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.

Canada–Madagascar Tax Convention Implementation Act, 2018

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Madam Speaker, I am glad to be joining this debate on the most exciting of subjects, tax and a tax treaty. For those constituents of ours who are tuning in on CPAC this early morning, or who have come to watch in the gallery, this is as exciting as this place is going to get, I think, until question period. I see the parliamentary secretary nodding his head, because he knows this too.

I am also glad his intervention covered so much subject matter beyond Bill S-6, because that now allows me to delve into the government's record on taxes, its management of different public policy issues like the Asian Infrastructure Investment Bank, consumer confidence in Canada and business confidence in Canada, as well as how the government has approached Bill S-6.

I will start with an observation about this tax treaty and some of the comments made by the parliamentary secretary. He seemed to be placing Bill S-6 within the confines of trying to achieve greater tax fairness and doing other great things with the Government of Madagascar. He said the bill would make sure that Canadian companies and Canadian taxpayers who may be doing business in Madagascar would not be double taxed, and that it would increase trade and do all of these wonderful things.

However, when I asked officials a question at the Standing Committee on Finance, we heard there was such a small number of tax filers with tax filings in Madagascar that each instance raises confidentiality concerns. Officials from Finance Canada responded to me that these concerns are such that, “consistent with the taxpayer confidentiality protections in the Income Tax Act, the department is precluded from releasing these data”.

This may be why Bill S-6 comes from the other place, the Senate side. The department told me in this official letter to the Standing Committee on Finance that there are so few tax filers impacted by this that the department would not be able to release the data. I had asked which sectors of the Canadian economy and which sectors of the Madagascar economy would be affected, and whether there were any good examples. I did a quick Google and DuckDuckGo search, and I was able to find that Sherritt International was one of the companies in question. It is mostly a mining consortium. There was very little else that I could find.

To the credit of the Department of Finance, it did a pretty thorough review. It reviewed sources including the T1134 information return on foreign affiliates of Canadian taxpayers, the T1135 information return that collects data on specified foreign property holdings, the T106 information return on non-arm's length transactions with related non-residents, and Schedule 21 to the T2 corporate tax return on foreign income tax credits. The department examined all of the years to 2011 and then the subsequent years.

For those still able to follow, either in the public gallery or at home, Finance Canada did a thorough search to double-check how many of these filings would include Madagascar in some way, and they are actually very, very few. Perhaps the tax treaty will enable more business to be conducted by Canadians in that particular country, and there are opportunities yet to be found for this tax treaty and the consolidation of some of the rules to make it simpler for individuals to do business in both. I was unable to find an instance through any international organization or online that showed that Madagascar was behaving like a tax haven. I think that assuages some of the concerns individuals may have had.

I am sure the government knows that I will be supporting this piece of legislation as well. There was no concern about curbing tax evasion through Bill S-6, or about a potential increase in tax evasion. In fact, this is a very small piece of legislation that does not do what the Parliamentary Secretary to the Minister of Finance said. It is not part of a broader approach. If there are so few tax filers that the information cannot be released, then the impact is negligible. Therefore, it cannot be counted as part of the government's broader plan.

I am pouring out my heart here on what I believe about Bill S-6 and its contents, having spent several meetings at committee looking at this particular piece of legislation. I am feeling lighter. As the Yiddish proverb goes, when one pours out one's heart, one feels lighter, so now that the parliamentary secretary has poured out his heart about the government and what he believes its achievements are, I am going to do the opposite. I am going to poke holes in a couple of things he said. I am going to poke holes in some of the Liberal government's achievements, including in some of the statistics it likes to use.

At committee we asked both Global Affairs and Finance Canada for information on the specifics of Bill S-6 and who it would impact. We were told the bill would impact the mining sector. We were also told that detailed information could not be released because it would compromise the privacy of certain tax filers.

That is unusual. In prior cases, when we have done these tax consolidation treaties or signed up to multilateral international instruments with respect to taxes, such as Bill C-82, which was the tax treaty of tax treaties, it was always tens or hundreds of thousands of Canadians who would be impacted. That included Canadian-controlled private corporations in Canada. There would be many of them, so it was easier for us to estimate the impact.

The parliamentary secretary mentioned base erosion and profit sharing, which is not a fixed section in this particular piece of legislation. We have already had legislation to cover that off.

When I mentioned to my kids, who are very young, with my oldest being 10, that I debated an obscure bill called the Canada-Madagascar tax treaty, the first thing they wanted to talk about was King Julien and Skipper, Kowalski, Rico and Private, the famed characters from Penguins of Madagascar and the other movies in the Madagascar series. My kids were thrilled to watch that series when they were younger, and they are still thrilled to watch it today.

However, this piece of legislation is not about that. I am sorry to burst their bubble but this, unfortunately, is not about King Julien or those four little penguins.

The parliamentary secretary went off on a tangent at one point. He mentioned that the tax treaty in Bill S-6 would increase consumer confidence, and that it was part of a slew of policy decisions the government has been making to increase both consumer and business confidence. If he had bothered to check the latest statistics posted by different economic analysis bodies online, or if he had bothered to check the Conference Board of Canada, he would have seen that consumer confidence is just as low as it was in 2015. It has not improved since then. We can see that in our communities. I can see it in cities and towns all over Alberta.

However, there is more consumer confidence in Alberta now that we have Premier Jason Kenney and the United Conservative Party in charge. A new cabinet has been sworn in, and on Tuesday of next week the members of the legislative assembly will be sworn in. I hope we will know the new plan for the province on Wednesday.

Some of that plan has already come out. The government of Alberta has already announced that it will get rid of the punishing provincial NDP carbon tax, which was far more punishing on Albertans and Alberta businesses than the federal backstop. That does not mean the backstop is any good. It does not mean the federal carbon tax is any better.

The Alberta government is basically proposing to return to the old system, which was working. It was the first system to put a price on carbon for the largest emitters, not directly on consumers. The system worked. It was lauded all across North America at the time. It did not punish consumers directly for their behaviour, but was specifically aimed at the largest emitters, who were making it part of their business plans. That is the difference. May 31 is the last day of the Alberta carbon tax.

We can really see consumer confidence returning in Alberta. People are more confident now that they have a government that is on their side and will back up the decisions of private businesses, everyday Albertans, the mom-and-pop convenience stores, the local dry cleaner and the small oil and gas servicing company that has somehow managed to just get by over the last few years.

Albertans are on the cusp. They know that prosperity might return with the right decisions being made by their government to get involved, not to make decisions for them but to support them in the decisions that will create new jobs, create more business investment and lead to higher returns in terms of corporate and personal income taxes.

That is how consumer confidence returns, not by having what we have seen from the federal Liberal government over the past four years. The Liberals created a situation here in Canada that made it impossible to build a pipeline. Energy east was cancelled because of regulatory red tape. Northern gateway was cancelled by cabinet order. There already is a functioning Trans Mountain pipeline, but the Liberals caused a situation in which Kinder Morgan saw no real means to get the expansion built. It was losing construction seasons to it, so the government expropriated it. The government bought it for $4.5 billion.

Now we know from the Parliamentary Budget Officer that the government not only overpaid for the pipeline project by $1 billion but will also need to extract another $8 billion to $9 billion from the taxpayer to build this pipeline.

There has been talk of legislation and there has been talk of an expedited process, but we are waiting until later in June to find out whether this pipeline will get perhaps half a construction season. We know that construction seasons in Canada are short. Basically, there is a construction season and then there is winter. These are essentially the two seasons we have in Canada. Most people who live in big cities know this, as they have experienced it. We are going to lose a second construction season, and this does nothing but reduce business confidence and reduce consumer confidence.

How can Canadians have faith in a government that purchases a pipeline, overpays for it, and loses money every single month operating it? When the interest being paid on the debt is subtracted from the tolls charged on the pipeline, Liberals are losing money every single month operating in the most profitable part of the energy sector, which is shipping.

I hear constantly from the Minister of Natural Resources, who is from Edmonton and should know better, as once the oil gets to the west coast, 99.95% of the product shipped out of the port of Vancouver goes to California. Those are not my statistics; I am not making them up. I asked the Library of Parliament to confirm them for me. This is from the Greater Vancouver Board of Trade. The port itself has said that 99.95% of the product goes to California to feed the refineries there.

Therefore, this is not about reaching new markets on the current pipeline, and perhaps not even on the future pipeline. A series of public policy decisions led to a situation such that a private company felt unable to build a pipeline because of obstruction at the federal and provincial levels. Those obstructions are not gone; they have just become purely governmental. All the decision-making is on the government side.

When I knocked on doors in my communities and for my provincial counterparts, which I did during this past election in Alberta, I heard time and time again that people have no faith whatsoever in the Liberal government's ability to deliver on the construction of a pipeline and no faith in the government's ability to manage public finances.

