Multilateral Instrument in Respect of Tax Conventions Act

An Act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting

Sponsor

Bill Morneau  Liberal

Status

This bill has received Royal Assent and is, or will soon become, law.

Summary

This is from the published bill. The Library of Parliament often publishes better independent summaries.

This enactment implements a multilateral instrument in respect of conventions for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

The multilateral instrument is an international treaty developed as part of the G20 and OECD’s project to tackle base erosion and profit shifting (BEPS). The purpose of the multilateral instrument is to modify, in their application, tax conventions between two or more parties to the multilateral instrument so as to further the objectives of the tax convention. The multilateral instrument operates alongside tax conventions to modify them in their application; it does not directly modify the text of the tax conventions. The multilateral instrument will apply to a Canadian bilateral double tax convention only if both parties to the convention notify the depositary that the convention is intended to be covered by the multilateral instrument. The Secretary-General of the OECD is the depositary of the multilateral instrument. The implementation of the multilateral instrument requires the enactment of this Act.

Elsewhere

All sorts of information on this bill is available at LEGISinfo, provided by the Library of Parliament. You can also read the full text of the bill.

Votes

April 8, 2019 Passed Concurrence at report stage of Bill C-82, An Act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting

Multilateral Instrument in Respect of Tax Conventions ActGovernment Orders

May 2nd, 2019 / 3:10 p.m.
See context

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Mr. Speaker, I am pleased to rise in the House this afternoon and speak to an important piece of legislation, Bill C-82, which is a further step in our government's agenda and plan to build an economy that is fair and where everyone has the opportunity to succeed.

A fair tax system forms the foundation for a stronger middle class and a growing economy, instills confidence in Canadians and helps create opportunities for everyone. It is important not only as a matter of fairness but as a means of safeguarding the government's ability to invest in programs and services that help Canada's middle class, including residents in my riding of Vaughan—Woodbridge and Canadians working hard to join the middle class.

In my riding of Vaughan—Woodbridge, residents work hard and pay their taxes diligently—

Multilateral Instrument in Respect of Tax Conventions ActGovernment Orders

May 2nd, 2019 / 3:15 p.m.
See context

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Madam Speaker, in the riding of Vaughan—Woodbridge, which I am privileged to represent, the residents work hard and pay their taxes diligently. They want assurance of our tax system and its fairness, assurance that everyone is paying his or her fair share.

As a government, since being elected we have invested over a billion dollars in the Canada Revenue Agency to ensure that we have a system that works for all Canadians and that our country can have confidence in this department. As we all know, tax season has now come to an end. Millions of Canadians have filed their returns, and they can be assured that our government is putting in the resources necessary for a timely, efficient, fair service for all Canadians from coast to coast to coast.

Tax fairness is something that is important to me and to our government. In addition to Bill C-82, with budget 2019, which followed a wide-ranging review of federal tax expenditures introduced in budget 2016, our government has brought forward a number of changes to make our tax system fair, efficient and transparent, and to ensure that tax expenditures do not unfairly benefit the wealthiest Canadians rather than the middle class and those working hard to join it.

I am proud to announce that our government's actions are expected to recoup over $4 billion annually in revenues that have been reinvested in the Canada child benefit, in seniors and in those Canadians who need it the most. In my riding, the Canada child benefit delivers benefits to over 16,000 kids monthly, nearly $5 million to over 9,000 families.

We know that in late February, Statistics Canada, in its annual income survey, noted that we have lifted 825,000 Canadians from coast to coast to coast out of poverty. We have seen a reduction of nearly 20% in poverty rates across Canada. At the same time, over the last three years, we have created over 900,000 new jobs, a majority of them full-time and in Canada. That is attributed to the hard-working entrepreneurial spirit that people have in my riding of Vaughan—Woodbridge and across Canada, and we have helped lay the foundations for this strong period of growth that continues today.

In addition, in budget 2019 we will limit the usage of the stock option deduction, a measure that benefited only 2,330 individuals who claimed approximately $1.3 billion of employee stock option deductions. We will limit the use of the employee stock option deduction to ensure that it is only used in new start-ups and young firms.

Before I left the private sector for the public sector, to run and be elected as a Liberal member of Parliament, one of the things I advocated for was an adjustment to the employee stock option deduction that was and had been in use for many years. I already knew that it was unfair, that it was something that was not necessary for our economy to grow, and that it did not benefit middle-class Canadians. I am happy that our government came through and put this measure in the current budget.

