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

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Mr. Speaker, the member's question is the same question I raised with the member for Vaughan—Woodbridge about the CRA's behaviour toward taxpayers and the way it goes about reassessing and auditing Canadians.

The member mentioned a single mom who was trying to get certain benefits that were owed to her by the Government of Canada. I had the exact same situation in my riding. It involved a single mom who had great difficulty in proving to the CRA that she was living with her kids. No paperwork satisfied the individuals who she was dealing with at the Canada Revenue Agency.

I had a business owner who in 2016 had his entire business crushed because he made an accounting mistake involving all of the wages he owed. He admitted to the CRA that he made a mistake and he was trying to fix it. The CRA shut down his bank account and took all the money out of it. He could not pay his employees. This was a small business with 18 employees.

I have serious problems with the way the CRA is behaving.

The member mentioned diabetics. Last year the Canada Revenue Agency went after diabetics. It refused type 1 diabetics from being eligible for the disability tax credit. This was one of the reasons I introduced my private member's bill to look after them and make it impossible for the CRA to do it again.

We in the House have to get into the weeds of the administration of taxes by the CRA. There is a culture problem over there that needs to be resolved.

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

Mr. Speaker, over the last three years, this government, in particular the Minister of National Revenue, has taken action on the issue of tax avoidance. For the first time in many years we have seen a serious commitment of close to $1 billion in total set aside to hire the auditors who are necessary to look at ways in which we can prevent tax avoidance. The member spends a lot of his time talking about ensuring that a sense of fairness applies.

This government put a special tax on Canada's wealthiest 1% and took many other tax initiatives in a relatively short time span.

All in all, even though we hear a lot of negativity from the Conservative side, as a government we have delivered in many tangible ways for Canada's middle class on the issue of tax reforms, including tax avoidance, tax breaks for the middle class and so much more.

The member might like to make a more general comment with respect to the many things that have been done by this government in a relatively short time span.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Mr. Speaker, there is a Yiddish proverb that goes, “A quarrel is like an itch; the more you scratch, the more it itches.” I am glad the member satisfied the itch I had, by bringing it back to just talking about more of the generalities rather than specifics of this tax treaty of tax treaties bill.

Yes, the government has done some things. Again, Bill C-82 is the government's attempt to go after multinational corporations that are taking advantage of base erosion and profit shifting, doing things bordering on aggressive tax planning.

What I am pointing out, though, is that in the CRA's drive to try to collect more taxes from overseas corporations, that same zest and zealotry is being applied to small business owners in Canada, to single moms simply trying to apply for child benefits, and to type 1 diabetics, whose only crime really is they wanted to apply for a disability tax credit. I went through this over the summer, when I was trying to figure out how to apply for the disability tax credit for my youngest daughter. It was a process where I was thankful I had spent a year drafting a private member's bill, because I am not sure I would have been able to do it all by myself. The complexity of complying with CRA rules and regulations at times makes it impossible for average Canadians to be able to file their taxes.

[Erin Weir, Independent, Regina—Lewvan, SK]

Mr. Speaker, I would like to thank the member for Calgary Shepard for bringing up the challenge posed by intellectual property, where it is very difficult for tax authorities to determine where it is located and how much it is worth. Now, there is a potential solution to that, which is called “formulary apportionment”, essentially allocating a company's profits based on the actual location of its sales and payrolls. We are familiar with the system in Canada because the Canada Revenue Agency does not allow companies to move their profits around between provinces based on transfer pricing. It actually requires them to allocate their Canadian profits based on where they actually employ people and sell their goods and services.

Since we are talking about an attempt at international co-operation through Bill C-82, does the member for Calgary Shepard see prospects to apply formulary apportionment at the international level?

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Mr. Speaker, I am not a tax lawyer, and this is one of those very technical questions I am not able to answer. Under the permanent establishment definitions that are part of this international initiative that Bill C-82 would implement, there might be an opportunity to ensure those types of definitions are included. Outside of that, it would have to be the hybrid mismatch arrangements and the anti-treaty abuse provisions, where I guess one would find these intellectual property rights and trademark provisions in order to ensure that type of behaviour is clamped down on.

[The Deputy Speaker, Conservative, Bruce Stanton]

We have time for one brief question or comment.

The hon. member for Jonquière.

[Karine Trudel, NDP, Jonquière, QC]

Mr. Speaker, I have a comment to make.