The parliamentary secretary mentioned the Liberals' great plan to increase affordability for the middle class and that Liberals reduced the tax bracket from 22% to 20.5%. I remind the parliamentary secretary and all members of the House that the biggest tax break from those tax changes went to every single member of Parliament in this chamber. Those who were earning $45,000 or less got zero. They received no benefit whatsoever from that tax cut, but because of the way the progressive tax system works, every single member of Parliament in this chamber got over $800 off their taxes at the end of the day.

That is what the Liberal government did. Those of us in this chamber are not the middle class, but the Liberals did this and claimed it was for the benefit of the middle class. They gave themselves a bigger tax cut than they gave not so much to the working poor, but to people trying to get by and get ahead, people who are taking jobs that many people do not want to take. They work hard for the wages and salaries they earn.

Instead, they received higher payroll taxes. There has been a CPP increase as well, which is taking away from their income at the end of the day and taking away their ability to choose how they want to save.

The second part is that they have a carbon tax to pay. We heard the Parliamentary Secretary to the Minister of Finance speak to this, and in the scenarios he noted, he gave OECD numbers. A colleague of mine mentioned that a family on the lower income scale with two kids would not be getting back all of that money. The parliamentary secretary's numbers only make sense if we include the child benefit, which is just a re-badging of the old universal child care benefit. It is the original Conservative policy that was introduced when the government wanted to introduce a universal, one-size-fits-all, cradle-to-old-age welfare system. Whereas the government would take care of our children directly under this system, the UCCB was meant to empower parents, and that is how we should be looking at it.

The government claims that if we look at all government policy together, the carbon tax is not so bad. However, that does not help the kind of family my colleague mentioned, which is not seeing these rebates.

As well, if we look more closely at the GGPPA, which is the acronym for the government's carbon tax bill that is over 200 pages long, and then if we look at this latest budget document and some of the implementation portions of it, including the algebra formula that implements the rebate program for the federal carbon tax, we see that there is a provision that would allow the minister of finance to exclude any money he or she wishes from the rebate. A finance minister could give it to any other minister he or she wants, for any program, infrastructure or purpose. It is right there in the formula. There is no guarantee in the legislation that Canadians would receive any sort of rebate on the carbon tax, and it will never replace the full amount.

It is absolutely illogical and irrational to say that 100% of the collected tax will be returned to those who pay it. There always is and there always will be an administrative cost in collecting a tax, unless people think that public servants work for free and they think the lights and the heating in this place come for free, and they do not. It has to cost a certain amount of money, which is why we say the government is misleading them. The way the government presents the facts around the carbon rebate and the carbon tax is ingenious, but it is not an environmental plan; it is a tax plan. It is as simple as that.

To return to the point of consumer confidence and how we have not seen it return, some of the facts on LNG speak for themselves. In the case of LNG, $78 billion worth of projects in Canada have been cancelled since 2015. Those are LNG projects that have been completely abandoned by the companies that were proposing them. Tens of thousands of potential well-paying construction jobs, many of them unionized, are gone. They will not be created, because that $78 billion to put people to work has been removed from the private sector. That is an important fact to remember.

The only large-scale project that I am aware of that is going ahead is LNG Canada's project. LNG Canada is a consortium. Mitsubishi is involved and Petronas is involved. The only reason that the consortium went ahead with the project is that it has an exclusion and an exemption from the carbon tax. Of course a company will go ahead and build a large-scale industrial project, as LNG Canada is proposing to do, when it gets an exemption to a tax.

I cannot imagine any regular, everyday, hard-working taxpayers being told by the Liberal government that CRA is going to give them an exemption this year so that they do not have to pay taxes because they are doing so well in producing jobs and growing their business or are earning a higher salary because they work hard. Nobody gets that type of exclusion or exemption.

I will spend my last two minutes on my favourite subject, the Asian Infrastructure Investment Bank, because Madagascar, this country that we are signing a tax treaty with, is a member of this bank. As I said, the parliamentary secretary, by going on a tangent, has allowed me to go on a tangent here. Madagascar is a member of the Asian Infrastructure Investment Bank. As far as I know, it has not received any project yet. It has only spent $15 million to $20 million, which is a paltry sum compared to the nearly half a billion dollars that Canada has set aside. That same money is being used to build pipelines all over Asia, including in Azerbaijan, Bangladesh and the suburbs of Beijing.

I am pouring my heart out here. As my Yiddish proverb said, I am feeling lighter from being able to speak about the Asian Infrastructure Investment Bank. If we in Canada are unable to build pipelines, which are the safest way to move energy, it seems absolutely wrong to be giving a half a billion dollars to governments in Asia and to the China-controlled, Beijing-based Asian Infrastructure Investment Bank.

I support Bill S-6, a small piece of legislation coming to us from the Senate, but I do not support the government's agenda and its repeated failures to get large-scale energy infrastructure built in Canada. I do not support the government's policies that have undermined business confidence and the confidence of Canadians. October cannot come soon enough. The current Liberal government is not as advertised.

Multilateral Instrument in Respect of Tax Conventions Act

[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.

[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.

[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.

[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—

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.

Business of the House

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

Mr. Speaker, this afternoon we will resume debate at third reading of Bill C-82, an act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting.

Tomorrow we will resume debate at second reading of Bill C-92, an act respecting first nations, Inuit and Métis children, youth and families.

Next Monday we will resume debate at second reading of Bill C-93, an act to provide no-cost, expedited record suspensions for simple possession of cannabis.

I hope I will have more to tell you tomorrow.

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 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.

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.

Multilateral Instrument in Respect of Tax Conventions Act

[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.

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

Members were clapping when I pointed out that the government is raising taxes on Canadians working hard to join the middle class, so they finally realize it. We certainly invite those members who realize this flaw to come over and join us. There is still some time. I know there are so many people coming over to the opposition benches these days, some voluntarily and some not, and we welcome more to see the light.

If we look at the contrast in approach, we have the carbon tax, which is a new tax imposed by the the current government. That is specifically targeted at punishing Canadians who can least pay the tax. The government has said it is an environmental measure and that the Conservatives want to make pollution free again.

The Liberals are giving a holiday on the carbon tax to Canada's largest emitters. There is no paying of the carbon tax and there is no cost to those large emitters. Instead, they are imposing the cost on Canadians who can least afford it, on the single mom who needs to drive her car to take the kids to grandma's and grandpa's, on the small business owner just starting out and on individual Canadians who are struggling and do not have high-priced lobbyists or the ability to access the PMO.

We know how many meetings happened in the PMO on how to help SNC-Lavalin avoid prosecution. I wish they had at least that many meetings to think about Canadians who are struggling and will struggle more because of the carbon tax that is being imposed on Canadians who can least afford it while large emitters are getting a break.

If the Liberals were at all serious in their claim that this is an environmental measure, then they would impose a carbon tax across the board. However, it is not an environmental measure, it is a revenue measure and that is why Conservatives will get rid of the carbon tax. We will not just get rid of the carbon tax on large emitters, but we will make sure that no Canadian is paying the federally imposed carbon tax that the Prime Minister is so desperate to impose on them.

My friend from Winnipeg North wants to know what is going to happen in the provinces. We see in provincial elections across the country that more and more Canadians are rejecting the carbon tax as well. We have seen that rejection in Ontario, New Brunswick, his province of Manitoba and very soon we will see that in Alberta as well. I am looking forward, next week, to Albertans joining the growing movement of Canadians who are rejecting the carbon tax. People in my constituency may still face a federally imposed carbon tax even after the next provincial election. However, they will not have long to wait until we replace the current government this fall and ensure that Albertans and all Canadians do not have the burden of the carbon tax.

For the members who want to say this is the only possible way to respond to climate change, I point out to them that we saw a reduction in greenhouse gas emissions under the previous Conservative government. We saw in every jurisdiction across the country that emissions either went down or up by less than they had during the previous period. We saw an increase in emissions in British Columbia under the carbon tax that they have had in place for quite a while. All the evidence suggests that this is not an environmental measure and, again, the Liberals' own decision to give a holiday on the carbon tax to the largest emitters shows that they are just not serious about this.

The government needs to re-examine the rhetoric it is using in light of the reality and in light of the fact that it is imposing tax increases at every opportunity it can. It is clear why it is imposing these tax increases. It simply cannot get a handle on spending.

In the last election the Prime Minister looked Canadians in the eyes and told them that he would run deficits lower than $10 billion, and then he would balance the budget by the 2018-19 fiscal year. There was no balance. We saw very clearly in the budget that the government has not balanced the budget. It has no intention of balancing the budget and it will not face up to the fact that it made a promise that it simply did not have any plan or sincerity about keeping.

