House of Commons Hansard #45 of the 38th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was industry.

Topics

Migratory Birds Convention Act, 1994
Government Orders

11:15 a.m.

Conservative

Lee Richardson Calgary South Centre, AB

Mr. Speaker, I want to thank the hon. member for his remarks and for his contribution to the committee in the passing of the bill.

I have some sympathy with regard to his comments on what appeared to be the rushing of the bill through committee and the lack of opportunity for some witnesses to appear before it. We had a number of requests from some of the larger shipping companies and organizations to appear as witnesses before the committee. Apparently, the response was that the bill had been around, albeit in a different form, Bill C-34, for the past two years and that they had adequate notice.

The hon. member makes a very good point that we need to discuss these matters. I do not think we would have had the amendments, which have been spoken to so highly of on all sides of the House today, if we had not had this in committee for the length of time we did. This is an example of how well committees can cooperate, particularly in a minority government, to bring forward solid legislation.

I want to ask the hon. member about his comments with regard to Canada Steamship Lines. Was he suggesting that it was one of the major polluters? Is it correct that it had a record fine of up to $30,000? Is it his sense that the money collected should go more toward the cleanup, as the legislation suggests? Earlier we talked about including a provision to have some of the fine proceeds go toward additional surveillance and enforcement of the legislation.

Could the member comment on those issues?

Migratory Birds Convention Act, 1994
Government Orders

11:15 a.m.

Bloc

Bernard Bigras Rosemont—La Petite-Patrie, QC

Mr. Speaker, indeed, I said that. I am not saying that Canada Steamship Lines is the greatest polluter; that is not necessarily what I am saying. However, there is a fact, and it is that, a few years ago, Canada Steamship Lines was fined for discharging oil in eastern Canada, in the Atlantic.

Canada Steamship Lines is a vessel owner, among many others, which, intentionally or not, also discharged oil in the Atlantic. It was found guilty and had to pay a fine.

What is important is to improve practices, because the risks are huge. I think this should cause us to reflect on the way that, strategically, we use oil. As a matter of fact, two weeks ago, there was an environmental disaster in the eastern part of the country. Of course, you will tell me that this was from a drilling platform, but we must find ways to ensure that this situation does not happen again.

I think that minimal fines are most certainly the best way to convince the major shipowners to change their practices. However, these fines, and the financial means the government will use, must not be used for anything other than cleanup. I think this is perfectly normal. In my view, the principle of precaution must prevail. We must be able to react quickly. We must not end up in the same situation that other departments are in.

I will give a very simple example. We notice that several departments, such as National Defence and Transport, are responsible for contaminated sites in many regions of Canada. They come up with decontamination plans, but the funding never follows. This kind of situation must come to an end.

If there are discharges, we will not be scrambling for the necessary funds to begin cleanup. A fund will be set up. Fines collected will go into this fund and we will be able to move quickly, which is much more efficient than the government's current tendency to identify contaminated sites and draft decontamination plans only to be without the necessary funds to follow through.

In my view, that is what this government amendment will help us to avoid. Most certainly, all government departments should have this same setup.

Migratory Birds Convention Act, 1994
Government Orders

11:20 a.m.

Liberal

Alan Tonks York South—Weston, ON

Mr. Speaker, I too would like to thank and congratulate the member for the very effective manner in which he has brought the concerns with respect to this bill through the committee process to the House.

The member will recall that we heard testimony from witnesses from the Justice Department who indicated that a minimum fine might in fact go opposite to the impact we wish to achieve. A minimum fine was to make it very clear to polluters that they were going to be dealt with in a very punitive manner.

The theory went this way. A minimum fine of $500,000 for those ships over 5,000 tonnes might in fact be seen by the court to be overly punitive and might persuade the court not to deal with the intent of the maximum fine, such that the very opposite might be the case. Judges might be more convinced that because of the nature and magnitude of the fine, they might not apply that regime to those who allegedly had polluted the sea.