I would like to take a step back and remind my colleague that it was the Conservative government that started making massive cuts to the Canada Revenue Agency, or CRA, back in 2012. The consequences of those cuts are still being felt today, and Canadians are the ones suffering. The upshot is that in terms of taxation, the CRA is not as efficient as lawyers, accountants and consultants in the private sector. This shows that the cuts had a catastrophic effect.

I would like to hear my colleague's thoughts on the fact that it was his party, the Conservative Party, that made these cuts in 2012.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Mr. Speaker, I thank the member for her question.

I do not think the cuts made in 2012 or in any other year are directly linked to the culture of the organization in its current form. In the interim, the CRA has received several hundred million dollars to hire more staff to hassle moms who need support or information from the CRA, as well as entrepreneurs and people who are just trying to find out what information the CRA needs so that they can pay what they owe. I think the organizational culture bears no relation to the amount of funding it receives.

There are thousands of CRA employees today who are more than capable of administering the Government of Canada's tax system. The issue of culture and work practices is much more important.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Mr. Speaker, as the spokesperson for the people of Timmins—James Bay, I am very proud to be here today to take part in the debate on Bill C-82, which seeks to implement measures to prevent base erosion.

When I look at this bill, I have one simple question: where is this government's plan to close tax loopholes? Workers across Canada pay their fair share of taxes, but wealthy people, corporations and Liberal cronies can use tax havens. It is unacceptable. Tax havens have undermined our country's ability to develop a fair and equitable economy.

I want to talk about this conversation we have been having this morning where the Liberals talk about tax fairness and closing loopholes. I do not often agree with the Liberal Party, but I will say that the Liberals have been very committed to closing tax loopholes. However, they are not committed to closing them on the friends of the Liberal Party. They have been using the massive resources of the CRA to go after single moms, young families and small businesses.

We see one of the great and I think really disturbing political frauds in the last few years. The government says again and again it is committed to getting money to young families through the Canada child tax benefit, but what it does not say is that it is clawing that money back through a whole series of measures, which are actually cruel in their implementation, and targeting people who have no capacity to defend themselves.

I could give a few comparisons to show how unfair this system is in terms of how the Liberals look after the friends of the Liberal Party.

Let us talk about the need to deal with the tax avoidance system. The problem with the super rich not paying their part has a massive impact on the erosion of our economy, and our ability to make investments and to build an economy that is fair and just across this country. We are learning now that tax avoidance is upwards of $3 billion a year, but there may be $70 billion to $240 billion being held offshore and out of access to the Canada Revenue Agency.

What is the Canada Revenue Agency's response to such massive tax avoidance? Well, we saw how the government made a deal with KPMG after it was found out that KPMG was involved in establishing scams for those who had $5 million to blow. Now, not many people out there in television land probably have $5 million to spare, but if one is friends with the Liberal Party it is likely one may and could be set up in offshore tax havens, which is cheating.

When a small business in my region gets caught out not paying its taxes, the government brings the full weight of the law down on it. There is no mercy. I have never seen mercy from the CRA, ever. If one is not paying one's taxes, that is the way it has to be. However, why would the government make an agreement, why would the Prime Minister make an agreement, with KPMG, people who are tied to the Liberal Party and people who are tied to getting federal contacts, to give them an amnesty for avoiding taxes? That does not happen if one is a single mom with an overpayment on EI.

Let us talk about Stephen Bronfman, who is a very close friend of the Prime Minister. He is the Liberals' top fundraiser. In fact, he is so good at raising funds, he helped raise $250,000 in two hours for the Liberal Party. I mean, they just travel in different circles than the rest of us Canadians do. When Stephen Bronfman gets named in the Panama papers, one would think that would be a serious question for the legitimacy of the friends of the Prime Minister and the need to deal with tax loopholes and unfairness. However, the Prime Minister came out and said immediately that there was no investigation needed. He was a friend of his. Know what? No investigation happened.

My young daughter, who just starting working and makes minimum wage, is being audited for the second time. She was audited last year and is being audited a second time. I told her to get used to it. A young student trying to pay her rent might get audited by the CRA all manner of times, but I would never call the CRA to say she's my daughter and does not need to be audited. That would never happen. However, the Prime Minister went public, said Stephen Bronfman is a good guy and does not need to be audited, when he was named in the Paradise papers, and it never happened.

Who else was named in the Paradise papers? There was Leo Kolber. This was about the trust that was set up for the Kolber family. For those who do not know and are not part of the Laurentian class, Leo is a Liberal senator and a very well-placed Liberal bagman. He was named.

