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

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

Mr. Speaker, it gives me pleasure to rise today in the House to speak to Bill S-17 the tax conventions implementation act, 2013, at second reading. This is technical legislation that would implement Canada's recently concluded tax treaties with Namibia, Serbia, Poland and Hong Kong, as well as tax agreements with Luxembourg and Switzerland.

The conversation has gone far and wide and far beyond the extent of the treaties and what we are discussing today with respect to the legislation itself.

Bill S-17 is part of Canada's ongoing efforts to update and modernize its network of income tax treaties with other countries, which is one of the most extensive of any country in the world.

Canada has comprehensive tax treaties in place with 90 countries, and our government is hard at work on agreements with other jurisdictions in connection with tax evasion, if we want to call it that. The double taxation that we spoke of relates to occurrences between countries and to movements of income, capital and properties between countries.

I want to make it clear that Bill S-17 does not represent any new or significant change in policy and should be considered standard and routine, but very important, legislation. In fact, tax treaties covered by this bill, like their predecessors, are patterned on the OECD model tax convention, which is accepted by most countries around the world. The pattern has been set, and these treaties are negotiated along that line.

As respected international tax commentator Jeffrey Owens, current senior policy adviser at Ernst & Young and former director for tax policy at the OECD, has noted, “Quite simply, the OECD model has established itself as the means of settling the most common problems that arise in the field of international taxation”.

Once again I would remind members we are talking about international taxation and not taxation within the country and the residents of that country itself. Therefore, it goes without saying that the provisions in these particular treaties comply with international norms and are based on standards that are generally acceptable.

The tax treaties in this bill have been designed with three goals in mind.

The first is to prevent double taxation and provide a level of certainty about tax rules that will apply to particular international transactions. That is important. Every business wants to know what the rules are. Businesses want to have a measure of certainty and know what to expect, and of course we want to do away with double taxation to ensure that appropriate investments take place.

The second goal is to prevent avoidance and evasion of taxes in various forms of income flows between the treaty partners. If the income flow is simply done to avoid tax, it needs to be dealt with.

The third goal is to facilitate international trade and investment, both incoming and outgoing.

These goals are consistent with the findings of the 2008 report of the advisory panel on Canada's system of international taxation, convened by our government to make recommendations to enhance Canada's international tax advantage. Not only is Bill S-17 consistent with the findings of that report, but the panel's observations helped clarify the importance of today's legislation for the Canadian economy. This allows for investment to take place, it allows for jobs to be created, and it allows for the long-term prosperity of Canada.

According to the report:

Canada's system of international taxation is important to our country's competitiveness. At the global level, competitiveness is crucial to attracting high-value activities, spurring innovation, and creating skilled jobs. ... Improving the international tax system will enhance Canada's advantage to the benefit of all Canadians.

I will speak further about this legislation's specific objectives, but first I would like to highlight how the tax treaties help contribute to a competitive tax system in Canada.

As members will know, our government is committed to expanding Canada's network of tax agreements with other countries. Better transparency and information exchange for tax purposes are critical to ensuring that Canadian taxpayers report their income earned from all sources and pay the right amount of tax in Canada.

We are serious about combatting tax evasion through the negotiation of tax treaties and tax information exchange agreements, sometimes known as TIEAs.

Since 2007, our government has brought into force 16 such agreements, signed three others and is actively negotiating with 11 other jurisdictions, including negotiations launched last year with Panama. Not only that, but we have provided the Canada Revenue Agency with even more tools to conduct international tax audits and enforcement.

As a direct result of action taken by our government, Canada continues to contribute actively to the efforts of both the OECD global forum on transparency and exchange of information and the G20, in order to further support the effective implementation of the OECD standard by all jurisdictions.

Our government understands the importance of open markets and full participation in the global economy and has shown continued leadership on the world stage by opposing protectionism and trade-restrictive measures. Canada believes open markets create jobs and economic growth for people around the world.

Indeed, the advisory panel identified the importance of trade as a key driver in improving Canada's system of international taxation. As the report noted:

Cross-border business investment has become central to the world economy. Global two-way trade is important to Canada’s prosperity, as it is to that of other countries. New competitors are emerging, notably from developing economies. ... Canadian businesses need to be able to compete with them for investment on both the outbound and inbound fronts.

To support Canadian business investment abroad, attract foreign business investment at home, and strengthen our open economy, tax policy must keep pace with global trends.

Our government strongly supports cross-border trade and investment, but we must ensure that cross-border investment is not used to avoid taxes with complicated tax schemes. In this spirit, the advisory panel identified a type of cross-border transaction, generally referred to as “foreign affiliate dumping”, as being abusive. These kinds of transactions reduce the Canadian tax base without providing any significant economic benefit to Canadians and need to be dealt with by legislation.

The panel recommended that a targeted measure be introduced to curtail these transactions while ensuring that legitimate transactions are not affected.

Foreign affiliate dumping transactions often involve a Canadian subsidiary using borrowed funds to acquire shares of a foreign affiliate from its foreign parent company.

Consistent with the advisory panel's recommendation, economic action plan 2012 announced rules to curtail foreign affiliate dumping transactions while at the same time preserving the ability of Canadian subsidiaries of foreign parents to undertake legitimate expansions of the Canadian-based businesses.

What we are trying to do is set the rules to ensure that people pay the tax they ought to pay and are not double-taxed, but also that they are not using means or mechanisms to create expenses or obviate income so that they do not have to pay taxes.

The new foreign affiliate dumping rules, where certain conditions are met, deal with deemed dividends to be paid by a Canadian subsidiary to its foreign parent to the extent of any debt funding incurred by the Canadian subsidiary, or other non-share consideration given by the Canadian subsidiary, for the acquisition of the shares of a foreign affiliate. Any dividend that is deemed a dividend in that fashion would be subject to non-resident withholding tax, which would generally be reduced to 5% of the gross amount of a dividend by an applicable tax treaty.

Going forward, our government will continue to monitor developments in this area to determine whether further action is required.

Now I will return to the measures contained in the legislation before us today and speak further to the importance of tax treaties, a vital part of the government's overall approach to improving the tax system. Indeed, they are an integral element of our economic action plan to bring jobs, growth and long-term prosperity to all Canadians.

Tax treaties like those in Bill S-17 directly affect cross-border trade in goods and services with our tax treaty partners, which in turn impacts Canada's domestic economy. In fact, over 40% of Canada's annual GDP can be attributed to exports. Moreover, Canada's economic wealth each year also depends on foreign direct investment as well as inflows of information, capital and technology.

In other words, the tax treaties contained in Bill S-17 would benefit Canadian businesses and individuals with operations and investment in the countries covered by this legislation, not only for their investments abroad but also for those investments that come into our country and bring all of what I mentioned with them.

Not only that, but tax treaties foster an atmosphere of certainty and stability for investors and traders that can only serve to enhance Canada's economic relationship with each country.

Another important aspect of these treaties is that they include a mechanism to settle problems encountered by taxpayers, in particular when double taxation arises. It is very important that if there is a dispute, there is a way to settle it, and there is provision in these agreements as to how that might happen, not only with respect to the taxpayer but also with the two countries involved as well. Under this mechanism, taxpayers can bring to the attention of taxing authorities issues that arise from the interaction of our tax system with that of the other treaty partner and seek a resolution to the issue.

Eliminating administrative difficulties and unnecessary tax impediments is an important priority for the Government of Canada and an important component of international tax treaties. In short, these treaties will provide individuals and businesses in Canada and other treaty partner countries with predictable and equitable tax results in their cross-border dealings, which can bring only positive outcomes for the Canadian economy.

As is common for tax treaties legislation, Bill S-17 would address double taxation issues, which occur internationally when two or more countries impose taxes on the same income for the exact same time period. Obviously that can happen, given the tax regimes of each country, and when it does, it needs to be dealt with. This would obviously be extremely unfair. Double taxation is not something that anyone would like and no parliamentarian would endorse, except, perhaps, the NDP, which is interested in spending and taxing on just about everything, not to mention the $26-billion carbon tax.

Addressing this issue, it is an non-partisan one. It is very common for tax treaty legislation. I want to underline that by reading verbatim from a speech given by the current member for Scarborough—Guildwood, who was the parliamentary secretary to the minister of finance under the former Liberal government in 2004. I will quote at some length, because I think he establishes the premises of why these treaties are as important as they are. He said:

The first, and probably the most important, objective of tax treaties is to avoid double taxation and provide a level of certainty about the tax rules that apply to international transactions.

Again, I want to re-emphasize that we are talking about international transactions. The member continued:

Relief from double taxation is so very necessary and deserves to be discussed in some detail. The potential arises when a taxpayer lives in one country and earns income in another. Without a tax treaty, both countries could claim tax on the income without providing the taxpayer with any measures of relief for the tax paid in the other country. This is simply unfair.

