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 tax.

Topics

Business of the House
Government Orders

11:50 a.m.

Some hon. members

Agreed.

(Motion agreed to)

The House resumed consideration of the motion 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

December 14th, 2004 / 11:50 a.m.

Conservative

Monte Solberg Medicine Hat, AB

Mr. Speaker, the House will be relieved to know that I do not intend to speak for very long on this fairly straightforward bill originating in the Senate, as is the tradition with these tax treaties.

Effectively, just to sum up, it brings about tax treaties with Armenia, Azerbaijan, Gabon and Oman. The idea is to ensure that we do not have double taxation for people who may be Canadian nationals living in one of these countries, for instance, so that they do not end up paying tax twice on income that they have received. The other part of it is to ensure that information is shared between countries so that we do not have a problem with tax evasion.

This is something that is eminently supportable, but of course I would be remiss if I did not stand up and say how much we regret that this is not a bill that brings about the reduction of taxes within Canada. I simply have to point that out. I never miss an opportunity to do that, especially as we get close to Christmas and people are struggling to find ways to meet their obligations. They are running out to the stores right now and purchasing gifts. It would be great if this were a bill to cut taxes. Sadly, it is not.

I simply want to say that the only concern the Conservative Party of Canada has with this is not really a concern with the bill. It is our hope that the government will use these new arrangements that we have with these countries to push to ensure that these countries are in fact respecting human rights.

We did a quick search on different websites to look at the human rights records of some of these countries. For instance, the human rights record in Azerbaijan is not good. In fact, it is deplorable.

While it is important to engage these countries on issues like a tax treaty, now that we have that kind of arrangement I hope the government will use its leverage with countries like Azerbaijan to insist that human rights be respected in these places. Their records are not good. If they are going to enjoy the popular support of countries around the world, they simply have to bring their countries into the 21st century and ensure that they do in fact respect fundamental human rights. That is certainly not too much to ask.

That is really all I have to say on this issue. The Conservative Party supports the idea of tax treaties. We support the idea of ensuring that there is commonality between countries when it comes to treatment of income. That is pretty fundamental.

I will simply end by saying once again that we very much look forward to the day when the parliamentary secretary stands up and brings in a tax bill that calls for a reduction in taxes so that in fact Canadians can enjoy more of their own income, which they work so hard to earn.

Tax Conventions Implementation Act, 2004
Government Orders

11:50 a.m.

Scarborough—Guildwood
Ontario

Liberal

John McKay Parliamentary Secretary to the Minister of Finance

As I say, Mr. Speaker, it really must be Christmas because I find myself in agreement with almost everything that the member opposite brings forward.

I want to go to the substantive point of his speech, which had to do with the effect on human rights that entering into these treaties may or may not have. This actually came up when the bill was first presented to the Senate. We had some very thoughtful discussion about whether it is good to enter into a tax treaty arrangement with a country that routinely abuses human rights. The member pointed to one example and there are certainly others where we are carrying on negotiations.

As a point of philosophy or a point of principle, does the member for Medicine Hat think it is a good idea to enter into tax conventions and treaties with a country that abuses human rights or should we restrict ourselves only to tax treaties and conventions with countries that have better human rights records?

Tax Conventions Implementation Act, 2004
Government Orders

11:55 a.m.

Conservative

Monte Solberg Medicine Hat, AB

Mr. Speaker, that is a good question. I would say that I think this is a strategic decision that countries make probably very often in coordination with other countries when one particular country may be behaving in some cases in a way that most of us find to be reprehensible. I think it is a strategic decision that countries may make.

We run into this all the time. Countries get together and ask whether they should expel a particular country from the Commonwealth, for example. I think a judgment has to be made based on that particular situation.

I would say as a rule that I think it is probably a good idea to engage these countries to a large degree. I would point to the case of China. The experience has been that certainly in the case of China engagement has moved the yardsticks forward. China, for instance, has a long way to go when it comes to the issue of human rights. In fact, it has a terrible record when it comes to that, but there are new freedoms in China that did not exist before countries engaged it, and that is a good thing.

While it probably would not be responsible to generalize based on a particular example, I think there is some evidence to show that when we do engage very often it does lead to progressive improvement in human rights. I hope that will be the case when it comes to some of the countries we are engaging with in this particular tax treaty.

Tax Conventions Implementation Act, 2004
Government Orders

11:55 a.m.

