Bill S-17 (Historical)

Tax Conventions Implementation Act, 2013

An Act to implement conventions, protocols, agreements and a supplementary convention, concluded between Canada and Namibia, Serbia, Poland, Hong Kong, Luxembourg and Switzerland, for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes

This enactment implements four recent tax treaties that Canada has concluded with Namibia, Serbia, Poland and Hong Kong. This enactment also implements amendments to provisions for the exchange of tax information found in the tax treaties that Canada has concluded with Luxembourg and Switzerland.
The tax treaties with Namibia, Serbia, Poland and Hong Kong are generally patterned on the Model Tax Convention on Income and on Capital developed by the Organisation for Economic Co-operation and Development (OECD). The amendments to the treaties with Luxembourg and Switzerland ensure that their provisions for the exchange of tax information reflect the current OECD standard on this matter.
Tax treaties have two main objectives: the avoidance of double taxation and the prevention of fiscal evasion. Since a tax treaty provides relief from taxation rules in the Income Tax Act, it becomes effective only after being given precedence over domestic legislation by an Act of Parliament such as this one. Finally, for each instrument implemented by this Act to become effective, it must be ratified after the enactment of this Act.

Tax Conventions Implementation Act, 2013

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Mr. Speaker, my question for the member for Souris—Moose Mountain is this.

I am well aware that we are here tonight to debate Bill S-17 and that it deals with tax treaties. I have not heard a single member of this place suggest that they do not want to vote for it. I find it strange that on a treaty and a bill of no consequence, which everyone supports, we have time for debate and we have committee hearings, but on something that threatens the sovereignty of Canada, such as the Canada-China investment treaty, we have neither had hearings nor adequate time for debate.

Would my hon. friend from Souris—Moose Mountain like to join me in urging that we still have time for debate before that treaty is ratified?

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

Mr. Speaker, I might remind the member that soon we will be off on summer break so time will be short.

To say that this treaty is of no consequence surely must mean the member has not read the legislation or has not listened to business, because business is quite clear. It wants this agreement. It wants to know what the rules of investment are. Billions of dollars are transferred that create jobs and long-term prosperity in both countries. Therefore, it is important that we deal with the legislation here today and that members are given the opportunity to debate this.

If we had said that members do not have the opportunity to debate this particular tax treaty, I cannot imagine what the member might have said. Perhaps, “We must have the time to debate it.” We have provided the time to debate it and the member talks about something else.

I know there are a lot of other issues and a lot of other pieces of legislation. However, today we are dealing with this legislation. If the member wants to debate she should debate this legislation, not something else.

So far what I have heard from the opposition is a debate on all kinds of other issues that may be of some significance but nothing to do with the tax treaties. If you want time to debate, when time to debate is given, debate the issues before you and not something else.

[The Acting Speaker, Bruce Stanton]

I would just remind hon. members to direct their commentary to the Chair and not directly to hon. members.

Questions and comments, the hon. member for Scarborough—Agincourt.

[Jim Karygiannis, Liberal, Scarborough—Agincourt, ON]

Mr. Speaker, it is indeed important that the member said that we should be debating issues that are important and this issue is certainly not less important than others.

Can the member can stand on his feet and say how many bills that are very important to this country the government has brought closure to and has tried to asphyxiate the rest of this chamber from talking about?

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

Mr. Speaker, I do not know where the question is coming from with respect to this legislation. However, there is an opportunity for the member to debate this legislation, and it is important because it deals with the rules of the road for investment.

Notwithstanding what the member and other members have said, there has been specific funding allocated to ensure that appropriate investigation takes place and that CRA has the finances to increase the size of the national audit program, in fact, by 40%. There is a $30-million investment to target international tax evasion and aggressive tax avoidance. That is what we are talking about and this legislation would provide for that. The government has taken some very concrete steps.

With respect to the member's question, which is not related to this legislation, when a particular piece of legislation does come before the House, he will have the opportunity to ask questions on that and he will get an answer. However, what he is talking about here has absolutely nothing to do with the legislation at hand and it does not matter how much he would—

[The Acting Speaker, Bruce Stanton]

Order, please. Questions and comments, the hon. member for Burnaby—New Westminster.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Speaker, we are speaking about Bill S-17. The reality is, as the member full well knows, that it is also a question of how the Conservative government implements these tax treaties. That is why we want to have a full discussion.