To alleviate the potential for this happening, a tax treaty between the two countries allocates taxing authority with respect to a given item of income in one of three ways: first, the income may be taxed exclusively in the country in which it arises; second, it may be taxed in the country in which the taxpayer resides; or, it may be taxable in both the source country and the residence country, with relief from double taxation provided in some form, usually the country of residence.

The member was saying that there are a lot of factors at play and we want to establish that these are the rules of the game. If a person earns income, he or she will be taxed only once, in one place, by one country and if that does not happen, here is the mechanism that can correct that.

I also want to speak about withholding taxes, because a lot of this deals not only with earning income, but with dividends, the disposition of shares, the disposition of capital property and so on. Another way to ensure that double taxation does not exist is to lower or reduce something called "withholding taxes". This is another common feature of tax treaty legislation. Obviously, it can be burdensome, with a lot of red tape and hassle, not to mention tying up huge sums of money by virtue of withholding.

These taxes are levied in one country on a certain income earned in that country and are paid to residents in another country. Again, I am quoting from the member for Scarborough—Guildwood from when he was the parliamentary secretary to the minister of finance under the formal Liberal government, who said:

Withholding taxes are a common feature of the international taxation system. In Canada's case, they are levied on certain payments that Canadian residents make to non-residents. These payments include interest, dividends and royalties, for example. Withholding taxes are often levied by a country on the gross amount of certain types of income paid to non-residents and such taxes normally represent the non-resident's final obligation with respect to income tax payable in that country with respect to that particular income.

There are obligations in the other country, there is withholding tax here, usually equally to what might be paid over there, when there are fairly large amounts of money being held. Tax treaties are important because they reduce the rates of withholding taxes and help to avoid double taxation.

Specifically with regard to Bill S-17, the treaties with Namibia, Serbia, Poland and Hong Kong provide for a maximum withholding tax on dividends between the affiliated companies at 5%. In respect to all other dividends, the treaties in Bill S-17 provide for a rate of withholding tax set at 15%. I should note that reductions also apply in respect of interest and royalties.

Our government is working with other countries to address the problem of double taxation. Another problem it is working on is to address tax evasion and avoidance, both tremendously unfair and steps that are harmful to our economy. The loss of revenue resulting from tax avoidance and evasion has the potential to adversely affect the efforts of governments in reaching important policy objectives.

Of course there will be certain sharing of information between the countries with respect to tax evasion, and that will help. Not only that, but tax evasion obviously places a disproportionate share of tax burden on honest taxpayers as has been mentioned in the House here earlier today. The government recognizes that one key component of the defence against international tax avoidance and evasion is through improved and expanded mechanisms for international co-operation and information sharing.

To facilitate that goal, treaties like those found in Bill S-17 permit the exchange of tax information between revenue authorities in accordance with standards developed by the OECD, and in doing so help them to identify cases of tax avoidance and evasion, and to act on them.

In conclusion, I would like to remind all members that Bill S-17 is not controversial, nor does it contain any surprises or contentious issues. There is little doubt that its benefits are clear. The treaties covered in this proposed legislation will promote certainty, stability and a better business climate for taxpayers and businesses in Canada and in these treaty countries.

Moreover, these treaties will help to secure Canada's position in the increasingly competitive world of international trade and investment. They comply with international OECD standards and will help ensure a stronger tax system for Canadians. They will help ensure our goal of tax fairness for Canadians.

They provide the rules of the road for foreign investment, for foreign movement of capital and income. This is something that investors and business would expect Parliament to deal with. It is important that Parliament deals with it at this stage, because the take-effect date is someplace down the road. We would like to see this particular legislation passed into law before the summer break.

I would ask all members to support this legislation.

[Joe Daniel, Conservative, Don Valley East, ON]

Mr. Speaker, it would have been appropriate if the member had read the bill in detail, because one of the key aspects of it is the double taxation, which would actually increase our business with the countries we have these treaties with, thus helping us in that sense.

There are also opportunities to invest both ways and make sure that works well for us and increases our competitiveness on a global scale.

That is what is contained in Bill S-17.

[Joe Daniel, Conservative, Don Valley East, ON]

Mr. Speaker, clearly Bill S-17 is looking to improve on the situation we currently have and looks forward to dealing with the various tax situations between the countries to capture more of the taxes and return them to Canada.

[Joe Daniel, Conservative, Don Valley East, ON]

Mr. Speaker, hopefully we can bring this discussion back to the bill that we are looking at.

I appreciate this opportunity to discuss Bill S-17, 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.

Before I begin, I would like to take this opportunity to thank all the members of the banking, trade and commerce committee in the Senate for their thorough and timely review of this piece of legislation recently. I would also like to extend my thanks to the Minister of State for Finance for his appearance at the Senate committee as well as the other officials and witnesses for their attendance. Their insightful testimony on this subject, which can often be technical, was greatly appreciated.

I think I am speaking for all in saying that the information they provided was invaluable in helping Canadians obtain a clear understanding of how Canada's network of taxes, treaties and information exchange agreements functions. As Cyndee Cherniak of LexSage Professional Corporation, a leading international trade firm in Canada, told the Senate banking, trade and commerce committee earlier this year, and I quote:

Bill S-17 is a good law and should be supported....Tax treaties facilitate trade. Tax treaties are symbols of cooperation, trust and friendship between nations. Tax treaties prevent double taxation.... They improve stability, transparency, fairness, procedural fairness and tax certainty relating to international trade and transactions. Tax treaties are good for Canadian businesses with activities abroad through branches, subsidiaries and other business enterprises. Tax treaties are good for individuals, employers, directors of corporations, students, shareholders, et cetera.

I could not agree more. Tax treaties are a vital part of a government's overall approach to improve the tax system.

Currently, Canada has comprehensive tax treaties in place with 90 countries and continues to work on agreements with their jurisdictions. Bill S-17 is part of Canada's ongoing effort to update and modernize our network of income tax treaties, which helps prevent double taxation and tax evasion. In the past, Parliament adopted many similar tax treaties. In fact, beginning in 1976, governments, both Liberal and Conservative, brought forward 30 such pieces of legislation, and most recently, those concerning Colombia, Greece and Turkey. I should note that Canada maintains one of the world's largest networks of bilateral tax treaties. This is an important feature of Canada's international tax system, a feature that is key to promoting our ability to compete.

At the same time, the system must ensure that everyone pays their fair share of taxes. It is not appropriate that some corporations, both foreign-owned and Canadian, take advantage of Canada's tax rules to avoid taxes and that some wealthy individuals use offshore jurisdictions to help them hide income and evade taxes. In all of these cases, working Canadians and small businesses, among others, are left having to pay more taxes than they otherwise should. This is simply not fair.

To detect and deter the concealment of income, the Canada Revenue Agency needs information from foreign governments. To this end, Canada supports the international consensus to encourage jurisdictions to meet and implement the Organisation for Economic Co-operation and Development standards for international tax information exchange. That standard is implemented under the bilateral tax treaties and tax information exchange agreements, like those being discussed today.

Here at home, our Conservative government continues to work hard to keep our tax system up to date and competitive so that Canada can remain a leading player in the global economy. Action in support of a more competitive tax system is essential to create an environment that enables Canada's visionary entrepreneurs and industries to excel and that does not stand in the way of their success. Moreover, tax treaties are an integral element of our plan to improve the standard of living of all Canadians.

Tax treaties, like those in Bill S-17, directly affect cross-border trade in goods and services with our tax treaty partners, which in turn impacts Canada's domestic economic performance.

Over 40% of Canada's annual gross domestic product can be attributed to exports. Moreover, Canada's economic wealth each year also depends on foreign direct investment as well as the inflows of information, capital and technology.

In other words, the tax treaties contained in Bill S-17 would benefit Canadian businesses and individuals with operations and investments in countries covered by this legislation. Tax treaties foster an atmosphere of certainty and stability for investors and traders that can substantially enhance Canada's economic relationship with each country.

Another important facet of these treaties is that they include a mechanism to settle problems encountered by taxpayers, in particular where double taxation arises. Under this mechanism, taxpayers can bring to the attention of taxation authorities issues that arise from the interaction of our tax system with that of other treaty partners and seek a resolution on the issue.

In short, tax treaties provide individuals and businesses in Canada and other treaty partner countries with predictable and equitable tax results in their cross-border dealings. This can only have a favourable effect on the Canadian economy.

Likewise, the tax treaties in the bill have been designed with three goals in mind: first, to facilitate international trade and investment; second, to prevent double taxation and provide a level of certainty about the tax rules that apply to particular international transactions; and third, to prevent avoidance and evasion of taxes on various forms of income flows between the treaty partners.