Conservative

Rob Nicholson Niagara Falls, ON

Mr. Speaker, I too want to congratulate the member for Medicine Hat on his comments to the House on this particular bill. I was interested in some comments he made toward the end that reiterated a point he made earlier, which was that he would have been pleased to have seen something come forward from the government that would result in tax cuts, and that while it is supportable that we are moving ahead to avoid double taxation, I think he quite correctly points out that most Canadians would be very pleased to get some sort of tax break. Certainly they have not seen it from the government.

The parliamentary secretary said, and I think I am quoting him, that he agrees with just about everything that the member for Medicine Hat said. Since the member for Medicine Hat made a point on two occasions in his speech of mentioning that he would like to see tax cuts, I suppose one could take some comfort from that, but this brings me to the question I want to ask the member for Medicine Hat.

He said in his concluding remarks that he looks forward to the day when he sees the government come forward with a bill that will cut taxes for Canadians. It is on this point that I want to ask him a question.

After seeing the performance of the government, does he think that is a realistic option? Is that just something that he hopes to see from the government? Or is it more realistic to say that Canadians will have to wait until the member for Medicine Hat is part of a government and he brings in those tax cuts? I would ask him to comment on that.

Tax Conventions Implementation Act, 2004
Government Orders

11:55 a.m.

Conservative

Monte Solberg Medicine Hat, AB

Mr. Speaker, let me start by saying how important it is that we have tax relief in Canada. Canada is falling behind in terms of productivity, our ability to compete, and therefore our standard of living remains much lower than that of our major trading partner, the United States. This is not just my opinion. This is a fact. It has been attested to over and over again by witnesses appearing before the finance committee.

That is regrettable, because Canada is a wealthy country in a sense. We have a wealth of resources. We have a wealth of human potential and talent. Unfortunately, because of public policy decisions, namely, taxes that are too high, we are not able to exploit that and we are not able to generate as much wealth as we could.

Therefore, all kinds of people who could be employed today remain unemployed. People who could have better jobs are underemployed. The result is that they do not have the income and the capacity to provide for themselves and their families that they otherwise would.

As to whether or not the government can do it, certainly this government is running surpluses in Canada today thanks to the efforts of hard-working taxpayers. However, the government has decided that increasing spending year after year is a much higher priority than tax relief. That is truly regrettable, especially considering how often the government wastes money on all kinds of boondoggles.

I could go on and on about that. I have given that speech many times in the House and the parliamentary secretary is throwing up his hands and saying, “don't do that again”, so I will not. Suffice it to say that we could have tax relief in Canada, but I do not expect it from this government any time soon, regrettably.

Tax Conventions Implementation Act, 2004
Government Orders

Noon

Bloc

Pierre Paquette Joliette, QC

Mr. Speaker, it is with great pleasure that I rise to speak on 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. This gives me an opportunity to denounce once again a scandal, and the word is not too strong. I am talking about the tax convention between Canada and Barbados.

Obviously, where the tax system of the foreign countries involved is similar to ours, the Bloc Québécois will not oppose the principle of bills like this one. Indeed, as the parliamentary secretary indicated, it makes no sense to pay tax twice on the same income: once in the country where this income was earned, and again in Canada, because the taxpayer in question happens to be a Canadian citizen.

We are therefore totally in favour of tax conventions ensuring that income on which tax is paid in a signatory country is not taxed again in Canada.

We must remember that the principle of Bill S-17, like all the other conventions, is to not double tax taxpayers and not to prevent or spare them from paying income tax. In so doing, both countries, that is, Canada and the other country with which a tax convention was signed, must have a system where the income tax paid is for real, and not for show, and totally superficial like what we see in tax havens.

This brings me to the tax convention between Canada and Barbados. That convention allows Canadian taxpayers, Canadian citizens, be they individuals or corporations operating or appearing to operate in Barbados, to evade tax in Canada. That is not the intention of the bill before us or other tax conventions previously debated in this House.

As for Barbados, it is the only tax haven widely recognized by experts worldwide with which Canada has signed a tax convention. Barbados is known internationally as Canada's tax haven, for wealthy companies and Canadian taxpayers. In this regard, the government cannot plead ignorance.

On many occasions in the past, the Bloc Québécois and other opposition parties have denounced this situation. We are not the only ones. The auditor general and his successor, on many occasions, have also denounced this convention that allows Canadian corporations and individual taxpayers to avoid paying taxes.

Keep in mind that taxes are used to pay for the collective tools we give ourselves as a society. So every time taxpayers dodge their responsibilities by using a tax haven or any other kind of tax evasion scheme, they are not living up to their responsibility to the community. It is a very serious attack against social and moral solidarity.