Now the Liberals are desperate to start to plug that fiscal hole by imposing new taxes on Canadians at every opportunity, and they have tried to do this in so many ways. After the last election, despite promising to lower the small business tax rate to 9%, they undid that promise and said they were going to leave the tax rate at 10.5%, effectively a tax increase on small business. Then, with great fanfare, after they had attacked small businesses, after they had called small business owners tax cheats, after they tried to impose these new rules that were met with such frustration, such virulent objection from the business community, guess what they said. They said they were going to lower the small business tax rate to 9%, which is what they had promised they were going to do in the last election before they unmade that promise. However, they still have changed rules for small businesses that impose a new and greater tax burden on them.

We know what the current government is about. It is about raising taxes at every turn to try to plug its wide-open hole in terms of its fiscal plan and we cannot let it do that. As these deficits and these debts grow, it will certainly be raising taxes unless we get a new government in place that ensures Canadians are no longer paying for the mistakes of the current Prime Minister and that instead allows Canadians to get ahead by lowering their taxes.

We can be sure that, as we have seen in the past, the approach of a Conservative government, under the able leadership of the member for Regina—Qu'Appelle, would be focused on providing tax relief to those Canadians who need it most, those Canadians who are suffering the most under the current government's high-tax, high-spend agenda.

There are members across the way who are shouting the phrase “trickle down”. The approach of the current government is to pour subsidies on the largest corporations, to try to give special deals to its friends, to try to help SNC-Lavalin to get out of its prosecution and to somehow think that will trickle down. On this side of the House, we oppose the Liberals' theory of trickle-down government, and that is why we believe in providing tax relief to Canadians who need it most as we did by lowering the GST, by lowering the lowest marginal tax rate and by raising the basic personal exemption.

It was important for me to start out by responding to my colleague, the parliamentary secretary, but let me now make a few comments on this legislation, which, contrary to my tone until now, is actually legislation that we support. It is legislation that really builds on great work done by the previous government. We would not necessarily know it by hearing some of the comments across the way, but Conservatives in government were actively engaged with our international partners in ensuring that we have a fair and more transparent tax system. The work that we are dealing with in terms of the bill began as a result of an agreement in 2013 and Conservatives from that period onward, and indeed before that period, were active in engaging with our international partners.

In January 2015, we put in place a requirement that electronic transfers of $10,000 or more had to be reported to the Canada Revenue Agency by banks and financial institutions. We have always, in terms of our policy declarations and the principles we have put out there in platforms since, emphasized tax fairness and emphasized simplification of the tax code. This is vitally needed. An area that many Canadians bring to our attention on a regular basis is that there are opportunities for us to ensure proper reporting and ensure tax fairness and, therefore, strengthen Canada's revenue position.

Therefore, this is legislation that builds on that work that our colleagues have spoken in favour of up until now and certainly that we continue to support.

Even as we discuss this legislation, we continue to see the gaps in terms of some of the things the government members say and the reality in terms of what they do. In many cases with these international conventions, we talk about the issues of simplification, of consistency, of ensuring that CRA is treating everybody fairly and of making sure that there is not double taxation.

In that way, it is worth pointing out again the good work of my colleague from Calgary Rocky Ridge who put forward Motion No. 43, which was a motion that would impose a duty of care on the Canada Revenue Agency in its interactions with Canadians, basically to ensure that people are treated fairly in their interactions with the Canada Revenue Agency. While, on the one hand, we have situations where companies may be taking advantage of some of these creative tax-planning arrangements, we have situations where individuals who may be low-income individuals face the CRA coming down very hard on them and they have a difficult time responding. It was a common-sense, reasonable motion that my colleague from Calgary put forward and I was pleased to support that. Unfortunately, it was only members of the Conservative caucus who supported Motion No. 43.

All members of the government opposed this common sense tax fairness measure. Unfortunately, my colleagues in the NDP opposed it. We do hear the NDP members sometimes talk about the problem their constituents face with respect to interactions with CRA.

However, I hope we will have an opportunity to bring a similar initiative in the future, perhaps in a future Parliament. Maybe in light of the more recent comments we have heard on this from the NDP, maybe its members will support it at that time. Canadians can have confidence that when it comes to holding CRA accountable to ensure that people are treated fairly and equally under the law, thus far it has only been the Conservatives who have taken that clear, consistent principled position.

If the Liberals are concerned about fairness for the middle class, then we would expect them to vote in favour of initiatives that would ensure fairness for the middle class when they have an opportunity. Unfortunately, they have not done that.

On the issue of double taxation, I spoke earlier about the carbon tax. We have with the carbon tax a form of double taxation, which is the fact that the federal government is requiring a carbon tax in every jurisdiction. It is imposing a federal carbon tax in jurisdictions where provinces are not imposing it themselves. Then it is collecting GST on top of it.

The Liberals have said that this will be revenue neutral for the federal government. It is not revenue neutral for the federal government. In and of itself, the federal carbon tax imposed on provinces that have rejected it is not revenue neutral from the perspective of the federal government. They have said in their announcements that most of the money will be rebated back. That is a big difference from all of the money, but the government is collecting GST on top of that.

Therefore, right here within our own domestic reality, we have a problem of double taxation. We have taxes being imposed on top of other taxes. This increases the burden on Canadians who really can least afford it.

We have had a number of initiatives, and not just speaking of the work of the previous government, in this Parliament from different members of our Conservative team who have been trying to bring about tax relief for Canadians. Every time we propose measures to bring tax relief to Canadians, the Liberals oppose them.

The leader of the opposition had an excellent initiative around making parental leave tax free. This would give parents a greater ability to plan to preserve their own fiscal situation while they were going through the transition of having a child. Certainly, we want to support parents in that situation. The government's approach to parental leave is to try to reduce that flexibility by reducing the flexibility that families have to allocate leave between different partners. Our approach is to provide more choice, more opportunity by reducing taxes across the board. Unfortunately, the Liberals voted against it.

Finally, with respect to Bill C-82, a mixed signal is being sent by the government. On the one hand, it wants to look like it is being tough on tax evasion and tax avoidance. On the other hand, we have seen how dedicated the Prime Minister and his team were to try and get a special deal for SNC-Lavalin. We do not exactly send a message that we are tough on anything when it comes to the actions of big corporations, if then we also try to put as much pressure as we can to get a special deal for those well-connected companies that can afford high-priced lobbyists and can push back there. It is gravely inconsistent.

If the government wants to address this issue and the issues around it, it needs to send a message that everybody is equal under the law, that it does not matter if one is a big company or a Canadian who is struggling to get by, that the law is the law. Sending that message in a clear and consistent way, ensuring that everybody is treated equally and fairly under the law, would very much address what we are talking about. It would confront the problems that this legislation seeks to confront.

Therefore, while we support the bill before us, we recognize the desperate need for the government to do better, to stop piling taxes on those Canadians who can least afford to pay them and to start sending a message that everybody, regardless of where one is situated in society, is equal under the law.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Mr. Speaker, I wanted to ask the hon. member and parliamentary secretary about the theme of our government for the last three and a half years, which has focused on tax fairness. We have Bill C-82 with respect to base erosion and profit shifting, along with budget 2019, which limits the stock option tax deduction. We did a full tax expenditure review beginning in 2016, with $4 billion in savings. Those funds are being invested for everyday programs.

Could the parliamentary secretary comment on how important tax fairness is for our government?

[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.

[Joël Lightbound, Liberal, Parliamentary 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—

[Ginette Petitpas Taylor, Liberal, Moncton—Riverview—Dieppe, NB]

moved 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 concurred in.

The House proceeded to the consideration of Bill C-82, An Act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting, as reported (without amendment) from the committee.

[The Chair, Liberal, Wayne Easter]

I do believe those are all of the questions we have.

Mr. McGowan and Ms. Smith, thank you very much for coming and appearing as witnesses and answering our questions.

With that we will go to committee business. We don't really need to suspend because this is public as well. I think there are really three items that we have to deal with. One is whether as Bill S-6 goes forward we are going to want further witnesses. We'll have to establish the deadlines on that, with or without witnesses, and a proposal on that depending on where people want to go.

Second, and maybe we'll deal with this first, there's a budget that we need to vote on for the hearings on Bill C-82, which are already done. We had to pay for those witnesses.

Third is the chair's ruling on the February 21 meeting. I think Mr. Richards had a question on that.

Maybe we could start with the budget. The other thing I should mention is that I do believe we need to hold a subcommittee meeting as soon as possible next week. Hopefully by that time we'll know where things are at on the budget implementation act. We'll have to schedule out where we want to go through to June, I expect.

On the project, there's a request for the budget. The amount requested to do the study on Bill C-82, an act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting, was $3,500. Do we have a motion to that effect?

That is moved by Mr. Fergus.

(Motion agreed to)

On Bill S-6, do we envisage having witnesses or not? That would make a difference. We had much the same as for Bill C-82. Do people, members, think that we will be bringing forward further witnesses on this tax treaty, similar to the case with Bill C-82 or not?

