House of Commons Hansard #93 of the 39th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was tax.

Topics

Tax Conventions Implementation Act, 2006
Government Orders

11:35 a.m.

Conservative

Dean Del Mastro Peterborough, ON

Mr. Speaker, I listened to the member with great interest. I have the opportunity to listen to her quite often in finance committee. I do not always agree with her, but I do have respect for her.

The issue of which she is speaking deals with the broader issue of tax fairness, an issue on which our government has the courage to act. Only a couple of weeks ago, the member complimented the finance minister or having the courage to pursue tax fairness.

The issue of which she is speaking is one that I have certainly been advocating on finance committee as a member of the government. She knows that full well. I suggest that the member be patient. We are moving toward tax fairness.

Tax Conventions Implementation Act, 2006
Government Orders

11:35 a.m.

NDP

Judy Wasylycia-Leis Winnipeg North, MB

Mr. Speaker, I am glad to hear from my hon. colleague, who I respect and work with in the finance committee, about his belief that the government will to eventually deal with these outstanding egregious matters.

However, I am not raising the broad issue of tax fairness today. I accept that is an ongoing battle we will have. We have very different views on this. The Conservatives believe in this trickle down theory of giving tax breaks to corporations in the hope that eventually we will pay off the debt and then we can all start again, with the hope that we have not lost medicare, post-secondary and cultural institutions by that point.

What I am raising is the question of tax havens specifically because the bill is about that. The bill is very narrow and routine. It was an opportunity for the government to do something more. It was an opportunity for the Conservatives to do what they said when in opposition. I will read another quote from a year ago in the House when a Conservative member stood and said:

The government has for far too long put off renegotiations on tax treaties that serve as tax havens for Canadian companies. Why is the government not closing those loopholes? It might be because they serve its self-interest in one way or the other.

If the Conservatives are not prepared to address this situation, then that statement applies to them. If they are not prepared to act, then it must be because it serves their self-interests in some way or another.

Tax Conventions Implementation Act, 2006
Government Orders

11:35 a.m.

NDP

Pat Martin Winnipeg Centre, MB

Mr. Speaker, I could not help but notice this. As my colleague was speaking about these outrageous tax loopholes, which still exist and are allowed to exist, both the Liberal and Tory members present were looking at their shoes. They were trying to pretend their laces were not tied so they would not have to look us in the eye and explain why on earth they allow these outrageous tax loopholes to continue, which allow tax fugitives to find tax havens.

In the context of trying to nickel and dime $1 billion out of virtually every social program, on which people our ridings have come to rely, how can the government knowingly and willingly show this wilful blindness? Sometimes I think the Tories view taxpayers the way P.T. Barnum viewed circus goers. They must think we are suckers if they think it is not ideologically driven to make cuts, yet show this wilful blindness and allow this egregious, outrageous loophole to continue on the other side.

Tax Conventions Implementation Act, 2006
Government Orders

11:35 a.m.

NDP

Judy Wasylycia-Leis Winnipeg North, MB

Mr. Speaker, the member for Winnipeg Centre certainly knows how to describe an issue and get to the nub of it very quickly. He talked about tax fugitives going to tax havens. I could not have said it any other way if I had tried.

He makes a very important point. His riding is very similar to mine. Mr. Speaker, your riding is very similar. We deal daily with people who are struggling to make ends meet, who do not want to be a drain on their communities, who want to do it for themselves, but need some supports and encouragement through difficult times. The government is cutting the ground right out from under them, leaving them in very difficult situations that could cause very serious harm to their families and themselves.

The issue for us today, especially in the context of Winnipeg, is that big banks have left communities almost entirely. At the same time, they have been able to find money to put into tax havens. I just noticed that a couple of years ago the Auditor General pointed out that multinational companies operating in Canada had avoided hundreds of millions of dollars in taxes over the past decade through the use of tax havens.

