Mr. Speaker, it is indeed an honour to rise in support of the opposition day motion today, which asks the government to keep its promise to cap the stock options deduction loophole and to take aggressive action to combat tax havens and take concrete steps in the next budget to do so.
This is a very important motion for a number of reasons. During the course of my remarks, I want to talk about tax havens in particular. I also want to talk about the use of tax havens by companies that are in the burgeoning cannabis business, something that came up in the Senate a couple of days ago that I would link into this debate. Finally, I would like to talk about a private member's bill I have before Parliament that would make some contribution to this problem.
What is this problem? We have heard it often already. Other speakers have pointed the finger at the enormous and growing gap in our society, the growing inequality, where Canada's top CEOs earn 200 times the average person's salary. These statistics are quite extraordinary when Canadians hear them, and they cannot be said too often.
Oxfam reported last month that eight super-wealthy men own as much wealth as half the world's population. That is staggering. It is hard to get our heads around figures like that. Of course, the top 20% also own 67% of all the wealth in our country. This is not the kind of society I grew up in, but it is the kind of society we are leaving to our children and our grandchildren. I frequently hear, on the doorsteps in my riding of Victoria, the recognition that Canada is changing before our very eyes. One of the reasons it is changing is that we are allowing tax havens to flourish.
The government will tell us that it is doing all it can to deal with aggressive tax avoidance schemes, that it has hired all these people. However, as the old ad used to say, “Show me the money.”
I cannot remember how many times in the last Parliament I asked the member from Delta, who was a Conservative member and the minister of national revenue, just how much money they had recovered, because they kept bragging about how the CRA was on the front lines in doing all it could to recover this money. I kept asking how much money they had actually recovered. Here is how they put it: “We have identified billions of dollars.” I would ask the next time, “How much have you actually recovered?” I never got an answer. It was alway “identified”. We need to watch the bouncing ball. We need to watch the rhetoric, because this government uses it as well.
About $500 million was recovered after the Panama papers were first exposed by countries that took seriously their need to tackle tax evasion and aggressive tax avoidance. The line between those two concepts is murky at best. How much did Canada recover? We do not know. They will not tell us. Maybe they identified a lot of money. I suspect that they did.
I do not for a second wish to make light of this. The government hiring more people is a good first step. Of course, when the Liberals were in opposition, they used to remind the House frequently that for every dollar invested in going after international aggressive tax avoidance, we would recover five or ten or some multiple. I absolutely believed them. It is an excellent investment.
Second, I support and applaud our government's work at the OECD, the G7, and other international places to make sure that we are part of the solution to tax avoidance and trying to deal with what they call BEPS, and a number of other things. I support Canada's leadership in those place. However, it is not as much as the British have or as the French have. I fear that Canada is there but perhaps does not have much to show for it yet.
Third, I noticed that Canada has entered into a number of these agreements called TIEAs, tax information exchange agreements. Sometimes it looks to a person reading them that all they do is regularize tax avoidance and that the use of tax havens seems to be just fine.
At the macro level, stepping back from this, our Income Tax Act has for a long time been criticized by accountants, the organized tax industry, and the person on the street who has enormous difficulty understanding how the scheme works. It is such a simple thing for a politician to stand up and say, “We have to simplify our tax system.” How long have we heard that? Sometimes we get simplistic arguments. Sometimes I hear in Alberta how we need to have a flat tax and all of a sudden everything will be better, no matter how regressive that in practice turns out to be.
We have a big problem at the international level and at the domestic level. If one talks about the effect of tax havens on Canada, it is nothing compared to what is happening in the developing world, where resources are siphoned off and find their way into bank accounts in Switzerland and Liechtenstein and places like that. The money that is so desperately needed for development is not happening. Sadly, some of that is in the mining sector, and sadly, the mining sector seems to be a significant part of Canada's economy. We see in Vancouver that half or more of mining corporations are incorporated, sometimes using tax havens.
I am trying to set out the enormity of the problem and some of the solutions that may be at hand.
One idea I think is worth discussing, at least, is my private member's bill, which is Bill C-362. It would attempt to close some of these loopholes. This is a very simple two- or three-line bill, which I would urge hon. members to consider. It is inspired by the late Dr. Robert McMechan, who, sadly, passed away last year. He was a tax litigator for most of his career right here in Ottawa in the Department of Justice. He went on to do graduate work at Osgoode Hall. He wrote a very important book on international tax avoidance. He came into my office and asked to work with me in trying to get our hands around this enormous problem. Of course, I welcomed him with open arms.
The bill that is at issue would make what the Canadians for Tax Fairness have characterized as a significant impact. I confess that I do not know how they got this figure, but they claim that it would yield $400 million to Canada every year if this bill were implemented.
What would the bill do? Members will recall, back when Prime Minister Mulroney was in power and Michael Wilson was our finance minister, that Canada did what a number of countries did. The government incorporated into our Income Tax Act the general anti-avoidance rule, GAAR, as it is called. GAAR would be amended by my bill to require that there be “economic substance” considered as a relevant factor in determining whether transactions were “avoidance transactions”. If the judge had the ability to eyeball a set of transactions, he or she could say that they seemed to be only for tax purposes. Putting that money in Liechtenstein or the Cayman Islands has only one purpose, and that is to avoid paying taxes, and there is no economic substance, in the jargon, for that to occur.
That was how we started, but with great respect to our courts, they took a different path in the application of that principle, and “economic substance” seems to have been lost in the fog. Cases such as Canada Trustco and Copthorne took us to a place where courts were no longer able to do what they had initially been instructed to do. This simple amendment would put us on track with what the British and the Americans are doing: being able to ensure that there is a reason to put the money in the Cayman Islands, aside from simply saving tax. It is simple, but it is an ethically important thing to do.
Speaking of ethics, it is time we took tax avoidance much more seriously rather than saluting and applauding the wizards of Bay Street, be they in a law firm or an accounting firm, who know how to play the angles. The best and the brightest, when I taught law, often went there, because the ability to make money is astounding in this field. As Canadians, we should look at that the same way we look at smoking or other social vices. This should be seen as an immoral activity. Yes, it can be done, but no, it should not be. We should, as Canadians, be applying an ethical lens to this field of the use of tax havens and aggressive tax avoidance.