House of Commons Hansard #153 of the 39th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was tax.

Topics

Budget Implementation Act, 2007
Government Orders

12:40 p.m.

NDP

Nathan Cullen Skeena—Bulkley Valley, BC

That is a true shame.

Budget Implementation Act, 2007
Government Orders

12:45 p.m.

Conservative

The Acting Speaker Royal Galipeau

Is the House ready for the question?

Budget Implementation Act, 2007
Government Orders

12:45 p.m.

Some hon. members

Question.

Budget Implementation Act, 2007
Government Orders

12:45 p.m.

Conservative

The Acting Speaker Royal Galipeau

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

Budget Implementation Act, 2007
Government Orders

12:45 p.m.

Some hon. members

Agreed.

No.

Budget Implementation Act, 2007
Government Orders

12:45 p.m.

Conservative

The Acting Speaker Royal Galipeau

All those in favour of the motion will please say yea.

Budget Implementation Act, 2007
Government Orders

12:45 p.m.

Some hon. members

Yea.

Budget Implementation Act, 2007
Government Orders

12:45 p.m.

Conservative

The Acting Speaker Royal Galipeau

All those opposed will please say nay.

Budget Implementation Act, 2007
Government Orders

12:45 p.m.

Some hon. members

Nay.

Budget Implementation Act, 2007
Government Orders

12:45 p.m.

Conservative

The Acting Speaker Royal Galipeau

In my opinion the nays have it.

And five or more members having risen:

Call in the members.

And the bells having rung:

Budget Implementation Act, 2007
Government Orders

12:45 p.m.

Liberal

Karen Redman Kitchener Centre, ON

Mr. Speaker, I would ask that this vote be deferred to the end of government orders tomorrow.

Budget Implementation Act, 2007
Government Orders

12:45 p.m.

Conservative

The Acting Speaker Royal Galipeau

Pursuant to the request by the chief opposition whip, the vote on Bill C-52 will be held at the expiry of the time provided for government orders tomorrow.

Income Tax Amendments Act, 2006
Government Orders

12:45 p.m.

Liberal

John McKay Scarborough—Guildwood, ON

Mr. Speaker, I rise to continue my remarks.

This is a technical bill. It is designed is to prevent a circumvention of tax rules and to prevent tax evasion, particularly through the use of tax havens. This bill results from a consultation process initiated in 1999 by the previous Liberal government. We saw its fruition in 2005. Bill C-33 is basically the photocopy of the Liberal initiative commenced over those years. As a consequence, the Liberal members of Parliament will be supporting the bill, as I hope all members of the House will.

I will start with a little background. As we know, Canada has a fairly complicated tax system. It has been negotiated over 14 years of consultation. It is fairly complex in that many considerations have to go into in writing an income tax act. We also have something in the order of 81 bilateral treaties with other countries, so any amendments on one side have to be balanced with amendments on the other.

The essential goal is to make sure that Canadian companies are not taxed twice, once in the jurisdiction in which the money is earned, and then once again in the jurisdiction of residence. Generally this system works quite well.

Occasionally, however, some residents go to zero tax jurisdictions and the result is that there is no tax at all, which I think all members will agree is an unfair proposition. Bill C-33 will help to ensure that when this happens all that income will be taxed in Canada.

We as legislators need to ensure that the Canada Revenue Agency has the proper tools in order to be able to make sure that everyone pays his or her fair share. In the previous Liberal government, we worked very hard to ensure that all Canadians paid their fair share.

In the 2005 budget, we provided the Canada Revenue Agency with an additional $30 million annually to strengthen its capacity to administer the tax system in areas where aggressive tax planning and compliance risks have the potential to erode the tax base.

Our government used that money to create 11 aggressive international tax planning centres of expertise whose main focus is to develop new ways to track and combat aggressive tax planning and the use of international tax shelters. These are centres in which we gather together the best and the brightest Revenue Canada has to offer in order to be able to deal with a series of complicated schemes to see whether they are designed merely to avoid income tax in this country. Specifically, the centres were designed to deal with tax havens and any illegal activities that were going on in those tax havens.

In order to effectively combat this problem, we must work with international partners, because there is no sense in being the boy scouts of the world. Thus, part of our responsibility is to work with the OECD, the Pacific Association of Tax Administrators and the Joint International Tax Shelter Information Centre.

All of these centres of excellence were created by the previous Liberal government.

We want to weed out the good taxpayers from the bad taxpayers. That is not always an easy job.

It is regrettable that the government seems to be engaged in some exercise in overkill. Let us take, for instance, the minister's latest blunder in a whole series of blunders coming out of the budget and in what looks like an endless series of fiscal missteps. He said at page 241 of the budget that he wants to “eliminate the deductibility of interest incurred to invest in business operations abroad”.

In short, the budget proposed to put an end to all interest deductibility for loans used to invest abroad. This would have ended a longstanding principle that when we invest money abroad the interest is considered a cost of earning it and is therefore deductible.

Since just about every other major developed country continues to allow these homegrown operations to do this, eliminating Canada's advantage in this respect would put our companies at a serious disadvantage in the competitive global marketplace.

The policy received virtually universal scorn from pretty well everyone from the Chamber of Commerce to any other business entity. Allan Lanthier, former chairman of the Canadian Tax Foundation, had this to say:

This measure would put Canadian companies at a significant competitive disadvantage and I think the economic fallout to the Canadian economy is potentially disastrous...I don't think the finance minister understands that, I don't think he was properly advised by his Finance officials.

I've been practising [tax] law for 35 years--this is the single most misguided proposal I've seen out of Ottawa in 35 years.