Today's legislation is part of Canada's ongoing effort to update and modernize its network of income tax treaties, which will help prevent taxation and tax evasion.

Let me go on to the issue of double taxation for a moment. Double taxation in an international sense arises as a result of imposition of taxes in two or more states on the same taxable income for the same period of time. This overlap between taxation by the country where the income is generated and taxation by the country where the taxpayer resides can have obvious adverse and unfair consequences for the taxpayer. Nobody wants to have their income taxed twice, nor should it be, but without a tax treaty such as those contained in today's bill, this is exactly what could happen.

Tax treaties ensure that double taxation relief is provided where both countries claim taxes on the same income. Tax treaties also allocate tax rights between two countries as a means of protecting taxpayers against potential double taxation. In some cases, the exclusive right to tax particular income is granted to the country where the taxpayer resides. This precludes taxation in the state of source and, therefore, double taxation.

For example, if a Canadian resident employed by a Canadian company were sent on a short-term assignment for, say, three months to any one of the treaty countries covered by the bill, Canada would have the exclusive right to tax that person's employment income. On the other hand, if the same person were employed abroad for a longer period of time, say one year, then the country where the person works could also tax the employment income. However, in this case under the terms of the tax treaty, through the foreign tax credit mechanism, Canada must credit that tax paid in the other country against the Canadian tax otherwise payable on the income. This is an example of how the allocation of taxing rights between countries and between bilateral tax treaties would ensure that individuals and businesses are taxed fairly.

One way to reduce the potential of double taxation is to reduce withholding taxes. These taxes are a common feature in international taxation. They are levied by a country on certain items of income earned in that country and paid to the residents of the other country. The types of income normally subjected to withholding taxes would include, for example, interest, dividends and royalties.

Withholding taxes are levied on the gross amount paid to the non-resident and represent the final obligation with respect to Canadian income tax. Without tax treaties, Canada usually taxes this income at the rate of 25%, which is a set rate under our own legislation for income tax.

Withholding tax rates in other countries are often as high or even higher. Tax treaties reduce rates for withholding taxes. For example, the treaties with Namibia, Serbia, Poland and Hong Kong in Bill S-17 would provide for a maximum withholding tax rate on dividends between affiliated companies at 5%. In respect to other dividends, those treaties would provide for a rate of withholding taxes set at 15%.

Reductions would also apply in respect of interest and royalties. Again, the treaties covered in this proposed legislation would promote certainty, stability and a better business climate for taxpayers and businesses in Canada and in the treaty countries.

Moreover, these treaties would help to secure Canada's position in an increasingly competitive world of international trade and investment. Clearly, having modern international tax conventions, such as these contained in Bill S-17, is a key component of that goal.

Canada remains committed to maintaining a tax system that will continue to help Canadian businesses in their drive to be world leaders. Tax treaties like those in Bill S-17 would directly support cross-border trade in goods and services, which in turn helps Canada's domestic economic performance.

Moreover, Canada's economic wealth each year also depends on foreign direct investment, as well as inflows of information, capital and technology. In fact, during the committee's examination of this legislation, well-respected tax professional Nick Pantaleo, of PricewaterhouseCoopers, remarked that:

...a key objective of the Canadian government is to pursue new and deeper international trade and investment relationships.... In my view, tax treaties contribute toward the success of such global trading arrangements.

This is not surprising given that more than 60% of the Canadian economy and 1 in 5 jobs in Canada are generated by trade. It would seem clear that the tax treaties contained in Bill S-17 are a critical tool in strengthening Canada's trade and investment relationships and in creating jobs for Canadians here at home. That is especially the case with the agreement with Hong Kong.

Our government considers Hong Kong a priority in Canada's global trade efforts. Hong Kong is our third largest financial market in Asia and an important source of direct investment. It is Canada's 10th largest export market, including everything from telecommunications devices to train signalling systems to educational and financial services.

An example of the importance of Hong Kong in our trade efforts is an agreement between Canada and Hong Kong for the avoidance of double taxation, which the Prime Minister announced when he was in Hong Kong last November.

Of course the region itself is a key market for us, which is why Canada is at the negotiating table for the trans-Pacific partnership, which would open up new markets and increase Canadian exports to fast-growing markets throughout the Asia-Pacific region.

Our government is also working hard to forge stronger links through such multilateral organizations such as the Asia-Pacific Economic Cooperation and the World Trade Organization to which Canada, China and Hong Kong all belong.

The Canada-Hong Kong tax treaty would truly foster an atmosphere of certainty and stability that would enhance Canada's economic relationship with Hong Kong.

As the Canadian Manufacturers and Exporters noted of the Hong Kong tax treaty included in Bill S-17:

Hong Kong holds tremendous potential for Canadian businesses looking to establish a strong presence in China and...across all of Asia, and this Agreement will help fulfill this potential....

(It) reduces barriers to two-way trade and investment between Canada and Hong Kong.

Listen to the words of the Investment Industry Association of Canada, again in reference to the Hong Kong tax treaty included in Bill S-17, who said it would expand:

....savings and capital flows between our two markets....

Moreover, the attraction of Canadian equities would benefit Canadian financial firms expanding their wealth management business in Hong Kong and, through Hong Kong, to a market of over one billion Chinese.

To conclude, the treaties covered in this proposed legislation would promote certainty, stability and a better business climate for taxpayers and businesses in Canada and in these treaty countries.

More importantly, the treaties would help to secure Canada's position in the increasingly competitive world of international trade and investment.

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

Mr. Speaker, Bill S-17 deals with tax treaties, as we know, with a number of countries. It is an interesting collection: Namibia, Serbia, Poland, Hong Kong, Luxembourg and Switzerland.

However, relative to collecting on tax debt, I was prompted by the member's comments about cutting back on staff at CRA. I am wondering if he is familiar with the train of reports we have had since 2006 from the auditor general pointing out that the CRA seemed to have a very poor understanding of where the tax debt was and why it was rising. It was failing to use its risk assessment models properly. The auditor general, for years, has found that CRA staff tends to go after smaller debts, harassing what I think of as regular folks, and leaving aside the millionaires. The large, low-hanging fruit is with the millionaires. Does the hon. member have any comments on the pattern of CRA tax collection?

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

Mr. Speaker, I am pleased to rise to speak to Bill S-17. I would have been much happier if this did not come on the heels of another time allocation motion moved by the government.

The government does not want us to debate the principles of this bill. That is what I want to focus my comments on during the 20 minutes I have been given, because this aspect is extremely important. Today, by presenting Bill S-17, the government is telling us that it has everything all worked out.

The Senate had the chance to debate the bill, but I will not get into the credibility of senators for now. The Conservatives think that by introducing this bill, they are accomplishing something. The sad thing is that the opposite is true.

First, let us start off with the issue of what we are talking about here. We have had a number of Conservatives who have tried to raise the issue of tax debt. It is true that on any given occasion, in fact, in every one of the ridings of the Conservatives who are here today, about 6% of Canadians fall behind on their tax debt. As they are Canadians, they endeavour to catch up and pay their taxes. There are those who fall behind and they are Conservatives, Liberals and New Democrats. The important thing is that those individuals eventually catch up. That is part of the $29 billion in uncollected tax debt that is being paid back.

I would like to speak to a broader issue which is the issue of the uncollected tax debt that Revenue Canada is seemingly unable to follow-up on. My colleague from Surrey North mentioned a few minutes ago the issue of the government saying that it was going to take on tax havens and that it was getting that uncollected tax debt. However, at the same time it would be cutting cut one-quarter of a billion dollars out of Revenue Canada's overall expenditures, cut 3,000 employees and somehow this time, even though Conservatives have screwed up pretty well everything else they had over the last seven years, they would get it right.

The Auditor General had something to say about that in the report that came out this spring. It is important to note, when we talk about what the Auditor General referenced, that he has seen his department cut back severely under the government. The government does not seem to like independent thought around issues of financial accountability and fiscal transparency. Even though the Auditor General's department has been cut back, here is what he said:

The level of tax debt is driven by the economic climate, tax policy, taxpayer behaviour, and the Agency’s efforts to collect taxes in a timely manner. In Canada, 94 percent of individuals...pay their taxes to the Agency on time. However...there is always a balance of unpaid taxes...

Those taxes get paid later on. As I mentioned earlier, in every one of our ridings, about 6% of our constituents have fallen behind. For Conservatives to denigrate those people who are endeavouring to catch up is something that is quite disrespectful. However, the reality is in each and every riding we are looking at about 6% of Canadians who work to catch up.

However, the Auditor General found on the corporate sector it was actually 90% where the taxes that were owed were paid on time. Therefore, there is a much bigger problem in the corporate sector.

It gets worse when we talk about large tax debts. This is obviously why the Conservatives wanted to shut down debate on this. As we bring forward the pathetic Conservative record in terms of tax debt in the corporate sector, Conservatives are understandably embarrassed by their inability to put in place a tax sector that functions.

