Bill C-82 (Historical)

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

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.

Multilateral Instrument in Respect of Tax Conventions Act

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Mr. Speaker, I would like to bring the debate back to the issue before us today, tax treaties.

Does my colleague have an opinion on concluding tax treaties with administrations where the tax rate is extremely low compared to the tax rate in Canada? These tax treaties can become loopholes for certain multinationals that manage to transfer their international profits to these places. Instead of declaring their income in Canada, they declare it in these places that have agreements with Canada. I would like my colleague's opinion on these agreements, to come back to the matter at hand today.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Mr. Speaker, the reason we enter into tax treaties, whether with higher tax jurisdictions or lower tax jurisdictions, is to ensure a framework for tax fairness so that people are not facing double taxation and to ensure there is a proper reporting structure to address possible issues of tax avoidance.

To the member's point, there is a principle here such that, regardless of the agreement, taxes should be paid in the jurisdiction where, in some sense, the work is being done. If there is a case, for instance, where all of the operational aspects are in one place but none of the taxes are being paid there, that is obviously an issue to discuss and to explore how we can respond to it.

I will also point out for the member that when other jurisdictions have lower taxes, companies can relocate to those jurisdictions if they wish to. It is not possible to, say, prohibit a company from moving its headquarters somewhere else. In fact, under the previous government, companies from the United States chose to move their headquarters to Canada. However, they would have had to bring aspects of their operations to Canada associated with that as well. When we are a low-tax jurisdiction, that can work to our advantage as well.

[Kevin Lamoureux, Liberal, Parliamentary Secretary to the Leader of the Government in the House of Commons]

Mr. Speaker, one of the concerns Canadians have is that as we get closer to an election, they expect a certain element of truth from leaders. We saw a good example of that today from the Leader of the Opposition, who continued to deny that he did not retweet after making some changes and so forth.

Let me give an example of what the member across the way said in terms of trying to give misinformation.

He is trying to give the impression that most of the residents in Winnipeg North are going to have to pay additional taxes as a direct result of the price on pollution, knowing full well that there is a tax rebate. People will find they are actually getting money from Ottawa. Most of the residents in Winnipeg North will benefit by the price on pollution, yet the Conservative Party will try to give a false impression to Canadians.

Is it the Conservative Party's overall plan to try to gain votes by trying to deceive Canadians?

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Mr. Speaker, what unbelievable language and what an unbelievable approach from the member for Winnipeg North.

I look forward to talking to his constituents about the carbon tax, because I am sure that people in Winnipeg North, as in Sherwood Park—Fort Saskatchewan and elsewhere, are deeply skeptical of the government's claim that it will take more money from people, process it over here, and then give even more of it back. When has that worked out?

That is about the quality of math that we would expect from a Prime Minister who said he would balance the budget by this year, and yet we are still tens of billions of dollars in deficit.

Canadians know they are paying more as a result of the Liberal carbon tax, and they simply do not accept that they would be any further ahead with this process of taking their money and processing it and rebating some of it back.

I look forward to having the conversation in the next election about the government's plan on the carbon tax. We have shown that we can do more for the environment by not imposing new taxes on Canadians. The Liberals believe that the only solution, the only thing worth doing, is to impose new taxes under all kinds of different names and excuses. We reject that and we look forward to having that debate.

[Colin Carrie, Conservative, Oshawa, ON]

Mr. Speaker, I would ask my colleague a very important question. He mentioned how companies can relocate. As everyone knows, General Motors is leaving Oshawa. We have seen 1,500 job losses in Windsor, and manufacturing is very susceptible to bad tax policy and uncertainty. I want the member to address how important the tax policy is for certainty and competitiveness.

We heard our colleagues talk about the carbon tax. When I was knocking on doors this weekend, a constituent told me I had to go back and tell the Liberals to make the carbon tax even higher because he wanted it to be $1 million per tonne. That way, with Liberal math, he would be getting back $200,000 or $300,000. He said that then he could retire.