The article goes on to say that a more recent university study charged that Canadian banks alone saved $10 billion in taxes over the past decade through the use of tax havens. This is at a time when the profits of banks have reached absolute record levels. Banks have never seen such profitability.

At this time of profitability, they are putting money into tax havens to avoid paying taxes, money that belongs here and could be spent on services, and they are destroying the ability of many communities to provide financial services to their own members because they abandon any community that is not adding astronomically to their profits. That has to end. The way to do it is by the government finally closing these tax havens.

Tax Conventions Implementation Act, 2006
Government Orders

11:40 a.m.

NDP

The Deputy Speaker Bill Blaikie

Pursuant to order made on Monday, December 4, Bill S-5 is deemed read a second time and referred to a committee of the whole, deemed considered in committee of the whole, deemed reported without amendment, deemed concurred in at report stage and deemed read a third time and passed.

(Bill deemed read the second time, considered in committee, reported without amendment, concurred in, read the third time and passed)

Bank Act
Government Orders

December 7th, 2006 / 11:40 a.m.

Whitby—Oshawa
Ontario

Conservative

Jim Flaherty Minister of Finance

moved that Bill C-37, An Act to amend the law governing financial institutions and to provide for related and consequential matters, be read the second time and referred to a committee.

Mr. Speaker, I am pleased to lead off the debate, at second reading, of Bill C-37, which amends the legislative framework governing financial institutions operating in Canada.

This proposed legislation is significant for a number of reasons.

First of all, it will go a long way toward improving our entrepreneurial advantage in Canada, one of the five advantages at the core of our government's new long term economic plan for Canada, called Advantage Canada.

Advantage Canada sets out to create several advantages for our country: a tax advantage, a fiscal advantage, a knowledge advantage, an infrastructure advantage, and, as I mentioned, an entrepreneurial advantage for Canadian families, students, workers and seniors.

To gain an entrepreneurial advantage, we must build a more competitive business environment by reducing unnecessary regulation and red tape and improving services for consumers, so this bill is significant for another reason as well. It will have a positive impact on one of the most important drivers of our economy, and that is the financial services sector. This sector is one of the key foundations on which our economy, indeed any modern industrial economy, rests.

On a broader scale, this important sector plays a unique role in ensuring financial stability, safeguarding savings and fueling the growth that is essential for the success of the Canadian economy.

Moreover, the financial services sector plays a significant part in the daily lives of Canadians. Beyond those of us who use their services, the financial services industry employs about 700,000 Canadians in good, well-paying jobs. It represents about 6% of Canada's GDP and is a leader in the use of information technology.

We can no doubt appreciate the importance of ensuring that the framework governing this important and influential sector is current and effective.

Canada's new government is committed to doing just that with the proposals contained in this bill before the House today.

Before I outline the proposals in the bill, I would like to make a few remarks about the consultation process that led to this review of the financial institutions statutes and the legislation before the House today.

A representative number of stakeholders have shared their comments on the 2006 review of the financial sector legislation.

Overall, stakeholders generally agreed that no major overhaul is needed, but many believe, as we do, that some steps could be taken to refine the legislative framework.

Stakeholders also made specific proposals for technical amendments. Those submissions in the consultations resulted in a white paper issued by the Department of Finance this past June, entitled “2006 Financial Institutions Legislation Review: Proposals for an Effective and Efficient Financial Services Framework”.

For the most part, the white paper is the basis for Bill C-37, which contains the government's proposals to amend the legislative framework for financial institutions. These proposals are aimed at achieving three key objectives: first, improving service for customers; second, increasing legislative and regulatory efficiency; and, third, adapting the framework to new developments.

Together, these objectives will contribute to a modern and competitive financial sector framework in which businesses of all sizes and consumers from every corner of the country will continue to be well served.

I would now like to briefly outline the intent of the three objectives contained in Bill C-37.

The first is improving service for customers.

Consumers are taking greater responsibility for their financial affairs. At the same time, we are seeing an increase in the breadth and complexity of financial products, service providers and delivery channels. Clearly, this means more choice for consumers. At the same time, it makes it more difficult for them to make informed choices in the marketplace.