Let me quote Len Farber, formerly a senior official with the Department of Finance, who said:

This goes beyond tax havens, this impacts good, complying, taxpaying corporations in many ways. The Canadian economy is a fairly small economy and if a company has reached its capacity here, if it doesn't continue expanding, it becomes a target for a takeover.

We have certainly seen that. Mr. Farber continued, saying:

Now they're making the cost of borrowing higher, so it's a pretty hard blow.

The budget did not distinguish if a company wants to borrow money to invest in the Cayman Islands or the United States or Germany. In one broad stroke, the finance minister lumped every single country in the world together and in the same breath told us that this measure was to fight the abuse of tax havens.

Shortly after the budget, the minister went to Toronto but had to beat a hasty retreat. He had to admit that he had made a colossal blunder. He now says that he will only go after Canadian companies that abuse the system by using tax havens for their investments.

The minister then got into a series of clarifications. Beware of clarifications, I say to everyone, because that is political-speak. What it means is: “I really goofed and what I am trying to do is redeem myself”. When questions got raised after the budget, he was quoted as saying:

We are satisfied with what we proposed in the budget, but I will certainly listen [to stakeholders]...

It would have been nice if he had listened before he put it in the budget. He continued, saying:

We have to have budget confidentiality before we bring issues forward.

However, one can have consultations. I know that idea is novel for his government, but it can be done. The minister continued:

But I will listen and we will design [the measure] in the most advantageous way possible.

People then legitimately asked, “So what does that mean?” Finance official and director of communications Dan Miles said:

No, he's not backing down. The policy is the policy.

Really, though, it is the policy but not necessarily the policy.

On May 8, the minister went to Toronto again to issue another clarification. Today, he was in Toronto again, to issue another clarification, so we are clarifying on the clarifications on the previous clarifications.

First of all, he said he was against all interest deductibility. Then he was only against interest deductibility through tax havens. Then it was only for two years, which meant, okay, I have tax deductibility for two years, so I will not really be upset for two years. Then he said no, it would now be 10 years, so I will be upset in 10 years. He then clarified again to say that it was not all interest deductibility and it was not two years and it was not 10 years and it was not just against tax havens: it was against double-dipping.

What the minister knows about double-dipping could probably be learned at a Dairy Queen, but now today he is against towering, which is a sort of subset of double-dipping. It is sort of like sprinkles on the double-dip. Now he is against the sprinkles on the double-dip.

He had changed this from two years to 10 years but now he is against it for five years. In five years he will be upset about it, but maybe not even then, at least until the tax experts and the panel get back to him. If we then read the rest of his press release, it is all blah-blah and Conservative propaganda.

If would be really interesting to find out, at one point or another, what it is the minister actually means as distinct from what he actually said in the budget. Also, as I and others have asked, if he is going to change the budget, could he at least table a precise ways and means motion so that we know exactly what it is he is upset about?

I do not know much about towering, but from what I do understand, it is a series of corporations and tax-flowing entities, that is, entities through which people can flow their profits, the objective of which is to eliminate withholding tax. It is not clear to me at this stage whether we are merely closing a loophole for a foreign jurisdiction, which will benefit the foreign treasury of another country but will have no impact on ours.

We may have gone through this whole entire exercise of corporation, non-corporate entity, another corporation, another non-corporate entity, through to the operating company and back up and down that whole tower, as they describe it, and all we will have achieved is a tax point for a foreign jurisdiction.

I hope that is not what he means, because then he certainly has a lot of people upset about absolutely nothing. If that is the case, then he will reduce the after-tax revenue to Canadian companies. That makes a lot of sense, does it not? Thus, we put money into somebody else's treasury, take money out of Canadian companies, and do nothing for our own treasury.

It will not benefit our treasury at all, so I do not know what the fuss is all about. Hopefully, we will find out if the minister actually tables something that has some precision and some meaning. As I said, the press release is just a glorified bunch of propaganda and rhetoric, but is very short on specifics.

What is obvious today is the minister has backed down from his position of all interest deductibility all the time to a microdot of interest deductibility. In two months from the budget, he has gone from two years, to ten years, to five years. He is so enamoured with this spinning exercise that he has spun himself into the ground. He is so excited about tax havens and so-called tax fairness that now he appears to be in favour of tax havens and is not fussed about tax unfairness.

I sincerely hope the minister is choosing not to throw the baby out with the bathwater and that he will arrive at some level of precision to which we are all entitled.

Income Tax Amendments Act, 2006
Government Orders

12:55 p.m.

Conservative

Dean Del Mastro Peterborough, ON

Mr. Speaker, on occasion the hon. member and I agree on a number of things. There may well be something we can agree on, which is a specific example that we saw in finance committee the other day when we were looking into the specific case. The finance minister has rightfully indicated that he would like to put an end to it. It was where a corporation borrowed money from a tax haven, lent it back to another tax haven, to lend it to a subsidiary of itself in the United States. This was tried by the CRA and it lost. The CRA could prove that the same company had claimed the same $20 million interest expense twice, taking a tax credit for it twice, incurring the cost only once, but the CRA lost, indicating that the courts felt this was perfectly legal.

This is a big problem. The point was made that if I could claim deductions on my taxes for interest expenses that I had not actually incurred, I would be more competitive. Indeed, I would be able to purchase more. I would be better off. Some of these corporations are doing that, and it is wrong. This is double-dipping.

Speaking about that specific example where the same corporation claimed the same tax deduction twice, but incurring it only once, does the hon. member believe that is wrong, or does he thinks it is fair? I do not think it is fair. It is not fair to Canadian taxpayers. I would love to hear what the hon. member has to say about it.