I do not know if Canadians realize how bad a policy this is. Could my colleague please talk about how important it is to have good tax policy to provide business certainty and to make sure we have competitiveness?

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Mr. Speaker, it is a great question from my colleague, who obviously lives these issues and is hearing directly from his constituents about them.

I come from an energy-producing part of the country. He comes from a part of the country where manufacturing jobs in the auto sector in particular are very important. We see in both of these areas how the imposition of taxes and regulatory changes, in particular the imposition of new taxes, is hurting economic development.

We saw in the past how lowering business taxes led to an increase in business tax revenue. That was because companies were looking at those tax policies and making decisions about investment that reflected those calculations. They were choosing to invest in Canada as a result of the fact that Canada was a good place to invest.

We have many advantages. We have an educated workforce and many things going for us as a country, but the financial dimension of it is obviously critical as well for companies that are thinking about making these investments.

The government's solution to this is to tax more and put the money forward in corporate welfare for things like superclusters. We have seen it has much less effect for the government to pick winners and losers and give money to some of its friends while taxing other people more. It is a much less effective approach than simply lowering taxes for all Canadians, especially targeting tax relief for small business and to those Canadians who need that tax relief at the individual level the most, thus putting them in the driver's seat and allowing them to make decisions to take advantage of the opportunities that result. It is up to the government to give people as much opportunity as possible to get ahead and then to let them do that with their own resources.

[The Deputy Speaker, Bruce Stanton]

Before giving the floor to the hon. member for Sherbrooke, I must inform him that there are 11 minutes remaining before the expiry of the time provided for government orders.

The hon. member for Sherbrooke.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Mr. Speaker, I am honoured to have these 11 minutes to speak to Bill C-82 and share my opinion on it as part of the debate and before it is eventually voted on at third reading in the House and sent to the other chamber.

As we saw at report stage, this bill has the unanimous support of the House. All members voted to support it. It has not been the subject of heated debates, from what I saw today, although it is relatively important. I will try not to repeat too much of what I said at second reading before it was referred to committee. On that point, the committee study went pretty well. There were no amendments to this bill, but still, there were some good debates. I will try to summarize them for the House to illustrate some of the dangers possibly in store for us regarding this bill, which simply aims to update the tax treaties we already have with 93 countries around the world. That said, it is anything but simple.

Concluding tax agreements with countless countries has almost become Canada's trademark. Other countries do not have so many tax agreements. Nevertheless, these tax treaties are a double-edged sword. On the one hand, they help avoid double taxation. In other words, companies and individuals are not taxed twice on the same income. That makes sense when we are talking about similar administrations with similar tax rates. Obviously a person should not have to pay twice on the same income in two different places, especially when their tax rate is similar. It makes sense to establish this type of connection with other countries to eliminate double taxation, whether informally or formally, as in the case of the 93 countries with which we have such agreements. This allows individuals and companies to have a residence in either country and be taxed according to their country of residence.

However, it makes less sense to sign tax treaties with tax havens. That is what Canada is doing with its trademark tax treaties, but it is sort of glossing over the fact that it has signed treaties with tax havens like Barbados, which has a tax rate of 0.5% to 2% for foreign corporations.

Canada's trademark is even seeping into its tax policy. It will not say so openly, but it is very happy to have a treaty with Barbados, a country where Canadians invest heavily year after year. Barbados is often the third or fourth biggest destination for Canadian foreign direct investment, after the United States and the United Kingdom.

That is no coincidence. It is not because the Barbadian economy is booming, because tons of new hotels and banks are going up, because its population is flourishing and wealthy, or because things are hopping there. It is simply because the government's unspoken tax policy allows Canadian companies to outsource their subsidiaries abroad; they can open a subsidiary in Barbados, which they use as a Canadian financial centre from which to run their international business instead of establishing a headquarters in Canada and doing business out of Canada. That is why we need to be cautious and make sure tax treaties are being used appropriately in cases where countries have similar administrations.

[The Deputy Speaker, Bruce Stanton]

Order. The hon. government House leader is rising on a point of order.