This is what the Auditor General said about the Canada Revenue Agency, and we are talking about the mega accounts of tax debt. He said:

When we reviewed the additional criteria for accounts over $10 million, we found that the Agency did not meet its targets for danger of loss reviews; they were either missing or not adequately documented in [about half]...the...accounts that required them. A danger of loss review is important, since it will allow the Agency to act quickly where the taxpayer may be disposing of assets instead of paying a tax debt.

That is very interesting. Among ordinary Canadian families, there is a fall of about 6%, but when we are talking about the large accounts, the $10 million accounts, Conservatives failed about half the time. That is fascinating. Half the time they failed. This is interesting, because when we talk about the overall issue of uncollected tax debt, it should be no surprise to any of us that the Conservatives' failure on this is one reason there has been a substantial increase in uncollected tax debt. You will recall, Mr. Speaker, that they have now slashed 3,000 of the positions of hard-working public servants in the Canada Revenue Agency, so it is going to get even worse.

In other words, in 2006, the Conservatives came into power, and there was about $18 billion in uncollected tax debt. What is it after seven years of the Conservatives mismanaging pretty well everything they touch? I would say that they cannot even run a peanut stand, but that actually would be doing a disservice to people who run peanut stands. We saw how they incredibly botched the F-35 debacle, with $8 billion moving up to somewhere around $40 billion, and apparently that was without engines. When we see that kind of fiscal mismanagement, we have to just shake our heads.

On uncollected tax debt, it is the same kind of thing. The Conservatives started with $18 billion, and after seven years of Conservative mismanagement, we are now up to $29 billion. That is an increase of 57% in uncollected tax debt. If people say they are surprised and cannot believe that the Conservative government would be this awful and ineffectual, and they ask why it is that there is that substantial increase, they would have to come back to the Auditor General's report. In the Auditor General's report, we see that even in the case of danger of loss reviews for accounts over $10 million, the Conservatives are simply incapable of getting the job done.

A very wealthy man owing $10 million, according to these Conservatives, will get off scot-free. It is not a problem if people owe millions of dollars. The Conservatives just say that it is fine, that they will slash the jobs of the people who are supposed to collect that money, because the Conservatives do not really care. That is why they have had a 57% increase in uncollected tax debt over the course of just a few years. My goodness. Since Conservative governments cost all Canadians so much in terms of quality of life and the fiscal mismanagement they are showing, we simply cannot afford too many more years of Conservatives. Fortunately, in 2015, Canadians will put an end to this, and they will be putting in place an NDP government that actually knows how to manage the tax system.

What do we mean when we talk about going beyond the uncollected tax debt? We have seen Conservative failure there. That is why the Conservatives prudently say, since the New Democrats would be talking about this for the next few days, that they will just invoke closure and shut down the debate so that hopefully, Canadians will not find out how badly they have botched the issue of uncollected tax and how much worse it will be because of the slashing and the cuts to the Canada Revenue Agency.

We have to ask about the money that has been put in tax havens. That has not even been calculated. We understand that. They have gone from $18 billion to $29 billion, an increase of 57%. That is the uncollected tax debt we know about. However, let us look at tax havens and the level of investment being pumped into tax havens. In 2011, about 24% of Canadian investment overseas went into tax havens. Going back a few years, it was in the single digits, but under the Conservatives, we have now moved to a situation where about a quarter of overseas investment goes into tax havens.

Given how badly the Conservatives have botched the issue of uncollected tax debt, one can imagine that the issue of tax havens is of major concern. However, what we have is a Conservative government that seems to be unwilling to deal with this fundamental issue. We are talking about tens of billions of dollars invested in tax havens overseas. The Conservatives just do not seem to care very much about that.

I have just a little aside. My grandmother was orphan. She came from England. She came to Canada to start a new life in her 20s. It was quite brave at the time. She had to take a ship across the Atlantic Ocean and take a train all the way across Canada. This was a young woman who decided that she wanted to start her new life in Canada.

She had an expression she loved to use. She would say that somebody who is not thinking very far ahead is being penny wise and pound foolish. Of course, that is a reference to English currency. Penny wise and pound foolish is what applies to this Conservative government.

It cut back and slashed $250 million from Revenue Canada. It slashed 3,000 positions and says that it is being penny wise. Yet it is being pound foolish when we see the billions of dollars of uncollected tax debt that has accumulated under the Conservative government and the tens of billions of dollars that are now flowing freely offshore into tax havens.

Members will recall that the NDP raised this a few years ago, even before the lightning breakthrough in 2011 that gave the NDP official opposition status, with 100 strong NDP members of Parliament, who come from all walks of life and really reflect the diversity of this country in a way that has never been reflected on the floor of the House of Commons. Even before that, we were raising this issue of tax havens on the floor of the House of Commons.

Members will recall the famous Canada-Panama trade agreement the Conservatives brought forward. We raised concerns at committee, and not only the NDP but also a number of other people who were concerned about Panama's status as a tax haven. It was not just me speaking. The Internal Revenue Service in the United States said very clearly that Panama does not have the transparency that is required. It is a tax haven.

At the time, we had Todd Tucker, of the Public Citizen's Global Trade Watch, come forward and say that Panama was one of the world's worst tax havens and that the Panamanian government had deliberately allowed Panama to become one of the worst tax havens in the world.

The Conservatives got it in their heads to actually put in place the Canada-Panama free trade agreement that would worsen that issue of tax haven status. Members will recall that the Liberals were just going along for the ride, as they usually did. They were the accomplices pushing along with the Conservatives saying that it was a great idea. Only the NDP caucus stood up and said that we could not sign a trade deal until we had an official tax treaty with Panama, because otherwise, we would be worsening the situation and would be making even worse the possibility of money transferred from Canada to Panama simply going into a tax haven, one of the worst tax havens in the entire world.

That was in January 2011. I dare say, two years later, yet again, the NDP has been proven right. We were right to say that it was the wrong thing to do.

I think, implicitly, the Conservatives are trying, through their Prime Minister's Office talking points, to say that they now want to somehow take action against tax havens. I think what the Conservatives are really saying is that the NDP members were right and that the Conservatives were wrong and are sorry. We accept the apology from the Conservatives, but that is not good enough. What they actually have to do is make things right, and that means not signing these types of free trade deals when what they actually do is enhance the tax haven status of these countries they are signing deals with.

Here is the real problem. We have a situation whereby hundreds of Canadians are now sending their money offshore. Again, those are estimates that come from a variety of sources. This is an increasing problem that is more and more manifest right across Canada. We are seeing tens of billions of dollars flowing offshore now. A quarter of our investment in this country is going offshore to tax havens.

We are seeing an additional $170 billion, it is estimated by the Canadians for Tax Fairness, going into 12 global tax havens. That means a difference of about $8 billion a year in tax income. Yet we are seeing the Conservative government do nothing except offer Bill S-17. It has signed a few agreements, yes. That is good. We support that on this side of the House, but that does not resolve the problem in any way, shape or form.

What it does, in this case, is allow a bit of cover for the Conservative government. It may have messed up with the Canada Revenue Agency. It may have messed up by cutting thousands of positions that would have allowed it to go after tax evaders in the corporate sector that are taking money offshore with impunity. Having messed up on the uncollected tax debt, having messed up, as well, on the whole issue of money going into tax havens, the government now presents Bill S-17. It is saying that it resolves all the various problems that exist on the issue of tax havens and uncollected tax debt.

New Democrats actually have a different and smarter idea about the kinds of things needed to resolve this issue. As is our normal practice, Mr. Speaker, having been a member of Parliament with long experience, you know that what the NDP always does is bring forward a wide variety of solutions to resolve issues, because we get the job done. I wanted to get in another plug, because I know it particularly embarrasses my Conservative friends. It is not meant unkindly.

This morning we had the debate on the parliamentary budget officer that was proposed by the member for Outremont and the leader of the official opposition. We had a chance, yet again, to talk about the fiscal period returns issued by the ministry of finance that have shown, for 20 years running, that NDP governments are by far the best at managing money, balancing budgets and paying down debt.

That is not me speaking. That is the federal ministry of finance, which is surely not a hotbed of social democrats yet, but it will be. It will be a hotbed of social democrats in a couple of years, and that means that we will have even better financial management than we have shown at the provincial level. We are number one provincially. Just imagine an NDP federal government, with all those social democrats with all that great experience of being number one at balancing budgets and paying down debt, then being able to change the priorities of the federal government so that Canadian families actually benefit. We would have the housing we need, the kind of health care system we need, high-paying jobs for Canadians rather than low-paying jobs for temporary foreign workers, which is where the government seems to love to put the emphasis, and perhaps, more importantly, a transparent, accountable government that actually honours and respects Canadian taxpayers.