Paul Martin was named, but I guess that should not be surprising. Paul Martin made his name by keeping his ships offshore so he did not have to pay taxes. Paul Martin was named in the Paradise papers. Jean Chrétien was named in the Paradise papers.

Then, of course, there is the finance minister. Morneau Shepell had its Bahamas subsidiary. What would anyone be going to the Bahamas for, one of the notorious tax havens? Of course, there was lots of tax work to do there and Morneau Shepell had its subsidiary in the Bahamas. When the government says it is going to take special measures to deal with the Bahamas, set up with the finance minister, does anybody in any place in this country think it is going to be looking after the little guy? I do not think so.

It keeps going on and on. There is the Minister of Infrastructure. There was a report in Le Journal de Montréal about the Minister of Infrastructure and the transfer of payments to shareholders of a company in, wait for it, the Turks and Caicos. Folks back home who work at the mill, at the mine or at Tim Hortons might wonder why someone would have shares in the Turks and Caicos and wonder where it is. It is well known for offshore finance operations. Maybe we will be talking, if we have enough time, about the privatized infrastructure bank that was set up. I bet a lot of people from the Turks and Caicos will be very interested.

I am not being mean to just the Liberals. We can talk about the famous Nicole Eaton, a senator. When a bunch of documents were released from the notorious Bahamas, it turned out that she was a director of a corporation called Mount Bodun Limited and said she had no idea how she was named as a director of this corporation. That stuff happens to me all the time. I find out I am a director of a corporation in the Bahamas. Shrug, shrug, how did that happen? I guess it is the world that they are travelling in.

Let us go back to the illustrious upper chamber. Of course, we could not have this discussion about offshore tax havens without talking about Liberal Senator Pana Merchant. It was said that her husband “moved nearly $2 million to secretive financial havens while he was locked in battle with the Canada Revenue Agency”, and she gets paid until she is 75 by Canadian taxpayers to represent our interests.

What happens is really interesting. When rich people like these move assets around outside the hands of the CRA, what happens? Nothing happens. That speaks to the fundamental problem we are seeing, the unfairness, because ordinary Canadians pay their fair share of taxes. They work really hard, they are diligent and they pay their fair share. Therefore, when we see the super rich and the friends of Laurentian and Liberal class not paying their share, we have a problem, unless one thinks that the CRA is the most relaxed, laid-back organization and does not like making life difficult for anybody over taxes.

Let me give an example of what happens for people who are not super rich. Let us talk about what happens for the working poor and how they get treated. Let us also talk about the Canada child tax benefit, because again the great fraud that is being perpetrated by the government day in, day out is this great miracle of the child tax benefit that everyone gets and brings everyone out of poverty. What Liberals do not say after they make those announcements is that they use the resources of the Canada Revenue Agency to claw it back, and the vast majority of cases coming through my office right now—and I have talked to many members of Parliament—are single moms being denied the child tax benefit because of the loopholes that they are being forced to jump through. What are some of those loopholes?

A young father came into my office. His wife left town and left him with the kids. He did not know where she went. He had to quit his job to look after the little children. He was cut off from his child tax benefit because he could not prove where she was. At Christmastime the neighbours were putting together food hampers for the family because the family had nothing.

It is not just single moms. A young couple was told after getting the funds to go back and prove who they were, prove that they were married and where the children were, even though they had always had the children. Single moms are being told they are being cut off because they cannot prove they have their children. They say the children go to the local school, but the government will not accept report cards as proof anymore. It is not fair to make a single mom jump through those kinds of hoops when we would not make Stephen Bronfman do it.

I know a wonderful young Cree mother who has the most beautiful little girl and in six years that mother has never received any child tax benefit. Why? The government does not believe she actually lives in the country. She is not living in the Turks and Caicos. She is living in social housing. She is working and raising her child but she is not getting a single dime from the government. Officials tell her she has to go to the doctor or the dentist, but that is not good enough. Then she has to go to the landlord. They even told her to get the mailman to sign something confirming where she lives. She has paid her taxes every single year.

There are mothers who do not have proper housing, so they are couch surfing. When they are couch surfing, CRA says their address indicates that they are staying with their folks and it is cutting them off. CRA will make single moms jump through all kinds of hoops, but would not make anybody whose name is in the Panama papers go through that.

