Bill C-48 (Historical)

Technical Tax Amendments Act, 2012

An Act to amend the Income Tax Act, the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the First Nations Goods and Services Tax Act and related legislation

Part 1 of this enactment implements, in accordance with proposals announced in the March 4, 2010 Budget and released for comment on August 27, 2010, amendments to the provisions of the Income Tax Act governing the taxation of non-resident trusts and their beneficiaries and of Canadian taxpayers who hold interests in offshore investment fund property.
Parts 2 and 3 implement various technical amendments in respect of the Income Tax Act and the Income Tax Regulations relating to the taxation of Canadian multinational corporations with foreign affiliates. The amendments in Part 2 are based on draft proposals released on December 18, 2009. Among other things, Part 2 includes the amendments to the foreign affiliate surplus rules in the Income Tax Regulations that are consequential to the foreign affiliate changes to the Income Tax Act announced in the March 19, 2007 Budget. The amendments in Part 3 are based on draft proposals released on August 19, 2011. Among other things, Part 3 includes revisions to the measures proposed in a package of draft legislation released on February 27, 2004 dealing primarily with reorganizations of, and distributions from, foreign affiliates.
Part 4 deals with provisions of the Income Tax Act that are not amended in Parts 1, 2, 3 or 5 in which the following private law concepts are used: right and interest, real and personal property, life estate and remainder interest, tangible and intangible property and joint and several liability. It enacts amendments, released for comments on July 16, 2010, to ensure that those provisions are bijural, in other words, that they reflect both the common law and the civil law in both linguistic versions. Similar amendments are made in Parts 1, 2, 3 and 5 to ensure that any provision of the Act enacted or amended by those Parts are also bijural.
Part 5 implements a number of income tax measures proposed in the March 4, 2010 Budget and released for comment on May 7, 2010 and August 27, 2010. Most notably, it enacts amendments
(a) relating to specified leasing property;
(b) to provide that conversions of specified investment flow-through (SIFT) trusts and partnerships into corporations are subject to the same loss utilization restrictions as are transactions between corporations;
(c) to prevent foreign tax credit generators; and
(d) implementing a regime for information reporting of tax avoidance transactions.
Part 5 also implements certain income tax measures that were previously announced. Most notably, it enacts amendments announced
(a) on January 27, 2009, relating to the Apprenticeship Completion Grant;
(b) on May 3, 2010, to clarify that computers continue to be eligible for the Atlantic investment tax credit;
(c) on July 16, 2010, relating to technical changes to the Income Tax Act which include amendments relating to the income tax treatment of restrictive covenants;
(d) on August 27, 2010, relating to the introduction of the Fairness for the Self-Employed Act;
(e) on November 5, 2010 and October 31, 2011, relating to technical changes to the Income Tax Act;
(f) on December 16, 2010, relating to changes to the income tax rules concerning real estate investment trusts; and
(g) on March 16, 2011, relating to the deductibility of contingent amounts, withholding tax applicable to certain interest payments made to non-residents, and certain life insurance corporation reserves.
Finally, Part 5 implements certain further technical income tax measures. Most notably, it enacts amendments relating to
(a) labour-sponsored venture capital corporations;
(b) the allocation of income of airline corporations; and
(c) the tax treatment of shares owned by short-term residents.
Part 6 amends the Excise Tax Act to implement technical and housekeeping amendments that include relieving the goods and services tax and the harmonized sales tax on the administrative service of collecting and distributing the levy on blank media imposed under the Copyright Act announced on October 31, 2011.
Part 7 amends the Federal-Provincial Fiscal Arrangements Act to clarify, for greater certainty, the authority of the Minister of Finance and of the Minister of National Revenue to amend administration agreements if the change in question is explicitly contemplated by the language of the agreement and to confirm any amendments that may have been made to those agreements. Part 7 also amends the Federal-Provincial Fiscal Arrangements Act and the First Nations Goods and Services Tax Act to enable the First Nations goods and services tax, imposed under a tax administration agreement between the federal government and an Aboriginal government, to be administered through a provincial administration system, if the province also administers the federal goods and services tax.
Part 8 contains coordinating amendments in respect of those provisions of the Income Tax Act that are amended by this Act and also by the Jobs and Growth Act, 2012 or that need coordination with the Pooled Registered Pension Plans Act.

Technical Tax Amendments Act, 2012

[Rosane Doré Lefebvre, NDP, Alfred-Pellan, QC]

Mr. Speaker, before I begin, I want to say that I will be sharing my time with the hon. member for Montmorency—Charlevoix—Haute-Côte-Nord.

I am rising in this House today to speak to Bill C-48, An Act to amend the Income Tax Act, the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the First Nations Goods and Services Tax Act and related legislation. This bill affects many pieces of legislation.

We in the NDP believe that this bill will have a positive impact on revenues and will generally discourage tax avoidance. Frankly, a technical tax bill was overdue. I am pleased to see that Parts 2 and 3 of Bill C-48 deal with the taxation of Canadian multinational corporations with foreign affiliates. These changes reflect the proposals made in the budgets of 2007, December 2009, February 2010, August 2010 and August 2011, and I am pleased to see that they seek to ensure the integrity of the tax system and discourage tax avoidance.

The NDP is in favour of cracking down on tax evasion and tax avoidance. That is why my colleagues at the Standing Committee on Finance have been pushing the committee to complete its study on this.

As an aside, I want to thank our official opposition finance critics: the senior critic, the hon. member for Parkdale—High Park, and the deputy critic, the hon. member for Rimouski-Neigette—Témiscouata—Les Basques. Over the past few months, they have done tremendous work on finance bills, including the omnibus budget bills and the current omnibus tax bill. I thank them. Their work is much appreciated, and it helps us to better understand the bills that are being introduced.

I am also pleased to see that this bill makes changes in order to reduce tax evasion. What is more, it seems that the committee will continue its study on the matter this year.

It is quite something to think that it has been 11 years since a bill like this has been passed. Tax practitioners have said time and again that Canada is very far behind because this government has taken too long to legislate these technical changes.

In a report released in 2009, Auditor General Sheila Fraser noted that:

If proposed technical changes are not tabled regularly, the volume of amendments becomes difficult for taxpayers, tax practitioners, and parliamentarians to absorb when they are grouped into a large package.

We could also see that the Department of Finance Canada had at least 400 technical amendments that, unfortunately, had not been enacted. I believe it is crucial that this type of delay does not happen again.

I also agree with the Certified General Accountants Association of Canada, which, during prebudget consultations, proposed to the Standing Committee on Finance that Canada's tax system be modernized to make it simpler, more transparent and more efficient. The association also proposed that a technical tax bill be introduced and passed to deal with unlegislated tax proposals. Finally it suggested that a sunset provision be implemented to prevent further legislative backlogs.

It is also true that the complexity of tax legislation makes this task extremely difficult. Our seniors, our youth and those who do not consider French or English as their first language would obviously prefer a simpler system that is easier to understand. Being a responsible, honest Canadian should not be so complicated.

This huge bill makes things even more complex. We know that this government is a great believer in omnibus bills, as it has demonstrated over the past year with Bills C-38 and C-45. Luckily, this time, I can see that the bill proposes technical amendments to a small number of closely related laws and not laws in other areas. The other two bills, on the other hand, amended laws related to environmental protection, government accountability, immigration, employment insurance and so on.

I still find it ironic that this government is introducing a bill that is so long when it did not hesitate to denounce such a practice before.

During the debate on Bill C-22, Income Tax Amendments Act, 2000, in the 37th Parliament in 2001, my colleague from Calgary Southeast, who is now the Minister of Citizenship, Immigration and Multiculturalism, had this to say:

Let me say at the outset that the bill before us is a classic example of what has gone wrong with parliamentary oversight of legislation, particularly with respect to taxation. The bill before us has some 513 pages of technical amendments. I can say with a fair degree certainty that not a single member of this place, let alone the parliamentary secretary who just spoke or the minister he represents, has read or will read. It is a bill that exercises enormous power over the lives of Canadians through the Income Tax Act which in itself has coercive powers delegated to it by this parliament. The some 500 pages of amendments in the bill are amendments to a tax act which runs over 1,300 pages long.

I think the same observations apply to Bill C-48, especially since it is twice as long as Bill C-22.

I believe that Canadians deserve to be represented by parliamentarians who make sensible decisions when it comes to taxes and spending. Canadians want accountability, and rightly so.

When we see things like the Parliamentary Budget Officer having to take the government to court to get information about how tax dollars are being spent and what cuts are being made to the services Canadians need, I think the public is entitled to ask some questions and to admit that they have lost confidence in this government.

Out of respect for Canadians, a government should be accountable and transparent. Frankly, that should be the very least they can expect.