That is why Canada's new government is acting to ensure that services are improved and customers are adequately protected. The government believes that the best approach to improving services for consumers is through competition and disclosure.

On the one hand, competition provides more choices to consumers and allows them to find financial products and services that best suit their individual goals and needs, at competitive prices. Disclosure, on the other hand, ensures that consumers and businesses alike have the relevant information they need to make the best decisions in light of the choices available to them.

As we all know from newspaper and TV ads, the range of financial services and products offered to consumers continues to evolve. In order to assist consumers to make choices, the disclosure regime for our financial institutions framework needs to stay current to accommodate the different types of products and services in the marketplace.

The proposed changes to the framework contained in this bill reflect that principle.

One example of consumer protection measures in the bill is with respect to online disclosure. As we know, federally regulated financial institutions must disclose in their branches information on the products and services they provide to their customers and the public. Many Canadians today are opting for the convenience of the Internet to meet their banking needs and current disclosure requirements do not extend to the online world.

To ensure that consumers have sufficient information, the bill proposes, first, to harmonize online and in branch disclosure requirements to allow consumers to compare products more easily and, second, to ensure adequate disclosure is provided to customers conducting transactions online.

The intent of this proposed measure is to provide consumers with the information they need in order to make informed decisions.

The second major objective of the bill is to increase the efficiency of legislation and regulations governing the Canadian financial sector.

The regular review of the financial sector statutes allows this government to amend the framework as necessary so that financial sector legislation and regulations continue to be both effective and efficient.

Bill C-37 addresses a number of key areas identified in the review to achieve increased legislative and regulatory efficiencies.

One such area that is quite relevant to many Canadians is the area of residential mortgages. Mandatory insurance for high ratio mortgages was introduced over 30 years ago as a prudential measure to ensure that lenders are protected against fluctuations in property values and associated defaults by borrowers.

Of course, the marketplace has changed since then. Among other things, the risk management practices of lenders have improved significantly and the supervisory framework for federally regulated financial institutions has been strengthened significantly. This means that some homeowners may be paying more for mortgage insurance than they need to.

The proposed amendments to Bill C-37 reduce the cost of mortgages for some families by raising the loan to value ratio requiring mortgage insurance from 75% to 80%. This will lower the mortgage down payment consumers are required to make before the law requires the purchase of mortgage insurance. This proposal will create an opportunity for mortgage cost savings and ensure that more young families can realize the dream of owning their own home.

Another key area identified in the legislative review called for improvements to the regulatory approval regime. Ministerial approvals are currently required for a broad range of financial sector transactions related to market entry, structure and competition, as well as financial institution ownership.

There are, however, transactions that the minister reviews that are routine and do not raise significant policy issues. Bill C-37 proposes measures to streamline the regime to ensure that these transactions are dealt with more expeditiously.

As we know, the rate of change in the financial services sector has increased dramatically in recent years. Financial institutions must be able to respond to developing trends such as globalization, convergence, consolidation, and technological innovation. This adaptation to market changes often results in the creation of new products and services and innovative ways of doing business.

The government needs to ensure that the framework regulating financial institutions is up to date to allow them to respond to these changes so that they can evolve and grow. At the same time, the government is also committed to protecting consumers and small businesses adequately while maintaining the overall safety and soundness of the financial system.

Bill C-37 does that and more.

One way that this bill will improve our financial system is by allowing for the implementation of electronic cheque imaging. Currently banks process about one billion paper items, mostly cheques, annually valued at over $3 trillion.

The process of clearing a cheque includes the physical delivery of the cheque to the paying or issuing financial institution in order for it to decide whether or not to make the payment. This process is more labour intensive, time consuming and costly than necessary, particularly given today's developments in technology.

The proposal in this bill to allow for the implementation of electronic cheque imaging will result in significant efficiency gains, saving time and resources currently dedicated to the transport of cheques. This will allow banks to keep their costs down, a benefit that needs to be passed on to customers to ensure that the efficiencies derived from electronic cheque imaging will be shared by all users of the payment system.