In addition, as a reminder, the first thing our government did when elected was cut taxes for nine million middle-class Canadians and, yes, ask the 1% to pay a bit more. The second thing we did was cut taxes on small businesses by lowering the small business tax rate to 9%, which represented a $7,500 tax saving annually for small businesses. In my riding, there are over 4,000 small businesses that potentially can reduce their taxes this year by approximately $7,500. They can use this to reinvest in their human resources, in their capital equipment and in greater dividends for themselves, for personal use.

We have introduced policies, including in Bill C-82, that ensure that our economy is strong, that our tax system is fair, efficient and transparent, and that all Canadians and all wealthy Canadians are paying their fair share. These measures by our government will help strengthen confidence in Canada and encourage investment. They will help support Canadian businesses as they grow, expand into new markets and create more good, well-paying jobs with great benefits.

Ensuring taxpayer fairness is a complex process requiring ongoing engagement with a wide range of partners both at home and around the world.

I would like to add that for a number of years, I sat on the Accounting Standards Board's User Advisory Council here in Canada. Members can rest assured that I am quite aware of the intricacies and the difficulties of ensuring a fair and transparent accounting system and a fair, transparent and efficient tax system and of coming up with norms and regulations that are uniform internationally, which we have done and that are contained in Bill C-82.

The bill would ensure that corporations do not shift profits from a jurisdiction with a high tax rate to a jurisdiction with a low tax rate or, in some instances, shift profits from a jurisdiction where there are tax rates to a jurisdiction where no tax rates exist and they would have zero tax payable. We want to avoid that situation. Residents in my riding of Vaughan—Woodbridge and across Canada depend on the programs and services that we as a government deliver, and we need to ensure that those government programs are funded equitably by Canadians from coast to coast to coast.

The bill being considered today is another step forward in this process. It proposes to implement a multilateral instrument, or MLI, in respect of conventions for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. When we refer to fiscal evasion, it is exactly what I mentioned earlier: profit shifting from one jurisdiction to another to lower one's tax bill and to avoid paying taxes. In other words, with Bill C-82, our government would not only be making Canada's tax system a fairer one, it would also help to escalate the fight against aggressive international tax avoidance.

Bill C-82 proposes to allow Canada to implement treaty-related measures to counter a practice known as base erosion and profit shifting, or BEPS. As this chamber has already heard, BEPS relates to strategies by which wealthy individuals can use loopholes to shift profits to low-tax or no-tax locations to avoid paying taxes. The multilateral instrument this bill seeks to enact is a product of a worldwide initiative involving over 100 jurisdictions, including Canada, again demonstrating Canadian leadership on the world stage to get done what is needed and what is right. It is the first multilateral convention to modify the application of bilateral tax treaties. It allows signatory nations to implement measures developed from the OECD/G20 project to counter the practice of base erosion and profit shifting and to do so in a timely manner. We are not talking about forward many years; we are talking about the near term.

Just as importantly, the MLI allows signatories to work more effectively together in the fight against aggressive international tax avoidance. In addition, the MLI contains provisions to improve dispute resolution under Canada's tax treaties.

While some of the provisions of the MLI are required, others are optional. The mandatory provisions meet the minimum standards established by the OECD, as agreed to by all the signatory jurisdictions, and each signatory is free to choose among the provisions that are optional. Our government proposes to adopt a number of the optional provisions of the MLI upon ratification in addition to the mandatory ones.

There are three provisions in particular I would like to reference that would prevent or reduce opportunities for inappropriate tax avoidance, which, again, is shifting profits from one jurisdiction to another. They look at transfer pricing and a number of measures wealthy individuals or some corporations utilize to reduce their tax bills, such as moving resources to a foreign jurisdiction so as to not pay taxes where the revenues are generated.

First would be a 365-day holding period for shares of Canadian companies held by non-resident companies. It would ensure that the lower treaty-based rate of withholding tax on dividends would not be available in the case of short-term share acquisitions.

Second would be a 365-day test period for non-residents who realize capital gains from the disposition of shares or other interests that derive their value principally from Canadian immovable property. It would aim to prevent non-residents from obtaining a treaty-based exemption from Canadian taxes on capital gains in inappropriate circumstances.

Third would be a provision for resolving dual-resident-entity cases to prevent potential double taxation, which would also help to protect against a company's ability to manipulate its tax residence to avoid or reduce its taxes.

Additionally, Canada would retain the option to adopt additional provisions of the multilateral instrument after ratification.

By implementing the optional provisions I mentioned, together with the required minimum international standards, Canada's ability to protect its tax base would be enhanced and would support the international effort to tackle base erosion and profit shifting.

Overall, the multilateral instrument is an international approach that makes it possible to implement necessary changes in a timely and efficient manner. It is an important tool in combatting aggressive international tax avoidance, and it would benefit both Canada and our international tax partners. Again, there are approximately 100 countries that have signed on to BEPS.