As well, the reality is that the government has been a colossal failure both in terms of uncollected tax debt and tax havens. We have seen a skyrocketing. Over the seven years of the Conservative government's watch, we have seen a 57% increase in uncollected tax debt because the government is fumbling the whole file. We have seen a doubling, almost $170 billion, of money that is invested in 12 global tax havens.

Given the government's massive failure on both files, the question is very simple. In terms of Bill S-17, how can we trust the Conservative government to implement it properly when it has failed every other time?

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

Mr. Speaker, this agreement will be implemented and it will save a lot of dollars. However, I will address the question the member asked, which is not related to this bill.

Last year alone, over $40 billion in tax debt was recovered and $100 million collected in fines from 1,182 people who were convicted of tax violations. As well, in closing tax loopholes, the New Democratic Party opposed that legislation.

We are setting a culture that is taking place at several levels. Tax enforcement ensures that people are obligated to not only indicate what their income is so they can be taxed, but also that they pay their taxes when they are obligated to pay them. It is a culture of saying that not only should we get rid of tax avoidance, not only should we get rid of aggressive tax planning that tends to avoidance, but when we owe taxes, we also ought to pay them. It is a culture that says it is important to follow the rules and to pay when people ought to pay tax and not try to avoid that by putting money in an offshore account. I should have asked the other member about—

[The Acting Speaker, Bruce Stanton]

Order, please. We are out of the time allocated for questions and comments.

Resuming debate, the hon. member for Marc-Aurèle-Fortin.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Mr. Speaker, from the outset, I wish to inform you that I will be sharing my time with my colleague from Brome—Missisquoi.

The NDP is in favour of this bill. For once, the Conservatives cannot accuse us of always being against the government. We are in favour of this bill, essentially because it is purely technical. It implements bilateral tax treaties with a certain number of countries, including Namibia, Serbia, Poland and Hong Kong, and makes amendments to treaties with Luxembourg and Switzerland.

This bill is worthwhile. It will make things easier for people who want to pay their taxes, who are not trying to defraud the government. Why would we be against virtue? We are pro-virtue. We are totally in favour of making it as easy as possible for people to pay taxes. However, I want to mention something important. Under Canadian tax law, any taxes paid in a foreign country are deducted from our nation's revenue. So much for savings.

This new rule makes it easier to pay taxes. Nothing more. If the government suddenly decided to harmonize tax regulations to make it easier for people filling out their tax returns, we would very much support that.

We disagree when the Minister of National Revenue and the Minister of State for Finance tell us that the bill is an important step in the fight against tax evasion. Nothing could be further from the truth, and that is dangerous. The head of our country's finances is telling us that this bill offers a way to combat tax evasion. That is not true. All this bill does is make it easier for people who want to pay taxes to file their tax returns.

I want to point out to the House that Luxemburg and Switzerland are tax havens. These countries allow financial institutions to have numbered accounts and to be protected by banking secrecy. This enables people to hide money and do so secretly. This will continue to be allowed. Switzerland will co-operate if we present a warrant and proof of criminal charges. However, it will not tell us whether the main people involved in trafficking cocaine in Canada have bank accounts there. Let us be realistic: we cannot expect any co-operation from them. It is quite sad.

The Auditor General already indicated that Canada's tax debt has significantly increased. It has jumped from $18 billion to $29 billion. These are people who openly declare that they owe money. Quite often, if they do not pay it is not because they are dangerous criminals but because they simply cannot.

When you are stretched to the limit because you have to pay your mortgage and car and grocery bills, and maybe buy clothes for your children from time to time, you might not be in a position to pay taxes. Self-employed workers are a good example of that. When they get a cheque, they do not set part of it aside to pay taxes. When they get that cheque, it is already spent on everything they owe. They do not want to cut their electricity or telephone, so that is what they pay. That is what accounts for the $29 billion. That amount is absolutely not owed by people who have made use of tax havens. These are our neighbours, our friends and our parents who had a hard time paying taxes because they had too many other bills to pay. Paying taxes is an expense, just like groceries or the electricity bill.