One of the other things the CRA has come up with is that for people to get the child tax benefit, they have to show proof of insurance on their residence and on their children. The people I represent such as single moms in poverty do not have insurance. I guess if someone is the finance minister and cannot remember he owns a chateau in the south of France, he probably thinks it is great: “We should just find out what people's insurance is.” What kind of idiotic loophole is it, telling a poor mother to prove she has insurance for her kids and maybe the CRA will give her the benefit? If she had insurance, she probably would not be so desperate to get the child tax benefit.

The government talks about the middle class and those wanting to join it. If it were a Liberal drinking game and the Prime Minister gave a speech, he would be bombed after the first five minutes if he had to respond every time he said the middle class and those wanting to join it. I do not want to be mean to the Prime Minister, but I think he and I grew up in different middle classes.

When I was young and starting out, my wife and I started a small business. We barely made ends meet, but we paid our taxes. We paid our employees. We worked really hard. I was really surprised when the Prime Minister talked about small business in the 2015 election. He worried they were being used as millionaire tax dodges.

For two terms I was on the Tri-Town and District Chamber of Commerce in northern Ontario. I did not know anyone sitting around that table who were there because they were establishing millionaire tax dodges. Small businesses are the backbone of the economy and people work really hard. It seemed to me such a disconnect that the Prime Minister said we would have to watch small businesses because they are millionaire tax dodges, but then of course, he would know because he set up three numbered companies to handle his income, his investments and also the money he was getting as a member of Parliament to do public speaking so it would lower his tax rate. From his perspective, everyone else must be doing it, but other people are not doing it.

What do we need to do? We need to start addressing tax fairness in a coherent manner. We need to review the overall tax system. The last time it was reviewed was in the 1960s. We are in a very different world now in terms of tax avoidance, in terms of corporations not paying their share. More and more the cost of social services is being downloaded onto municipalities. Single households and people in the middle class pay a very good chunk of taxes.

We need, number one, an overview of the tax system. We need a really clear sense of where tax avoidance is happening. I was really surprised to see that the government fought so hard against the Parliamentary Budget Officer over the simple question of identifying where the tax bleeding is happening. If we can see where the tax bleeding is happening, we can start to make changes.

Then we need a government that will spend more time going after the superbillionaires who are hiding their money in the Turks and Caicos than going after single moms. That should be a fundamental principle that all members in the House, regardless of their political ideology, agree with. Young people, single mothers and young families who are trying to get by should not have to bear the kinds of burdens CRA is putting on them, as though they were criminals for being entitled to this money.

We should be putting those resources into actually tracking and going after those who use tax havens. For those who use tax havens, like corporations, there has to be some kind of punishment. An example is KPMG. We have to start saying that if people are using international tax havens and are found guilty of not paying their fair share, they will be disallowed from getting federal contracts for a period of, say, five years. That would send a message that we are serious. Many companies in this country play by the rules and do everything that is asked of them and more to make sure they are compliant. The outliers that do not play by the rules should not be rewarded for shipping resources offshore to avoid their basic responsibility, which is to ensure we have a tax system that works so that we can make the investments needed to grow a more fair economy, a more just economy, an economy in which people can live the kinds of lives they deserve to live in this country. A coherent tax policy is important for this.

As much as I am okay with the fact that we are going to sign a bunch of tax agreements with a bunch of countries, which is all right, I want to know when we are going to start getting serious about going after these tax havens and the Canadians who use them.

[Adam Vaughan, Liberal, Parliamentary Secretary to the Minister of Families]

Mr. Speaker, I rise just to clarify a few points that were addressed to the House in the previous presentation.

When the member opposite spoke about requiring proof of insurance for people to qualify for the child benefit, he mentioned that the Canada Revenue Agency asks for proof of residency. The Ontario health card is the insurance they are talking about. It is not a private scheme; it is a public scheme. That health card, which provides a person's address and identity, is one thing that people can use to verify residency so that people can qualify for the Canada child benefit.

Additionally, I am disturbed, as I am sure every member of the House is, to hear of aggressive tactics by the Canada Revenue Agency that put, in particular, single moms into harm's way. We are committed to working with members of the House. If members are hearing about these sorts of situations, they should be resolved as quickly as possible, because the Canada child benefit, which is one of the best social policies to have evolved in this country in the last 40 years, is there for children and they should ensure that parents can get access.

There are complicated situations involving divorces where the two parents are in a dispute and both claim the child benefit. Those things have to be resolved. However, I give the assurance to the House and to Canadians listening that the government works very quickly to resolve those issues, and it would be happy to take inquiries from members of Parliament to ensure we resolve issues in the best interest of the children in this country.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Mr. Speaker, I appreciate that answer. I wonder why he is not the CRA minister, because we never get those kinds of answers from the present minister.