I am glad to see Canadian leadership on that front. That is what we have demonstrated as a government time and time again in the last three and a half years since we were elected and given the privilege of serving this great country and the 37 million residents that inhabit it.

The multilateral instrument this bill proposes to put in place, with its provisions designed to address aggressive tax avoidance, represents another step in our government's efforts to ensure tax fairness for Canadians. Again, we have lowered taxes for middle-class Canadians, nine million of them, with an approximately $20-billion tax cut, and have asked the wealthiest 1% to pay a little more. We know that the recent report by the Parliamentary Budget Officer looked at that tax cut and actually put a stamp of approval on it, saying that what we attempted to do in terms of lowering taxes for middle-class Canadians and ensuring that the 1% paid a little more actually worked. There was a net benefit for our economy.

We made a promise to middle-class Canadians that we would lower their taxes and make sure that everyone paid their fair share. While we have introduced a middle-class tax cut and reduced the small business tax rate, Canadians need to have confidence that the system will, at the same time, help grow the economy and ensure that the benefits of growth can be felt by everyone.

For many years, economic growth could not be defined as inclusive. For the last three and a half years, we have seen what inclusivity of economic growth means. It means lifting 825,000 Canadians out of poverty. It means creating 900,000 new jobs, the majority full time, the majority private sector. It means the lowest unemployment rate in over 40 years. It means wage growth, real wage growth, which we have not seen in Canada for many years. It means that Canadians are optimistic about their future.

We do face challenges in certain sectors, and our government is there to address those challenges, working in partnership with those sectors and those industries. That is the good work we were elected to do, and that is the good work we will continue to do.

I encourage all hon. members to support the proposed legislation, Bill C-82, which would implement such an important tool for tax fairness.

Multilateral Instrument in Respect of Tax Conventions ActGovernment Orders

May 2nd, 2019 / 3:25 p.m.
See context

Conservative

Tom Kmiec Conservative Calgary Shepard, AB

Madam Speaker, as the member knows, I support this legislation as well. It is one of the few Liberal initiatives that actually makes some sense. I have called it in the House before a tax treaty for tax treaties. That is really what it is.

The member talked about many other things that had very little to do with the contents, so I am just going to ask him a question on that point. Originally the Liberals promised that the so-called increase on the top 1% would pay for itself. That is actually the wording they used, “pay for itself”. That is not what the Parliamentary Budget Officer found. He found that the top income earners in Canada were paying a higher share of total income being collected, which was not the point.

Would the member agree with me that the effect of the tax changes the Liberal government introduced gave a bigger tax cut to every single member of the House of Commons than it did to those earning $45,000 or less?

Multilateral Instrument in Respect of Tax Conventions ActGovernment Orders

May 2nd, 2019 / 3:25 p.m.
See context

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Madam Speaker, I would like to thank my hon. colleague and friend, the member for Calgary Shepard, who I have the privilege of sitting on the finance committee with.

What I will say is that when we look at our overall tax system and the way it works, and if we look at the elasticity of tax in terms of the way the Parliamentary Budget Officer wrote about it in the report, our tax cut worked. We allowed nine million middle-class Canadians to receive a tax cut. They used that income to invest and save. We also adjusted the top tax rate. There was some front-loading in the first year, which many had anticipated. What we are seeing is that upper-income earners are still responding with their labour supply. They are still responding. We are still seeing growth in the economy. We are still seeing growth, I would say, in incomes.

The Parliamentary Budget Officer's report was, in my view, an endorsement and a validation of our policy of reducing taxes for middle-class Canadians and asking the 1% to pay a little extra.

Multilateral Instrument in Respect of Tax Conventions ActGovernment Orders

May 2nd, 2019 / 3:30 p.m.
See context

NDP

Rachel Blaney NDP North Island—Powell River, BC

Madam Speaker, in my riding of North Island—Powell River, there are some serious concerns regarding the fisheries. For many years, successive governments have not supported restoration and local community hatcheries. That has put a lot of the community members I represent in great financial difficulty.

When we look at this legislation, we have to recognize that the gap between the richest Canadians and low-income Canadians is growing. In fact, the 100 richest Canadians now hold as much wealth as the bottom 10 million Canadians combined.

In the last two elections, the Liberals promised to cap how much could be claimed through the stock option deduction. However, they backed down on that promise more than once after they took power. Why did the government decide to do this? Why not keep that promise?

Multilateral Instrument in Respect of Tax Conventions ActGovernment Orders

May 2nd, 2019 / 3:30 p.m.
See context

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Madam Speaker, I want to put on the record that I grew up in northern British Columbia, in Prince Rupert. My mother and her five sisters worked at a cannery. That is how they made their income. I worked at a cannery. Unfortunately, many of those canneries no longer exist, as the industry has changed quite a bit.