Another proposal in this bill relates to cheque hold periods. For most large banks, the maximum hold period on cheques deposited with tellers is 10 days. While the government recognizes the importance of cheque hold periods for risk management, a concern remains about the length of time that consumers may be subject to these hold periods. Cheque holds not only affect consumers who need to access funds to pay their bills, but also small and medium sized businesses that need to pay employees and operate their businesses out of the funds they deposit.

While the proposed legislation would be facilitating the establishment of a limit on the time that banks can hold a cheque, the government is finalizing the agreement with the banking industry. The agreement will reduce the maximum hold period immediately to seven days and reduce it further to four days once electronic cheque imaging is fully implemented.

This change will be a significant improvement over the current maximum hold period of 10 days or more. It is a major step forward for consumers and businesses. It will increase efficiency and free money up more quickly, having a positive impact on the Canadian economy overall.

In summary, the measures proposed in this bill will amend the legislative framework governing financial institutions in order to achieve three key objectives.

First and foremost, the bill proposes steps to improve services for consumers. Second, Bill C-37 would increase legislative and regulatory efficiency and contribute to a framework where financial institutions could grow and prosper in the global marketplace. Third, the proposed amendments in Bill C-37 would allow financial institutions to adapt to new trends in the industry by providing a framework that is up to date and, above all, dynamic.

I urge all members to give Bill C-37 careful consideration.

Bank Act
Government Orders

11:55 a.m.

Liberal

Roy Cullen Etobicoke North, ON

Mr. Speaker, I have a couple of specific questions for the Minister of Finance.

The white paper mentions the need to deal with some measures that would allow foreign banks greater access to the Canadian market. I also see a number of technical areas in the white paper that I think have been, to a large extent, incorporated in the bill.

When our government looked at the Bank Act and the financial sector during our mandate, one of the objectives was to increase competition through credit unions and through the foreign banks. For the foreign banks there were some limits because of what we used to call the bricks and mortar advantage that Canadian chartered banks have. Therefore, a lot of foreign banks were not inclined to get into the retail market in Canada but to get into the wholesale level and others.

First, does the Minister of Finance see that these measures would realistically allow more competition from foreign banks in Canada and, in so doing, give Canadian consumers greater access and more product choice?

Second, one provision in the white paper refers to data processing outside of Canada. It basically says that the proposal is to eliminate the superintendent approval for processing information or data outside of Canada. As the minister knows full well, there were some issues, I think, last year with respect to outsourcing of data processing by Canadian financial institutions that raised certain privacy concerns, particularly with respect to the Patriot Act in the United States. It seems to me that this might be moving in the wrong direction. I wonder if the minister has followed through with that in the bill and if that is the right direction to go, given some of the privacy concerns of Canadians.

Bank Act
Government Orders

11:55 a.m.

Conservative

Jim Flaherty Whitby—Oshawa, ON

Mr. Speaker, the question raised by the hon. member is a good one and engages us in the reality that the financial services sector is a global business and we want it to be a global business. This is one of the great sectors of the Canadian economy. It is a pillar of the Canadian economy. We want our insurance companies, our banks and our major financial institutions to be global players and to grow globally. They are doing a good job at that and that is good for Canada.

Being global sometimes involves using data sources outside the country. We know that because that was part of the strength of Ireland when the Celtic Tigers started in the west of Ireland processing data for companies in New York, in Canada and so on, subject always to the privacy rules and the jurisdiction of the Privacy Commissioner.

The member opposite raised the point that earlier this year there was a concern about data and privacy, on which the Privacy Commissioner exercised her jurisdiction and looked into on behalf of the people of Canada. We need to be mindful always of those important privacy concerns.

Bank Act
Government Orders

Noon

Bloc

Pierre Paquette Joliette, QC

Mr. Speaker, one of the objectives in the bill introduced by the minister is to enhance the interests of consumers and improve the system for disclosing information to consumers. We are obviously very pleased with that.