Since I was first elected, not a day goes by without someone from my riding of Alfred-Pellan contacting me to share their concerns about this government. They are worried about how transparent it is, and if you ask me, they are right to be worried.

In closing, I am thrilled that this bill has been introduced, even though it took a while, because it implements over a decade's worth of highly technical changes to Canada's tax system.

Before I finish, I want to reiterate that the people of Alfred-Pellan contact me often about the omnibus bills. I recently received letters from some of them that I would like to share in the House so that everyone can understand that the public does follow what is going on in Parliament and that it is important to listen to them.

I will quote some of my constituents from Alfred-Pellan. First, Mr. Nadeau said that the Conservative Party is running the country with its own members in mind, and Mr. Nadeau is against the massive bills introduced by the Conservatives. According to him, they are using these bills to try to push through all of their ideas en masse, and it is very sad to see these bills being introduced.

Mr. Prejent said that it is impossible, or at least very difficult, to meaningfully challenge a particular issue. It is becoming clear that this approach allows the government to pull a fast one on the opposition, and by extension the Canadian public.

To Mr. Prejent, I would say that the Canadian public is not affected by extension. This affects the Canadian public directly and the opposition by extension. We see these kinds of things every day.

One of my other constituents, Mr. Jetté, is not happy about these omnibus bills. He said that the Conservatives should talk with the opposition before bringing in such bills, and that it is arrogant and a bit too self-serving not to. He apologized for saying such things, but it is what it is.

I also heard from Mr. Bergeron, who said it was unbelievable that in 2012, the government forgets and fails to listen to the Canadian people.

People are not happy that such bills are being introduced, and I understand. I know how important these amendments can be, especially when things have dragged on and on with this government and also with the Liberals in the past. So it is important to deal with these issues, but we must be cautious. We must also ensure that these laws are useful to the public, because it is extremely complicated to make so many changes in one fell swoop. We must be cautious about the complexity of the law, especially when it comes to taxes.

I think that everyone, in all ridings, just wants to be able to properly fill out their tax returns. We need to give them the right tools. We must make their lives easier and make things as simple as possible.

As parliamentarians, we have a duty to ensure that Canadians trust their government and trust that it is transparent when it manages taxpayer money. Unfortunately that is not always the case with the current government. But I am happy to be part of a team that, in 2015, will show that it is possible to have a government that works fairly, efficiently and transparently.

[John McCallum, Liberal, Markham—Unionville, ON]

Mr. Speaker, I am pleased to rise on the subject of Bill C-48, which is now before the House. The bill could be termed a housecleaning bill, which does not mean that it is unimportant because it is important to keep one's house clean and in this case we are talking about the cleanliness of our tax system. The bill enacts into law previous comfort letters and other statements by the Department of Finance, which have already been enacted by CRA but which are not yet enshrined in the law.

As I will indicate, the Liberal Party will support the bill. Our only complaint is that it is far too long in coming. There have been massive delays to the point where the bill is almost 1,000 pages long with, I believe, 40-something amendments. This has caused great cost and great uncertainty to the tax system. We believe that it is simply bad public administration that the government should have delayed so long in bringing the legislation forward.

The last housecleaning tax bill passed by Parliament was in 2001, almost 12 years ago. We believe as a matter of course such bills should come before the House every year, so that the complexity of the tax system would be alleviated and taxpayers would have a clearer idea of what their rights and obligations are.

Let me begin by going through a little bit of the sad, lengthy history, which has led us from 12 years ago when the last bill was passed to where we are today. As I said, in 2001, a tax housecleaning bill was passed, 12 years ago. The Liberal government prepared another one but then was defeated. The Conservatives made two attempts but both failed. Because of an election or because of prorogation, those bills simply did not get through the House and were dropped.

The next event that is of some importance is the Auditor General's report of 2009. The Auditor General made it crystal clear that there were major costs imposed by not acting more expeditiously in this area. I would like to read a few of the key recommendations that were made by the Auditor General in 2009.

She said:

For taxpayers, the negative effects of uncertainty may include

• higher costs of obtaining professional advice to comply with tax law;

• less efficiency in doing business transactions;

• inability of publicly traded corporations to use proposed tax changes in their financial reporting, because they have not been “substantively enacted”;

• greater cynicism about the fairness of the tax system; and

• increased willingness to use aggressive tax plans.

She continued:

For the tax administrator, the negative effects may include

• higher costs for providing additional guidance and interpretations to taxpayers and tax auditors; and

• higher administrative costs for reprocessing the tax returns after an outstanding legislative amendment is enacted and for obtaining waivers to extend the limitation period for reassessment.

These points are extremely clear. The Auditor General makes it very clear that the absence of housecleaning legislation presented promptly imposes major costs on taxpayers in terms of their ability to understand the law, their need for professional advice and also imposes greater delays on rulings by CRA, which further reduce the efficiency of the system.

Following the Auditor General's report, the parliamentary committee on public accounts met and I would like to read its recommendations, which were published in the year 2010:

RECOMMENDATION 1

That the Department of Finance Canada facilitate the elimination of the backlog by ensuring that bills making technical amendments to the Income Tax Act only relate to technical tax matters.

RECOMMENDATION 2

That the Department of Finance Canada not wait until technical amendments bills are passed by Parliament before releasing further proposed amendments to the Income Tax Act for comment.

RECOMMENDATION 3

That once the current backlog of technical amendments is passed, the Department of Finance Canada should prepare annual technical amendments bills for consideration by Parliament.

RECOMMENDATION 4

That the Canada Revenue Agency provide by 31 March 2011 a progress report to the Public Accounts Committee on actions taken to address the recommendations contained in Chapter 3 of the Auditor General’s November 2009 Report.

It is clear as we stand now, in 2013, that these recommendations of the public accounts committee were not followed. It called for this housekeeping legislation to be presented on an annual basis. It called for a reduction in the time that CRA took to give its tax opinions or directions. This has not happened. The time has gotten longer, not shorter. Again, I would argue that this is a case of really bad public administration in an area that is not particularly exciting to the public but is, nevertheless, critical to the good functioning of our economy.

Now, one would think that accountants, of all people, would love tax complexity because they are paid for helping people to complete their taxes. If the system is more complex, they are needed even more and they would make more money. However, quite to the contrary, both the chartered accountants and the certified general accountants have recently been arguing very strongly in favour of expeditious passing of the legislation as well as a more general reform of the tax system.

I would like to read from both the recommendations of the chartered accountants and the certified general accountants on these issues. In 2010, the Canadian Institute of Chartered Accountants said:

Reducing complexity in Canada’s domestic tax regime is crucial to easing the regulatory burden placed on Canadian businesses and attracting investment. Simplifying our tax system would make the country more competitive and allow both individuals and business to prosper. According to The Global Competitiveness Report 2010 – 2011 issued by the World Economic Forum, tax regulations are among the top four most problematic factors cited by business executives for doing business in Canada. Many aspects of Canada’s tax system have become much too complex. We recommend that the government establish a national consultation process to examine tax simplification measures.

This is a government that talks all the time about caring only about the economy, about being competitive, about attracting foreign investment, and yet tax complexity is number four on the list of negative factors, according to companies, investors. The government has done nothing since these recommendations of 2009-10 until three years later, today, notwithstanding the pleas from the accountants, the Auditor General and the public accounts committee, to act expeditiously.

Let me now read what the certified general accountants said:

Modernize Canada’s tax system – make it simple, transparent and more efficient

Introduce and pass a technical tax bill to deal with unlegislated tax proposals

Implement a “sunset provision” to prevent future legislative backlogs

Appoint an independent panel of experts to recommend steps to reform Canada’s tax system

That statement about a sunset provision is interesting because it would say that when Finance issues a declaration or a comfort letter that effectively changes the system, unless it is placed in law within a certain time, such as a year or two years, it sunsets. It disappears. This would be a good change to the system because it would be an incentive for the Department of Finance or the government to implement these housecleaning bills annually or expeditiously so as to reduce this growing complication of Canada's tax system.

However, as members will have heard from these quotes, the issue goes further than simply these housecleaning bills. It has been 12 years since our last housecleaning bill and close to 50 years since our last full-scale examination of Canada's tax system. The last time that was done, I believe, the report was issued in 1966 and it was done by the Carter commission. The accountants and I say that it is high time we have another overall study of Canada's tax system with a view to simplifying it and making it more competitive, less complex and more fair. This would be a major undertaking, and since it has not been done in almost 50 years, it is high time that we do it.

One obvious unfairness, which would become apparent if such a study were done, is the operation of our tax credits. The government offers tax credits for young soccer players or young violinists. Some economists would prefer that such measures be put into overall cuts in income tax, but that is another issue. My point is that these tax credits are grossly unfair because they deliberately exclude those people whose income is not high enough to pay significant tax. Therefore, low-income Canadians' sons and daughters might want to play soccer or the violin just as much as a child of a higher-income Canadian, but because their income is low and they do not pay tax or much tax, they are excluded from the benefit. That is a gross unfairness. Item number one in reforming our tax system would be to make those tax credits refundable so that they are available for all Canadians and not just for well-heeled Canadians.