I note that in budget 2019, we have put in approximately $100 million for the restoration of the salmon industry. I would love to follow up with the member on the exact details.

In budget 2019, our government aligned our stock option rules with those of the United States. We will still allow the stock option deduction for small firms and new technology firms, because we need those innovators in Canada. Many firms that come into existence do not generate cash flow right away. Stock options are a form of payment in terms of compensation for their employees. For existing and mature firms, we have eliminated the tax deduction beyond $200,000.

This is real progress and real change.

Multilateral Instrument in Respect of Tax Conventions ActGovernment Orders

May 2nd, 2019 / 3:30 p.m.
See context

Liberal

Bob Bratina Liberal Hamilton East—Stoney Creek, ON

Madam Speaker, I was pleased to hear some endorsement from the other side regarding some aspects of our budget.

It is important for people to know that informed consultation goes on in the decisions we make with regard to the finances of the country. Certainly, the great experience my friend from Vaughan—Woodbridge has had in that field speaks to the integrity of our process.

How much intense consultation was there regarding the issues we brought forward? I know there were some controversial consultations early on. They were changed somewhat because of the input we received from people like the member for Vaughan—Woodbridge. Could the member tell us about the consultation process?

Multilateral Instrument in Respect of Tax Conventions ActGovernment Orders

May 2nd, 2019 / 3:30 p.m.
See context

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Madam Speaker, I come from a very humble, middle-class background, having grown up in Prince Rupert, British Columbia. However, through a lot of work, I had the privilege of working on Bay Street and Wall Street for over 20 years.

Our government does listen and consult when it puts forward changes in how businesses operate and in our tax system. This has been a fundamental principle since our government entered office.

Bill C-82, a multilateral instrument, went through vast consultation with our international partners. Bringing this legislation forward would ensure that shifting profits from one jurisdiction to another would not occur. It would lessen that opportunity. It would ensure that Canadians continued to have confidence in our tax system's ability to fund the programs and services they utilize and need on a daily basis. It would allow us to take a step forward on a national pharmacare program and to take a step forward on the Canada child benefit, which we have done by indexing it two years ahead of time. We have brought in measures such as a $1.7-billion tax cut for seniors through the guaranteed income supplement exemption amount.

Many measures we have brought forward we have been able to do through consultation with Canadians, similar to what we have done for Bill C-82.

Multilateral Instrument in Respect of Tax Conventions ActGovernment Orders

May 2nd, 2019 / 3:35 p.m.
See context

Winnipeg North Manitoba

Liberal

Kevin Lamoureux LiberalParliamentary Secretary to the Leader of the Government in the House of Commons

Madam Speaker, a question was raised a few minutes ago in regard to the issue of income inequality. One of the things that I like to think we have done very successfully in government to address that issue is increasing the tax on Canada's wealthiest 1%, while at the same time decreasing the tax on Canada's middle class. We also put in a boost of income through the Canada child benefit and things such as the guaranteed income supplement.

Could my colleague and friend provide his thoughts on how that actually assists in ensuring that there is more equality?

Multilateral Instrument in Respect of Tax Conventions ActGovernment Orders

May 2nd, 2019 / 3:35 p.m.
See context

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Madam Speaker, if we look at all the policies we have implemented and where Canadian families are today, we see that an average family of four is $2,000 better off today than it was three and a half years ago. We know that has been done through a middle-class tax cut, which was funded by increasing taxes on the wealthiest 1% of Canadians. We know those are progressive policies. We know that all Canadians need to pay their fair share of taxes. However, we know that Canadians in the middle class deserve a break. We understand there are affordability issues. We have addressed some of those affordability issues in the budget with regard to youth and students, with regard to seniors and with regard to housing affordability.

We have also asked a very fundamental question. We have asked the wealthiest 1% of Canadians to pay a little more, because we need it for the betterment of society. We cannot allow our society to further go down the path of income inequality. We have stopped that and we have improved that. We have seen the results as, again, over 825,000 Canadians, in all 338 ridings across this country, have been lifted out of poverty. It is a great success and we should all be proud. It is a 20% reduction of our poverty rate. Those are the measures behind it, which have reduced inequality in this country and are giving more and more Canadians hope. We as a government need to be proud of that record.

Multilateral Instrument in Respect of Tax Conventions ActGovernment Orders

May 2nd, 2019 / 3:35 p.m.
See context

Conservative

Tom Kmiec Conservative Calgary Shepard, AB

Madam Speaker, God is an honest payer, but a very slow one, as the Yiddish proverb goes. It means that for all the good things we do during our life, the treasures await us in heaven, which is a very common thing many Christians believe. The National Prayer Breakfast was this morning, so I thought I would begin with a Yiddish proverb that many know.