This is a problem. When people cannot pay taxes, they are not able to pay all their other bills either. The $29 billion represent a lot of people who will file for personal bankruptcy. That is quite often the problem.

The second problem with the $29 billion is that the greater the debt, the less likely it is to be repaid. This bill does not solve this problem, and that is truly unfortunate. The bill is being presented as a significant piece of legislation that will get results. In fact, I do not deny its positive effects for people who are willing to pay taxes. Rather, the problem I see concerns those people who are unable to pay taxes either because they do not earn income or because they have too many bills to pay. The household debt ratio is now at 163%. The bill will not mitigate this problem.

There are huge numbers of tax havens, and Canadians have put their money in well-known tax shelters. Indeed, $53 billion has been invested in Barbados, $25 billion in the Cayman Islands and $23 billion in Ireland. A total of $13.8 billion has been invested in Luxembourg, a country with which we have treaties. Bermuda has received $13.2 billion in Canadian investments. This represents 51% of Canada's foreign bank investments. This figure has doubled since 1987.

What was the government's response? It decided to cut the Canada Revenue Agency's budget by $250 million. Europe, Spain, Italy, Portugal and Greece are in a deep economic slump, largely because they did not collect the taxes owed to the government. Not paying taxes is a national sport in those countries.

The level of debt in those countries shows that these people are particularly adept at tax evasion. Why do they do it? Simply put, it is because tax equality is non-existent. Why ask someone to work 40 or 60 hours a week to make ends meet and pay taxes when he knows full well that a mafia member in Sicily, a crooked politician in Greece or a flashy real estate developer in Spain will not pay taxes?

Why ask someone to keep paying taxes for services when the rich are not paying those same taxes? The poor man is paying the rich man's share. That lack of tax fairness is the main reason people in certain European countries avoid taxes and shirk their responsibilities. This government is leading us down exactly the same path.

Instead of saying that they will do things differently since Spain's and Italy's economies have tanked, the Conservatives are following the worst examples. Then they say that they are doing well, that they are among the best. They should not be following the worst examples then. This problem will not go away overnight. Tax evasion requires two things. First, it requires the means to do it without getting caught. Second, it requires motivation, which exists when tax fairness does not.

The NDP has proven its good faith by supporting technical measures such as this bill. However, do not try to tell us that this law will solve the problem of tax evasion. That is untrue.

[Pierre Jacob, NDP, Brome—Missisquoi, QC]

Mr. Speaker, I thank my colleague, the member for Marc-Aurèle-Fortin, for his very persuasive speech. Clearly the numbers are no longer a mystery to him.

Speaking of numbers, there is one that grabbed my attention. According to Statistics Canada, $146 billion—one-quarter of our direct foreign investment—is hidden away in tax havens. That is money the government should be collecting, money that is not being spent here on infrastructure and services to improve our social safety net.

I would like my colleague to comment on the following two observations: people who do not have the means to use tax havens are the ones footing the bill, and people who are not paying their fair share are often the very same ones telling us that we have to cut spending.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Mr. Speaker, a similar observation was made in the United States.

For example, multi-billionaire Warren Buffett said it does not make sense for him to make millions while being taxed at a significantly lower rate than his secretary. That man pays his taxes. He does not try to evade taxes. When the government tries to get people to pay their taxes, it does not have much credibility.

Those who pay their taxes are the very ones whose services are being cut. That is a problem. The government is constantly asking people to pay. They are not getting the services they need, but they still have to foot the bill. If the Auditor General proved anything, it is that they, not the very rich, are the ones targeted by the CRA.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Speaker, I want to congratulate the hon. member for Marc-Aurèle-Fortin on his excellent speech. As usual, he brings a wealth of experience as a lawyer and financial expert every time he speaks in the House.

Outstanding taxes are a real problem. As we know, the Conservatives have been completely incompetent when it comes to this issue. When they came to power in 2006, there was $18 billion in outstanding taxes. Now there is $29 billion, because they are not even capable of managing the issue of outstanding taxes.

What does my colleague think of the Conservative government's competence when it comes to managing issues such as outstanding tax accounts, which should be pretty easy to manage?

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Mr. Speaker, this is particularly interesting, and I thank the hon. member for his question. This shows that he read the Auditor General's report carefully.

