth of revenue go out of the country. If you or I, Madam Speaker, owed $100 in taxes we would be hounded to the ends of the earth. The government would be knocking down our doors to collect that. It would be repossessing our property to collect that. However, it willingly let $750 million of revenue go. I am very critical of that. It is relevant. I do not know if I am going to be challenged on relevancy in this speech, but it does have to do with taxation policy and international foreign relationships, I suppose, with other countries.

I am really quite impressed with how thorough and how comprehensive Bill S-2 is. It really seems as though it tries to consider every eventuality and is very careful to anticipate all the possibilities of Canadians working abroad and whether they file taxes in their home country or in the country that is the source of the revenue. All the combinations, permutations and possibilities were considered, yet the contrast I would like to point out is that there are other aspects of taxation law where there seems to be a complete unwillingness to even lift a finger to correct obvious flaws in the Income Tax Act. I would like to draw attention to just one and that is the fact that businesses can deduct fines as legitimate tax deductions.

I simply cannot believe that it was ever Parliament's intention when it crafted the Income Tax Act to make it tax deductible to break the law. I do not accept that, but we have made government aware that this is the perhaps inadvertent status quo or byproduct of the current act and it has chosen not to take any steps to correct it. It has known for years that this is the situation, so I am confused by the amount of detail and analysis that it spent on Bill S-2, which does not affect that many people, really, although it will be of benefit to some Canadians working abroad. I am confused by its complete unwillingness to address this outrageous tax loophole that exists whereby fines and penalties can be considered a legitimate, tax deductible business expense.

The government will not dedicate one iota of time and resources to add one simple line to the Income Tax Act, which could say that “for greater clarity, fines and penalties imposed by law are not to be considered tax deductible expenses”. The situation would be resolved. In the absence of the government taking that action one can only conclude that it approves of the current situation, which most Canadians certainly would not.

The other thing I would point out in terms of contrast to the amount of energy and attention that the government attributes to some things is the disability tax credit. There was an absolute missionary zeal with which it undertook harassing every disabled person in the country who applies for and qualifies for the disability tax credit. It spared no effort in terms of energy or resources to go to every single person who applied for the disability tax credit and make them undergo a whole new medical test at their own expense and then reapply and requalify under a rigid new set of criteria. It raised the bar a great deal in regard to who should be eligible for the paltry $970 disability tax credit.

We can imagine the energy and the resources it must have taken to review every one of those applicant and recipient files, craft a letter and send it out. I believe the current estimate is about $7 a letter. That is what it costs to mail a letter these days by the time it is produced, printed and mailed to the public. Then each one of those people who wanted to reapply for the disability tax credit was forced to go and get a new medical opinion at their own expense. Doctors do not do that for free because it is not covered under the medical plan. It costs from $130 to $150 to prove that a visually impaired person is still unable to see or to prove that an amputee is still an amputee or to prove that for quadriplegics nothing miraculous happened overnight to change their circumstances between when they filed for their disability tax credit last year and now wish to file again. This small amount of money is supposed to compensate people for the extra expenses they incur due to their disability, so it is frankly the most meanspirited and cynical initiative that I have witnessed since I have been here in Ottawa.

I raise it because it stands in such glaring contrast to how the government shows a wilful blindness to an obvious tax loophole that could be plugged, thereby forgoing revenue as a result by allowing a tax deduction that should not be allowed. On the other hand, the government wastes all kinds of energy and resources in harassing, of all people, the disabled. It is a glaring contrast that we should shine the spotlight on.

Bill S-2 does not offend me. I can see it being necessary and even useful. What irritates Canadians, I believe, are the other contradictions in taxation policy in the country and the warped sense of priorities that exists when one considers the disability tax credit, operation loophole, and allowing businesses to deduct fines, to reward people, let us say, for breaking the law. I do not think there can be a person here who does not recognize that it undermines the deterrent value of a fine if we can have it reduced automatically by writing it off against our income taxes. That much is common sense.

If Bill S-2 is worthy of our attention in such great detail, I wish that Revenue Canada would spend more time and attention on glaring, outrageous omissions like the business tax deduction for fines.

Tax Conventions Implementation Act, 2002
Government Orders

12:30 p.m.

Progressive Conservative

Bill Casey Cumberland—Colchester, NS

Madam Speaker, I am pleased to speak to Bill S-2. The previous speaker brought up the subject of the disability tax credit and I am glad he did. I had not thought to raise that issue in my remarks, but I will do that now. I have raised the issue in the House several times and I have been very troubled with the way in which some of my specific constituents have been dealt with.

Last night the Minister of National Revenue spent a long time helping me go through the system. I very much appreciate her taking the time to do that. I am still just as concerned as I was before, but I have a much better understanding of the process. She was very good to have spent the time with my staff and me to help us understand why this review happened, why the changes are there and what the philosophy is behind them. I would like to extend my appreciation to the minister for that.

In those discussions last night I talked about two people in my riding who had been receiving the disability tax credit for some time and then had it cancelled. One is Don Pryor, a man who was run over by a train. His leg was amputated and his internal organs were damaged. He has gone through a great deal of grief and pain since I think 1979. He was receiving the disability tax credit and then with this new review, it was taken away after all that time.

Obviously he still does not have his leg and suffers from all the injuries, but he has been denied his tax credit. We will to appeal it once again, as the minister instructed, and hopefully we will have it reinstated. That is an example of the shock that hits people on this issue.

Again, I want to thank the minister for taking the time last night to help me with this. I really do appreciate it. It was very helpful. Perhaps if we all had access to that, we could understand what is happening and we could help people with disabilities through this very troubling program.