I'll give people a few minutes to think about it, because that will determine when we will have to establish deadlines.

While you're thinking about it, I'd put it this way. If there are no witnesses, we'll propose amendments by April 4, the amendment deadline. On April 9 we'll do clause-by-clause. If there are witnesses, we'll have to go to April 4 as the witness deadline. On April 9, we'll hear from witnesses and April 16 will be the amendment deadline. On April 30 we'll go to clause-by-clause. That's the difference. It's entirely up to committee.

Go ahead, Tom.

[Michael McLeod, Liberal, Northwest Territories, NT]

That is Bill C-82.

[Trevor McGowan]

Thank you for the question. I would be happy to.

This bill relates to a bilateral tax agreement between Canada and Madagascar. It's intended to both improve the administration of our tax system and reduce barriers to trade between two countries on a bilateral basis.

The base erosion and profit shifting project was born out of a multilateral effort to deal with global tax avoidance—the base erosion, profit shifting and moving income around. It was determined as part of that process that a number of bilateral tax treaties, such as with Madagascar.... Of course, we have them with 93 countries; this would be the 94th. Renegotiating all of those bilateral treaties would take a tremendous amount of time and effort by all of the countries involved. The multilateral instrument is itself a treaty. It serves to modify the application of existing bilateral treaties, so it can update a large number of treaties all at once by virtue of being entered into by a number of countries on a multilateral basis.

Here in Bill S-6 we have a bilateral income tax convention. The MLI in Bill C-82 affects and updates the application of Canada's existing multilateral treaty networks, as well as the networks of the other participants in the MLI.

[Michael McLeod, Liberal, Northwest Territories, NT]

We have this bill in front of us, and there's another bill, Bill C-82, which is supposed to prevent base erosion and profit shifting. Can you explain the difference and why there was a need to have these two separate bills?

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

Thank you, Mr. Chair. I'm happy to ask a few questions.

I want to thank the officials for joining us today to answer our questions on Bill S-6.

Does the convention proposed in Bill S-6 reflect the text of the multilateral convention in Bill C-82? I'm afraid that we're working for nothing, and that the convention in Bill S-6 isn't the same as the multilateral convention and will therefore need to be updated in the near future. Is it the same text? Otherwise, why not speed up the process and avoid an update in a few years?

Finance

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Mr. Speaker, I have the honour to present, in both official languages, the 28th report of the Standing Committee on Finance concerning Bill C-82, an act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting. The committee has studied the bill and has decided to report the bill back to the House without amendment.

[The Chair, Liberal, Wayne Easter]

That deals with Bill C-82.

Thank you, gentlemen, for coming and answering our questions. We went a little far astray on relevance there, but that's all right. I believe you're going to get back to us with some information, Mr. McGowan.

With that—

[The Chair, Liberal, Wayne Easter]

Now, turning to clause-by-clause study of Bill C-82, pursuant to Standing Order 75(1), consideration of clause 1, the short title, is postponed.

(Clauses 2 to 6 inclusive agreed to on division)

Shall the schedule carry?

(Schedule 1 agreed to on division)

Shall the short title carry?

[The Chair, Liberal, Wayne Easter]

We will have it at another time. I think it's more appropriate that we deal with Bill C-82.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

I need 30 seconds, Mr. Chair. Thank you.

On a point of order, I do want to put on the record that Bill C-82 on base erosion and profit shifting came forth from exhaustive negotiations between 2013 and 2015 under the prior Conservative government. Now we're finally passing the legislation, or going through it here in committee.

Hopefully, legislation will be passed and put into place so we can ensure that Canadian corporations—all of them, much like their counterparts all over the world—benefit from this agreement, but also so Canadian citizens benefit from this agreement, in that all corporations are paying their fair share of taxes. That's something that I know our side wants. I'm not sure why the other side does not see it that way. Our side sees it that way.

I'll stop there, Chair, and Bill C-82—

[Trevor McGowan]

I can only speak to my personal knowledge, certainly not to any of the conversations between our minister's staff and anyone not in the department.

To answer your question, I'm not aware of any mention of SNC-Lavalin in the context of Bill C-82.

You asked, though, whether there could be any benefit under Bill C-82 for companies like SNC-Lavalin, Canadian companies competing abroad.

Of course there would be benefits under Bill C-82 for Canadian businesses. One that comes to mind is the improved dispute resolution process contained in the bill, including the mandatory binding arbitration, which can provide certainty for affected businesses involved in tax disputes with other jurisdictions that have also adopted that standard—not so much certainty as to what the outcome will be, but that in a binding arbitration there will be final resolution of a tax dispute and within a defined time period.

There are, then, benefits in this bill for Canadian businesses competing abroad, but they are of a general nature.

[Blake Richards]

Thank you, Mr. Chair, and it will, I assure you.

She said, “These events involved 11 people...from the Prime Minister's Office, the Privy Council Office, and the office of the Minister of Finance. These included in-person conversations, telephone calls, emails and text messages.”

Further on she indicated, “...on September the 19, I spoke to Minister Morneau on this matter when we were in the House. He again stressed the need to save jobs, and I told him that engagements from his office to mine on SNC had to stop, that they were inappropriate.

She said, “They did not stop. On September 20, my chief of staff had phone calls with Mr. Chin and Justin To, both members of the Minister of Finance's office, about DPAs and SNC.”

Those are the relevant quotes, because they obviously reference the Minister of Finance or his office in what Jody Wilson-Raybould and, I think, many Canadians would term as inappropriate efforts to try to advocate on behalf of SNC-Lavalin.

My question—and this is where the relevance comes in—is in relation to Bill C-82. Obviously, if the Minister of Finance and his staff felt somehow compelled to inappropriately lobby and pressure the then-Minister of Justice and Attorney General on behalf of and in trying to do something to benefit SNC-Lavalin in regard to the deferred prosecution agreements, one would have to wonder, would they then be willing to do the same on something such as Bill C-82?

The question would be, do you see anything in Bill C-82 that would potentially be of benefit to a company like SNC-Lavalin?

Also, was there ever any representation from the Minister of Finance or his staff made to you or any other officials in the Department of Finance related to Bill C-82 and with relevance to SNC-Lavalin?

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

To cite one of the first countries on the alphabetical list, Barbados merely signed the convention on January 24 but has done nothing since then. Time will tell whether it's serious about its actions and whether it will bring the convention into force. Otherwise the current system will prevail, as you confirmed earlier.

Approval of Bill C-82 is a step in the right direction, but our committee must be realistic and understand that the new convention will apply solely to those countries that take the necessary action on their end.

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

You justify Bill C-82 by saying the new provisions will be more effective in combating abuses than the present act.

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

Can you confirm what you previously said, that it's possible for taxpayers to abuse the present tax conventions—hence Bill C-82—to avoid their Canadian tax obligations?

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

Thank you, Mr. Chair.

Last week, I believe, I asked an expert from outside the department a question, and I think it would be worthwhile to put it to the Finance Department representatives today.

Gentlemen, since everyone here's already up to speed on the issue, there's no need to confirm today that the new international convention contemplated in Bill C-82 has to be ratified by the partner countries in order to come into force. Every country has to follow the necessary legislative process as we are doing. Does that implicitly mean that, if a country fails to ratify the convention within a few months or years, the former convention will apply to that country?

[The Chair, Liberal, Wayne Easter]

We shall reconvene.

Pursuant to the order of reference of Monday, October 15, 2018, we're dealing with Bill C-82, an act to implement a multilateral convention to implement tax treaty-related measures to prevent base erosion and profit shifting.

We have with us, as witnesses from the Department of Finance, Mr. Trevor McGowan, who is the Director General, Tax Legislation Division, who has been with us many times before; and Mr. Boychuk, Expert Adviser, Tax Legislation Division.

I understand that you're here basically to answer questions. You don't have an opening statement.

On Bill C-82, on which we've had a number of witnesses before the committee, are there any questions for the witnesses from the Department of Finance before we go to clause-by-clause consideration?

Mr. Dusseault.

[The Chair, Liberal, Wayne Easter]

With that, we will have to go to our next session.

On behalf of the committee, I want to thank you, Mr. Hamilton, and all the other witnesses who came with you, for providing the information you did.

We will suspend for two minutes and ask Mr. McGowan and Mr. Boychuk to come forward on Bill C-82.

Canada–Madagascar Tax Convention Implementation Act, 2018

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Mr. Speaker, I was just paying attention to the testimony going on at the justice committee. If people are watching at home, I suggest they turn to that and watch the testimony by the former attorney general. It is quite rivetting. I will not take offence if my words get missed.