Does the member feel that this point of view had any validity? From his perspective, how would that amendment be even more effective in achieving the intent of the bill, which is to deal very effectively with those people who are polluting at sea?

Migratory Birds Convention Act, 1994
Government Orders

11:20 a.m.

Bloc

Bernard Bigras Rosemont—La Petite-Patrie, QC

Mr. Speaker, if we try this, history will be the judge. I understand what the Minister of Justice was talking about. On the other hand, in real life, the average fine is $30,000. I think that looks like a licence to pollute. Fining a big marine industry, shipowner or shipping company $30,000 for having discharged in our waters is completely irresponsible and ridiculous.

It is our duty to raise that penalty, perhaps quadrupling it, as the bill stipulates. We cannot accept such ridiculously low fines. It is very embarrassing when we compare our fines to those levied by our neighbours in the United States and Great Britain.

Current legislation and conditions may give big shipping companies and industries the impression they have permission to pollute. But that is not true. Legislators must send a clear message that such behaviour will not be tolerated. We will not leave it to the courts to decide this issue. Experience shows us that decisions here are quite different from those in the United States and elsewhere, and impose few constraints. In view of this situation, we, as legislators, must act.

If the courts had imposed fines of $200,000 on shipping companies for their illegal discharges, we would probably not have come to this stage, and the motion certainly would not have been introduced by the Bloc Québécois. We were forced to introduce this amendment because we concluded that the court-imposed penalties were ridiculously low. The bar had to be raised. We will see how things turn out. Perhaps this part of the law will be contested. Nevertheless, it is worth the trouble of making the amendment. I would like to see a shipping magnate take part in a public debate to argue that the minimum fine is too high. I do not think that will happen. We must assume our responsibilities.

The fines imposed by the court so far are not consistent with the degree of harm done to the environment and ecosystems by these bad practices. The fines we impose must be commensurate with the negative impact of those actions. If not, we will be sending the message that pollution is allowed, and up to a point, it pays well. For a major multinational, $30,000 is just peanuts. We have to send the opposite message. That is exactly what the Bloc Québécois's amendment, adopted by the committee, is intended to do.

Migratory Birds Convention Act, 1994
Government Orders

11:25 a.m.

The Deputy Speaker

Is the House ready for the question?

Migratory Birds Convention Act, 1994
Government Orders

11:25 a.m.

Some hon. members

Question.

Migratory Birds Convention Act, 1994
Government Orders

11:25 a.m.

The Deputy Speaker

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

Migratory Birds Convention Act, 1994
Government Orders

11:25 a.m.

Some hon. members

Agreed.

Migratory Birds Convention Act, 1994
Government Orders

11:25 a.m.

The Deputy Speaker

I declare the motion carried.

(Motion agreed to, bill read the third time and passed)

Tax Conventions Implementation Act, 2004
Government Orders

11:25 a.m.

Fredericton
New Brunswick

Liberal

Andy Scott for the Minister of Finance

moved that Bill S-17, an act to implement an agreement, conventions and protocols concluded between Canada and Gabon, Ireland, Armenia, Oman and Azerbaijan for the avoidance of double taxation and the prevention of fiscal evasion, be read the second time and referred to a committee.

Tax Conventions Implementation Act, 2004
Government Orders

11:30 a.m.

Scarborough—Guildwood
Ontario

Liberal

John McKay Parliamentary Secretary to the Minister of Finance

Mr. Speaker, I thank the House for the opportunity to speak to Bill S-17, the tax conventions implementation act, 2004, at second reading.

This legislation would implement four new tax treaties that Canada has recently signed with Gabon, Armenia, Oman and Azerbaijan. The bill would also implement a new treaty with Ireland, replacing the older treaty that is already in effect.

These bills are simultaneously quite simple and yet exceedingly complex. For instance, the implementing part of the bill is relatively simple. The first section deals with the title; the second section deals with what a convention means; and the third section, which is probably the most critical section, indicates that the convention is approved and has the force of law in Canada. In effect, we are applying the rule of law to these treaties.