[Bardish Chagger, Liberal, Waterloo, ON]

Mr. Speaker, I will not interrupt for long. I saw that he was pausing.

I would like to table the government's response to Order Paper Questions Nos. 2246 to 2264.

Bill C-82—Notice of time allocation

[Bardish Chagger, Liberal, Leader of the Government in the House of Commons]

Mr. Speaker, I would like to advise that agreements could not be reached under the provisions of Standing Orders 78(1) or 78(2) with respect to the third reading 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. Therefore, under the provisions of Standing 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 proceedings at the respective stage of the bill.

The House resumed consideration of the motion that Bill C-82, An Act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting, be read the third time and passed.

Multilateral Instrument in Respect of Tax Conventions Act

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Mr. Speaker, I was saying that there has been a form of unanimity on the bill, and that we must be careful with tax treaties on the whole.

The bill was introduced and debated because we want to modernize tax conventions to prevent them from being abused, as the government itself has stated. At committee, for one, the government said that tax conventions were being abused. Bill C-82 can help with this by modernizing these conventions and ensuring that they are not abused in future.

It is an admission of guilt by the government to recognize that, although the conventions have good intentions, some taxpayers abuse them. The bill will clarify the language of these conventions to ensure that this no longer occurs and that the courts have more teeth to enforce the provisions of the convention pertaining to the fight against tax evasion. This bill attempts to address the loopholes in these conventions.

The fundamental problem, which was also brought up in committee, is that the modernization of these treaties requires the support of both countries that are party to the tax treaties. There are 93 treaties, and not only will Canada have to ratify Bill C-82, but the co-contracting country will also have to ratify an equivalent bill in its own jurisdiction so that the instrument can be implemented in both countries and the new and improved treaty can be applied. In my opinion, that severely limits the future scope of the bill.

What we were told in committee is that both countries are indeed required to complete the ratification process for the convention to take effect. To date, only 12 to 15 countries have ratified this sort of bill and done the same thing that Canada is in the process of doing today. That means there are still about 80 countries that have not yet taken such action and may not even be in the process of doing so. The best example I can give is that of Barbados. Barbados signed the document during a nice photo op. The only thing the country has not done is initiate its own legislative process, which is required to implement the convention.

I find that troubling, because I am not convinced that all the partners of these 93 countries are going to sign them. This legitimizes to some extent the countries that are so-called tax havens, which will continue to exist and might just sign the document for a nice photo op but do nothing afterwards. That will only perpetuate the problem. If this instrument is going to improve the treaty, both countries have to sign it. If either country does not sign it, there is absolutely no point to the treaty, and we will be left with the old system, the old treaty that, by the government's own admission, is not working properly and has loopholes that the courts cannot close. That is the legal and inherent limit to this bill, which means that its enforcement will also be quite limited.

It will be up to us to look at it again in the future. It will be up to legislators and the government to keep a close eye on the situation in other countries. Having nice signing ceremonies is all well and good, but if we cannot move forward and if we decide to let it go and not assume our responsibilities, we will wind up with the same problem.

One thing that was clearly stated during the committee's study was that this bill might be limited in scope, so we need to take a closer look at that. We also need to make sure that we are monitoring the countries we have these agreements with over time.

Bill C-82 will make for better treaties. I would like to thank the NDP for that because we are the ones who, for years, have been urging the government to renegotiate all the tax treaties people are abusing. Members may recall that, two years ago, my caucus was behind a motion the House adopted to, among other things, renegotiate tax treaties. We should all thank the NDP leader for his insistence on tax fairness, because it is thanks to him that renegotiation is happening now.

We will have to make sure that everyone follows through on these promises and that the new instrument is implemented by the countries with which we have signed treaties.

[The Deputy Speaker, Bruce Stanton]

The hon. member for Sherbrooke will have 10 minutes for questions and answers when the House resumes consideration of this motion.

The House resumed from April 8 consideration of the motion that Bill C-82, An Act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting, be read the third time and passed.