That is just one tiny item in the overall scheme of things. We need an overall review of our tax system, which has not happened for nearly 50 years, and it is high time that this was done. We do support the bill. Our complaint is that it is far too late in coming.

I will go over a few of the provisions of the bill. I obviously cannot cover in detail the nearly 1,000 pages of changed legislation. One of the problems with it is that it is just too much to absorb correctly all in one bite and to analyze appropriately. However, I will mention some of the things that would be changed.

There would be changes to the foreign affiliate rules, which would probably be the most important changes for business. These changes would generally be considered to be relieving for business, although they also would increase the complexity of meeting those tax obligations.

On income trusts, the bill would affect how debt would be treated when an income tax trust is taken over by a corporation after the infamous 2006 income trust tax announcement.

There would be a change for employment insurance. Now that self-employed individuals can contribute to EI, Bill C-48 would ensure those contributions would be deducted from annual income for taxation purposes in the same manner that an employee's contributions are deducted.

On GST, first nations would be able to choose to levy a sales tax on reserve by allowing the Canada Revenue Agency to collect and administer the tax. All money collected would be returned to the band council. Bill C-48 would allow Revenu Québec to fulfill that same function.

On labour-sponsored venture funds, in 2010 the Province of Ontario announced it was phasing out its tax credit for labour-sponsored venture funds by 2014. Many of those funds are no longer attracting the capital they need to continue as labour-sponsored funds, and the fund administrators have asked that they become mutual funds. However, the Income Tax Act imposes some severe federal penalties for making that switch. Bill C-48 would waive those penalties in recognition of the Ontario government's change. It would also allow shareholders to sell their shares to other investors instead of back to the fund.

Finally, on airlines, provinces and taxes, this clarifies the allocation of miles flown over certain territorial waters for the purpose of provincial taxation.

As we will see from that list, none of those items is likely to make a headline, but cumulatively, when added together, the absence of such provisions in our income tax law adds complexity and costs and reduces the competitiveness of the Canadian economy. That is why the Liberal Party, while supporting this bill, would also make a plea to the government that the next such housecleaning bill be introduced in the House approximately one year from today.

The House resumed from January 28 consideration of the motion that Bill C-48, An Act to amend the Income Tax Act, the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the First Nations Goods and Services Tax Act and related legislation, be read the second time and referred to a committee.

Business of the House

[Peter Van Loan, Conservative, Leader of the Government in the House of Commons]

Mr. Speaker, I welcome the implicit offer of assistance from the House Leader of the Official Opposition.

I look forward to discussions with him later on the possibility of moving forward both Senate reform and Bill C-12 on a unanimous consent basis straight to committee. I would be happy to do that with him.

This afternoon we will continue debating the Liberal opposition day motion. Tomorrow we will hopefully finish second reading of Bill C-48, the Technical Tax Amendments Act, 2012, a measure supported by all three parties. After that we will turn to third reading of Bill C-42, the Enhancing Royal Canadian Mounted Police Accountability Act; third reading of Bill S-7, the Combating Terrorism Act; and second reading of Bill S-12, the Incorporation by Reference in Regulations Act.

When we return from our constituency week on Monday, February 25, we will start second reading of Bill C-55, the Response to the Supreme Court of Canada Decision in R. v. Tse Act. This bill needs to be passed by mid-April before the Supreme Court ruling takes effect, which would render the important powers available to police ineffective.

After Bill C-55, we will consider Friday's unfinished business.

Tuesday, February 26, shall be the fifth allotted day, which will go to the Official Opposition, and it will therefore choose the subject of debate.

On Wednesday and Thursday, we will continue debating the bills I have already listed.

Additionally, Bill C-47, Northern Jobs and Growth Act, was reported back from committee yesterday, and I anticipate Bill S-9, Nuclear Terrorism Act, will be reported back soon. So we could also call these bills at report stage and third reading, if we have extra time next week.

Finally, on Friday, March 1, the House will start the second reading debate on Bill C-54, Not Criminally Responsible Reform Act. The Prime Minister announced this bill last week as part of our efforts to ensure we have a justice system that puts the rights of victims first.

[Peter Van Loan, Conservative, Leader of the Government in the House of Commons]

Yes, I have a plan, Mr. Speaker.

This afternoon, we will continue today's NDP opposition day.

Tomorrow, we should finish the second reading debate on Bill C-52, Fair Rail Freight Service Act. Then, we will resume the second reading debate on Bill C-48, Technical Tax Amendments Act, 2012.

Before question period on Monday and Tuesday, the House will debate third reading of Bill C-42, Enhancing Royal Canadian Mounted Police Accountability Act. After question period those days, we will turn to second reading of Bill C-51, Safer Witnesses Act.

On Wednesday, we will debate second reading of Bill S-12, the incorporation by reference in regulations act. I do not expect that this bill, which responds to views of the Standing Joint Committee for the Scrutiny of Regulations, would need a lot of House time. I hope we can deal with it quickly. We could then turn to report stage and possible third reading of Bill S-7, the combating terrorism act.

Next Thursday shall be the fourth allotted day, which I understand will see the Liberals choosing our topic of debate.

On Friday, we will resume any unfinished debates on the bills we just mentioned, or we could also consider dealing with any of the many bills dealing with aboriginal issues. That being raised as a concern, we have Bill S-2 dealing with matrimonial property; we have another bill dealing with safe water for first nations; and we have another bill dealing with fair elections for first nations. On all of these bills we would welcome the support of the official opposition. We have not had that to date, but if we do, we can deal with them very quickly on that day. I would be delighted to do that. I will await with interest the response from the NDP.

[Brian Ernewein]

Perhaps I might take that.

The technical tax bill has a lot in it. I think it is roughly 1,000 pages, most of which are highly technical amendments effectively dating back through the last decade and implementing a lot of changes relieving taxpayers on a technical level. On a level of the questions being raised in terms of measures to help the government in relation to aggressive tax avoidance transactions, a few things that I mentioned before, I will explain in a little more detail.

There are new rules in relation to non-resident trusts and foreign investment entities. These rules build on rules that are already in place in the Income Tax Act but take them quite a bit further. On the foreign investment entity side, it raises the income that can be attributable to having an investment in a foreign investment entity. On the non-resident trust side, it tries to effectively put in a more robust regime for making sure that Canadians who invest in foreign trusts are taxable on that income currently, where the conditions for the rules that apply are met.

I've already talked at some length about the aggressive tax planning reporting regime, which requires taxpayers to effectively self-identify and tell CRA when they are engaged in an avoidance transaction that has certain hallmarks: where a contingency fee is involved, where there is a requirement by the tax adviser that the taxpayer be quiet, keep the transaction confidential, presumably so they can continue to market it to others. Where hallmarks like that are part of a tax avoidance transaction, the regime would require that the transaction nonetheless be reported to the Canada Revenue Agency.

The final one I'll mention, for the sake of this, is a rule dealing with foreign tax credit generators. This is a scheme or transaction, which we've seen in some contexts in very high volumes, quite frankly, whereby taxpayers were attempting to create foreign tax credits without really generating any additional underlying foreign income. The FTC, or foreign tax credits, could be applied to reduce taxes on other real foreign income. That was a concern, and again, it is part of Bill C-48, the Technical Tax Amendments Act, to address.

[Brian Ernewein]

Let me talk specifically about what Canada is doing in that context. I've lost track of when it was done, but sometime in the last decade or 15 years, there were rules, so-called third-party penalties, introduced for tax advisors—civil penalties. There have been for many years possible criminal sanctions that could apply to those complicit with tax evasion, those who conspire to engage in tax evasion even on another's behalf. But there was a perceived gap, in that there was no ability to proceed civilly against tax advisors who would engage in what we'll call domestic tax avoidance.

More recently, actually in the 2010 budget, and, as I've said, as part of Bill C-48 currently before the House of Commons, we have an aggressive tax reporting regime. It essentially gives an early warning or notice to CRA of transactions that have an avoidance motive, which the taxpayer evidently believes works. Nonetheless, where there are certain hallmarks of a tax avoidance transaction, such as a contingency fee or the like, there's a reporting regime in place that requires the taxpayer or the tax advisor to formally advise CRA of the existence of the transaction, which thus allows CRA to step in. They can take a look at the transaction and challenge it early. Perhaps if they think there's a real concern for the fisc and that in some sense the transaction may work, they can let us at Finance know as well and we can take stock and decide whether a change should be required.

[Brian Ernewein, General Director, Tax Policy Branch, Department of Finance]

Thank you, Chairman.