However, it also applies to taxes, because what we expect from Canadians, Canadian corporations and those doing business in Canada is to pay their taxes honestly and not to engage in aggressive tax planning and tax avoidance schemes, which this bill proposes to make more difficult by implementing a multilateral tax treaty. In this House, I have previously called it a tax treaty for tax treaties.

Those who are listening in or those who are in the gallery may be wondering what BEPS is, because many members have mentioned it. It is base erosion and profit shifting. I am going to provide a definition and I am hoping that everybody will be able to follow along.

The definition from the OECD is an example, so it is easy to figure out. Company A, which resides in the Cayman Islands, wants to provide a licence for the use of intellectual property to company C in South Africa. South Africa, however, has not concluded a tax treaty with the Cayman Islands and would thus be entitled to apply its domestic withholding tax rate on outbound royalties.

Hopefully, everybody is getting what I am getting at here.

However, a European country has concluded a tax treaty with South Africa that reduces its withholding tax rates on royalties. This country does not itself levy a source tax on royalties. Therefore, company A establishes a letterbox company in this European country and diverts the royalty payments through the letterbox company to reduce the tax withheld by South Africa. In this example, the principal purpose of establishing this arrangement, including the letterbox company, is to obtain the lower withholding tax rate available under the tax treaty between South Africa and the European country.

This is what we call base erosion and profit shifting. It is something that very large corporations routinely engage in and have been accused of in the past. It is sometimes called “the green jersey”. I have heard it called “the single malt”, depending on the jurisdiction it comes from. Typically, it heavily impacts high tax rate countries, such as Canada, the United States and others. Low tax rate countries are impacted as well, as they lose a lot of their ability to raise taxes on behalf of their citizens, because they are not able to track the money as it moves around. The companies are not honest payers in those situations, nor will they be slow ones in the future, unlike the Yiddish proverb I mentioned. We want to ensure that large corporations, large multinationals and individuals doing business in other countries are paying their taxes honestly and that they are not slow to do so but pay them on time and when they are expected to.

This is a tax treaty for tax treaties. I support this piece of legislation, because we want to ensure that our tax system is both fair and efficient, and that we are able to collect the taxes owed to the government. We know how much difficulty the Canada Revenue Agency has had collecting that information. Hopefully, now it will be looking at what the tax gap is.

I want to draw the attention of the House to article 28 and article 29 of this tax treaty, because that is the only part of the legislation I had concerns with at committee. This tax treaty will not return to Parliament to determine whether we continue with certain reservations or not. What this tax treaty is proposing to do is take Parliament out of consideration after the bill is passed by this House and by that other place as well. What will happen in those situations, with the many reservations the Canadian government has indicated to our multilateral partners, is that if in the future cabinet were to decide that we wish to participate in them, that particular matter will not return to the House and will not be taken up for consideration.

I think that was a matter brought up by Patrick Marley at committee with respect to articles 10, 12 and 13. He mentioned that, because of that, he had some concerns that perhaps Parliament would lose its ability to impact the tax treaty choices and specific implementation provisions in the future, perhaps when some members of this House are no longer here, or I am no longer here, and the contents of the treaty would not be well known.

That is literally the only part of the treaty that I have concerns with. Outside of that, I think the generalities of it are the MLIs, ensuring that our multilateral partners are harmonizing the rules with us and that we have the same rules applied across many different countries. This would ensure that we are able to collect the taxes that are owed to the Canadian treasury. We would also be able to ensure that tax avoidance and aggressive tax planning are reduced to an absolute minimum.

There are many examples of these types of companies that engage in it. Some of the largest ones, like the one that produces the smart phones in our pockets, typically have trademark and copyright subsidiaries that simply trade in the trademark. There is no actual business being conducted in the different jurisdictions; they simply charge a royalty for its use.

Starbucks is a great example. I have used it before and I am still waiting for their lobbyists to call me and complain that I used it as an example.

Starbucks engages in this practice by charging a royalty on its logo and its name, which it puts in a different jurisdiction. Then its Canadian, American and other subsidiaries—holding companies, sometimes—pay a royalty to the other place that does not charge any taxes on the royalty. That is the type of base erosion we are trying to avoid and do away with.

Before I continue, I will mention that today, May 2, is a special day. As I do on almost every May 2, I want to wish a very happy birthday to my father-in-law and my wife, who were both born on the same day. If I did not do that, I would not want to go home tonight and could not guarantee I would return next week. I say a very happy birthday to both of them.