It is my pleasure to speak to Bill S-6, an act to implement the convention between Canada and the Republic of Madagascar for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. In November of 2016, the convention was signed between the governments of Canada and Madagascar. While reviewing the bill, I was surprised to learn that we have had diplomatic relations with Madagascar for nearly 55 years.

In terms of economic activity between our two countries, Canada imported $100 million in goods last year. The bulk of these imports were mineral and vegetable products. Madagascar imported $16 million of Canadian goods last year. Global Affairs Canada reports that Canadian direct investment to Madagascar was $28 million in 2017. Canada has mining companies there. We do business with Madagascar.

Since 1976, Canada has entered into similar tax agreements with countries all around the globe. In fact, we currently have 93 such agreements in place. The main purpose of the convention is to eliminate double taxation and prevent international tax evasion.

I want to support Bill S-6 and the international efforts coordinated by the organization for Organisation for Economic Co-operation and Development aimed to reduce treaty shopping for tax havens. However, the bill reminds us that the government's overall approach to addressing international tax evasion is inadequate and more needs to be done.

I had the pleasure of rising in the House on September 28 of last year to speak to Bill C-82, an act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting. For the benefit of those at home and as a reminder to my colleagues in the House, Bill C-82 aims to make it more difficult for corporations to hide money in offshore tax havens.

What is double taxation? It is a taxation principle referring to income taxes paid twice on the same amount of earned income. It could occur when income is taxed at both the corporate level and the personal level. It also occurs in international trade when the same income is taxed in two different jurisdictions.

I had a number of concerns with Bill C-82. I will not repeat them all here, but one of my major concerns, which is an underlying problem with these agreements, is this. I really have no problem with the agreements that inevitably make other jurisdictions more attractive to Canadian investment. Promoting investment in Canada should be a priority for the federal government, but in truth we live in a global community with economic opportunities for Canadians outside the country, whether through direct investment or indirectly through mutual or pension funds.

What I see as a problem is when the government fails to support competitively lower taxes for Canadians and businesses domestically. With respect to businesses, we need to lower corporate taxes, reduce red tape and create an investor-friendly climate. This is something we must do in concert with bills like Bill C-82 and Bill S-6.

We have companies moving from Canada to the United States because of a lower corporate tax regime. If we want to stop the use of tax havens, we need to make it attractive to invest at home and make tax rates competitive with other jurisdictions. The more investment dollars we can attract and retain in Canada, the less taxes we need to spend in pursuit of those who exploit loopholes in tax rules.

Let me be clear. The Conservatives support measures to crack down on tax evasion. Aggressive tax avoidance is a major source of lost tax revenue for high tax jurisdictions like Canada. The vast majority of citizens and businesses in Canada pay their taxes and follow the rules. We need a competitive and fair tax system for all Canadians and corporations that do business in Canada. That is fundamental to a healthy and equitable economy.

During the fall economic statement, the Minister of Finance confirmed that the Liberals were borrowing about $18 billion this year and almost $20 billion next year to pay for their spending, and they have no plan to balance the federal budget. This year's deficit is more than three times what the Prime Minister said it would be. He has added $60 billion in debt.

We are giving the impression to Canadians, through bills like Bill S-6, that the Liberal government is more interested in hunting down tax evaders in Madagascar, although I am not aware of an outbreak of tax evaders in Madagascar, than creating a fair and equitable system here in Canada.

Canadians know that one does not need to be an economist to understand that more debt today means higher taxes tomorrow. Tax treaties might be important, but something that is far more important is the halting of the ongoing plundering of our children's economic futures.

Canadians are going to pay higher taxes once the government's Canada pension plan tax increases are fully implemented by 2025. That is up to $2,200 per household. The Prime Minister's national carbon price, the carbon tax, will cost up to $1,100 per household. Canadians are going to pay more in future taxes to service the interest on the government's ballooning deficit fuelled by out-of-control spending.

The Liberals' previously proposed tax grab would have forced business owners in Canada to pay 73% on savings income, penalized family businesses for sharing earnings and work with family members and doubled the tax on the sale of a farm from parents to children, forcing them to sell to multinational corporations instead.

This is not how we create a friendly investment climate in Canada. This is not how we create wealth and lift people out of poverty. This is not how we safeguard our children's future.

The previous Conservative government signed tax agreement's like Bill S-6, but we did this in concert with reducing taxes for Canadian families and businesses. The average Canadian middle-class family is paying $800 more income tax today than it did before the Liberal government took office in 2015.

The Conservatives implemented family tax cuts, arts and fitness tax credits and education and textbook credits, all of which were cancelled by the government.

Bill S-6 is more than just about cracking down on tax evaders. Trade and commerce between two countries are supported by these agreements. That is why our previous Conservative government signed a record number of them.

Under the previous Conservative government, Canadian workers and businesses won free trade access to more than 50 countries around the world, creating hundreds of thousands of jobs and opportunities for everyone. In just three years, the Prime Minister has failed to secure a trade deal with China and delayed and nearly derailed plans for Canada to join the CPTPP trade agreement.

Worst of all, the Prime Minister made massive concessions to the United States at the NAFTA negotiation table. He backed down on cars, giving the U.S. limits on how many cars we could export. He even backed down on pharmaceuticals, giving the U.S. higher profits at the expense of Canadians from coast to coast to coast. Canadians cannot bid on American government contracts and we still have tariffs on steel, aluminum and softwood lumber, with no timeline to end them.

Bills like Bill S-6 are important and need to be supported. Tax evasion is a real issue. We need to crack down on tax evasion, but we also need to support lower taxes for Canadian businesses. We have lost out on tens of billions of dollars' worth of investment because of the government's misguided fiscal policies.

Investment is fleeing, we are losing jobs, families are worse off than they were before and we are going in the opposite direction with respect to what most countries are doing by lowering taxes and making themselves investment magnets.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Mr. Speaker, I thank the member from Quebec for his question. I would like to answer in French, but it is a bit tricky.

Our government has invested over $1 billion in the CRA to provide the wonderful folks who work there with the services and tools they need to ensure that all Canadian organizations, including multinationals, pay their fair share of taxes.

Our government is working extremely well with our international partners to ensure that tax avoidance, because there is a difference between tax avoidance and tax evasion, is brought down, that we ensure corporations and high net worth individuals do not take advantage of loopholes. We are closing loopholes. We are investigating. Most important, we have the right tools to do such a thing and CRA and its associate partners have those tools. This will be very effective with Bill C-82, base erosion profit shifting.

We all know that under 10 years of the former government, under the Harper regime, that money was cut from the CRA and it was unable to do its job effectively and diligently for hard-working Canadians, much like the ones in my hon. colleague's riding, who I was able to serve with on the finance committee, and those wonderful Canadians in my riding of Vaughan—Woodbridge.

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

Mr. Speaker, I thank my colleague for his speech and many interventions at the Standing Committee on Finance. I know that he is very knowledgeable about his files, especially tax conventions and double taxation agreements, which aim to help our corporations be successful and to ensure tax fairness for corporations that do business abroad.

With Bill C-82, the government hopes to revise all our tax conventions because public officials have indicated that some taxpayers abuse them. I know that my colleague is very conversant with Bill C-82 as well.

Would he also acknowledge in the House that, absent the changes provided for in Bill C-82, our tax conventions are being abused by certain Canadian taxpayers in order to avoid paying their fair share of Canadian taxes?

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Mr. Speaker, it is great to be here this afternoon. Bill S-6 is along the lines of what our government's platform and agenda has been over the past three and a half years. The bill fits well within our tax treaties with our international partners and international organizations. It is a routine bill, a routine tax convention, which we need to have implemented.

If I may, I will take a step back in terms of what our government has done over the last three years with regard to improving our tax system, investing in the CRA and investing in middle-class Canadians. Yesterday we had Statistics Canada report to us on the annual Canadian Income Survey, 2017. As an economist by training and someone who reads the daily notices from Statistics Canada, it was wonderful for me to see this report. It was wonderful to know that from the work we have been doing for three years, not only have 900,000 jobs been created by hard-working Canadians and Canadian entrepreneurs but also that the growth that has occurred is inclusive, widespread and benefiting Canadian families from coast to coast to coast, including families and their children in my riding of Vaughan—Woodbridge. It was great to see that over 850,000 Canadians have been lifted out of poverty.

We based our platform three years ago on the Canada child benefit, which benefits nine out of 10 Canadians. It is tax free, simple and monthly. We based it on cutting taxes for nine million middle-class Canadians, which benefits them and their families. We also asked the 1% of Canadians, the wealthiest, most fortunate in our country, to pay a bit more. Now we see the fruits of those results, which have lifted hundreds of thousands of Canadians and their families out of poverty.

We ran on a platform of strengthening the middle class and helping those working very hard to join the middle class. I am happy to say that we are getting there. We have seen our poverty rate decline significantly. We know we have more work to do.