At the finance committee level, New Democrats offered a whole range of amendments. We talked about the federal government studying and measuring, to the greatest accuracy possible, Canadian tax losses to international tax havens and tax evasion to determine the Canadian federal tax gap. Australia has done that. The United Kingdom has done that. The U.S. has done that. It is time for Canada to actually measure the tax gap.

We talked about greater transparency and telling Canadian corporations that they have to disclose all taxes paid in other jurisdictions. We also said that the Auditor General should evaluate the success of the Canada Revenue Agency in prosecuting and settling cases of tax evasion. We put all those forward, and the Conservatives rejected every single one.

New Democrats are going to vote for Bill S-17. The reality is that if we really want an effective income tax system, in which everybody pays according to what they earn, and there are not these tax havens and growing tax debt, then Canadians have to elect an NDP government in 2015, and that is what they are going to do. I have no doubt about that.

[Wladyslaw Lizon, Conservative, Mississauga East—Cooksville, ON]

Mr. Speaker, Bill S-17 includes tax treaties with certain countries because some are renegotiated treaties, which is a step forward.

I was speaking about the Canada-Poland treaty, which is an improvement from the previous treaty that was negotiated in 1987. It reflects the new worldwide situation and new regulations in both countries. When the previous agreement was signed, Poland did not have personal income tax. It adopted personal income tax in 1991, which was four years after the previous treaty was signed. Of course this had to be reflected.

Therefore, for all those treaties, when they are renegotiated and up for improvements, we move forward and improve the situation.

[Wladyslaw Lizon, Conservative, Mississauga East—Cooksville, ON]

Mr. Speaker, I appreciate the opportunity to speak today to the second reading of Bill S-17, the tax conventions implementation act, 2013.

Over the years, our government has worked hard at signing many tax treaties to help improve our system of international taxation. Bill S-17 would add to Canada's ongoing measures to update and modernize its network of income tax treaties with other countries, which is one of the most extensive in the entire world. Canada has tax treaties in place with a whopping 90 countries, including most of our major trading partners, and is working on agreements with other jurisdictions. Bilateral income tax treaties like the one before us today help us to prevent double taxation, thus creating tax fairness for all Canadians, and ensure everyone pays their fair share, something we know we must do.

Tax treaties also eliminate tax barriers to trade and investment. As we noted in the economic action plan 2013, deeper trade and investment relationships in more overseas markets help support jobs and growth in Canada. In this respect, Bill S-17 would provide benefits to both taxpayers and governments by setting out clear rules that would govern tax matters relating to cross-border trade and investments. The treaties covered in Bill S-17 would promote certainty, stability and a better tax climate for taxpayers and businesses in Canada and these treaty countries. While these treaties would help to secure Canada's position in the increasingly competitive world of international trade and investment, they would also help combat tax evasion.

While Bill S-17 is a relatively standard, routine and innocuous piece of legislation, these new and updated treaties would strengthen Canada's already-strong network of tax treaties. Bill S-17 proposes to implement tax conventions, either new or updated, with Canada and Namibia, Serbia, Poland, Hong Kong, Luxembourg and Switzerland. With these six new and updated treaties adding to the 90 tax treaties already in existence, we could be proud that Canada boasts one of the largest networks of bilateral tax treaties, ensuring a fair and competitive international tax system.

I mentioned previously why the legislation before us today is a standard fare, but it is nonetheless very important in achieving the above goals. Bill S-17 would help to stop tax cheats and help to combat tax evasion. It would create tax fairness and prevent double taxation. Finally, it would help improve international trade and investment.

Cyndee Todgham Cherniak of LexSage Professional Corporation said this recently to the Senate banking committee:

Tax treaties facilitate trade. Tax treaties are symbols of cooperation, trust and friendship between nations. Tax treaties prevent double taxation.... They improve stability, transparency, fairness, procedural fairness and tax certainty relating to international trade and transactions. Tax treaties are good for Canadian businesses with activities abroad through branches, subsidiaries and other business enterprises. Tax treaties are good for individuals, employers, directors of corporations, students, shareholders, et cetera.

We can all agree on the importance of working with other countries to provide tax fairness for Canadians, and the bill before us today would do just that.

Tax treaties like those in Bill S-17 complement our Conservative government's overall commitment to a more competitive tax system, one that improves the standard of living of all Canadians. Tax treaties like those in Bill S-17 directly support and encourage cross-border trade in goods and services, which in turn helps Canada's domestic economic performance.

Moreover, Canada's wealth as a proud trading nation depends on a strong global marketplace where information, investment and technology flow with ease.

In fact, during the Senate committee's examination, Nick Pantaleo, a well-respected tax expert with PricewaterhouseCoopers LLP, remarked that:

...a key objective of the Canadian government is to pursue new and deeper international trade and investment relationships. This is not surprising given that more than 60 per cent of the Canadian economy and one in five jobs in Canada are generated by trade. In my view, tax treaties contribute towards the success of such global trading arrangements.

Accordingly, the tax treaties contained in Bill S-17 are a critical tool in strengthening Canada's trade and investment relationships, creating jobs for Canadians here at home.

How does Bill S-17 do that? I would like to take a moment and discuss one particular issue dealt with in this legislation and tax convention implementation through the years, preventing something called double taxation.

Double taxation in the international sense arises as a result of the imposition of taxes in two or more countries on the same taxable income for the same period of time. The treaties in Bill S-17, through bilateral rules, would help avoid double taxation and ensure that taxpayers pay tax on the same income only once.

The Canadian income tax system generally taxes residents on their worldwide income. However, in recognition of the fact that a foreign country may also have a right to tax income earned in that country by a Canadian resident, Canada will provide a credit for foreign income taxes paid, and vice versa. Indeed, if this rule did not exist, there would be unfair consequences for taxpayers, who would be punished for trying to grow or expand their Canadian businesses internationally.

Simply put, nobody should have their income taxed twice—at least, this is what we think on this side of the House. The exception may be the high-tax NDP. Unfortunately, without a tax treaty like those contained in Bill S-17, that is exactly what would happen, and I am happy this legislation will address that problem.

In the time I have left today, I would like to single out how Bill S-17 would be beneficial to Canada's relationship with its dear friend, Poland.

Canada and Poland enjoy a close relationship, including growth in trade and investments as well as increasing military co-operation and academic relations programs. Canada is home to a vibrant community of nearly one million Polish-Canadians, and since 2008, Poles can travel to Canada visa-free with their e-passports, further expanding people-to-people ties among our citizens.

In February 1998, Canada was the first North Atlantic Treaty Organization country to ratify Polish accession to the organization. Since then, Canada has become a leader among NATO countries in language and peacekeeping training in Poland, with hundreds of Polish officers and senior general staff having received training in Canada and Poland.

Further, Canada and Poland co-operate closely through multilateral initiatives as valuable partners in NATO, in Canada-EU relations and across a wide range of United Nations organizations and initiatives, including the International Security Assistance Force in Afghanistan.

With regard to academic relations, there are seven Canadian studies programs in Polish universities that conduct research, offer courses and organize conferences on Canada. Some have extensive library holdings and are a rich source of information for Polish students, researchers, academics and the general public.

Finally, Canada and Poland are also seeing rapid growth in our cultural relations. Canadian artists frequently entertain audiences in Polish cities.

Given our two countries' close ties, in 2009 two important agreements between Canada and Poland came into force: the social security agreement, which coordinates pension benefits between the two countries, and the youth mobility agreement, which allows youth from Canada and Poland to travel and work in the other country for up to one year.

In May 2012, during Polish Prime Minister Donald Tusk's visit to Canada, a new tax convention that will reduce tax barriers and encourage increased trade and investment between the two countries was signed.

This convention is a significant element of Bill S-17, which will further develop and facilitate Canada and Poland's mutual economic relationships and will eliminate double taxation with respect to taxes on income and on capital.

The impetus for the new convention with Poland, which was signed on May 14, 2012, was the need to replace the existing tax convention signed in 1987 in order to reflect current Canadian tax treaty policies.

The new convention will continue to contribute to the elimination of tax barriers to trade and investment between Canada and Poland and will help further solidify the economic links between us.

This convention remains consistent with the government's long-standing commitment to seek out new trade and investment opportunities for Canadians and to promote economic prosperity.

In addition to the close relationship Poland and Canada share, we also enjoy excellent trade relations. Poland is Canada's largest merchandise trading partner in central and eastern Europe. In 2011, the value of bilateral trade was $1.69 billion.

Canadian exports to Poland amounted to $251 million and included primarily machinery, electrical and electronic equipment, mineral ores, scientific and precision instruments and vehicles.

Canadian imports from Poland were valued at $1,439 million in 2011, with top sectors being machinery, furniture and bedding, aircraft and spacecraft products and electrical machinery.