May 2 is also a special day for those who, like me, are of Polish heritage. Constitution Day is the day the original Polish Constitution was created. It is the founding document of many European constitutions, including the American constitution. Guaranteed rights are set out in it. The principle of “no taxation without representation” comes partially from that original document, a principle that again is found in documents like Bill C-82, the tax treaty of tax treaties. That same principle applies here as well.

We are trying to ensure that the taxes owed to the people of Canada are paid by the corporations and individuals who owe them. I simply do not see a reason that we should not be enforcing as many of the provisions as we possibly can.

Many of our OECD and G20 partners will be participating, although the United States of America will not be participating in this multinational convention. However, we have many tax treaties with our neighbours to the south that will ensure they meet their obligations to us and we meet our obligations to them. They will ensure that taxes owed in both jurisdictions are indeed paid.

We know that the partial goal of the government with this document and with budget bills is to collect the difference between what is owed and what is actually collected. Many officials at committee said their hope is that they will be able to close that tax gap and collect the taxes they have not been able to collect. It is estimated that roughly $23 billion in profits that should have been declared in tax in Canada were shifted to a lower-tax jurisdiction. That is a large sum of money, but it would not be the full $23 billion; it will be a faction of that amount. It is all part of the government's attempt to find and scrounge every single last dollar to pay down the deficit.

Kudos to the government. It is about $20.3 billion off the target it set for itself in 2015, and it will still be off its target well into 2040.

I was at a town hall yesterday, and several constituents asked me whether the Canadian government was ever intending to reduce the deficit to zero and start paying down the national debt. I had to tell them that unfortunately, no, that is not the case, that there is no such intention in any government document at this point. It simply tracks how big the deficit and the national debt will be. For the first time this year, the Government of Canada owes over $700 billion on behalf of taxpayers. If we include crown corporation debt, it goes to over $1 trillion. After the next few terms, we are expecting to see another $250 billion to $300 billion added to the national debt, and that number excludes crown corporations.

Initiatives like this try to seek justice on behalf of Canadians by trying to collect the taxes owed in other jurisdictions, an important part of closing the tax gap. I will be supporting this piece of legislation, as I did at earlier stages of the bill and at committee. My only concern, which I am putting on the record so that future parliamentarians will see it, is provisions in articles 28 and 29 that shift the responsibility from Parliament to cabinet to decide which reservations can be done away with. Those will be done by orders in council. My understanding from officials at committee is that a simple order of cabinet would do so. It is a defect in the bill, but the defect is not sufficient to cause me vote against it. I invite all members to vote in favour of it.

Multilateral Instrument in Respect of Tax Conventions ActGovernment Orders

April 8th, 2019 / 5:20 p.m.
See context

Louis-Hébert Québec

Liberal

Joël Lightbound LiberalParliamentary Secretary to the Minister of Finance

Mr. Speaker, I am pleased to speak today about the importance of tax fairness and to join the debate on Bill C-82. I would like to use my time to explain how the bill would become an important new tool in the government's arsenal to combat aggressive international tax avoidance.

Tax fairness is fundamental to our democracy. It is a cornerstone of our government's plan to grow the middle class and spur economic growth so that more people can join it. In each of our government's last three budgets, we introduced measures to enhance the integrity of Canada's tax system. We continue to do work and take action in this regard so that Canadians can have confidence that their tax system is working and is fair.

As part of these actions to improve tax fairness, we introduced Bill C-82. The bill is a response to a profound challenge. When some Canadians choose not to pay their fair share of taxes, all of us are affected. What does this mean for Canadians? It means less money for important social programs to help new parents take care of growing families, workers find skills training or seniors live in independence. It means less money for vital infrastructure such as the roads, railways, ports and airports that help people and goods move safely and on time to where they need to go. As well, it means less money for policing our communities, health care and the environment. I could go on and on.

This is why it is important to make sure our tax system is and remains fair—

Multilateral Instrument in Respect of Tax Conventions ActGovernment Orders

April 8th, 2019 / 5:25 p.m.
See context

Liberal

Joël Lightbound Liberal Louis-Hébert, QC

Madam Speaker, our government believes that all Canadians deserve to reap the benefits of a strong and vibrant economy. It goes without saying that this is made possible through a fair tax system.

Now I would like to talk about the bill before us in detail. Bill C-82 will give Canada better tools to fight what is known as tax base erosion and profit shifting, which is also known domestically and internationally as BEPS. The issue is tax avoidance strategies that wealthy companies and individuals use to exploit loopholes in the tax system. They take advantage of these loopholes to avoid paying tax or to shift their profits to low- or no-tax jurisdictions.