We have seen tens of thousands of seniors now being lifted out of poverty. That 10% increase in the guaranteed income supplement for our most vulnerable seniors is benefiting my riding and the 17,810 seniors who, according to Statistics Canada, live in my riding of Vaughan—Woodbridge. I know that 1,530 of those vulnerable seniors in my riding received, on average, $800 more every year from the 10% increase in the guaranteed income supplement we campaigned on, that we promised and that we implemented.

I look at this Canada–Madagascar tax convention bill, Bill S-6, as another step forward in improving our tax treaties with our international partners and in building a stronger Canada by ensuring that all Canadians pay their fair share of taxes and that all Canadians can depend on the services that we, as a government, deliver. When I say we, I mean all members of Parliament.

Over the past three years, we have taken action on multiple fronts to ensure that this happens, because when everyone pays his or her fair share, the government can continue to deliver the programs and services Canadians need while keeping taxes low for middle-class families. Again, I allude to the fact that we cut taxes for nine million Canadians, as we promised at the outset. Promise made, promise kept.

As members know, one of the government's first actions was to cut taxes for middle-class Canadians. Over nine million Canadians are now benefiting from this change, with nearly $20 billion over five years of tax relief for families from coast to coast to coast. To help pay for this middle-class tax cut, we asked the wealthiest to pay a little bit more.

Next we made changes to better provide targeted, more generous and simpler support for Canadian families with children. We accomplished this with the introduction of the Canada child benefit, or the CCB, which was implemented, proudly, on July 31, 2016.

In my riding of Vaughan—Woodbridge, in looking at the numbers for one of the time periods, I see that nearly 17,000 children benefited, and 9,510 payments were made on a monthly basis for nearly $5 million.

If I look quickly at the numbers for the year, I see that nearly $57 million was paid out from the Canada child benefit to families in Vaughan—Woodbridge. That is incredible. That is lifting families and their children out of poverty. That is helping families save for a rainy day and pay for their kids' winter boots. I understand it is a snow day back home in Vaughan—Woodbridge and that the buses were cancelled. If those funds paid for those kids to have an extra pair of boots or a new pair of boots, then I am proud of that.

The CCB is particularly helpful for families led by single parents. These families are most often led by single mothers, who tend to have lower total incomes. In fact, close to 95% of CCB amounts paid to single parents with incomes below $30,450 are paid to single mothers.

The government is committed to ensuring that Canada's tax system is fair, effective and competitive. I am certain that all hon. members know how important small businesses are to Canada's economy. They account for 70% of all private sector jobs and are vital drivers of economic growth in communities all across the country.

In looking at Bill S-6 and this tax convention with Madagascar, we see that this is another tax treaty that is made for the benefit of businesses on both sides of the Atlantic. We need to know that we as a country are eliminating barriers to investment and eliminating barriers to trade, and we have done that with the implementation of CETA and the implementation of the CPTPP and, mostly recently, the newly signed USMCA accord with the United States and Mexico, our two largest trading partners.

This is about creating good middle-class jobs, growing the economy, and growing the economy in an inclusive manner that benefits all Canadians, all middle-class Canadians and all those working very hard to join the middle class.

When small businesses succeed, Canada succeeds. That is why the government reduced the small business tax rate to 10% in January 2018, with a further reduction to 9% coming on January 1, 2019. These low tax rates will enable small businesses to create good, well-paying jobs in communities across Canada.

We know that the best poverty reduction plan is a job. It is giving Canadians skills training and lifelong learning. Hard-working Canadians and entrepreneurs, such as the 13,000 small business owners in the city of Vaughan and in my riding of Vaughan—Woodbridge, have created approximately 900,000 jobs in Canada since we were first elected. The unemployment rate hit around 5.4%—I think it is at 5.6%—because people are being drawn into the labour market. The unemployment rate is at a 40-year low, something that we should be proud of.

We know there is more work to do, but the fact is that there are over 500,000 job openings in Canada currently. The fact is that people from all over the world want to come and work and invest in our country. There is a reason for that: We have the best entrepreneurs, we have one of the best educational systems in the world, and we are a great place to invest. We have access, through three major trade deals, to all our major trading partners. We have free trade access to over 1.6 billion people, and businesses across the world know this.

These low tax rates will enable small businesses to create good, well-paying jobs in communities across Canada. When we say we expect these results from small business tax cuts, it is because we have a track record of success, giving us confidence in the direction we are headed.

Many positive signs tell us our plan is working. Since 2016, hard-working Canadians have created—as I said, to re-emphasize—hundreds of thousands of jobs, pushing the unemployment rate to a 40-year low and giving Canada one of the strongest records of economic growth in the G7.

Canadian workers are experiencing the strongest wage growth in a decade. We have seen some of the numbers that came out yesterday from the Canadian income survey, showing that after two years of stagnation, wages are on the rise and incomes are on the rise. That is more money in the pockets of Canadians, whether they are low-income, middle-class or upper-class. That is a good-news story. It is more income to invest, more income for Canadians and their families to save.

Most importantly, I would argue, as we compare our finances of governments around the world, that we have had the flexibility in Canada to invest in Canadians. We invest not only in skills training and the Canada child benefit but also in infrastructure through a $180-billion, 12-year infrastructure plan. We sat down at the table with our municipal, regional and provincial partners and worked on both the urban side and rural Canada, where we invested funds in both broadband and public transit. That is due to the inherent flexibility in our fiscal strength in Canada, where we can make these investments and plan for the long term.

Canada's net debt-to-GDP ratio is the lowest among all G7 countries, and we intend to maintain it and bring it down over the medium and long term. However, we understand, as Canadians do, that more needs to be done to encourage long-term economic growth. As I said earlier, one of the things we need to do is ensure that everyone pays his or her fair share of taxes. It is unacceptable that some corporations, both foreign-owned and Canadian, take advantage of Canada's tax rules to avoid tax. It is unacceptable that some wealthy people use offshore jurisdictions to hide income and evade tax.

I am happy to re-emphasize that we as a government, since taking office, have invested nearly $1 billion in CRA to provide it with resources, after a number of years when the prior government cut funding to agencies like CRA and did not allow them to have the tools to do their jobs effectively. We have reversed that. Canadians understand and appreciate that, because our services are delivered and funded through taxpayers, and, as a government, we respect them. We have lowered taxes for nine million Canadians, but we have also asked the wealthiest 1% to pay a little more, and those who attempt to avoid paying their fair share need to be held accountable.

We have addressed base erosion and profit shifting, which was recently debated in the House and which we had the pleasure of speaking to, and we have worked with our multilateral partners to look at ways to deal with transfer pricing for corporations, strengthening the exchange of information with our multilateral partners and providing the tools to CRA to do its job effectively. We need to ensure that corporations and wealthy individuals continue to pay their fair share of taxes and that our tax laws are being enforced judiciously, diligently and effectively.

In order to stop this profit shifting from happening, the Canada Revenue Agency needs information from foreign jurisdictions. That is why the tax convention in this bill puts in place measures to make possible the exchange of tax information from one country to the other. Bill S-6 would help Canadian tax authorities prevent international tax evasion while gathering the information they need to enforce our tax laws.

Canada's network of 93 income tax treaties currently in force is one of the largest in the world. However, we must keep updating and expanding this network in order to encourage international trade and make it easier for other countries to invest in Canada. In this way, getting our tax treaties in order will help the Canadian economy and Canadian businesses compete globally and enable them to hire workers, invest, grow our economy and improve the future of middle-class Canadians, such as those living in my riding of Vaughan—Woodbridge. Bill S-6 gives Canadians more certainty about the tax implications involved in doing business with, working in or investing in Madagascar.

This bill would make our tax system more efficient, while also ensuring tax fairness for Canadians who already pay their fair share. It would encourage more foreign investment in Canada, remove barriers to international trade and help grow and strengthen the middle class across the country. I encourage all members to support this bill.

As I conclude my remarks on Bill S-6, an act to implement the convention between Canada and the Republic of Madagascar for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, I see this bill much like Bill C-82 on base erosion and profit shifting and much like the work we have done in the finance committee on a study with regard to tax avoidance and tax evasion, which was done very judiciously by the finance committee.

It is great to see committees doing the work that they are tasked to do independently. They work judiciously, make recommendations and produce reports, which are then looked at both externally and internally by ministers.

On this issue of a tax convention and its implementation, it is obviously very important for Canada as a country to work with all of its international partners, no matter how big or small, no matter how near or far, to ensure that we have the proper information exchanged between the two entities so that on a technical basis we ensure that we eliminate double taxation between the two countries for individuals investing both ways, reduce the risk of burdensome taxation and ensure that taxpayers are not subject to discriminatory taxation.

In closing, I will say that by strengthening our ties with Madagascar, our government is seeking out the kind of investments and trade opportunities that are vital to grow the economy.