The Auditor General made an observation. He said that the CRA is targeting individuals and has put a system in place to collect taxes. However, this system does not apply to businesses. Oops.

The other problem has to do with people who have a lot of taxes to pay. I am talking about tax bills over $10 million. The government's batting average is practically a big, fat zero. As for the little old lady who owes $800, I guarantee she will be taken to the cleaners. The government has the resources to collect from her and it has no problem doing so.

The Conservatives call this double standard, which is an integral part of their economic policies, tax fairness. However, this is not tax fairness. The Conservatives are betraying the people who elected them. That is serious.

[Pierre Jacob, NDP, Brome—Missisquoi, QC]

Mr. Speaker, I will use Bill S-17 to talk about tax evasion.

People take advantage of our excellent economy, our extraordinary education system and our infrastructure to make money, but some refuse to pay their fair share. They keep their profits in offshore bank accounts in order to avoid paying taxes in Canada. According to the OECD, an estimated $10 trillion is hidden in tax havens around the world.

Every year, this scourge deprives Canada of $5 billion to $8 billion in revenues. According to Statistics Canada, between 2003 and 2008, Canadian investment in tax havens went from $94 billion to $146 billion. This is a quarter of our direct foreign investment.

As I already said, this is money that is owed to Canada. It is money that is not being spent here to renovate infrastructure or pay for services that would allow Canada to have a better social safety net. In the meantime, those who do not have the means to use tax havens are the only ones paying the bills. That is what my colleague calls tax fairness. Those who do not pay their fair share are often those who say we need to reduce spending. It is a great injustice that undermines the very foundation of our society. Tax evasion is one of the greatest challenges the federal government must face. Bill S-17 is a step in the right direction, but the step is far too small. Even though we will vote in favour of the bill, it is woefully inadequate.

Bill S-17 implements four tax treaties with Namibia, Serbia, Poland and Hong Kong. It also implements amendments to the treaties between Canada and Luxembourg and Canada and Switzerland. The purpose of the tax treaties is to avoid double taxation and prevent tax evasion. We support harmonizing tax laws and complying with OECD standards, and that is why we will support the bill. However, the government could do more.

Bill S-17 does not make any changes to Canada's policy. It is considered standard legislation of a routine nature.

To hear the Minister of Finance tell it, this bill is a major step forward in the fight against tax evasion. While it does contain provisions that will be useful to the government, it does not make up for the government's failure to take the major tax haven problem seriously.

The last budget was proof that the government is not taking the problem seriously. On March 20, 2013, 900 Canada Revenue Agency employees, including 400 tax auditors, received notices that they were in danger of losing their jobs because of budget cuts.

The Canada Revenue Agency's budget will be cut by about $460 million by 2015. How is the agency supposed to fight tax evasion with fewer employees and resources?

My NDP colleagues on the Standing Committee on Finance proposed several recommendations to combat tax evasion. I would like to share some of those recommendations.

First, the Canada Revenue Agency should require Canadian corporations and all of their subsidiaries to disclose all taxes paid in other countries. This measure would result in greater transparency concerning their activities in offshore tax shelters.

Second, the auditor general should evaluate, on a regular basis, the success of the Canada Revenue Agency in prosecuting and settling cases of tax evasion.

Third, the federal government should create an efficient system to identify tax evasion enablers including accountants, lawyers and other professionals.

Last, the federal government should to move towards a system of automatic tax information exchange with other countries. This would be a much more effective way to fight tax havens than the bilateral agreements covered in this bill.

We made clear recommendations to ensure tax fairness for all Canadians. They deserve to know how much tax evasion is going on.

Despite our repeated requests, the Conservatives are refusing to measure how much tax fraud costs us. The Conservatives' failure to collect lost revenue means that Canadians who do pay their taxes are on the hook for a larger share of the cost of government programs.

Why do the Conservatives insist on doing the bare minimum with respect to the serious problem of tax evasion and tax havens?

We hope that the government will introduce major changes to solve this serious problem instead of giving us routine measures like Bill S-17. This bill will not solve the problem. As I illustrated earlier, tax evasion is serious. The government must act now. I urge the government to consider our recommendations.