Worse yet, taxpayers like you and me, who live up to their obligations and pay their taxes in full both to the federal government and the provincial government--the Quebec government in my case--are paying more taxes because those taxpayers, corporations or individuals, are not doing their fair share. As a result, the average tax burden of those who do pay their taxes is getting heavier. The middle class is left holding the bag.

It is extremely important. Indeed, as the auditor general said, it is not only eroding the tax base but also sowing the seeds of cynicism among Canadians and Quebeckers. As a result, now everybody sees nothing wrong in taking advantage of tax loopholes, one way or another and on a small scale, of course. Working for pay under the table is a case in point.

So on fiscal, ethical and social cohesion grounds, it has become urgent to close this loophole, the tax convention with Barbados.

Again, I point out that this no coincidence. The federal government, and particularly the current Prime Minister when he was Minister of Finance, arranged the income tax regulations to promote tax avoidance through Barbados, our tax haven.

The result is that, with a population of 272,000—which is the equivalent of a Montreal neighbourhood—Barbados has become the third destination for Canadian capital and direct investments abroad. It is right behind the United States—which is understandably our number one destination—and Great Britain.

Are these direct investments from Canada being made to take advantage of economic development opportunities offered by Barbados? Maybe so in some cases, but definitely not to the extent that we are talking about. When the number three foreign destination for direct investments has a population of barely a quarter of a million people, I think there is more than meets the eye.

It is easy to see that most of this money—although not all of it—comes from Canada's major banks. They use the tax convention with Barbados to avoid fulfilling their responsibilities in terms of income tax or benefits. They are taking advantage of the situation that the federal government, the current Prime Minister and former Minister of Finance, created by extending the tax convention with Barbados.

As I mentioned earlier, Barbados is a small island of a quarter of a million people and it is the third destination for direct investments from Canada. To give an idea of the scope and extent of this phenomenon, and therefore of the urgent need to condemn this tax convention, Canada's financial transfers to Barbados went from $5.1 billion in 1994—the year the Liberals first took office—to $23.9 billion in 2002. This is an increase of close to 400% in nine years.

The government would have us believe that there are investment opportunities in Barbados that justify such an increase. We are not stupid. Canadians and Quebeckers are not fooled, as the outcome of the June 28 election indicates.

The government has an opportunity to again raise the matter of this tax convention and, as I mentioned earlier, to remedy the situation. I have another figure which will show once again how absurd the situation is. Since 1988, Canadian investments in Barbados have increased by 3,600%. Once again, it seems to me that, despite the business opportunities which this magnificent island in the Caribbean might offer, it cannot absorb these investments entirely. Therefore, it may easily be inferred that Canadian businesses and taxpayers have used this tax loophole, the tax convention between Barbados and Canada.

Since 1996, the Bloc Québécois has been asking the Canadian government to beef up its international service in order to be able to discourage tax avoidance through tax havens. As I said, Barbados is the only tax haven we have a tax treaty with. It is the only one with which we have officialized and institutionalized tax avoidance. Nevertheless, tax havens as a whole are a problem. They are a problem for Canada and also for most other jurisdictions.

Again, since 1996, The Bloc Québécois has been calling for a comprehensive reform of Canadian taxation and will continue to do so, as I am doing today. We must eliminate all tax loopholes that enable companies to get out of paying their fair share of taxes, while the average taxpayer bears the brunt of this. People who cannot use such tools end up paying the bill. This mechanism was established by the Liberal government for the benefit of wealthy businesses and individuals.

We must also look at the very close link between money in tax havens and money laundering. Studies have been done to that effect by FATF, the group that examines the issue of money laundering and finding ways to counter it. I believe that FATF is celebrating its tenth anniversary this year.

This special group made up of OECD countries has found that 25% of the money currently kept in tax havens is laundered money. In other words, the money that comes from fraudulent and illegal activities, such as drug trafficking, weapons trafficking and other such organized crime activities that, unfortunately, are being conducted throughout the world. These organized groups, especially those with warring or terrorist intentions, also use these tax havens to transfer money for carrying out their sinister plans.

There is a certain irresponsibility. As I mentioned, the Canadian government is not alone in this. The U.S. government, the British government and most western governments seem to be hypocrites. On one hand, they say they want to prevent money laundering and to fight terrorism, while on the other hand they maintain mechanisms such as the Canada-Barbados tax convention, which facilitates not only tax avoidance but the transfer of money for terrorist purposes.

If they were at least consistent and honest, if they had the political will to truly put an end to this financial pipeline provided by tax havens to terrorist groups, they would address this issue seriously.