I want to ask the minister whether it would be possible to appoint a federal ombudsman who would have the necessary power to defend people based on law. He could also represent them when they have disputes with financial institutions. A great number of people are unable to defend their rights in legal situations with banks because they do not have the financial means.

Would the idea of appointing a federal ombudsman for consumers who feel duped by a banking practice be a possibility in this bill, or another bill?

Bank Act
Government Orders

Noon

Conservative

Jim Flaherty Whitby—Oshawa, ON

Mr. Speaker, there is substantial consumer protection with respect to financial institutions. Perhaps we view things somewhat differently on this side of the House.

Competition creates choice and disclosure creates knowledge. This bill emphasizes the encouragement of competition in the Canadian banking system among Canadian financial institutions, not just banks but also credit unions that play a very important role across Canada as members of the financial services sector.

We want to encourage competition that gives Canadians choices, selections and opportunities to exercise their own judgment. However, to exercise their judgment in an informed way, there must be disclosure of various options, not only in-branch but also online, and this bill includes provisions to accomplish those goals.

Bank Act
Government Orders

Noon

Calgary—Nose Hill
Alberta

Conservative

Diane Ablonczy Parliamentary Secretary to the Minister of Finance

Mr. Speaker, one of the frustrations that the businesses and individuals have is that when they make a deposit to a bank they often cannot negotiate a cheque or an instrument for up to 10 days, which is a real hardship for many people.

I think it would be helpful if the minister were to remind Canadians of the positive changes in that regard that will be coming in this bill.

Bank Act
Government Orders

Noon

Conservative

The Acting Speaker Andrew Scheer

I just noticed that the hon. parliamentary secretary was not at her seat when she asked the question but I did not catch it, so I will allow the Minister of Finance to respond. However, in future I would ask all hon. members to be in their proper seats when they ask questions or make comments.

The hon. Minister of Finance.

Bank Act
Government Orders

Noon

Conservative

Jim Flaherty Whitby—Oshawa, ON

Mr. Speaker, the parliamentary secretary has worked hard on this bill and on her duties as parliamentary secretary in finance.

This is a big step forward, especially for small businesses in Canada. It is a problem when people deposit a cheque and they must wait 10 or more days for the cheque to clear. If the bills are not paid, the interest mounts up. This is a good step forward, particularly for small and medium sized enterprises and for individuals in Canada, that we will be moving forward with reducing that 10 day holding period down to 7 and then ultimately to 4 days. There does need to be a holding period based on the present state of affairs, but we can certainly reduce that by more than 50% down to four days over the course of the next while.

Bank Act
Government Orders

12:05 p.m.

Liberal

Roy Cullen Etobicoke North, ON

Mr. Speaker, I want to go back to my earlier question for the minister, which he did not have time to address, dealing with foreign bank entry and competition from foreign banks, which has the opportunity and potential to increase consumer choices and product lines for Canadians. The advantage for some of the Canadian charter banks is that they have retail branches across Canada.

I am wondering what changes he is proposing in Bill C-37, in lay terms, that he thinks will make a difference and allow more foreign bank competition in our financial markets.

Bank Act
Government Orders

12:05 p.m.

Conservative

Jim Flaherty Whitby—Oshawa, ON

Mr. Speaker, actually the foreign banks are doing well in the Canadian markets and growing. Their participation in Canada is welcome for the same reason that we want our banks to grow globally, be competitive around the world and help Canadian businesses expand their businesses abroad, whether it is in China, India or in other of the emerging economies.

There is a change in the bill though that relates to the composition of the boards of directors of financial institutions. The bill would allow additional foreign directors to be on the bank boards. Canadian representation would be maintained as boards of directors would still be required to have a majority of directors who are Canadian residents. The Canadian majority requirement will still be there but adding some additional foreign directors is something that the banks are interested in doing because it helps them connect and expand their businesses globally.