My name is Brian Ernewein. I'm the general director in the tax policy branch of the Department of Finance, and I'm joined by a few of my colleagues from the department, who may join us at the table if a question should arise.

I appreciate the invitation to appear before the committee again today to discuss tax evasion and tax avoidance. This gives me the opportunity to report to the committee on the government's most recent efforts, both domestically and internationally, to address various aspects of those issues.

I propose to briefly highlight some of the policy initiatives that we have undertaken in the recent past to combat tax evasion and tax avoidance. My remarks will first be about tax evasion and then move on to tax avoidance.

Tax evasion and combatting international tax evasion—I take that to be more the focus of the committee, but perhaps the questions will take us in different directions—primarily concerns the vigorous enforcement of existing tax rules by the Canada Revenue Agency. You'll be hearing from my colleagues at the agency about their experience in the administration and enforcement of Canadian laws. We take as a given that CRA's enforcement of our laws requires that the agency be provided with the right tools and be allocated sufficient resources to pursue those efforts.

Access to relevant taxpayer information is key to the effective enforcement of our tax laws. Internationally, bank secrecy laws are a significant obstacle to the exchange of tax information between tax authorities. In order to overcome that obstacle, it is important to have access to information on taxpayers who seek to avoid their tax obligations, especially in jurisdictions that maintain bank secrecy.

When I last appeared before this committee, in December 2010, I talked about the budget 2007 measures to improve tax information exchange and Canada's efforts to promote the OECD standards in transparency and effective information exchange. They have led to the negotiation of tax information exchange agreements and new or revised tax treaties.

I'm pleased to report that we've achieved significant progress in this regard since we were here a couple of years ago. Canada now has 16 tax information exchange agreements, or TIEAs, as we call them, in force, and is currently negotiating over a dozen more. Last week, we signed a TIEA with Liechtenstein, and we hope to be signing another later today. Almost all of Canada's 90 tax treaties currently in force now include the OECD standard on tax information exchange.

Of particular significance, the tax treaties that Canada has with other countries, which were identified as requiring changes during the Global Forum's peer review—and I'll talk in a moment about the Global Forum—have been or are being renegotiated.

We've had an amending protocol on exchange of information with Singapore that came into force in 2012. We have amending protocols with Austria, Barbados, Luxembourg, and Switzerland that have all been signed, and we have negotiations with Malaysia and Belgium that are in progress. From our perspective, a developed tax information network is an important cornerstone in combatting international tax evasion, and we're working to negotiate many more similar agreements in the future.

I said I'd talk for a second about the Global Forum, and I'll just take a second on it. The so-called Global Forum on Transparency and Exchange of Information now has 100 members—countries and subnational jurisdictions. It conducts rigorous peer reviews of the legislative framework and administrative practices of member states, including jurisdictions with which Canada has entered into TIEAs, or renegotiated tax treaties. This peer review helps ensure that Global Forum members abide by their obligations to exchange information in the manner that those TIEAs and tax treaties contemplate.

I'll say quickly that on the domestic front there are tools we can use to help the CRA in its work on dealing with tax evasion. One important example that's been in place for several years now is the Income Tax Act's foreign reporting rules, which require the disclosure of the value and location of property held outside Canada. These rules assist the CRA in detecting tax avoidance and evasion, and help to better target the CRA's audit efforts, both for individuals and for companies that own subsidiaries outside of Canada. These reporting obligations are backed up by penalties for failure to file the required return.

Finally, on the tax evasion front, additional funding has been provided to the CRA in past budgets in support of their enforcement efforts, particularly as regards international taxation and for the purpose of creating tax planning centres of expertise.

Moving over to the topic of tax avoidance—and I can be a little bit briefer on this point—I'd like to make mention of only recent initiatives that the government has made to address domestic and international tax avoidance. While tax evasion generally refers to the wilful concealment of income from taxation, tax avoidance is more in the nature of aggressive tax planning arrangements that reduce or eliminate tax, or purport to, which are presented as being consistent with the letter of the law but which produce results that are unintended and inconsistent with sound tax policy principles.

The government has put forward a large number of changes designed to address avoidance concerns and improve the integrity of the system. Just dealing with a few examples coming from the past year, Budget 2012 introduced measures to address aggressive tax shelters, to improve the integrity and fairness of our thin capitalization rules, and to restrict foreign affiliate dumping.

The second example, or list of examples, I will give you comes from Bill C-48, which is currently before the House. The Technical Tax Amendments Act does a lot of things. Among these, it contains legislative measures to give effect to a number of changes that were proposed in Budget 2010 to address aggressive tax avoidance transactions and to improve the integrity of the tax system. These included rules dealing with foreign investment entities and non-resident trusts, a reporting regime for aggressive tax planning transactions, and specific rules dealing with what were so-called foreign tax credit generators.

Just referring to those examples, I think they serve to show the tax system is being regularly reviewed and updated to address issues of tax avoidance. It's obvious that we must remain vigilant in identifying and pursuing issues as they arise, with a view to ensuring the fairness and integrity of the tax system.

Thank you.

[Peter Van Loan, Conservative, Leader of the Government in the House of Commons]

Mr. Speaker, let me wish you and all hon. members a happy new year.

I believe that 2013 will be a very productive year in the House of Commons.

The House has been a productive place in the last 200 sitting days. Between the election and today, Parliament has seen three-quarters of the government's legislation pass through at least one of the two chambers, and in fact a majority of the bills we have introduced have made it all the way to entering the statute books. I do look forward to seeing the government add to this record of accomplishment.

On the question of Bill C-32, I will again offer to my friend that we could pass that bill right now, at all stages, if the NDP is agreeable. I believe that would be a reasonable course of action.

Today, of course, we are debating an opposition day motion for the New Democratic Party. Tomorrow and Monday will see us start to consider second reading of Bill C-52, the fair rail freight service act. If we have time, we will go back to the second reading debate on Bill C-48, the technical tax amendments act, 2012. Wednesday will see us finish third reading of Bill C-43, the faster removal of foreign criminals act. Tuesday and Thursday shall be the second and third allotted days. I understand that both of those days will go to the official opposition. Then, if we have not previously finished Bill C-52 and Bill C-48, we will return to them next Friday.

Finally, there have been consultations among the parties respecting a take note debate on the situation in Mali. I am pleased to move:

That a take-note debate on the subject of the conflict in Mali take place, pursuant to Standing Order 53.1, on Tuesday, February 5, 2013.

Technical Tax Amendments Act, 2012

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

Mr. Speaker, as this is my first time rising in the House in 2013, I would like to take a minute to wish my constituents a happy and prosperous New Year.

I am glad to speak to Bill C-48 today, a bill that has been a long time coming. I hope it will not be another decade before we undergo this exercise again.

As we have heard, this is a huge bill. It addresses the changes to the Income Tax Act, the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the First Nations Goods and Services Tax Act and related legislation. It is almost a thousand pages.

What sets this large piece of legislation apart from the omnibus budget implementation acts that we debated last year is that it makes changes to a few closely related pieces of legislation. Therefore, I am perplexed as to why the government did not just throw it all in with the other stuff.

As we heard today, these changes are mostly old news and have been in practice for a number of years. That said, the bill is needed, as it has been more than 10 years since we have updated tax code legislation.

It is not that there have not been changes. The bill will include hundreds of tax measures that are already in place and have been enacted by comfort letters. In that respect, a lot of Bill C-48 amounts to technical housekeeping.

As the House is aware, the New Democrats are supporting the bill, but that does not amount to the acceptance of the government's direction on taxation or the belief that this entire process should not be improved. Certainly, the long period between updates to the tax code lead us to the situation that we have now where the legislation becomes so large. If we were to go through this process a little more regularly, we could avoid the scenario where MPs are forced to vote on bills that defy thorough study.

Tax lawyer Thomas McDonnell stated as much in a blog that touches on Bill C-48 as he discussed the legislative process with respect to taxation in both the United States and Canada. He wrote:

This Bill will also be passed without much in the way of informed debate in the House. Most parliamentarians voting on it will admit that they have not read it, let alone tried to fully understand the consequences of voting for (or against) it. This is not how Parliament is supposed to deal with one of its essential functions–the raising of revenue.

With that in mind it seems fairly straightforward to suggest that the government would do well to set a more regular schedule for this type of legislation going forward. I cannot imagine that such a move would be anything but positive, especially for those people whose business it is to work with the tax code.

We know there is broad support to do the work set out in the bill to get these measures into the tax code proper. The Auditor General has told us that it is long overdue. She told Parliament in 2009 that there were at least 400 outstanding technical amendments that had not yet been put into legislation. Over 200 of those outstanding changes are addressed in Bill C-48. While the Auditor General acknowledged that most tax practitioners were relatively happy with the comfort letter process, she noted the need to enact the legislative changes the comfort letters identified. Why it took four years to act on that advice is a question the government will have to answer. With the support it is receiving for Bill C-48 today, it is obvious that this could have been done some time ago.