A type of hypocrisy exists. At first, outside of FATF, other groups and governments, the U.S. and Canadian governments in particular, had shown a desire not only to prevent money laundering, but to gain real control over tax avoidance. It seems that in time, the groups working on this problem, FATF in particular, dropped the second element and dealt only with the issue of money laundering for terrorist activity purposes.

This is totally irresponsible and impossible. As long as there are tax havens, it will be impossible to stop money laundering. As long as there are tax havens, it will be impossible to prevent various groups from using them to launder money for terrorist activities. So, we must attack the very existence of these tax havens.

In her recent report on money laundering, the Auditor General says that the federal government has done very little. I am surprised that she does not make a more direct link among tax havens, money laundering and terrorism.

I want to focus on tax havens. Perhaps viewers would like to know a little about how to identify a tax haven. In 1998, the OECD gave it the following definition. First, it is a country that generally imposesno or only nominal tax on income. Second, there is noeffective exchange between countries of relevant information for tax purposes. A few years ago, Barbados announced it intended to improve the exchange of information. To my knowledge, no efforts have been made to do this.

Third, a tax haven is defined by the lack of transparency of legislation or taxation regulations; this is the famous bank secrecy. The fourth factor is the absence of substantial activities. As we know, real activity must be conducted in one location in order to benefit from a tax treaty, under Canadian legislation. Taxpayers who, to avoid paying taxes, put their savings or dividends in a bank account in a tax haven cannot legally use tax treaties to this end.

In 1972, we rectified this situation by making a distinction between passive activity, or simply depositing money in a bank account, and active activity, a real activity in economic terms, meaning providing a service or manufacturing a good. The fourth factor used to identify a tax haven is a lack of substantial activity, meaning that the standards for determining a real activity are extremely low.

In 1998, the OECD identified 35 tax havens, based on four criteria: no taxes, no effective exchange of tax information, no transparency, and no substantial business activities. Hon. members will not be surprised that Barbados was among these. I would also point out that Canada was one of the 47 countries listed with particularly lax laws concerning tax havens.

What follows is important because of the debate prior to the June 28 election. A number of editorial writers in the Quebec press in particular serve as Liberal mouthpieces, and this is my main source of news—though I do occasionally enjoy a look at the press in English Canada. In the year 2000, the OECD changed its definition of a tax haven, focussing more on the non-cooperating aspect.

As I have already said, following on that decision by the OECD to focus differently on the tax haven situation, Barbados announced its intention to take on slightly greater transparency in passing tax data on to other countries and jurisdictions. As a result of that commitment, the OECD decided not to keep Barbados on the list of uncooperative tax havens. This does not, however, change the fact that Barbados is still a tax haven.

What we heard from the federal Liberals, from the government side, was “Just look at the OECD listing”. It is true that Barbados was on it in 1998, but not in 2000. These two lists were not the same. In 2000, the list was of tax havens according to the OECD, based on the four criteria I mentioned. The focus in 2000 was more on lack of cooperation, particularly in connection with the campaign against terrorism. So the same things are not involved. After the definition's focus was changed, nine countries were still on the list. No one is going to convince me, however, that a list of 35 countries identified as tax havens in 1998 by the OECD was suddenly transformed into a list with only 9 countries on it, with the flick of a magic wand.

As I have said, the change was due to a change of focus by the OECD. I should add it is well known behind the scenes at the OECD that Canada, the United States and Great Britain lobbied a great deal to get Barbados struck off the list of uncooperative tax havens.

I said that because the subject will certainly be coming up again. When they talk about the tax treaty between Canada and Barbados, they will tell us that Barbados is not one of the countries the OECD considers to be tax havens. Once again—and I say this for those watching at home—we must not be fooled. The OECD is no longer worried about such things. Those countries that have disappeared from the OECD's list are the ones called uncooperative tax havens. Therefore, all those that intend to cooperate, or actually do so, are not on the list, although they are still tax havens according to the four criteria I just listed.

I would like, if I might, to return to the figures on Canadian direct investments abroad, because I think they are quite extraordinary. Everyone understands why the United States is the primary destination for Canadian direct investments. Just now, I mentioned that Barbados was the third on that list. The second destination is the group of countries consisting of Barbados, the Bahamas and Bermuda, three small island countries with small populations. Canadian investment in these three little island countries was $38.71 billion in 2001. That was more than the U.K.

Although the Bloc Québécois supports Bill S-17, we must take this opportunity to speak out against this tax agreement between Canada and Barbados once again. With regard to real, legal activities, we would be in agreement, but this convention is full of holes at present.

Moreover, the company that formerly belonged to the Prime Minister has—unfortunately—profited from this. I am speaking of CSL International,which has, according to our calculations and thanks to this convention full of holes, saved nearly $103 million in income tax over the five years we examined.