The fourth section deals with any inconsistencies between the tax regimes of these various countries and our own, and methods to resolve those inconsistencies. The fifth section deals with the opportunity for the national revenue minister to make any regulations which he may deem to be appropriate. The final section deals with the notification that the Minister of Finance must give in order to give the bill the force of law.

As I said, the bill is quite simple. There are only six sections in it and yet schedules 1 and 2 run 136 pages. They are sufficiently complex and there are not that many people in the House who would actually understand all of the nuances of those schedules, myself included.

The bill builds on Canada's well established network of tax treaties with other countries, which happens to be one of the most extensive of any country in the world. At present, we have 83 treaties in effect. The passage of Bill S-17 would make that 87. The new treaties would provide taxpayers and businesses, both in Canada and in these other countries, with more predictable and equitable tax results in their cross-border dealings.

Before discussing these treaties any further, I want to provide the House with a brief overview of the importance of tax treaties and why it is necessary for the bill to be passed.

As hon. members know, the government has long been committed to enhancing fairness in the tax system. These tax treaties contribute to that goal. Since income tax was first put in place back in 1917, Canada has taxed both the worldwide income of Canadian residents and the Canadian source income of non-residents.

All income of Canadian residents, whether earned here or abroad, is subject to tax in Canada. Non-residents, on the other hand, are taxed here only to the extent that they participate in the economic life of Canada or receive income from sources of business in Canada.

Tax treaties, or income tax conventions, or agreements as they are sometimes called, are an integral part of our tax system. Basically, they set out the degree to which one country can tax the income of a resident of another country.

The benefits to Canada having tax treaties in place with other countries are significant. We already have 83 in place which attests to this fact. For example, tax treaties provide certainty on how Canadians will be taxed abroad. At the same time, they assure our treaty partners of how their residents will be treated in Canada. Tax treaties also benefit the Canadian economy by contributing to a sound framework for international trade and investment.

There are definite economic disadvantages for countries that do not enter into tax agreements with other countries. The absence of such agreements can have harmful effects on the economic relations between countries. I will explain that.

The absence of tax treaties makes the threat of double taxation a great concern to taxpayers. Double taxation occurs when a taxpayer lives in one country and earns income in another. Without a tax treaty in place to set out the tax rules, the same income can be taxed in both countries without consequential relief. This situation can have a negative impact on the expansion of trade, and the movement of capital and labour between countries.

It is only natural that investors, traders and others with international dealings want to know how they will be taxed before they commit to doing business in the country. For example, when considering doing business in Canada, foreign investors and traders are anxious to know the tax implications associated with their activities in that country. They also want assurances that they will be treated fairly.

Tax treaties establish rules as to how the tax regime of one country would interact with that of another, thus removing much of the uncertainty about the tax implications associated with doing business, working, or otherwise earning income from abroad.

It is important to note the fact that tax treaties are international agreements that require official notice be given before they can be terminated. That in itself adds to a degree of certainty. The tax rules range from an allocation of taxing rights between the two countries to the establishment of a mechanism to resolve tax disputes between those countries.

All these measures promote certainty and stability and help produce a better business climate.

Tax treaties, including the ones enacted in the bill, are especially designed to facilitate trade, investment and other activities between Canada and its treaty partners. They are developed with two main objectives in mind.

The first, and probably the most important, objective of tax treaties is to avoid double taxation and provide a level of certainty about the tax rules that apply to international transactions.

The second objective of tax treaties is to encourage cooperation between tax authorities in Canada and the treaty countries to prevent tax evasion and tax avoidance.

Tax treaties play an important role in protecting Canada's tax base by allowing information to be exchanged between our revenue authorities and their counterparts in countries with which we have tax treaties.

I would like to return to the issue of double taxation. Relief from double taxation is so very necessary and deserves to be discussed in some detail. The potential arises when a taxpayer lives in one country and earns income in another. Without a tax treaty, both countries could claim tax on the income without providing the taxpayer with any measures of relief for the tax paid in the other country. This is simply unfair.