When we are speaking about taxes, especially in the technical manner that we are today, most Canadians will not be sitting on the edge of their seats. This is not a bill that is likely to be newsworthy, since most of it is old news. What the bill does a lot of is to bring existing measures into the tax code that are designed to curb tax avoidance, which is actually good news for the vast majority of Canadians.

While the political discourse on taxation is often stuck in one gear, namely how to cut taxes, what is usually lost in the debate is the role that taxes play. Despite the universal desire to pay less, most people recognize the necessity of taxes. They allow us to operate as a country and can help us do a lot of good. Let us not forget about all the infrastructure dollars that go into our communities; they come from part of our taxes.

It is also a simple fact that countries require revenue and that revenue largely comes from taxation. What people absolutely want to see is a tax system that is fair, a system that guards against tax avoidance and a system that does not reward those people who are in a position to hide their money from their country. People do not want to feel that they are paying to subsidize others who have managed to use loopholes to minimize their contribution. That will not sit well with hard-working Canadians, and it should not sit well with parliamentarians either.

New Democrats understand this. We believe in cracking down on both tax avoidance and tax evasion, while ensuring the integrity of our tax system. We support the changes being proposed in the bill, especially those that aim to reduce tax avoidance.

The work being proposed in Bill C-48 is long overdue. Among the beneficiaries of the bill will be small businesses. These are the cornerstone of our communities, and it is important for us to do everything we can to create an environment that would make it easier to do business. These business people have enough to worry about without having to consider things like comfort letters. In that respect, what we are debating here is good. We would be streamlining the workload that businesses will have to comply with. Based on what I hear from businesses in my constituency of Algoma—Manitoulin—Kapuskasing, that would be a good and welcome thing.

As we have heard today, it would be impossible for any one of us to give a detailed account of such a large bill in the limited time we have to speak to the bill, so I will touch on one last item that I believe is timely.

What I am talking about is part 7 of Bill C-48. Part 7 clarifies the minister's authority to amend schedules and annexes to tax administration agreements if doing so does not fundamentally change the terms of the agreement. It would also allow tax administration agreements for the first nations goods and services tax between the federal government and aboriginal governments to be administered through a provincial administration system if the province also administers the federal GST. If we think back to how that issue was bungled when the HST was rolled out in Ontario, it would certainly help us avoid a similar scenario in the future.

I am sure members remember the discussion on the HST in Ontario. When the HST was brought in, how it would affect first nations was an afterthought by the Conservative government. Only some eleventh-hour negotiating at the insistence of Ontario chiefs like Chief Shining Turtle of Whitefish River First Nation, who is also the chair of the United Chiefs and Councils of Mnidoo Mnising First Nations on Manitoulin Island and Anishinabek Nation Grand Council Chief Patrick Madahbee. They avoided a showdown over the issue. In the end the solution was there all along. The Conservative government and the Government of Ontario chose to ignore it until they had no choice.

It is fitting that the Idle No More national day of protest was held in front of Parliament today. This is a similar issue. Some of us, along with the leader of the NDP, took the opportunity to meet with these people who have travelled a long way to bring their message of dissatisfaction to Parliament. Much of the frustration they are expressing comes from exactly the type of oversight that was on display when the HST turned first nations' tax exempt status into an exercise in red tape. What was forgotten at that time was the constitutional obligation of the federal government to meaningfully consult and accommodate first nations in decisions that directly affect them. I would like members to think about that because it seems that people have forgotten those words. I will repeat them: meaningfully consulting, meaningfully accommodating first nations in decisions that directly affect them.

This has been a sticking point for the Conservative government and I hope it has now recognized that first nations are not going to merely roll over and accept top-down directives. Had the government consulted, it would have heard that messing with tax exempt status was a non-starter and it could have moved immediately to the solution. Had the government remembered about the HST fiasco, it would not have gone ahead with the type of legislation that it threw into Bill C-45.

I met with some young people from the Whitefish River first nation. They do not understand why the government is not respecting their treaty rights, the accords and other agreements that have been signed. They are beyond themselves when it comes to the fact that the government often does not respect doing meaningful consultation. They have a right to that. New Democrats are hopeful the government will now show signs of understanding this and will proceed accordingly.

In closing, I reiterate that although New Democrats are supporting this bill, it is by no means an endorsement of the government's tax policies which put too much of the burden on the little guy while allowing an increasingly freer ride for the top earners in this country. We remain unconvinced that such a model is the best way to create wealth or jobs, but that is not the goal of this legislation either.

[Irene Mathyssen, NDP, London—Fanshawe, ON]

Mr. Speaker, I will be sharing my time this afternoon.

I am most pleased to join the debate on Bill C-48, a bill to amend the Income Tax Act, the Federal-Provincial Fiscal Arrangements Act, the First Nations Goods and Services Act and related legislation.

The bill makes important and long-overdue changes to the tax laws, and this is the issue. While New Democrats support the bill, we do take issue with the omnibus nature of it. At close to 1,000 pages, it leaves little opportunity for study and debate.

The very point of Parliament and our democratic system is not only to introduce laws but to scrutinize those laws and ensure they are accurate and they work in the best interests of the country. That is the very reason we are all here, to work toward the betterment of this great country.

We put at risk our very democracy and we shun the very core of Parliament by introducing huge pieces of legislation that leave little time for such scrutiny.

I notice the members across have chosen to put up only one speaker on the bill, leaving the official opposition with the task of carrying out that important scrutiny of Bill C-48. That should be the role of all parliamentarians, but it seems that upholding the functions, checks and balances that Parliament is supposed to provide is not a priority with the government.

Conservatives take partisan rhetoric to the extreme and continue to introduce mammoth bills with as little debate as possible, and in fact with closure motions, so that there is as little debate as possible.

I want to add that it is not the changes that Bill C-48 undertakes that New Democrats are concerned about; it is the fact that the bill is so very large that the ability to scrutinize it is almost impossible. The changes outlined in Bill C-48 should have been introduced over the years, not grouped into one unwieldy bill.

There is no need for this massive piece of legislation. It should have been introduced in smaller pieces as routine housekeeping bills over the years. In fact, Bill C-48 includes outstanding legislative proposals dating back as far as 1998. Many of us in this chamber were children then. Good heavens, what a long time to postpone and procrastinate.

Even if the Prime Minister was not aware of these much needed updates to taxes, in 2009, the Auditor General raised concerns about the fact that there were at least 400 outstanding technical amendments that had not yet been put into legislation. There is no excuse. There were several years and plenty of time after this report was released to introduce the smaller bills that would have addressed the backlog of tax changes that needed to be addressed.

Of the outstanding changes outlined by the Auditor General, more than 200 are now in Bill C-48. Most tax practitioners have been relatively happy with the practice of the comfort letter process. However, as I have indicated already, the Auditor General's 2009 report noted “an expressed need for the legislative changes that the comfort letters identified and should be enacted”.

I want to quote a little further from the Auditor General's fall report of 2009:

No income tax technical bill has been passed since 2001. Although the government has said that an annual technical bill of routine housekeeping amendments to the Act is desirable, this has not happened. As a result, the Department of Finance Canada has a backlog of at least 400 technical amendments that have not been enacted, including 250 “comfort letters” dating back to 1998.

The Auditor General is very clear. The need for updates to the legislation is important, perhaps even critical, and we had plenty of opportunities to pass bills related to tax legislation long before now.

Sadly, this is not the first time the Auditor General has complained about this issue. She expressed concerns over and over again, and in response the Department of Finance Canada stated:

—the government intends to release a package of income tax technical amendments on an annual basis, so that taxpayers will not be subject to more lengthy waiting periods as in the past before amendments are released to the public.

While comfort letters have since been regularly released to the public, very few technical bills have been introduced or passed in recent years. In the last 18 years, only four such income tax bills have been enacted. Annual income tax technical amendments were promised, but neither Liberals nor Conservatives bothered to do this basic annual housekeeping. How on earth can they continue to misrepresent themselves as good managers when their ability to manage is so obviously bad?

I would like to reiterate that there is absolutely no need to create massive bills such as this. At close to 1,000 pages, this is most definitely an omnibus bill. However, in contrast to the government's Trojan Horse budget bills, Bill C-48 does make some technical changes and does have a purpose as opposed to the callous lumping together of Conservative legislation into two omnibus bills in the spring and fall sessions. In those bills we saw the dismantling of environmental reviews, the rewriting of the Fisheries Act, the elimination of wildlife habitat protection, the repeal of the Kyoto Protocol Implementation Act, the reduction of the powers of the Auditor General and the dissolving of the Public Appointments Commission meant to fight patronage.