I hope that by the time of the next election, the Liberals will understand what they have to do, look right into those holes, and correct this Canada-Barbados tax convention.

Tax Conventions Implementation Act, 2004
Government Orders

12:20 p.m.

Scarborough—Guildwood
Ontario

Liberal

John McKay Parliamentary Secretary to the Minister of Finance

Mr. Speaker, I listened quite carefully to the hon. member's long rant about so-called tax havens. It is hard to know where to start with such a naive analysis of the international taxation regimes in the world.

Everyone in the chamber, everyone watching us on television and everyone in this country is entitled to arrange his or her affairs, his or her own affairs, or his or her company's affairs to avoid taxes, to minimize the impact of taxes. That is lesson number one in law school and accounting school. Tax avoidance is an expectation on the part of the government and taxpayers are entitled to arrange their affairs accordingly. You do that, Mr. Speaker. My hon. friend does that. Everyone in the chamber does that. We try to minimize the tax impact on our income.

Tax evasion on the other hand is illegal. Tax evasion cannot be tolerated by any country whether or not one is in a so-called haven or whether one is in any other country.

It is amusing to me that my hon. friend conflates those two ideas and misses the point. It is more than ironic that the member purports to speak on behalf of Quebec. His separatist friends, the Parti Québécois, turned Quebec into not a tax haven but probably a tax hell. There the rates of taxation on the people of Quebec are probably among the highest, if not the highest, in North America.

If a person in Quebec or a person in any other part of Canada, or a corporation in Quebec or a corporation in any other part of Canada takes the first rule of income tax seriously and says “I am entitled to arrange my affairs in the way that is most advantageous”, in other words to avoid taxes, not to evade taxes, then he, she or it is entitled to seek the jurisdiction that most satisfies those needs.

What the hon. member fails to state in his diatribe about so-called tax havens is that the information exchange and the transparency allow countries that have entered into tax treaties with the so-called tax havens to tax income that is earned as a source income in Canada. Absent these treaties there is virtually no chance.

As I understand the thrust of my hon. member's diatribe, he would pull us out of any tax convention with any other country which does not tax at the level that he thinks is appropriate. Therefore a taxpayer would be left with some unhappy choices.

I put it to my hon. friend that having a tax convention, such as the one with Barbados and others that he disapproves of, is a good thing. Canadian authorities get access to information on which they can tax income that is sourced in Canada, that is earned in Canada which impacts many of these companies, especially companies from Quebec, that do some business in the Caribbean. Banks do some business in the Caribbean on which they pay taxes. Much of those taxes, because of the transparency and the OECD protocols, gets reviewed here and taxed as Canadian source income. Absent these conventions, absent these rules, we would see none of the income.

I put it to the hon. member that the entire premise of his speech is in error.

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12:25 p.m.

Bloc

Pierre Paquette Joliette, QC

Mr. Speaker, I will probably not have enough time to reply to all the wonderful questions I have just heard. However, if the parliamentary secretary is serious and really thinks that Barbados, which has a rate of between 1% and 2 1/2% on profits, is not a tax haven, he is not in the right place. We are not talking about identical systems but about comparable systems.

In the case of Barbados, it is not a matter of double taxation but of tax avoidance. I was therefore careful to use the words—perhaps they were misinterpreted by the translators—“tax avoidance”. I did not speak of tax evasion. There is tax avoidance in the case of Barbados because it was the finance minister, now the Prime Minister, who changed the rules to ensure that it was not tax evasion.

There is a serious problem now. If the parliamentary secretary saw the show Enjeux , which was televised last spring, he saw journalists going to Barbados to see where the headquarters of CSL International were. They found that there were nine CSL companies under the same heading, whereas normally, Canadian law provides that there must be real business activities. There are apparently three people who work for these nine CSL companies, including CSL International. However, the receptionist was only able to name one person.

ATTAC-Québec has now filed a complaint against CSL International and the CSL Group to see whether there really were some business activities, in accordance with the tax treaty and with Barbados law and Canadian law. This is therefore something that should be followed.

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12:25 p.m.

NDP

Alexa McDonough Halifax, NS

Mr. Speaker, it was not my intention to speak to the bill until I heard the parliamentary secretary's attack on the Bloc member who just spoke.

I found it astounding that what we heard from the parliamentary secretary was effectively an elaborate defence of countries that make tax evasion legal. What he said was that tax avoidance was something that everyone does and that countries are a party to and so on.