EU membership, coupled with Poland's resilience during the recent global economic slowdown, makes it an attractive investment destination for Canadian companies.

Canadian cumulative direct investment in Poland totalled $411 million in 2011. Major Canadian investors in Poland include such companies as Pratt and Whitney Canada and Bombardier Transportation.

Hon. members, this convention also modernizes the income tax system between our two nations. Most countries, including Canada and Poland, tax their residents on their worldwide income. Moreover, when a resident of a particular country derives income from sources in another country, it is not uncommon for that other country to subject that income to tax.

The convention recognizes this international taxation dynamic and sets out under what circumstances and to what extent Canada and Poland may tax the earnings of one another's residents.

The convention also provides that when income, profits or gains may be taxed in both countries, the country of residence is to allow double tax relief against its own tax for the tax imposed by the country of source.

Specifically, the convention sets a maximum withholding tax rate of 5% for dividends paid to a company that holds directly at least 10% of the capital in the company that pays the dividends, and a maximum rate of 15% in all other cases.

The convention also generally limits to 10% the maximum withholding tax rate on interest and royalties. As well, the convention limits to 15% the maximum withholding tax rate on payments of pension income.

It includes a provision that limits the potential for double taxation arising from the application of Canada's taxpayer migration rules without restricting Canada's ability to tax its departing residents under pre-departure gains.

Finally, it includes the latest standard of the Organisation for Economic Co-operation and Development on exchange of tax information in order to assist Canadian tax authorities in the administration of Canadian tax laws.

In conclusion, trade and foreign investment are major engines of economic growth. Canada relies on open markets as a source of opportunity and a stimulus to efficiency, which in turn contributes to economic growth and rising incomes. Openness to trade, investment and global economic engagement are thus critical to Canada's long-term prosperity.

Bill S-17 is another step forward in ensuring the reduction of trade and investment barriers with our close ally, Poland. Considering the close relationship Canada and Poland have, it is only fitting that we ensure that our tax policies reflect the same mutual advantages. Further, Bill S-17 adds to Canada's low-tax commitment, ultimately allowing Canadians to keep more of their hard-earned money.

Since 2006, we have introduced more than 150 tax relief measures for Canadian families, individuals and businesses. The overall federal tax burden is the lowest it has been in 50 years. As a result, the average family of four now receives over $3,200 in extra tax savings. Going forward, we will continue to open markets and keep taxes low in pursuit of our main objective of increasing jobs, growth and long-term prosperity.

With that, I urge all members to vote yes on Bill S-17 and yes to closer Canada-Poland relations, stronger international trade relations and tax fairness.

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

Mr. Speaker, it is a pleasure to rise to speak to Bill S-17. Taxation and taxes is always a hot topic. No matter what day of the year it is people always want to talk about taxes. One thing that they like to tie to taxes is the idea that it is an absolute necessity. Government has to generate revenues and part of those revenues is taxes. I will make reference to a multitude of different types of taxes shortly.

I will first start off from the whole aspect of what I made reference to earlier today. There are some bills that I believe are fairly straightforward, standard and receive a considerable amount of support. When we look at Bill S-17, we find there is substantial support of all entities in the House to see the bill ultimately pass. The objections are reasonable in what it wants to accomplish. I do not think we have too many advocates suggesting that we should be creating tax havens. We might hear some differences in whether the government is doing enough. Again, I will provide some further comment on that point shortly.

First and foremost, what I want to start off with is why we have Bill S-17 before us today and the manner in which the government has brought it forward. It concerns me because even though the bill we have before us is relatively non-controversial, the government has made it more controversial. The reason why we might want to speak to it that much more is because of the manner in which the government has chosen to bring in the legislation.

I have been a parliamentarian for a number of years and have had the opportunity to negotiate session wind-ups, albeit at the provincial level, but it is a parliamentary system very similar to the type of procedures that happen in the House of Commons. As we look to our days winding down here, in my beloved home province of Manitoba the legislature is winding down its session. However, it looks as though its session will go on well into July if we believe some of the reports. What is interesting about that with respect to the relevancy of that bill is that it is all about taxes.

In Manitoba, the NDP government of the day is increasing the provincial sales tax from 7% to 8%. There is an issue surrounding the balanced budget legislation. There was supposed to be a referendum, but that was not held. I suspect the reason being is that the government would likely lose the referendum because there is no appetite to see the provincial sales tax increased, especially when the province next door is decreasing its sales tax and that gap continues to grow. The bottom line is there is a bit of a stalemate happening there.

As much as I might not necessarily be a strong advocate for the New Democrats in the province of Manitoba, I do respect the fact that they are going through a process and are not yet putting in limits in the form of closures, from what I understand. This is with respect to a bill that is exceptionally controversial and no doubt will receive hours of debate and go into committee, which is a different system. I believe there are close to 200 Manitobans who have expressed an interest in wanting to talk about taxes in that legislation. Therefore, there is what I classify as due process. There they have controversial legislation where there is no unanimity within the legislative chamber.

Contrast that to Ottawa, where we have a bill, subject matter, taxes, tax evasion and tax havens. We seem to have wide support for the bill and its passage. Yet we have a government that has brought in time allocation. This is not the first time it has brought in time allocation. I believe this is already the 40th, 41st or 42nd time that the government has brought in time allocation. I have had the opportunity on numerous occasions, probably 30 times or even more than that, to stand in my place to talk about the serious nature of time allocation. It is serious, when we have a majority government making a decision before the House to define the amount of time to be allocated for debating Bill S-17.

When I listened to the Minister of State for Finance, he indicated that we have had a piece of legislation before the House for 100 days, trying to give people who may be following the debate the impression that for 100 days, we have actually been debating Bill S-17, and that the government is doing us a huge favour by bringing in time allocation.

Nothing could be further from the truth. We might have had a few hours, not even a full day of real debate inside the House of Commons on this issue. Yet it is the perception. The government has made the decision that it will limit the amount of opportunities for members of Parliament to address the issue of taxes.

When I had the opportunity to review Bill S-17, I had the opportunity to talk about taxes in general and the whole issue of fair taxation, spending smarter and so forth. I believe that is what the constituents of Winnipeg North would want me to do, to express concerns I might have on the legislation and to talk about taxation policies.

We have 300-plus members of Parliament, and the government has said that it wants a very limited number of MPs allowed to speak to this legislation. I am grateful to my party. It made sure I was afforded the opportunity to express my concerns. On this bill, I suspect that if there was any goodwill coming from the government House leader, maybe even working with the Minister of Finance and approaching opposition parties, negotiating, talking about what kind of legislation it is, how many hours would we like, then respective caucuses could work with their colleagues to get a sense of how long the debate could or should be.

We have all sorts of ways to enable legitimate, full, wholesome debate on bills that are deemed important, where members of Parliament want to stand up and address their concerns. The government, through this whole time allocation addiction it has, is preventing that.

The unfortunate things is that in principle we support Bill S-17 because of its objectives and what it hopes to accomplish. I suspect it may not even have required five hours of debate. I do not know, because we had no sense of interest within our own caucus or whether it was brought to our caucus; I have no idea how many New Democrats would have chosen to speak to it.

Even though in principle I support the bill we are talking about, what upsets me is the fact that the government continues to use time allocation in order to get through its legislative agenda.

I want to emphasize how important it is that we recognize that we have seen a significant change in attitude in the Prime Minister ever since he received his majority Conservative/reform government. It has been a significant shift in attitude. He has been very disrespectful toward individual members when it comes to their participation in debate.

The government has invoked time allocation, another form of closure, on legislation that definitely should have had a lot more debate. As a result of the government's inability to negotiate in good faith, now we find that every time it introduces a bill, either one day later or even sometimes on the same day, a time allocation motion is invoked. We are seeing that again today on Bill S-17. That lack of respect for proper procedure inside the House of Commons is going to hurt the government. Conservative members may not realize that today, but at the end of the day, it will have an impact.

Canadians respect our democratic system. They appreciate the fact that there is a proper process to be followed. The degree of the Conservative government's lack of respect for due process will become better known. It is an issue I plan to raise significantly going forward, because the frequency is the greatest insult to the House.

I will conclude my remarks on the issue of the process by saying very clearly that no government in the history of Canada has used time allocation in the fashion the Conservative government has, and we are only two years in to a majority government. I want to emphasize that particular point.

Let me get to taxation.

When we look at what the bill would ultimately do, we think of achieving bilateral agreements. What we are attempting to do is ratify them through this legislation. We can have as many of these bilateral agreements as ultimately can be developed and passed through the House, but that will not really address the issue to its fullest degree. If we want to deal with the issue of tax avoidance or people hiding money or not paying their fair share, then we have to look at resources and to what degree we are allocating resources to those authorities, such as the Canada Revenue Agency, and its ability to go after those individuals who feel they do not have to pay their fair share of taxes.