We also saw the gutting of food safety inspection. It was a one-stop shop of Conservative slicing and dicing through services Canadians rely on, while making changes to a slew of laws that they never once mentioned in their budget. By forcing omnibus bills such as the Trojan Horse bills through, the Conservatives demonstrated a mastery of the art of circumventing the democratic process and ignoring the concerns of Canadians and the concerns of first nations.

We now see another massive bill in Bill C-48 and that tells me that there is still work to be done among Conservatives if we are to see important changes legislated in a timely fashion. Failing to do so would hurt the business community and make it difficult for proper evaluation by Parliament.

It is not just difficult for parliamentarians. The government claims that its goal is to boost the economy, but by introducing overly complex bills, it does not allow small business people to invest the time and resources they need in order to understand them. They are in the business of business. They are not in the business of circumventing all of this red tape.

The Auditor General was clear about this and said, “If proposed technical changes are not tabled regularly, the volume of amendments becomes difficult for taxpayers [and] tax practitioners...”.

It is not just the Auditor General who has noted this issue. We heard from the Certified General Accountants Association of Canada. In its pre-budget submission, it said that, “CGA-Canada strongly believes that the key to sustained economic recovery and enhanced economic growth lies in the government’s commitment to tax reform and red tape reduction”.

There is a need to modernize the system and smaller bills would do that.

Finally, I would like to address the very important issue of tax avoidance, parts of which have been addressed in Bill C-48. It is very important for the government. New Democrats absolutely believe in cracking down on both tax avoidance and tax evasion while ensuring the integrity of the tax system.

As members know, there are many honest and hard-working Canadians out there who believe in the systems that our taxes support such as health care, social assistance and various environmental policies, even though they have been dismantled and disrupted. Those Canadians need to know that everyone is paying his or her fair share and that every business and every person is making the contribution to this country that we need. Therefore, it is important to focus on compliance in order to ensure the integrity of our tax system. It is important to get rid of the loopholes in a timely manner. In an ever-growing complexity of tax codes, we now need simplification, clarity and changes that will make it progressive and effective.

[Rathika Sitsabaiesan, NDP, Scarborough—Rouge River, ON]

Mr. Speaker, I wish you and all my colleagues and everyone on the Hill a very happy new year. I am very happy to be back after a good few weeks in my community and my constituency of Scarborough--Rouge River.

I am happy to rise today to speak to Bill C-48, An Act to amend the Income Tax Act, the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the First Nations Goods and Services Tax Act and related legislation. Let us be straight. Bill C-48 is massive legislation that contains numerous technical changes. It is close to 1,000 pages long. This is definitely an omnibus bill, yet another omnibus from the government.

However, it is in stark contrast to the Conservatives' Trojan horse budget bills they presented as Bill C-38 and Bill C-45, which made sweeping changes to everything from environmental protection and government accountability to immigration and employment insurance, everything but the kitchen sink or everything and the kitchen sink.

Bill C-48 at least makes technical changes to a few closely related pieces of legislation. That is the big difference. The changes in Bill C-48 are largely designed to ensure the integrity of the tax system and discourage tax avoidance. The New Democrats believe in cracking down on both tax avoidance and tax evasion, while ensuring the integrity of our tax system. We support the changes being made in this bill, especially those that aim to reduce tax avoidance.

Moreover, the majority of measures in Bill C-48 have been in practice for several years, since it is the standard practice for tax measures to take effect upon their proposal. Once they have been announced, people accept them as adopted. It is for these reasons that we are supporting the bill. However, as I will reiterate later, the government needs to be more diligent in legislating these technical changes in a more timely manner rather than once every decade or so to avoid these massive pieces of legislation.

Bill C-48 includes outstanding legislative proposals dating as far back as 1998. Consultations with tax specialists and lawyers have indicated that the measures in Bill C-48 are overwhelmingly positive and that the changes in the bill are necessary technical changes. We believe these changes will in total be revenue positive and they generally move toward discouraging tax avoidance. Given the size of the bill, it certainly covers a great deal and many of these changes make sense.

Bill C-48 deals with offshore investment fund property and non-resident trusts and includes proposals from budget 2010 and August 2010 that are aimed at taxing the worldwide income of Canadian residents. It also deals with the taxation of foreign affiliates of Canadian multinational corporations.

The proposed amendments also ensure that provisions that use certain private law concepts, for example real and personal property, joint and several liability, reflect both the common law and civil law in both linguistic versions. Industry feedback that we received since July 2010 is entirely in favour of these changes.

The bill also includes: anti-avoidance measures for specific leasing property; ensures income trusts and partnerships are subject to the same loss utilization restrictions between corporations; limits the use of foreign tax credit generators for international tax avoidance; clarifies rules on taxable Canadian property for non-residents and migrants; and it provides an information regime for tax avoidance. All avoidance transactions, for example, any transaction where the purpose is to get a tax benefit must now be reported, even if the transaction is not abusive. Additional reporting will be required in cases where the transaction raises red flags for abuse of course.

The proposed bill clarifies the minister's authority to amend schedules and annexes to tax administration agreements if doing so does not fundamentally change the terms of the agreement which is already the practice.

The proposed bill also now allows tax administration agreements for the first nations goods and services tax between the federal government and aboriginal governments to be administered through a provincial administration system if the province also administers the federal GST. This will have the effect of simplifying the administration of the First Nations Goods and Services Tax Act.

However, these are all good things but I do have a few concerns that I would like to point out.

First and foremost is the timeliness and predictability. Given the complexities of this bill and its vast and massive scale, we believe the government needs to be more diligent and responsible when handling tax code. This bill seems way overdue. The government must ensure that tax proposals are legislated on a regular basis as failure to do so can create uncertainty in the business community, as well as among tax practitioners.

The chair of the tax and fiscal policy advisory group, in a prebudget consultation meeting on October 15, argued that implementing a sunset provision would ensure that tax amendments would be legislated and eliminate the growing backlog of unlegislated tax measures.

He stated that a sunset provision:

—would bring greater clarity and certainty to tax legislation, reduce the compliance and paperwork burden, and, perhaps most importantly, prevent any future legislative backlogs.

He also added that these:

—steps that would go some distance in improving and strengthening Canada's tax system. Canada needs a 21st century tax system that is simple, fair, efficient, and transparent with low, internationally competitive tax rates.

We agree. Efficiency, transparency and predictability in our tax code are important for Canadian businesses, fiscal planning and a healthy economy.

The Auditor General also agrees, and raised concerns a few years ago about the slow pace of the government in legislating these technical changes found in the Department of Finance comfort letters.

In 2009 it was raised at that time that there were at least 400 outstanding technical amendments that had not yet been put into legislation. Now, going on four years later, 200 of these outstanding amendments are finally being addressed in Bill C-48.

In the 2009 fall report, the Auditor General wrote:

No income tax technical bill has been passed since 2001. Although the government has said that an annual technical bill of routine housekeeping amendments to the Act is desirable, this has not happened. As a result, the Department of Finance Canada has a backlog of at least 400 technical amendments that have not been enacted, including 250 “comfort letters” dating back to 1998, recommending changes that have not been legislated.

While Bill C-48 aims to deal with more than 200 of these changes, it still leaves a good deal remaining. One has to wonder how long we, the business community and tax practitioners, will have to wait for the next update.

The second concern is with respect to transparency. Certainly the size of this bill, close to 1,000 pages, and the long lapse of time between Bill C-48 and the last technical tax bill indicate that this process clearly still needs improvement.

The government must work harder to ensure the integrity of our tax system. The size of this bill also says something about the government's concern for transparency. I hope this bill of approximately 1,000 pages receives thorough scrutiny by parliamentarians and full debate in the House and proper examination and consideration at all stages.

The large nature of the bill due to the infrequency of technical income tax bills has negative impacts on the business community and certainly makes it difficult for proper evaluation by Parliament.

As the Auditor General wrote:

If proposed technical changes are not tabled regularly, the volume of amendments becomes difficult for taxpayers, tax practitioners, and parliamentarians to absorb when they are grouped into a large package.

We need to do better and ensure that we are doing the necessary due diligence when we are responsible for the affairs of Canadians.

Finally, the third concern is compliance. While the measures in the bill are much needed and important, we also need to focus on compliance. While the vast majority of these measures in Bill C-48 have already been in practice for several years, as it is standard practice for tax measures to take effect upon their proposal, the aspects that have not yet taken effect typically involve direct reporting or compliance.

Compliance is extremely important to ensure the integrity of our tax system, as well as the need to close unexpected loopholes in a timely manner. While we agree that these changes are necessary, I wonder what efforts the government is going to take to ensure that people are complying with the ongoing technical changes?