However what he did not say is that we have a hemorrhage of taxes that ought to be paid by Canadian corporations to the public coffers to sustain our most important public services and programs precisely because the government refuses to do anything about the fact that the law does not capture those taxes properly.

While we heard the parliamentary secretary say that it was quite legal for people to avail themselves of tax havens, the previous member quite rightly pointed out that we needed to do something about the problem.

A great deal of analysis has been done on this but the parliamentary secretary treated the member's comment as though the member was somehow dreaming it up for some paranoid reason or some unduly partisan reason. The member was speaking of a very respectable body of research done by tax accountants and economists that points out the incredibly low levels of taxes that Canadian companies are paying in places such as Barbados and many other countries simply because they are completely free to do so.

While Canadians pay their fair share of taxes, we have examples of the major banks. It does not matter which bank but the Canadian Imperial Bank of Commerce happens to be the one at the centre of this particular analysis. This bank, which would have and should have been paying taxes in the amount of $844 million, was able to reduce that legally, because we do not have any tax agreements to capture this, to $239 million.

I know that seems like a lot of taxes but we have to consider the fact that instead of paying at a rate of 36.6% on the profits, the bank was actually paying only 10.4%. The result is that the government uses the fact that we do not have the tax dollars to maintain our basic programs very conveniently.

Earlier today the parliamentary secretary stood and agreed with an opposition member who said that we should do something about the problem of pensions not being indexed in the U.K.

We should also be addressing a problem that has been raised again and again by the member for Windsor—St. Clair and the member for Windsor West about completely unfair taxation, practically tax confiscation, that penalizes Canadians--

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12:30 p.m.

The Acting Speaker (Mr. Marcel Proulx)

The hon. member for Joliette.

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12:30 p.m.

Bloc

Pierre Paquette Joliette, QC

Mr. Speaker, I would just like to remind the hon. members that when CSL International was founded in 1992, its headquarters were in Liberia, a tax haven, as everyone knows.

Under pressure from the Americans, especially President Clinton, the current Prime Minister and finance minister at the time, tightened the tax criteria. Liberia was excluded from the countries that could take advantage of a certain number of tax benefits.

At that point, CSL International moved its headquarters to Barbados. If one moves from Liberia, which is a tax haven, to Barbados, it is probably because the latter has tax advantages under the treaty that was signed with it, advantages that do not exist elsewhere. Otherwise, they would just have brought the headquarters back to Montreal, which would have been the logical thing to do.

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12:30 p.m.

NDP

Judy Wasylycia-Leis Winnipeg North, MB

Mr. Speaker, I am pleased to join in the debate on Bill S-17. It is an important discussion on tax policy in general and the degree to which we allow for tax avoidance or tax evasion. It has been a very curious intervention by the parliamentary secretary for finance with his suggestion that there are certain appropriate ways in which one should be allowed to avoid paying taxes in the context of the bill.

Bill S-17 on its own is a reasonable initiative on the part of the government. If one looks at it in isolation just for its own merits and in terms of the specific provisions in the bill, it is clearly an improvement in terms of the overall situation we are grappling with today. It is a bill that seeks to implement new tax conventions and treaties between Canada and the countries of Gabon, Ireland, Armenia, Oman and Azerbaijan.

It is an important initiative because the bill attempts to ensure that there is a way to avoid double taxation and the prevention of fiscal evasion. We know from previous speeches on this matter, and I refer specifically to the interventions by Senator Mac Harb, who at the time was spokesperson in the House on this bill, that Canada has been trying to increase the number of tax treaties in place and through this bill would increase those treaties to 87.

The senator went on to suggest that Canada had signed treaties or amended protocols with an additional 14 countries since 1976. However what was done in this instance and what is still a problem today is that the government has refused to address where such tax havens continue to exist and has failed to account for its tardiness in ensuring treaties are signed and precautions are taken with respect to tax havens between Canada and a number of other countries.

Before I address the concerns of many groups with respect to tax havens and tax evasion, it is always important to talk about tax policy in general and public policies that address the matter of productivity. In that context it is fair to point out that for all the rhetoric and all the protestations by Liberal members in the House on both these issues, we have yet to see a comprehensive, meaningful and progressive set of ideas or policies with respect to taxation in general and on our collective agenda to ensure a more progressive tax system so that those with the ability to pay are taxed accordingly and those at the lower end of the income scale are able to benefit from the riches accrued as a result of development and investments in this country.

We have heard a great deal from the government in the past about how it has put in place such a progressive taxation policy and how it has ensured that our taxation initiatives today help ensure that low income people are given some tax relief. However, as we look at this whole issue in the context of Bill S-17, the government has missed the boat and has neglected its responsibility in terms of ensuring a fair taxation system where those with the greatest burden and the greatest need are able to reap the greatest benefits from our policies.