I have spoken about the treaties we have put in place on the trade front, such as CETA, CPTPP and USMCA. I have also spoken of our plan to grow the economy by lowering taxes for middle-class Canadians and asking the 1% to pay a little more, and the results are bearing fruit. The numbers that were produced yesterday by Statistics Canada show that over 850,000 Canadians have been lifted out of poverty in the last two and a half years. These are real people working hard every day to provide for a better future for themselves and their families. We as a government will continue to invest in them, believe in them, work with them and work with all of our partners.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Mr. Speaker, under Bill C-82, future tax agreements will be based on OECD standards, which allow for comprehensive tax information exchange.

We will continue to support that bill as well as Bill S-6, the Canada-Madagascar convention. We believe that the convention honours the spirit and the standards set out by the OECD even though the wording itself is not exactly the same as what was signed in Paris. Again, that is based on my understanding of the file.

Madagascar is not a tax haven at the moment, so, in my opinion, the wording about the information exchange agreement is fine. Obviously, it would be better if this were standardized across all our agreements, which is the goal of Bill C-82. The real problem lies with the tax information exchange agreements with tax havens, which make effective tax information exchange complicated or well-nigh impossible.

In such cases, the Canada Revenue Agency has to request specific information about a known taxpayer. We do not have enough information to monitor data about information exchange. If everything were available, auditors could identify situations in which tax fraud or tax evasion likely took place. That is what needs to change. Tax information exchange agreements with tax havens are the problem.

I would remind members that when these agreements were entered into with tax havens, the Income Tax Act was changed. It was not done openly, but hidden in the information on medical expenses, among the thousands of pages of the Income Tax Act. It stated that when Canada enters into an agreement with a tax haven, the portion of income that the Canadian corporation declares was generated in the foreign country will no longer be taxable here. The income will only be taxed in the tax haven, where the tax rate is zero or close to that. That is what we are speaking out against and it must change.

Canada is a lame duck in the fight against tax avoidance; it is letting the big banks and multinationals shift their profits to tax havens under these agreements. At the time, there were 22 agreements. This is still going on. Things have to change.

I introduced a motion in the House to do just that. Every Liberal, except for one, and every Conservative member voted against the motion. Do the parties that aspire to govern represent the Canadians who want to eliminate the use of tax havens, or do they serve the big corporations and major banks that are the main beneficiaries of these immoral schemes?

I think that in asking the question, we have our answer. This must change.

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

Mr. Speaker, I thank my colleague for his speech and his expertise on the matter. I know that he also analyzed Bill C-82. I am sure that he fully understands the fact that this bill aims to renew and improve our tax treaties. Our partners must also accept the improvement of a treaty; it goes both ways.

Today, we are studying Bill S-6, a tax treaty with Madagascar. However, this treaty was modelled on the old system. The tax treaty was signed on November 24, 2016, and the multilateral treaty, which is the subject of Bill C-82, was signed on the same day in Paris. Therefore, while a treaty was being signed in Antananarivo, Madagascar, and another in Paris, two different things were being signed.

Can my colleague tell us about the difference between the new and improved OECD treaties, which were adopted in Paris, and the one signed in Madagascar, which is based on a version that the government believes taxpayers can abuse?

[The Chair, Liberal, Wayne Easter]

That's a question you can raise when we get to your time, Mr. Masse.

The floor is back to you, Mr. Poilievre. Please stay on Bill C-82 and the estimates.

I know you're trying to say that I'm trying to shut this down. No, I'm not. There is a place for those questions to be raised. There are appropriate committees, if it goes before them, in terms of that issue. I believe the justice committee is dealing with that issue. There's also the House of Commons, where you can raise anything that you desire to raise. However, as stated on the agenda, this hearing today is on Bill C-82 and the estimates, and the estimates are quite broad in terms of the finances of the nation. We have a deputy minister here, as well, with Mr. Lightbound and other officials.

So, the floor is yours, and if we can stick to that, it will be great.

[Brian Masse, NDP, Windsor West, ON]

Mr. Chair, the only thing I want clarification—and I'm a guest at this committee—would be on Bill C-82 and whether international corporations are subject to that. If that's the case, then I believe it is in order.

That's the only thing that I would suggest that we look at with regard to this process of a difference of opinion on it: whether the bill actually applies to international corporations doing work abroad.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

—such behaviour.

We're here to talk about Bill C-82 and this reference. The material that Mr. Poilievre has brought up has nothing to do with what we are here to talk about. I'd like to have a ruling on whether we need to stick to the material or whether we wander off on some fishing expedition.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Chair.

Mr. Chair, we're here this morning to discuss Bill C-82 and also, pursuant to Standing Order 81, to look at interim estimates 2019-20, votes 1 and 5 under Department of Finance, vote 1 under Financial Transactions and Reports Analysis Centre of Canada and vote 1 under Office of the Superintendent of Financial Institutions, referred to the committee on Monday, January 28, 2019.

I've been on this committee since I was elected, and I have the privilege to serve the residents of Vaughan—Woodbridge. We're here to do the work of our residents. We are here today to analyze and to ask questions of the parliamentary secretary, Mr. Lightbound, and the officials.

Thank you for being here again. I'm sorry you're having to witness—

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

Mr. Speaker, I may have forgotten to mention that our caucus supports Bill S-6. As I am sure I mentioned, the reason we support this bill is that Madagascar's tax rates are comparable to ours. They are reasonable tax rates compared to those in Canada. That is why it is possible to accept a bill like this one on an agreement with Madagascar.

That being said, I would put a big asterisk next to tax treaties, because over time, they can be abused. We must ensure that these countries do not become tax havens, like Barbados, with which we have a tax treaty. That is why I am warning the government. By its own admission, as evidenced by Bill C-82, taxpayers abuse tax treaties. That is precisely the government's argument in the case of Bill C-82, and that is why I am cautioning the government against tax treaty abuse. I am only reiterating what the government is saying.

As far as investments are concerned, it is all well and good to say that $1 billion has been invested and that we have 1,300 more auditors, but when the system is broken and no longer works, then it will not change anything. That is why the government has nothing to show for this investment. There have been no convictions or even charges related to offshore tax evasion. The government sent out 12 notices of assessment, and that is it. Congratulations.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Lightbound.

I wanted to respond in French, but it's very difficult for me, even though I practise as much as I can.

This is just a follow up on Bill C-82.

The big question the world faces in terms of tax avoidance measures and tax evasion....

I can turn this over to the officials as well. We did hear from Trevor McGowan in the past on Bill C-82. I'd love to get your opinion on just how big of a step this multilateral convention is, in terms of—if I could use the word—“fighting” tax avoidance strategies, in terms of monitoring and in terms of compliance for, realistically, multinational corporations and high-net-worth individuals.

[Joël Lightbound]

Thank you for your question and comments, Mr. Sorbara.

I think that it's fair to say that when we came to power in 2015, Canada's economic situation was significantly different from the situation today. The country was practically in a technical recession. Our investments, our support for small and medium-sized businesses and our tax cuts for the middle class have helped move the economy in a positive direction. I obviously share the sentiments and agree with the observations that you expressed in your question, and I echo them.

This is what makes Bill C-82 good. Together with our G20 and OECD partners, it will implement one of the recommendations and measures proposed in the base erosion and profit shifting project, or BEPS project, to prevent companies from treaty shopping, in particular through the principal purpose provision. The goal is to avoid double taxation but also double non-taxation. We must ensure that the companies pay their taxes when they need to do so. The principal purpose provision is fundamental in Bill C-82, the multilateral instrument before us today. I think that it's a step in the right direction, and it will ensure that Canadian companies pay their fair share.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Chair.

Welcome, everyone. It's great to see everybody.

I want to welcome Mr. Lightbound, the parliamentary secretary.

It's great to have you here today.

I'll focus my comments and questions on Bill C-82, this multilateral convention. I think it speaks to two things our government has put forward: tax fairness and tax simplification.

When I think about tax fairness for the residents and the entrepreneurs of my riding of Vaughan—Woodbridge, I think about the tax cut on the middle-income tax bracket that has benefited nine million Canadians. It's about a $20-billion tax cut over five years, which has helped grow our economy, strengthen the middle class and has helped those working hard to join the middle class.

I think about our small business tax cut now at 9% which, for firms earning up to $500,000 on the accounting standard, is about $7,500 per year in savings that they can invest in their businesses.

I think of the nearly 13,000 small businesses in the city of Vaughan that employ over 200,000 workers who will benefit from the small business tax cut, or if they're too large, they'll stay at the corporate income tax rate, which is competitive worldwide. But they'll also benefit from our accelerated investment instrument that we introduced in the fall economic statement, which now, in terms of tax fairness, and also tax competitiveness, means that we now have a lower marginal effective tax rate on new investment than the United States, by 4%. What does this mean for Canadians and the residents of my riding of Vaughan—Woodbridge? It means that over 850,000 new jobs have been created in Canada since October 2015, the majority full time, the majority private sector, which is near and dear to my heart after 23 years in the private sector.