These schemes enable wealthy companies and individuals to avoid paying their fair share of taxes. They rob Canadians of the tax revenue that pays for the services and benefits that make Canada a good place to live and a more just and equitable society.

We have worked hard to combat that loss of tax revenue. In particular, I would highlight the work we have done on this with our international partners. We have worked with our partners at the Organisation for Economic Co-operation and Development, the OECD, and other G20 nations to identify ways in which our current tax treaties are vulnerable to potential abuse.

Those organizations then developed measures that the countries can choose to include in their tax treaties to directly address those vulnerabilities. This new approach also addressed the fact that it would take a long time to renegotiate existing tax treaties one by one.

The approach I just described has been included in this bill. This is called a multilateral convention, also known as a multilateral instrument or MLI. This instrument is the result of a global initiative and the work of more than 100 countries and jurisdictions, including Canada. The multilateral instrument allows participating jurisdictions to adopt measures with respect to BEPS agreed to by the OECD and G20 without having to renegotiate each tax treaty.

By supporting Bill C-82 and implementing the multilateral instrument, the Government of Canada is taking action to preserve the integrity of our tax system and stop people from abusing our tax treaties. In addition, implementing the MLI will demonstrate Canada's desire to take concerted action with our treaty partners to combat aggressive international tax avoidance.

The fact is, at a time when companies and capital are increasingly globalized and interconnected, no country can fight tax avoidance single-handedly. In order to implement effective reforms, it is more vital than ever to collaborate with our international partners, such as the OECD and the G20. With this bill, we are taking one more step in that direction.

On the home front, the government is also aggressively pursuing those who promote tax avoidance schemes. In the last fiscal year alone, we imposed roughly $48 million in civil penalties on these third parties.

We are also gaining better access to information on Canadians' overseas bank accounts with the implementation of the common reporting standard, or CRS. CRS is a new system that will let Canada and more than 100 other countries exchange financial account information. This information will help us identify instances in which wealthy Canadians hide money in offshore accounts to avoid paying their taxes.

We have also hired more specialist auditors who focus on the high net-worth individual taxpayers. These teams include about 250 auditors, who are responsible for examining high-income earners and more than 800 high net-worth individuals and their webs of corporate structures.

In addition, the Minister of Finance and his provincial and territorial counterparts have committed to ensuring that Canadian authorities know who owns which corporations in Canada. They are also committed to better harmonizing corporate ownership record requirements between various jurisdictions.

Building on that agreement, we amended the Canada Business Corporations Act to require federally incorporated corporations to maintain beneficial ownership information. The government's previous budget, in 2018, enhanced the income tax reporting requirements for trusts so that beneficial ownership information would be more available and accessible.

Data of this kind helps Canadian authorities act against those engaging in international tax avoidance and criminal activities, such as tax evasion.

Thanks to the latest available data and our government's targeted investments, the Canada Revenue Agency is now armed with better tools and approaches that enhance the integrity and fairness of our tax system.

These tools help the CRA collect valuable information and allow its agents to work smarter and more effectively to ensure all Canadians pay their fair share.

For example, Canada is a member of the Joint International Taskforce on Shared Intelligence and Collaboration, or JITSIC. This expanded network of 38 countries works closely and actively with other tax administrations to coordinate tax compliance activities across the spectrum of international tax risks. This expertise has allowed the CRA to participate in and lead JITSIC expert working groups, including in the development of a strategy to identify and stop promoters of abusive tax schemes.

Canada has also taken steps to coordinate its criminal investigation by joining Australia, the Netherlands, the United Kingdom and the United States in the Joint Chiefs of Global Tax Enforcement, or J5, group. The J5 will share intelligence and criminal investigation strategies with each other and conduct joint operations in the fight against those who commit, promote and enable international tax crimes, money laundering and cybercrimes.

The CRA has also been automatically accessing all international electronic fund transfers for more than $10,000 entering or leaving the country. As of March 31, 2018, teams have analyzed more than 187,000 of these transactions, amounting to more than $177 billion. Reviewing these types of transfers helps identify transactions for which taxes should potentially have been paid and better risk assess individuals and businesses.

Through these efforts, Canada is taking concrete measures to secure tax fairness for Canadians. That includes continuing to work to maintain and improve our enforcement of tax compliance, so we can have a society that works for all Canadians.

In closing, I would like to point out that we are carrying out our work to ensure tax fairness in a context where the Canadian economy is well-positioned to continue to grow. The government remains committed to investing in people and what they care about the most, namely, good jobs, strong communities, a cleaner environment and better opportunities for future generations.

Almost four years ago, one of the first things we did was to ask the wealthiest 1% to pay a little more, which enabled us to lower taxes for the middle class.