Finally, ensuring the integrity of our tax system is essential. The last technical bill was passed in 2001 and the long lapse of time between Bill C-48 and the last technical bill indicates that this process still needs improvement.

The responsible management of tax code means that changes must be made on a regular and ongoing basis so those impacted are not left in a state of uncertainty. The Conservatives must ensure to further improve the process for getting these technical changes into legislation on a regular basis to create greater certainty, predictability and transparency in our tax system.

[Jasbir Sandhu, NDP, Surrey North, BC]

Mr. Speaker, I will be splitting my time with the hon. member for Scarborough—Rouge River.

Before I begin I want to wish everyone a happy new year. Members are back from their constituencies after a break over the holidays. Let me tell you, Mr. Speaker, I have talked to hundreds of my constituents. The priorities of the current government are not the priorities of the people of north Surrey.

People are very concerned about a number of bills that were introduced last year. Clearly Bill C-38 and Bill C-45 are not the priorities of my constituents from Surrey North. They are concerned about the degradation of our environment and the service cuts being put in place. Those are some of the things I heard. I am hoping that the government will go in the direction that Canadians want. Canadians' priorities are about getting jobs and providing services to Canadians. Clearly the government has not done that.

It is an honour to rise today on behalf of my constituents from Surrey North to speak to Bill C-48, which is an act to amend the Income Tax Act, the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the First Nations Goods and Services Tax Act and related legislation.

Bill C-48 is a massive, monster bill, with over 1,000 pages to it. Members have seen this before from the government. We have seen legislation, two omnibus bills introduced by the government in the last year. We had Bill C-38 and Bill C-45.

Members all know what was in those bills. Those bills dealt with hundreds of different laws. They amended different acts that made no sense whatsoever. Those bills should have been split into various different areas, which we then could have debated in the House. The Conservatives rammed them through without the proper oversight of Parliament and the parliamentary committees. We have seen that the Conservatives did not even listen to one amendment. There were thousands of amendments introduced in committee and in the House, but the Conservatives failed to take any of those amendments into consideration. They rammed those bills through and we are seeing the consequences of ramming those bills through the House.

This morning members saw a protest outside the House, when the Idle No More demonstrations took place. In fact, they took place across this country. One of their concerns is the government's lack of consultation with first nations. It is not only with first nations. The government failed to consult Canadians on legislation it was bringing in. It failed to consult the very people who should have been consulted, the very people whom Bill C-38 and Bill C-45 were going to impact.

Again, Bill C-48 is a large omnibus bill, but there is one difference from Bill C-38 and Bill C-45. The bill actually relates to income tax issues, but to put this together in a large bill is still an issue for the opposition. Basically a huge bill creates a huge burden for those trying to understand what is included and what is not included in the bill.

On top of that, members have not seen this sort of bill for the last 11 years. We heard from the Auditor General, through one of her recommendations, about the impact that doing this legislation every 11 years could have on our economy, on the services we deliver and on tax evasion and those sorts of things, which we are trying to prevent.

I am going to look at the concern that the Auditor General raised previously about the slow pace of government in legislating the technical changes found in the Department of Finance comfort letters. Certainly the size of the bill, which again is close to 1,000 pages, and the long lapse of time between Bill C-48 and the last technical tax bill indicate that this process still needs improvement.

It took 11 years to move on some of these technical income tax issues. We need to address this on a yearly basis so we can close the loopholes that people and corporations are taking advantage of. We should not be waiting 11 years to update our tax code and legislation and to crack down on tax avoidance and tax evasion. New Democrats believe in cracking down on tax evaders and tax avoiders while ensuring the integrity of our tax system. We support the changes being made in the bill, especially those aimed at reducing tax avoidance.

The bill is so massive that trying to decipher it, to look at what is included and what is not, is difficult. In fact there are 400 recommendations that were offered by the Auditor General. However, only about 200 are covered in the bill. Therefore, not only is this a slow pace but the government has still not addressed some of the loopholes that have been pointed out by the Auditor General.

This is a good bill. We should not be waiting 11 years to bring it forward to address some of the concerns that have been pointed out by not only the Auditor General but other Canadians and organizations that deal with tax evasion and tax issues on a daily basis. The CGA is one of the associations that has strongly criticized the government about the need to have the code updated on a regular, yearly basis so that it is up to date and our businesses have clarity as to what needs to be changed and what they are dealing with from the government side.

There are many parts to the bill. I am not going to go through all of them because I know I do not have a lot of time. Part 1 of the bill deals with the offshore investment fund property and non-resident trust and includes proposals from budget 2010. Also, some of the changes in Bill C-48 are largely designed to ensure the integrity of tax system remains in place and to discourage avoidance. They incorporate feedback on proposals previously in Bill C-10.

Part 2 deals with the taxation of foreign affiliates of Canadian multinationals. Some of these changes reflect proposals from way back in 2007 and 2006. It deals with a number of different areas, but the fact is that the government is failing to update our tax code so we can catch those avoiders and can provide certainty to businesses.

Auditor General Sheila Fraser's 2009 fall report states:

No income tax technical bill has been passed since 2001. Although the government has said that an annual technical bill of routine housekeeping amendments to the Act is desirable, this has not happened. As a result, the Department of Finance Canada has a backlog of at least 400 technical amendments that have not been enacted, including 250 “comfort letters” dating back to 1998, recommending changes that have not been legislated.

The Conservatives are failing to update some of the changes that are required. They are slow. Their priorities are not right. The priorities of Canadians are not the priorities of the government. We saw that with Bill C-38 and Bill C-45, where the government brought in omnibus bills and rammed them through the House without even consulting the very people they would impact.

In its pre-budget submission in 2012, the Certified General Accountants Association of Canada stated:

CGA-Canada strongly believes that the key to sustained economic recovery and enhanced economic growth lies in the government’s commitment to tax reform and red tape reduction. Therefore, CGA-Canada makes the following two key recommendations: 1. Modernize Canada’s tax system--make it simple, transparent and more efficient • Introduce and pass a technical tax bill to deal with unlegislated tax proposals • Implement a “sunset provision” to prevent future legislative backlogs....

I want to summarize this. The Conservatives have been slow to get these technical changes legislated and they go as far back as 1998. Bill C-48 aims to deal with more than 200 of these changes, but there is still a large number of technical codes that need to be changed. The Conservatives have failed in that sense.

[Jonathan Genest-Jourdain, NDP, Manicouagan, QC]

Mr. Speaker, I will begin the New Year by addressing some notions that are, to say the least, tiresome, since they are associated with the ins and outs of the Canadian tax system. The spirit of plurality that should inform remarks made in this House and my constant concern to highlight the ethnic diversity of this country encourage me to present these comments, which deal with Bill C-48, from a perspective of exposing white-collar crime, tax avoidance schemes and corporate tax evasion on aboriginal lands.

At the risk of repeating myself, I did teach for one semester at the Cégep in Sept-Îles. My course was on legal and administrative aspects of aboriginal organizations. I have therefore gone very deeply into the subject, which I was teaching at the time at the college level, and I have decided to bring that knowledge up to date. Within the course, one section dealt essentially with white-collar crime, and the ways organized crime has found to interfere in the management and economic operations specific to Indian reserves. I think it is timely to share this information with all Canadians.

The Conservatives must already be telling themselves that they addressed this idea in Bill C-27. However, they are on the wrong track, because the people behind this economic malfeasance and who work on the fringes of Indian reserves in Canada are most often, in fact, non-aboriginal. They are foreign elements. They are financiers, lobbyists, people with special interests who prowl around the reserves and work on the fringes because of the special schemes relating to income and other taxes, among other things.

That is why these financiers propose phoney corporate vehicles, which are mere fronts. The most common method is to exploit a few willing Indians on a reserve. The corporate vehicle is developed with a very special capital structure. From that point, the rules respecting income and other taxes come into play. We have to address this reality when we talk about tax evasion on the reserves in 2013.

If we consider this interference in the context of economic expansion in our communities, it is related to the successive announcements about such matters as the development of natural resources in remote communities, but it is also related to economic growth. I have already indicated in the past that the people who live on Indian reserves across the country have been compelled over the last 150 years to develop what is designed to be a parallel economy, not “parallel” in the pejorative sense, but because it meets special requirements, responding to a way of life and to adversity.

The aboriginal communities in Canada have long been ignored in the development of economic growth measures as proposed by the various governments, even in 2013. These communities have been left behind, and for a long time, many communities, if not nearly all the Indian reserves in Canada, have gone without.

Over the last 50 years, there has been an expansion, with the development of special schemes and alternative measures. There has been a genuine expansion. Economic conditions in some communities are very good. This is not true of most Indian reserves, but some communities are fairly well provided for with respect to their economic basis. This interference by harmful elements and criminal elements has been accentuated with this growth in the economic strength of Indian reserves.