Former prime minister Paul Martin allocated $150 million to combat international tax evasion. We took the issue of tax evasion very seriously, so $150 million was put in the Liberal Party's last budget in order to combat tax evasion. If we follow that through, in 2009 we could ultimately argue that $150 million had a fiscal impact of about $2.5 billion. When we think of how effective that $150 million was in terms of being able to return $2.5 billion to the coffers in some fashion or another, that shows very clearly and decisively just how effective it would be to allocate the appropriate resources in order to avoid tax evasion. That is very important.

The other issue is with respect to bilateral information. At the end of the day, bilateral information or establishing some sort of an exchange framework is one way to deal with this. Those who participate in tax evasion are very creative: they come up with different ways to avoid having to pay taxes. Working toward the larger, multilateral information exchange framework is ultimately the next best way, I would argue, to clamp down on those companies that are participating in tax evasion.

I want to very briefly comment on the issue of taxation, in general.

We all know that governments need to have revenue in order to function. What I would like to see, and I believe what most Canadians want to see, is that the money collected is in fact being spent smart. As a taxpayer, I want, number one, to pay my fair share. I do not want to have to pay more, but I am prepared to pay my fair share. I think a vast majority of Canadians have that attitude. The other concern is that they want the sense that those tax dollars are being spent wisely.

On both of those fronts, there is a wide belief that this is not taking place today. It does not matter what level of governance, there is this suspicion that the government is just not doing enough. I think what we need is the Prime Minister and his government to take the issue of tax evasion more seriously and look at how we can have multilateral agreements to ensure that those who try to avoid paying taxes are held accountable. The government, the Canada Revenue Agency, must be empowered to do what is necessary to ensure that people pay their fair share. I believe that is quite reasonable.

When I look at Bill S-17, it is a step forward. However, I do not believe that the government is doing enough. All we need to do is look at the last Paul Martin budget where there was a huge investment of tax dollars to deal with the issue of tax evasion. The return for that $150-million investment was overwhelmingly positive.

If the government had its priorities right, I think that there is so much more out there that we could benefit from. A more aggressive government would ensure that all Canadians paid their fair share.

I will save my comments in terms of spending that money in a better fashion for another debate on another bill. For now, suffice it to say, there needs to be a lot more improvement.

I will conclude my remarks by saying when we talk about taxes, it is important that we recognize that taxes come in many different forms, whether it is hiking up tariffs, the PST, income tax and many others. I look forward to this bill passing. If there are any questions, I am more than happy to answer.

[Murray Rankin, NDP, Victoria, BC]

Mr. Speaker, I rise today to speak to Bill S-17, which is a lengthy statute to deal with certain double taxation conventions between Canada and Namibia, Serbia, Poland, Hong Kong, Luxembourg and Switzerland. This is second reading debate. I want to say at the outset that the official opposition supports the bill.

I would like to divide my comments into four parts: first, the process that led us here; second, the issue of time allocation; third, just what double taxations are designed to achieve; and fourth, comments about international tax avoidance and tax evasion and why the bill is such a baby step in that direction.

Bill S-17 is 103 pages long. The bill started in the Senate, and lest anyone say this represents a great illustration of the utility of the other place, the government itself has acknowledged that this is routine legislation, and I note that since 1976, there is a convention that bills of this sort, dealing with tax convention legislation, originate in the Senate. In fact, there have been 30 different pieces of tax convention legislation in front of Parliament since 1976.

The bill is designed to bring into effect certain bilateral income tax conventions with the countries I mentioned. It is not a bill that represents significant, staggering, revolutionary change. On the contrary, I think the Parliamentary Secretary to the Minister of Finance accurately characterized the bill as a routine housekeeping type of statute. That was confirmed by the member for Pickering—Scarborough East who said in this place on second reading, “I am delighted and pleased to rise...to kick off the debate on a rather technical and routine piece of legislation”, to which I say that is entirely accurate.

Let me set the stage by saying the New Democratic Party supports harmonization and greater clarity for taxation laws and likes to bring into force these kinds of tax treaties, which as I will describe, are based upon a model tax treaty convention that the OECD generated many years ago and renewed quite recently.

The parliamentary secretary, while in the other place, referred to this as somehow a major step forward in the fight against international tax evasion. For reasons I will describe, that is entirely not accurate.

Let me speak to the second point I wanted to raise, which is the issue of time allocation. The government today, in a rather embarrassing stunt, decided that 43 times it would use what is in effect a closure motion, time allocation, to deny the House the opportunity to scrutinize a bill. It is embarrassing for democracy and shameful. When asked to justify it during the debate on time allocation, the Parliamentary Secretary to the Minister of Finance asked why we do not just pass it, since we support it. He said something about how this is a very important bill dealing with tax havens.

The bill is important. It is routine. However, it takes baby steps to deal with the crisis in tax havens and international tax avoidance, a matter I would like to speak about later in my remarks.

I presume the government is anxious to tell its base that the New Democratic Party, the official opposition, is somehow made up of unreasonable people who refuse to co-operate, and that is why it has to allocate time to debate the matter. We support the bill, and I guess I am just too new here to understand why it needs time allocation when we support this measure. He also said that there had been 100 days of debate on this measure. Surely that is not accurate. Surely he means that maybe it has been before the Senate for 100 days. If that is what he means, I wish to say that the official opposition has no members in that place and I hope it never does.

What is this legislation about? Canadians might not be familiar with double taxation conventions of this sort, so let me say a few things about the nature of this important legislation.

There are perhaps 90 tax conventions Canada has entered into since the 1920s. They have been a routine feature of international law since then. What are they for? The taxation treaties are designed to avoid imposing double taxation in both what is called the source country and the country of the taxpayer's residence. This is distinct from what the government is trumpeting as a great success, which is what are called TIEAs, tax information exchange agreements.

The Conservative government just did one in March, to great fanfare, with Panama. That was said to be a great step forward in the fight against tax evasion and international tax havens. I have news for the government. Panama is a notorious tax haven made up of many banks with lots of drug money, and Canada thinks that by entering into a tax information exchange agreement with that country, it is a great step forward.

One has to know what to ask for under these tax information exchange agreements. That is the basis of some of the provisions of the bill before us, which we are debating today. Many speakers before the finance committee said that they were essentially useless.

Yes, there are some good reasons for these tax conventions, such as the need to promote investment in various countries where the non-resident invests or works, and in fairness, to prevent Canadians and others from paying tax on the same income in two different countries. The concept is very simple. The concept is to avoid paying taxes twice and to set certain standards as to how income from those things will be treated. Dividends are treated differently than interest. Royalties are treated differently than capital gains.

The OECD, of which Canada has long been a member, has entered into a tax convention treaty that sets down these types of standards with fairly, by now, routine amounts of tax for different kinds of income. That is precisely what this double taxation treaty has done. That, as I said, is by now commonplace.

A country like Canada enters into these solemn conventions, and it is very hard, and should be very hard, to get out of them. One can enter into a protocol that has to be negotiated if it is to be modified. Indeed, there are a couple of protocols in this bill dealing with changes to the longstanding arrangements with Switzerland and Luxembourg. Frankly, the protocols can be changed, but there is still a solemnity. It takes some time. People intend at the international level to enter these for long periods of time, and they should be, and are, difficult to change.

The treatment of different kinds of income I have already described, and the OECD has made that very clear. The details I can confirm in this statute are entirely consistent with what other tax conventions of this kind have done for these different kinds of income. However, there are many other ways and progressive things going on in the world that the bill has nothing to do with. Let me give an example.

There was a recent agreement between the United Kingdom and Switzerland such that British nationals who have money in a Swiss account are subject to the Swiss government determining if they are British nationals, and if so, remitting to the U.K. tax authorities 30% in taxes of the amount in that Swiss account. It is much like a withholding tax. The British person could agree to self-identify and say, yes, he or she is a British citizen, and pay a lower amount of 5% or 10%. Thus, it is an incentive to self-identify if someone has money in a tax haven. Why does Canada not do something like our allies are doing? Nothing like this exists in this fairly routine statute.

What is the bill not about? The parliamentary secretary has told us that it is about international tax evasion and tax havens. I do not think so. It is not about international tax avoidance.

Next week, the G8 is meeting in Northern Ireland. The leader of the United Kingdom, Prime Minister David Cameron, has made it one of his three key priorities to address this crisis in tax havens. It is estimated that we are talking about between $10 trillion and $30 trillion in tax havens abroad.

It is estimated that the Canadian treasury is losing perhaps $7.8 billion every year to tax havens. Canadians need to understand that this is not arcane tax law. It is money that could be in our treasury to pay for goods and services for Canadians. Other Canadians are not paying their fair share, therefore requiring us to do more.