Instead of ensuring such an approach, we have seen over the last number of years a government that continues to provide tax relief for those who have the most ability to handle that tax load. The government has provided tax relief for the biggest corporations and the wealthiest individuals in our society and done little to deal with the burden facing low and middle income earners.

Over the past number of years the government has used a considerable portion of the available surplus to provide tax relief for wealthy individuals and large corporations. We continue to be astounded at the fact that the government had the audacity to bring in a $200 billion tax initiative spread out over five years to benefit the wealthiest in our society while those at the bottom continue to struggle.

The other issue that has to be addressed is productivity and the role of corporations in that regard. The finance committee has just been through numerous debates leading up to the finalization of our report on pre-budget consultations. I was surprised at how often Liberals spoke about the need to provide more tax breaks for large corporations through the taxation system and their suggestion that in order to be competitive with the United States we had to continue to reduce the taxes on corporations.

That approach has been tried but we have not seen much benefit over the last number of years. The government continually focuses on corporate tax relief in the hope that it will increase productivity and boost our economy but we have not seen that. We have not seen the kinds of benefits that the Liberals espouse as they pursue this narrow program of tax benefits for the wealthy and money being set aside for lowering the debt without considering the impact on low and middle income Canadians.

Unfortunately, after trying this for a good number of years and seeing no results we still have a government that is wedded to an idea that has no basis in fact and for which there is no scientific evidence to suggest that approach should be continued.

In the context of Bill S-17, it is time we started talking about the responsibility of corporations to the country and what their obligations are to increase productivity. We cannot keep blaming workers and the tax structure. We need to ask corporations to what extent they are investing in Canada and to what extent they are taking the profits earned and produced as a result of the work of Canadians and putting those profits back into the economy to ensure Canadians have new economic opportunities and educational training opportunities that allow people to contribute to the best of their abilities and to use their talents in this country.

I find it rather strange that we are again dealing with a bill that deals with part of the problem but in the course of the debate we find that Liberals are less than enamoured with the idea of finding ways to ensure that corporations pay their fair share. We expect ordinary Canadians to pay their fair share and not to evade taxes so why would we not expect corporations to do their part in investing in Canadian industries, in Canadian economic opportunities and in community economic development and all that that implies?

I, frankly, get a little tired of hearing time and again from Conservatives and Liberals in the House that we have to lower our tax burden on corporations so we can compete with Americans and therefore create this happy scenario where everything will be fine. What they forget is that the United States is trillions of dollars in debt today, which is not necessarily an example for Canada. A country that does not provide any semblance of support for its citizens in the way of access to health care, education and social services, is surely not able to claim it is competing on a level playing field with Canada.

Canada should not be considering that in order to be competitive all it has to do is lower the corporate tax rate without taking into account the great contribution that all taxpayers in this country make through the taxation system to ensure we have a national health care system and some semblance of a post-secondary education system, even though it is falling into greater and greater disrepute as a result of government cutbacks and neglect. Canada is a country that at least recognizes as part of its identity the values of cooperation and community, of compassion and caring, of sharing the wealth, of ensuring that everyone has an opportunity. We distinguish ourselves from the American model of laissez-faire market approaches, a dog eat dog, survival of the fittest philosophy of life and any notion of civil society.

In that context we have to look at Bill S-17. It is always amazing just how little the government brings forward in terms of cracking down on tax havens and programs that allow for tax evasion. I do not think it is good enough for the parliamentary secretary to suggest that it is quite normal and that everybody looks for ways to avoid paying taxes. He says we all do it and therefore there is nothing wrong with having policies in place that do not enforce treaties between Canada and countries like the Barbados and the Cayman Islands.

Most Canadians would be appalled at that kind of thinking and rationalization of a very untenable and despicable process. Canadians are expected to pay their taxes. When they avoid or evade their taxes, they are hounded and pestered until they pay. They are penalized accordingly. Were it only possible for the government to apply the same principle to large banks and corporations.

It is important for us to recognize in the context of this debate that it is organizations like Oxfam that have called on the world's richest countries to make a genuine commitment to global poverty reduction. It is important to reference the millennium development goals under which we are doing an abysmal job. The report calls for powerful nations to invest in a strong and effective public sector in the developing world and suppress weak regulations and tax havens.

I repeat that the report addressing the millennium development goals calls for governments to address weak regulations and tax havens. It is noted that this is an essential element of the fight against corruption in developing countries. There is an inherent obligation on our part to do what we can here in Parliament to address the continued presence of tax havens and provisions that allow for tax evasion in terms of relations between Canada and other countries.