I would like to just clarify that if a health card were sufficient, the CRA would not be telling single moms to go find a doctor. They are. Many families in the north do not have doctors, so the CRA tells them to go to a dentist. If the health card is sufficient, they should not have to jump through those other hoops. They should not have to get proof from their landlord or the school. Children's report cards say where they go to school, but the CRA is not accepting those either.

What really concerns me is when there are issues of domestic abuse. I talked with my hon. colleague earlier about the situation where a man has skipped out of town after being abusive, and the woman is supposed to find out where he is living to prove he has left. She should not have anything to do with him.

These are serious questions, and I am hearing from my constituents and staff about this more and more across the board. To me, this is a structural problem at the CRA that needs to be addressed across party lines.

[Todd Doherty, Conservative, Cariboo—Prince George, BC]

Mr. Speaker, the intervention by our hon. colleague from Timmins—James Bay was well-thought-out and had a lot of key points.

I too find it very rich that we have, as has been said before, a trust fund duo with the Prime Minister and the finance minister, a finance minister who registered a Toronto-based company in Alberta. I am wondering why he would have done that.

I know of a number of incidents where the CRA has gone after single mothers and small businesses yet lets big business get away with things. One who comes to mind is Irvin Leroux in my riding, who actually took the CRA to the highest court in our country and won his case, showing that the CRA owed Canadians a duty of care. The process absolutely bankrupted him, but it was a case of the little man, just an everyday Canadian, winning.

I am wondering if our hon. colleague from Timmins—James Bay has more examples of where the CRA has been heavy-handed. Perhaps it should be turning its attention to the folks who are in big business, which this bill really looks to tackle. I wonder if our hon. colleague has more local examples from Timmins—James Bay.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Mr. Speaker, this is not something we should be putting on the front-line staff of the CRA as though they have vendettas, because we deal with them all the time and they want to work with us. The impediments are higher up. The impediment is the policy, and the policy is set by the government.

My hon. colleague has a really good example with respect to small business. We have dealt with small businesses in hard times, when things start to fall behind. An example would be the prices in the forestry sector, when the cashflow was not coming in and they were falling behind. However, these are long-term businesses, sometimes two and three generations, that need a deal. They are not trying to cheat the system. They are trying to stay afloat. If we do have issues where people are cheating, they end up paying the full amount. I tell them from the get-go that if they are cheating, they will pay the full amount.

On the issue of the child tax benefit, I have dealt with young mothers who have just given up. It seems to me the fundamental problem is that the CRA makes it so difficult. People have to leave work and get an appointment with their doctor. The doctors do not want to get involved in family matters, especially if there has been a divorce. People have to go to the school to get proof. There is this whole long list of things that the CRA is demanding when the parents already have the children.

I will end on this final note. There are people who were getting the benefit and then it was cancelled arbitrarily and they were told that they had to prove they have children. How could they have been getting the money for having children and then be told that there is no proof that they have children? This happened before Christmas. We were making Christmas hampers to help families actually have Christmas because the Liberal government cut off single moms and young single families at Christmastime. How is that possible in this country right now?

[Bob Bratina, Liberal, Hamilton East—Stoney Creek, ON]

Mr. Speaker, we are all familiar with our own statistics of the Canada child benefit. I am wondering if the statistics are correct for Timmins—James Bay, that 8,900 families receive benefits for a total amount in the 2016-17 year of $64 million. Would that be accurate? What percentage of that number does my friend think would be challenged?

[Charlie Angus, NDP, Timmins—James Bay, ON]

Mr. Speaker, I would like to ask my hon. colleague what he is saying. Is he saying that because money comes into Timmins—James Bay the parents who are not getting it should keep their mouths shut and be thankful to the government? To me, that is not acceptable. I do not care how much money comes into the riding, if people are entitled to this money and they are not getting it, then they are being ripped off by the government.

The government acts like the money is coming out of its own pockets. The government acts like it is the benevolent one. It has the gall to tell individual MPs that because this money has come into their ridings they should be happy. I am happy when single moms in my riding have what they are entitled to. This is not a gift from the Liberal Party. This is what they are entitled to. When the CRA is targeting, sometimes upwards of 60% of my cases, single moms to prove that they have children, and the member says that as all this money is coming in we should be happy, no, we will be happy when every mother gets what she deserves.