My staff and I came away from that meeting much more informed and better prepared to help because we all care about disabled people. We all have them in our ridings. They are all coming to our doors with these situations. It is much more than just a review to them. It is almost intimidation by big government. They are afraid in some cases to even fill out the form and return it. They go to their doctors and the doctors are sometimes not cooperative. The forms that are filled out are supposed to be free but now some doctors find it necessary to charge for them. There are a lot of questions and it is very complicated for people with disabilities.

I never had a lot to do with people with disabilities until I came to Parliament. Now it is very much a part of my job because of the hurdles thrown in the paths of people with disabilities at every turn. Whether it is a disabled person applying for Canada pension or simply trying to find ways to afford to put a ramp into a house or to change the facilities in a house or receiving the disability tax credit, it is very complicated for that person.

In my view it results in many cases with people with physical disabilities ending up with very troubled emotional situations because they have lost their ability to contribute in some cases. They have lost their ability to support their families in some cases. What starts off as an emotional disability ends up as a financial disability because they cannot work, they cannot earn a living like they used to, they cannot join the workforce and the hope for promotions and recognition for the good jobs they have done is gone.

When someone is totally disabled, it has a big impact on them, much more than just a physical disability. I have learned to appreciate that from meeting some of the people with disabilities. I admire them for handling their situations.

I have a letter from a Mr. Sherman Bent. This man is incredible. He was a hard worker all of his life. He never had a day off in his entire life until he was diagnosed with a very serious cancer. He went through a full year of chemotherapy, which did not work. Then he had to go through a bone marrow transplant. That left him without 80% of his vision in one eye and 50% in the other. He is pretty much confined to a wheelchair. He requires help to do everything in his normal life that people without disabilities can do and not even think about it.

He applied for the disability tax credit some time ago and received it. Then this year he has been denied it even though he is totally disabled. As instructed by the minister, I will help Mr. Sherman Bent appeal this. I believe by any standards he should receive it and I will stay with it until he does. It is a big issue for all of us.

I would say that perhaps the case was not handled the way it should have been. Considering how serious it is to these people, perhaps we should all go back, take a look at this and try to learn more about it, which is what I did last night. It will change how we handle it.

I will move on to the subject at hand, which is what I am supposed to be talking about, Bill S-2. It just makes common sense to enter into treaties with other countries so that we can share information and make sure there is not double taxation. This came very close to home for me a couple of years ago.

Before a friend of mine moved to Bermuda he got all the rules and regulations from the tax department. As he was told by the tax department, he sold his house and completely transferred his whole life to Bermuda. He had a three year contract and is a professional. He did everything he could to avoid double taxation. He followed the rules exactly.

What happened was that a situation happened in his family. He thought it would be better if he came back to Canada before his three year contract was up. Of course that triggered a nightmare from the tax department because Bermuda charged him tax and Canada charged him tax. He had gone through this whole thing for nothing. He had sold his house and had taken all the steps that the tax department told him to, but because his circumstances changed it placed a great burden on him. It took a long time for him to sort it out.

I understand what double taxation can do. This was a Canadian who had gone to Bermuda to do a professional job. He ended up being audited by Revenue Canada when he came back and it determined that he owed a lot of tax money on which he already had paid tax in Bermuda. Again he had gone through the painful ordeal of selling his house, moving his family and completely uprooting himself exactly according to the instructions.

It can be very troubling when someone from another country comes to Canada or someone from Canada goes to another country and has to face this double taxation. This convention will help eliminate that.

The convention would actually ratify treaties with Kuwait, Mongolia, the United Arab Emirates and Moldova, but it would also correct treaties with Norway, Belgium and Italy, and some technical aspects of the treaties with Vietnam, Portugal and Senegal. It now means that Canada has negotiated tax treaties with 80 countries so that if Canadians do move to another country they will at least have a chance under these treaties not to be double taxed .

Unfortunately, every country has a different regime for taxation. Some have capital gains and some do not. Some have income tax and some do not, and so on, but at least now they will have some protection against double taxation. It should also facilitate investment from country to country, which is necessary for us all to grow and get the maximum benefit from the global economy.

The second purpose of the bill is to avoid tax evasion by people who go from country to country and try to break the rules. All of us as members of Parliament know that if the government establishes a set of rules, it does not matter whether it is a disability tax credit or fisheries, there are always some people who try to get around the rules. By previously allowing people to go from one country to another, and there was no sharing of information, the people who wanted to break the rules and take advantage of loopholes were able to do so. Perhaps this will avoid those infractions of our taxation rules. Perhaps it will ensure that Revenue Canada gets the taxation revenue to which it is entitled.

I will be supporting the bill. It is a timely bill and it would increase our participation in the global economy. It would make it easier for Canadians to participate and exercise their rights to travel and work in other countries.

Tax Conventions Implementation Act, 2002
Government Orders

12:40 p.m.

The Acting Speaker (Ms. Bakopanos)

Is the House ready for the question?

Tax Conventions Implementation Act, 2002
Government Orders

12:40 p.m.

Some hon. members

Question.

Tax Conventions Implementation Act, 2002
Government Orders

12:40 p.m.

The Acting Speaker (Ms. Bakopanos)

The question is on the motion. Is it the pleasure of the House to adopt the motion?

Tax Conventions Implementation Act, 2002
Government Orders

12:40 p.m.

Some hon. members

Agreed.

Tax Conventions Implementation Act, 2002
Government Orders

12:40 p.m.

An hon. member

On division.

Tax Conventions Implementation Act, 2002
Government Orders

12:40 p.m.

The Acting Speaker (Ms. Bakopanos)

I declare the motion carried. Accordingly the bill stands referred to the Standing Committee on Foreign Affairs and International Trade.

(Bill read the second time and referred to a committee)