Our government then implemented the new Canada child benefit, which, compared to the previous child benefit, is simpler, more generous, completely tax free and better targeted to help those who need it most.

In order to ensure that the Canada child benefit takes into account the ever-rising cost of living and helps those who really need it, the government indexed the benefit as of July 2018, two years earlier than planned. A typical middle-class family of four is now receiving approximately $2,000 more a year than in 2015 thanks to the tax cut I mentioned and the Canada child benefit. The OECD pointed that out this summer in a very interesting report that I encourage all members of the House and all Canadians to read.

When we add up the impact of measures such as the Canada child benefit, our government's new and more generous Canada workers benefit, and our support for seniors through the guaranteed income supplement, which was enhanced in our first budget, we are on the right track to help lift approximately 650,000 Canadians out of poverty. Actually, we are more than just on the right track since we have already lifted 825,000 Canadians out of poverty; according to Statistics Canada, that represents a 20% drop in poverty in Canada.

That is thanks in part to an approach very different from that of the previous government. We asked the wealthiest 1% to do its part so we could lower taxes for the middle class and those who need it most. We created the Canada child benefit, which lifted many families out of poverty and actually reduced child poverty by 40% in this country. I think that is something we should be proud of. Making sure our tax system is fair and equitable made that possible. That is a priority for us, but unfortunately, it was not a priority for many past governments, including the one that was in power prior to the October 2015 election.

We have been making great strides toward creating stronger, more resilient communities, and our major infrastructure investments are one reason why. Since 2016, we have approved over 30,000 infrastructure projects through the investing in Canada plan. The vast majority of those projects are under way and are creating good jobs for the middle class. They are also improving the lives of Canadians from coast to coast to coast, which is, after all, the ultimate goal.

These significant and concrete achievements have bettered the lives of many Canadians across the country.

Our plan is working. Over 850,000 more Canadians are employed today than in 2015. The unemployment rate is near its lowest level in 40 years. Our economy is one of the fastest growing in the G7.

We are committed to building an economy that works for everyone, where every person has a real and fair shot at success. Moreover, we are committed to making these investments to our economy for the long term, while we continue to bring down the federal debt to GDP ratio.

To continue on the trajectory of growth, Canada's economic health needs everyone to pay their fair share of taxes. The legislation before us, Bill C-82, gets Canada closer to meeting that goal.

I encourage all members of the House to support the legislation before us.

Multilateral Instrument in Respect of Tax Conventions ActGovernment Orders

April 8th, 2019 / 5:35 p.m.
See context

Conservative

Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC

Mr. Speaker, the parliamentary secretary skips over the fact that this was originally started with the OECD under the previous government. That being said, it is helpful to know that a government can recognize when it is in its interests to pursue what a previous government had done and building on that. Therefore, I am happy to see that happen.

The member mentioned a number of examples to fight tax evasion and money laundering internationally. While it is important to have these rules put in place, I would point out that on this very day, the solicitor general of British Columbia, David Eby, has called out the federal government for not supporting the RCMP so it can do the work that is required to tackle money laundering.

A tremendous amount of documentation in the German report has come out, yet the Liberal government does not fund the important part of enforcement.

Does the member realize that having rules is important, but there also needs to be a commitment to having boots on the ground to make a meaningful difference and to ensure we have a system that works for everyone?

Multilateral Instrument in Respect of Tax Conventions ActGovernment Orders

April 8th, 2019 / 5:35 p.m.
See context

Liberal

Joël Lightbound Liberal Louis-Hébert, QC

Mr. Speaker, it is appropriate to acknowledge the efforts of the former government, which joined the concerted international efforts as part of the BEPS project. It is true that this began under the former government, and yet we could have passed this bill much more quickly with the support of the opposition, as we have been working on it for quite some time. However, the opposition sometimes plays political games that affect and delay the process. Nevertheless I do want to point out that this was an initiative of the previous government.

With respect to my colleague's question about funding for the RCMP and the means at its disposal to combat tax avoidance and evasion in Canada, I find it somewhat surreal to hear this from a Conservative member because the Conservatives made cuts in this area. The former minister of national revenue under Stephen Harper, Mr. Blackburn, clearly said in an interview that the fight against tax evasion and avoidance was not a priority for them.

It is better late than never, but it is rather odd to have a Conservative member come to this realization and state that it is important to fight tax evasion and avoidance. He should also acknowledge that we have provided the Canada Revenue Agency with almost $1 billion in additional funding in the past three budgets to support these efforts to fight tax evasion and ensure that everyone pays their fair share. He voted against these measures.

I therefore tip my hat to the Conservative member, who has finally realized what we in the Liberal government have known for a long time.