People are outraged by these abuses. Fortunately, the press has done a great job in recent months to show the enormity of this problem. The figures are staggering, the cost is enormous and people are demanding action. I salute the Prime Minister of the United Kingdom for his leadership. I regret that the Canadian government is very much the caboose on that train.

New Democrats will continue to push the Conservatives to take real action on tax havens. We did a supplemental report to the finance committee's study on tax havens and brought out a dozen or so recommendations for meaningful change, not radical change, which, of course, the government resisted. They were the kinds of changes our allies are bringing forward to address this crisis.

While we support the routine negotiating and updating of tax treaties such as this, we will continue to push harder against Conservative policies that have failed to protect the integrity of our tax system and that are furthering the erosion of our tax base.

Let us talk about the priorities of the government in going after tax havens. As I said, the parliamentary secretary would have us believe that there is real action going on in Canada and that we are really serious about this. That may be so, except for the fact that the statistics speak for themselves.

I quote an order paper question, Q-1174, of February 14 of this year, because there has been a lot of misinformation about whether there are cuts at Canada Revenue Agency. The minister reported that after the budget, which we dealt with today, Bill C-60, 2,568 full-time equivalents will be lost to the Canada Revenue Agency. They trumpet two areas: the international audit program and the aggressive tax planning program of the Canada Revenue Agency. In the last four or five years, the government confirmed, in the order paper question I just mentioned, there have been cuts in those as well.

Therefore, the notion that somehow we are serious about tax cheats, that we are out there with both feet and doing our thing like our allies is demonstrably not so. If they could characterize this as an investment, perhaps they could understand the enormous amount of money that could be made if they got serious, just as our allies have. I will provide examples of that in a moment.

Joseph Stiglitz, the Nobel Prize winning economist, wrote in The Guardian on May 27, 2013:

Our multinationals have learned how to exploit globalisation in every sense of the term—including exploiting the tax loopholes that allow them to evade their global social responsibilities.

He talks about transfer payments, whereby, as he says firms "make up" the prices of goods of services that they charge each affiliated entity and so forth to avoid paying their fair share of taxes. We have seen that. We have seen that the Cirque du Soleil uses a subsidiary in Luxembourg, a low-tax jurisdiction, to not pay its fair share of taxes in Canada. The Irving family is notorious for this. Of course, there is Apple, Starbucks and Google, and the list goes on. People are outraged.

Canadian firms are just as involved in the creative use of tax havens to avoid paying their fair share. It is the kind of thing that finally seems to be getting attention, albeit not from the Conservative government.

What can be done? What have the French done? They have published a black list of tax havens with bank-secrecy laws. They are simply saying that their French development agency will not operate in the 17 countries that are on the list. Is there any such list in Canada? I do not think so.

They have signed the multilateral Convention on Mutual Administrative Assistance in Tax Matters and have agreed to share information, on request, from other countries—and here is the punchline—with the optional provision for automatic tax information exchange. What does that mean? Luxembourg, Singapore and Austria, all sensitive, traditional bank-secrecy jurisdictions, are among the 50-some countries that have agreed to automatically exchange tax information to help foreign nations clamp down on tax debtors and allow countries to conduct wide-ranging, multi-party tax investigations.

The Globe and Mail reported yesterday, as did the Financial Post today, that Canada is opposing the automatic tax information exchange agreements. To use my analogy again, if there is a train, we barely make the caboose on that train.

Let me talk about what the OECD Secretary-General, Ángel Gurría of Mexico, has recently said about the kind of things this convention deals with:

The [international tax] rules which we have built since the 1920s were meant to avoid double taxation....The problem is we've moved from double taxation to double non-taxation.

I will continue the quote:

Now we don't tax anybody because we've built a set of codes and regulations and law...and culture...where we facilitate the fact that co-operations, through transfer pricing practises, put their profits in low-tax jurisdictions and therefore do not pay what would be considered to be their fair share.

He also said that taxing IT companies such as Google and Amazon had become especially difficult, as they are apparently based in the “ether”.

You can move anywhere and it doesn't matter where you originate the information or where you register the company, basically the consistency is that they [the companies] want to pay less tax.

This is hurting developing countries a great deal as well, as their wealth is taken to tax havens, and Canada has not been aggressive on that score either.

I said I would talk about what other countries are doing. I have given some examples.

The Swiss government and the Americans have been involved in serious negotiations involving their bank secrecy and enablers that come to that country to get Americans to not pay their fair taxes. In 2009, UBS, the largest Swiss bank, agreed to enter into a deferred prosecution agreement with the United States. The bank eventually turned over 4,450 client names. It paid a $780-million fine after admitting criminal wrongdoing and selling tax evasion services to wealthy Americans.

Do we think Canadians are not part of that? We know that they are. Do we think the Canadian government is putting in the energy to deal with this crisis it should? Of course it is not.

That is why the NDP's supplementary report to the finance committee lists a number of things we think need to be done. The government refuses to measure this problem, as our allies have done. The measurement of the tax gap and the like they scoff at as being irrelevant.

I wish it could finally follow the practice of the French, the Australians and the British in doing the right thing, but it does not seem to want to. It cut services. CRA does not have the warm bodies to do the job that is required, and we are supposed to believe that this is different.

We support the bill. We think it is a bill that is in line with modern tax practice in avoiding double taxation. It makes sense at one level. However, when it is sold as something it is not, we have to stand and tell the government that the emperor has no clothes.

It is a great housekeeping bill. I am glad we have a deal with Serbia. I am glad we have a deal with Namibia. I am glad we have a deal with countries that are our allies. However, why can we not see the need to really get serious about tax evasion?

I note that the government has been given information recently, that it had the information from the international consortium that was doing the tax evasion studies and that it had the opportunity to move forward, and it did not. It said in this House that it will take all measures to do so. It did not.

I am hoping, when our government is in the G8, that it shows a tiny bit of leadership on this issue and gets on board with Mr. Cameron, gets on board with the Americans, gets on board, indeed, with all of the G8 and says, “Canada is here to play as well. We're not simply going to take a back seat or ride in the back of the train, in the caboose, on such an important issue”.

The House resumed from June 3 consideration of the motion that S-17, 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 be read the second time and referred to a committee.

Bill S-17—Time Allocation Motion

[Ted Menzies, Conservative, Macleod, AB]

Mr. Speaker, that was a rather mythological sort of question, I would suggest. I am not presuming that my hon. friend across the way would not be precise and concise in his presentation. I have listened to him on many occasions. I listened to him in the leadership debate for his party, and he was very articulate. We encourage him to continue with that. He will have time during this debate to actually bring the concerns of his constituents forward.

Forgive me if I repeat myself, but we have listened to many speeches in this House that are basically a mirror image of the speech that was just presented. I do not think that is a good use of those hon. members' time or of members' time on this side. We actually want to move forward with the protection of the tax system in this country and in the countries we are dealing with in Bill S-17.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Mr. Speaker, we are not actually talking about Bill S-17 at the moment. We are talking about the government's motion to limit debate so that we cannot talk about Bill S-17.

Over the last number of weeks, what we have heard from the government is that if we disagree with it, we are anti-Canadian and traitors. If members do not speak properly, then the Conservatives are going to move time allocation on these various bills.

It is not up to the member to determine how I am going to present myself in the House. It is up to my constituents. I am here because the people of Dartmouth—Cole Harbour who voted for me decided that they wanted me to come here to speak to bills, such as Bill S-17.

With its tendency to bring in time allocation, the government is suggesting that it is going to decide how much time I am going to have to speak on it, regardless of what I want to say. The member opposite now suggests that if he decides that I am not articulate enough or am not getting to the point quickly enough, as he would identify it, the government is going to bring in time allocation on that basis. I have wondered why it is that it will not agree to abolish the Senate, but now I understand that it wants to abolish this chamber. It wants to eliminate all free speech for the commoners, for the people of Canada.

[Ted Menzies, Conservative, Minister of State (Finance)]

moved:

That, in relation to Bill S-17, 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, not more than five further hours shall be allotted to the consideration of the second reading stage of the Bill; and that, at the expiry of the five hours provided for the consideration of the second reading stage of the said Bill, any proceedings before the House shall be interrupted, if required for the purpose of this Order, and, in turn, every question necessary for the disposal of the said stage of the Bill shall be put forthwith and successively, without further debate or amendment.

Bill S-17—Notice of time allocation motion

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

Mr. Speaker, I would like to advise that agreement could not be reached under the provisions of Standing Order 78(1) or 78(2) with respect to the second reading stage of Bill S-17, 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.

Under the provisions of Standing Order 78(3), I give notice that a minister of the Crown will propose at the next sitting a motion to allot a specific number of days or hours for the consideration and disposal of the proceedings at the said stage.