To alleviate the potential for this happening, a tax treaty between the two countries allocates taxing authority with respect to a given item of income in one of three ways: first, the income may be taxed exclusively in the country in which it arises; second, it may be taxed in the country in which the taxpayer resides; or, it may be taxable in both the source country and the residence country, with relief from double taxation provided in some form, usually the country of residence.

For example, if a Canadian resident employed by a Canadian company is sent on a short term assignment, say for three months in any one of the five countries talked about in this bill, Canada has the exclusive right to tax that person's employment income. However, in the case of most items of income and capital, the right to tax is shared, although for certain types of income, such as dividends and interest, the rate of tax that may be imposed in the state of source is limited.

Put another way, the treaties in the bill contain provisions that would alleviate the requirement for taxpayers in one country who carry on business in the treaty partner country to pay tax in the treaty partner country on their business profits earned in that country if they are not meaningful participants in the economic life of that country.

There is another aspect of tax treaties that I want to discuss, and that is the importance of withholding taxes. Bill S-17 provides for several withholding tax rate reductions.

Withholding taxes are a common feature of the international taxation system. In Canada's case, they are levied on certain payments that Canadian residents make to non-residents. These payments include interest, dividends and royalties, for example. Withholding taxes are often levied by a country on the gross amount of certain types of income paid to non-residents and such taxes normally represent the non-resident's final obligation with respect to income tax payable in that country with respect to that particular income.

The tax treaties in the bill all provide for certain reductions in withholding tax rates. For example, without a treaty or other legislated exemption, Canada taxes various categories of income paid to non-residents at the rate of 25%. Most of Canada's trading partners impose a similar level of withholding tax.

However, withholding taxes do not provide for the deductability of expenses incurred in generating income and are imposed on the gross amount of the payment. The taxpayer will therefore be subject to an effective rate that is significantly higher than the tax rate that applies to net income in either the source or the residence country.

To remedy this, Canada's network of tax treaties limits the rate of withholding tax that can be withheld by the source country on various types of income so as to more accurately reflect the level of taxes that would be payable on a net income basis. Consequently, the treaties in the bill provide various limits, usually at the rate of 5%, 10% or 15% on dividends, depending on the circumstances, and 10% on the case of interest in royalties. In some instances, royalties paid for through the use of copyright, computer software, patents and know-how are completely exempt from withholding tax.

Finally, these treaties also implement other measures which ensure that tax consequences of certain transactions are in line with Canadian tax policy. Unfortunately, time does not permit to go into details about these matters today, to the great disappointment of my colleagues opposite.

However, I do want to point out that Bill S-17 is standard routine legislation. Part of the fact is that these treaties, like their predecessors, are modelled on the OECD model tax convention, which is accepted by most countries around the world. The provisions in these particular treaties comply fully with the international norms that apply to such treaties.

Bill S-17 also addresses fair taxation and good, international trade relations.

Fairness in the tax system which, as we all know, is an ongoing priority of the government, demands that Canadians should not find themselves subject to double taxation. Nor should there be any evasion or avoidance of taxes. That is what these tax treaties work to do: eliminate double taxation and prevent tax evasion and avoidance.

Other meaningful benefits will also result once these treaties come into force. The treaties covered under Bill S-17 also address a number of the important tax treaty histories such as the taxation of capital gains realized on the alienation of foreign properties, the taxation of pensions and annuities paid to non-residents as well the prevention of a discrimination based upon a taxpayers nationality.

As I stated at the beginning of my remarks, Bill S-17 represents a part of Canada's ongoing efforts to expand its network of tax treaties with other countries. The benefits of the proposed legislation are clear. I therefore encourage all hon. members to support the bill.

Tax Conventions Implementation Act, 2004
Government Orders

11:40 a.m.

Conservative

Rob Nicholson Niagara Falls, ON

Mr. Speaker, I welcome the comments of the parliamentary secretary. I would guess that a bill like this works into the overall context of coming up with fair taxation policies between all the countries of the world, and this is just the latest instalment. It brings Canada into agreement with a number of countries to ensure that people are treated fairly. This is presumably a step forward for Canadians who live in Gabon or those from Gabon who live in Canada as well as the other countries mentioned.