This whole issue was really brought home this week by an editorial in the Montreal Gazette on Sunday. It reiterated some of the concerns that members of the Bloc and the New Democratic Party had raised in the House. It had a way of raising the profile of this very serious issue. I want to quote very briefly from the editorial, which begins by saying:

Even as Canada's five largest banks announced record profits last month, they withheld from the Canadian treasury billions of dollars in taxes. Many big corporations in other industries were able to do the same. The corporations do this through the perfectly legal manoeuvre of funneling some profits through off-shore branches, conveniently located in tax havens such as Barbados, the Cayman Islands, the Bahamas and the Channel Islands.

The article goes on to suggest:

Canada's big banks have a total of 73 branches in such places, jurisdictions where the tax rates are much lower than in Canada. Under tax treaties, profits declared there are taxed there, and what's left can be repatriated to Canada with no tax liability here.

We have a very major issue to address in the context of Bill S-17. We have to get an understanding from the government as to how it intends to clear up this reprehensible state of affairs that continues to exist today. If we are talking about trying to find ways to build this country, to create jobs and opportunities, then surely we have to start by looking to ensure that profits generated in this country are invested back in this country and are not allowed to be shipped offshore for tax relief.

I fail to see any rationale in the argument presented by the Parliamentary Secretary to the Minister of Finance on that matter. When a profitable corporation takes money that is earned here on the backs of workers, as a result of efforts and creative energies by Canadians, and invests it offshore because of the tax benefit, I do not see how we benefit at all in this country.

We had the issue recently of operation loophole. A large family, identified in the press as the Bronfman family, invested $2 billion offshore. A small group based in Winnipeg, Manitoba called Choices, a social justice coalition, took it upon itself under the name of an individual, George Harris, to take on the Government of Canada over this absolutely reprehensible policy that allowed a wealthy family in this country to move $2 billion offshore and not pay a penny in taxes. It went all the way to the Supreme Court. Although George Harris did not win his case, it was clearly indicated that there had to be changes in policy and that the government had a responsibility to clarify this issue.

Have we had any clarity? Has there been a clarification? Has there been a change in policy to prevent the movement offshore of money, profits earned in this country as a result of workers' input, for tax evasion purposes and tax avoidance purposes? Have we learned anything from the furor and the uproar around the Prime Minister's own company, Canada Steamship Lines? Have we learned anything about the possibilities for conflict of interest when that kind of situation has arisen? Have we learned anything about what messages we send to Canadians when we have such a double standard?

The lesson for us today in the context of Bill S-17 is to find ways to crack down on such tax evasion and tax avoidance.

Bank profits continue to skyrocket. We have seen that in the news. Net profits for the six major Canadian banks reached $13.3 billion this year. According to La Presse , that is up 20.5% since 2003. Yet despite these massive profits, billions of dollars are withheld from the Canadian treasury each year. This is accomplished by the funneling of money through branches in tax havens such as Barbados and the Cayman Islands.

On top of the big banks' earning huge profits and moving money offshore, they are taking away services from Canadians. The double whammy occurs. Canadians are denied the benefit of profits reinvested in this country and at the same time the big banks have the audacity to destroy communities by eliminating all bank branches, by denying ordinary people, working families, access to financial services in their own communities.

We have a lot of work to do with respect to big banks and big corporations. Let us look at the facts. Last year the six big banks paid about $9.5 billion in Canadian taxes. This sum accounts for 89% of total taxes paid by the banks. The rest was paid in other regions, most notably in tax havens.

I will conclude by referencing the work that was mentioned in the Montreal Gazette and raised by my colleagues in the Bloc, about a month ago vis-à-vis a study released by Université du Québec Professor Léo-Paul Lauzon. He castigated the big banks for the exploitation of tax havens. According to Lauzon, as reported in an article, the tax bill for the Canadian Imperial Bank of Commerce would have been roughly $844 million but it dropped to $239 million, largely due to the bank's use of tax haven branches.

There is evidence around us. There is scientific fact. There is empirical evidence pointing to the problems with respect to tax havens and tax avoidance.

This is the time for Canadians to deal with it. This is the time for Parliament to address it. It is not sufficient to rest with Bill S-17, but to deal with the whole gamut of opportunities that corporations and banks use to take advantage of tax havens and tax avoidance.

Tax Conventions Implementation Act, 2004
Government Orders

12:55 p.m.

The Acting Speaker (Mr. Marcel Proulx)

Is the House ready for the question?