The concerted efforts of tax authorities, combined with joint investigations carried out by specialized police units in Canada, have in fact highlighted the real mark left by embezzlement on the part of organized cells of shady operators, on the fringes of the aboriginal communities in Canada.

I said there are special tax rules for Indian reserves. Nonetheless, it took a few years for promoters from outside the communities to find compliant actors, among other things, on Indian reserves.

To set up these business vehicles, which are dubious, to say the least, it still takes a token member of the community. Often, these people are well placed and visible within the communities, but there also has to be a form of compliance on the part of both the federal and the provincial government authorities.

At one point, when I worked for my band council, I submitted this problem to the Indian affairs representative who travelled there. I was told quite brusquely that this did not fall within their mandate and I should approach some other authorities to resolve that kind of problem. In other words, they turned a deaf ear. I concluded as follows: there was compliance and blinkers had been very carefully placed on the representatives of government agencies at both the federal and provincial levels. This is a known fact.

When I taught that course, I based what I said on information compiled by information agencies here, agencies of Canada. So this was a well documented problem. When we talk about tax havens, we think of foreign destinations, but this type of scheme operates and is observed right here in Canada. We cannot ignore this.

On the subject of the compliance that existed, I would say that the various governments engaged in cherry-picking. In other words, they take a different view of operations in communities that are more docile or are relatively supportive of the policies of a particular government.

Other communities, some of whose representatives come to testify before the committee fairly regularly, support the existing government policies. In those communities, the schemes run by shady operators, organized crime or white-collar crime will be given free rein, even though that is not how it looks at first glance. These kinds of operations will be allowed to go on in certain more docile communities that toe the line promulgated by the government authorities.

The New Democrats believe this kind of tax avoidance and tax evasion has to be combatted, while at the same time preserving the integrity of our tax system. We support the changes this bill makes, and particularly those aimed at reducing tax avoidance.

I indicated that measures like the ones in Bill C-27 will make us look at our own community leaders and members as negative influences and the only ones responsible for tax avoidance and obvious financial wrongdoing, and this is a mistake. This is false in most cases, based on what has been proven. Studies and wiretaps from undercover operations and intelligence agencies in Canada indicate that these negative influences are located outside of the community. These include businesspeople as well as people involved in organized crime. Biker gangs have also expressed interest.

Furthermore, it is important to understand that most native reserves are located in isolated communities in the north. Verifications are done by financial institutions. However, based on my own experience and my own reality, other auditors and people in a position to shed some light on these kinds of economic activities and wrongdoings take very little interest in the development of and the realities facing communities above the 52nd parallel. That is why these kinds of wrongdoings can persist.

Make no mistake, in most cases, the expertise comes primarily from people who are outside of the community. Legal and judicial advisors have developed economic and financial schemes. They also develop share capital and divide this phony share capital in such a way that puts all voting shares in the hands of one individual or group. Everything is calculated very carefully. The same goes for imposing shotgun clauses.

Since I have studied corporate law at the post-graduate level, I am in a position to dissect share capital and to see it for what it really is. On the face of it, a business can call itself aboriginal, even though that technically may not be the case. A business might be owned by aboriginal interests on paper, but when we really look at how the share capital is divided up, we quickly see that the power is held by individuals outside of the community.

I submit this respectfully.

[François Choquette, NDP, Drummond, QC]

Mr. Speaker, I am pleased to rise today to speak to Bill C-48, An Act to amend the Income Tax Act, the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the First Nations Goods and Services Tax Act and related legislation.

First of all, I would like to say that I will be sharing my time with my colleague from Manicouagan.

As I mentioned earlier and as many of my colleagues in the House of Commons have said today, this bill is very big. The bill is huge, and with nearly 1,000 pages, it is the size of a very thick brick. It is a bill that dates from 2001 and to which no amendments of this scale have been made.

This bill is so big because previous governments had been dragging their feet, because they did not do their job and because they took too long to bring the bill to the table. Because they did not do their job properly, today we are faced with a huge bill, a bill that we might call an omnibus bill.

However, this bill does not compare to the horrible omnibus bills C-38 and C-45, which covered a range of different items such as the environment, the economy and old age security. Those were really bad bills. It was with good reason that they were called “Trojan horses”. Those omnibus bills were horrible, “monster” bills.

This omnibus bill is acceptable as it deals only with income tax legislation. However, the problem is that the bill is so huge that it is practically impossible to study it carefully within the timeframe we have been given. The Conservative government must be much more attentive and efficient in bringing forward their bills on a more regular basis, which would allow us to have time to study the amendments to these bills.

In this regard, Auditor General Sheila Fraser stated in the report she tabled in the fall of 2009:

No income tax technical bill has been passed since 2001. Although the government has said that an annual technical bill of routine housekeeping amendments to the Act is desirable, this has not happened. As a result, the Department of Finance Canada has a backlog of at least 400 technical amendments that have not been enacted, including 250 “comfort letters” dating back to 1998, recommending changes that have not been legislated.

This has been dragging on since 1998.

If proposed technical changes are not tabled regularly, the volume of amendments becomes difficult for taxpayers, tax practitioners, and parliamentarians to absorb when they are grouped into a large package.

As I mentioned, that is what happened. The Conservatives have wasted time since coming to power, and now we have a hefty, 1,000-page omnibus bill. Of course I am neither an expert or a tax practitioner. However, as parliamentarians, it is important that we study bills with as much rigour as possible and within a reasonable amount of time. Unfortunately, we will not have the opportunity to do so with this bill.

Another point I would like to address is tax avoidance. Bill C-48 is a first step towards fighting tax evasion. However, the Conservative government is talking out of both sides of its mouth. On the one hand, it is taking a small step to prevent tax avoidance; on the other hand, it is signing bilateral agreements with countries that flaunt basic tax rules and are even tax havens. This government is not taking this seriously.

A number of my NDP colleagues sit on the finance committee. They heard some very interesting things from Brigitte Alepin, a very well-known tax expert. She has written two books that are reference works for anyone interested in fighting tax evasion and tax havens.

The first book is called Ces riches qui ne paient pas d'impôt. I recommend that all members of the House read it, particularly the Conservatives, since the work on tax evasion in Bill C-48 was not done properly. This excellent book, which was published in 2003, describes all the pernicious ways people use on a regular basis to avoid paying taxes, whether it be by deferring their taxes for ever or by inventing a rather questionable foundation.There are bona fide foundations but others can be very questionable. Clearly, there are also all sorts of subsidies.

I am going to talk about various issues but these are the choices that have to be made with a bill such as Bill C-48. The environment is very important and, right now, the government is shamelessly providing billions of dollars in subsidies to the oil and gas industries. They are even providing coal subsidies. I am not talking about tax evasion here but about subsidies that make the tax roll unfair and inequitable.

Ms. Alepin describes the three basic principles that are very important to a sound taxation system: the system must be simple, effective and fair. That is very important. However, right now, the Conservatives do not have a simple, effective and fair tax system, far from it. I mentioned a few aspects. I would like to read a short summary of Ms. Alepin's latest book, La crise fiscale qui vient, which is very interesting. If my colleagues have not read this wonderful book, I recommend that they all do so, particularly my Conservative colleagues since they did not do their work on the fight against tax evasion properly. This is what the book summary says:

The author identifies the signs of the impending fiscal crisis, which has already begun in most western economies. She provides a simple and enlightening description of the new conditions that exacerbate this crisis: the increased number of charitable foundations [I spoke about this earlier], the development of electronic commerce, the increasing use of tax havens [I also spoke about this], the competition between states to attract large corporations, etc. Although current governments seem to have given up on dealing with this crisis [and the Conservative government is a good example], Brigitte Alepin shows that there are solutions to this problem. She also shows how tax measures can help to reduce greenhouse gas emissions, among other things.

That is why I referred just now to tax measures and environmental measures. My colleagues also said that we could promote tax measures to favour, say, renovations. We had the ecoENERGY Retrofit--Homes program for energy efficient houses. Such programs are very good from the tax point of view. They are straightforward and keep the economy moving. It is the same thing here. When we have a government that stands up and earnestly tries to prevent tax evasion, and wants to invest in good things that benefit our economy and our planet and are good for our children and for future generations, we can make fairer and more enlightened choices.

To sum up, Brigitte Alepin is truly a tax expert. She has written other books, like Ces riches qui ne paient pas d'impôt about rich people who pay no taxes. The summary I have just read you is taken from La crise fiscale qui vient, about the looming fiscal crisis. I advise everyone to read these books, and of course to invite Ms. Alepin once again before the Standing Committee on Finance, because she has a lot of useful things to say.

In closing, it is very important when embarking on such reforms to do so quickly, so that there is not too much work to be done, so that it is not impossible to do it, and above all, to make enlightened choices that will be the right ones for future generations.