I was interested in what the parliamentary secretary had to say on the bill. The contents of the bill are perfectly reasonable and of course are a step in the right direction. I hope the parliamentary secretary would agree with me that more has to be done between Canada and other countries of the world.

I would like to bring to his attention one of the unfairnesses that exists between Canada and, my example, that of the United Kingdom.

There is a treaty between Canada and Great Britain that protects individuals against double taxation. Of course that would be a very important one. As important as the countries are, as listed by the parliamentary secretary, hundreds of thousands of people who originally lived or were citizens of the United Kingdom now reside in Canada and vice versa. It is a very important relationship.

Therefore, I would like to bring to his attention a matter that has been brought to my attention. That is the treatment of pensions of individuals who live in one or the other countries. Specifically, I have individuals in my riding, and of course individuals throughout Canada, who have obtained a pension from the United Kingdom for whatever reason, but those pensions are not indexed. We have the situation where people may have emigrated from Britain say in 1970, they become entitled to a British pension, but their pensions are not indexed. Once one makes inquiries as to why they are not indexed, they say that there is no reciprocal treaty between Canada and the United Kingdom.

For instance, if a Canadian goes to the United Kingdom, there is no arrangements to have these pensions indexed. It seems to me that might be an area for the parliamentary secretary and the department to look into. We want to ensure that Canadians who live in Great Britain and British citizens who live in Canada get every benefit.

I know if one is entitled to American social security, that is indexed even though one is a resident of Canada and likewise if one is a Canadian citizen living in the United States. There is no problem with the indexing of Canadian pensions.

My understanding is that all this would take is an agreement that both countries would do it for the residents of each other's country. It seems in line with what the parliamentary secretary said about increasing the fairness to citizens who live abroad. This is something else I hope he would add to the list of things I am sure he is looking into.

Tax Conventions Implementation Act, 2004
Government Orders

11:45 a.m.

Liberal

John McKay Scarborough—Guildwood, ON

Mr. Speaker, it must be Christmas because I agree with the member. It is well said, and he raises a very valid point. The issue is the indexation of the pensions, and there is not a reciprocal indexation from the British authorities.

I can recollect a specific meeting with the High Commissioner on this very point, with colleagues from our party, his and others as well. Frankly, the High Commissioner was not very satisfactory in his answer with respect to the indexation.

In the member's second point, as to whether this can be included in a tax convention, I am hesitant to give a straightforward answer on that point. The issue is indexation of the pension rather than the taxation of the pension. Generally, treaties deal with the taxation of the pension, not the indexation, because pensions get treated as income.

I would finally note that Canada does have a tax treaty with the United Kingdom. It is one of the 83, about to 87, countries with which we have concluded a treaty. However, I do not know frankly what will persuade British authorities to treat Canadians living in Canada who receive British pensions properly.

I welcome the member's comments, and I think he is spot on.

Business of the House
Government Orders

December 14th, 2004 / 11:45 a.m.

Bloc

Michel Gauthier Roberval, QC

Mr. Speaker, I rise on a point of order. I apologize to the member, but this will not take too long.

Discussions have been held among all parties, and if you were to seek it, I think you would find unanimous consent of the House to adopt the following motion:

That, following Private Members' Business today, the House continue to sit, in committee of the whole, no later than 9 p.m., to consider the situation facing the textile industry. That, during the debate, the Chair shall not receive any quorum calls, dilatory motions or requests for unanimous consent.

That all speeches be limited to a maximum of ten minutes and be followed by a period of five minutes for questions and comments. And, when no member rises to speak or at 9 p.m., whichever comes first, the Chair shall leave the Chair, and the House shall adjourn until the next sitting day.

I believe there is consent from all parties.

Business of the House
Government Orders

11:50 a.m.

The Deputy Speaker

The House has heard the terms of the motion. Is it the pleasure of the House to adopt the motion?