I think we're on the right path. For background, I sat on the Accounting Standards Board User Advisory Council for a number of years. I used accounting statements for many years as an analyst both on Bay Street and Wall Street, but as a kid I worked at McDonald's and grew up taking the bus as many others did. I look at Bill C-82 and I say our government continues to be on the right track in adopting base erosion and profit shifting and this multilateral convention.

I could continue speaking about the number of great things our government has done, but now I'll ask my first question.

I hear some chirping from the Conservatives, which I guess I'm used to sometimes.

I will ask my first question in reference to when the implementation date is of Bill C-82. Second, how does this instrument prevent treaty abuse?

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

Mr. Speaker, I am pleased to rise in the House to speak to Bill S-6, following two of my colleagues who have already spoken on this subject.

At first glance, this bill may seem a bit dull. I will therefore try to be as interesting as possible to ensure that Canadians tuning in know how important these issues are and that there are risks associated with establishing tax treaties with other countries. That is what is at stake here. A new tax treaty is being proposed to us. As we already have 93 of them, this would be our 94th tax treaty. That is not a small number. Consequently, we should not take this new treaty lightly, since it will be one of a series of treaties we have with many countries that have significant tax implications.

All Canadians feel concerned about tax issues because they all file a tax return each year to pay their dues and get all the credits to which they are entitled. They all know that taxation is an extremely important issue related to fairness and justice.

I have said this before, but in our country, we are fortunate to have a tax system that allows the federal, provincial and municipal governments to deliver services to the public. In some provinces, there are even school boards with a tax system. The ultimate goal of taxation is to ensure that the government can operate, but the government's primary focus is to serve the public and provide the best possible services to Canadians. They deserve value for their money, as they say in the business world.

When we buy a product or service, we want value for our money. The same goes for taxation. When we pay taxes to different levels of government, we hope to get our money's worth and get good services. The problem is that some Canadians feel like other taxpayers like them, usually the rich, are getting out of paying taxes by hiding their money either in Canada or offshore.

Some cases involve domestic tax evasion. For example, there are people who work under the table and hide their cash under a rug or in a mattress. We have all heard of that before. In other cases, people hide their money in tax havens. In both cases, the principle is the same, namely to avoid paying their fair share of taxes to the system that helps provide services to all Canadians.

As I have said in other debates on taxation, most Canadians receive more in services than they contribute in taxes. That much is clear when we add up all the services they receive. This means that we have a fair system, but it needs to be even more progressive so that the least well off can still receive the best services.

No one wants to live in a country or a society where a person's wealth determines the services they receive from the government. It is therefore important to make sure that the wealthy contribute their fair share, especially multinationals and Canadian banks, which post record earnings in the billions of dollars every year, and which make use of many tax havens. This is fundamental to preserving Canadians' trust in our tax system.

This is perhaps a brief preamble to the debate we are having on tax treaties, which avoid double taxation.

I will use an example that many Canadians will recognize. Consider a Canadian company that has a U.S. subsidiary or does business there. If that company pays taxes there, where rates are similar or even higher than ours, it will not be taxed a second time when its profits are repatriated to Canada. That is the basic premise of tax treaties, and it is a matter of fairness. If the taxpayer pays taxes in another country, that money should not be taxed a second time when it is brought home. The main purpose of a tax treaty is to avoid taxing the same income twice.

Having said that, this makes sense in the case of countries like the United States, which has tax rates that are comparable to and even higher than ours depending on the state. However, in the case of other countries with which we have tax treaties, we must ask ourselves what the real purpose of the treaty is. Take for instance Barbados, with which we have a tax treaty. Barbados is a small country. For reasons that are still unclear to me, even though I have asked many questions about it, this country ranks third, and sometimes even second, in terms of countries where Canada makes direct investments abroad. This information comes from Statistics Canada. Barbados, of all the countries in the world, ranks third in terms of Canadian investment. After the United States and the United Kingdom, Barbados often ranks third or fourth in terms of our foreign direct investments. We have to ask ourselves why.

The answer seems simple to me. We have an agreement with Barbados to prevent double taxation, and Barbados has a tax rate ranging from 0.5% to 2.5% for foreign companies. We need look no further to understand this. This is not new, but from 1982. It was one of the first international tax treaties we signed.

When we ask questions about this agreement with Barbados, we hear snippets about why, historically, we have this very close relationship with Barbados. It is hard to find it anywhere in writing, but Barbados being Canadian companies' gateway to the rest of the world actually seems to be part of Canada's tax policy. If a Canadian company wants to do business abroad, Barbados is the gateway to those countries with its low tax rates ranging from 0.5% to 2.5% for foreign corporations. A Canadian company that establishes a subsidiary in Barbados will do business with countries from around the world, and since their revenues are reported in Barbados, that is where they are taxed. Instead of being based in Canada, the company uses Barbados as the gateway to the entire world. The government will not admit it but, unofficially, during many discussions, I heard that this tax policy dates back to 1982, and that Canada adopted it because that is what every other country was doing. We are being told that we have to do this because everyone else is. If everyone is doing it, why should Canada be put at a disadvantage by not doing it? That is what we are hearing.

It is extremely important now, more than ever, to have a real discussion and to work together on tax havens, even though the current and former governments have never taken real action on this. More than ever, we need to put an end to these dishonest practices by many taxpayers, especially companies and multinationals, which use shell companies in tax havens all around the world.

Barbados is the preferred tax haven for Canadians. Other countries will have another. We need to put an end to this practice for good. All industrialized countries that are missing out on taxes and whose tax base is incorrect as a result of these practices need to get what they are entitled to. They are owed the taxes that these multinationals generate on their billions of dollars in profits every year. These billions made all over the world are hidden away in bank accounts, in tax havens, to avoid fair and equitable taxation that would be used to provide public services.

The worst is that these companies are often the first to make use of these public services. They are the first to use the infrastructure that our industrialized countries have built. Their employees are the first to use roads, public transit and public services like education and health care. It can therefore be argued that they are taking advantage of Canada. They are taking advantage of Canada's system and of its generosity, and they are then hiding their money abroad, without contributing to our system in return.

What we keep hearing from governments, especially Conservative ones, is that there is not enough money. Fortunately, not all of them are sending that message, but around the world, more and more of them are saying that the money has run out and that governments no longer have the means to provide services to Canadians. Governments are drowning in debt, they cannot balance their budgets, and they have to cut services, yet billions of dollars are being hidden abroad, where they are not contributing to society as they should. We want to see more services, better services, services that benefit everyone, including people in Canada, of course.

That is the crux of the matter. That is why it is important to consider this issue carefully. Far from being a boring bill, Bill S-6 is exciting. The tax convention with Madagascar may enable continued abuse of a convention. I am not alone in saying that tax agreements are being abused. Bill C-82 is being debated at this very moment two floors down in a committee room.

As finance departments officials themselves have admitted, taxpayers can and do abuse tax treaties. That is why Bill C-82 was tabled. It is clear, it has been said in so many words, which is fortunate. I think this was the first time I heard anyone admit it out loud. Earlier I was saying that we often hear things through the grapevine that are never said out loud into a microphone. However, it was said loud and clear that tax treaties do get abused, which is why Bill C-82 had to be tabled and now has to be passed.

My question for the parliamentary secretary, who did not seem to know the answer, was related to that. I actually know the answer to my own question. Bill S-6 follows the old tax treaty model, which, by the government's own admission, produced tax treaties that get abused.

Today we are debating a bill on a tax treaty with Madagascar. In this case, it seems all right. As I said earlier, we do not want double taxation. Madagascar has reasonable tax rates that are comparable to those in Canada. That is fine, but we do not want tax treaties to be abused.

However, Bill C-82 demonstrates that tax treaty abuse is already happening. Also, Bill S-6 seeks to adopt a treaty just like the ones that the Liberals themselves admit are open to abuse. That makes no sense.

They should have taken the time to negotiate the treaty using the new model developed by the OECD to come out with a better agreement. I am not saying it would have been perfect—and I will be saying that in committee—but at least it would have been a step in the right direction. They acknowledge that tax treaty abuse is a possibility, and they are making an effort to close these loopholes in the treaties to keep that from happening. However, by the government's own admission, taxpayers could abuse this treaty.

That is why I wanted to say in my speech today that the government has a responsibility to make a clear commitment to ensure that these conventions cannot be abused over time. As I was saying earlier, a convention with Madagascar is a good idea because its tax rate is similar to Canada's.

However, this does not meant that five years down the road, Madagascar will not become a tax haven or will not change its tax laws to lower the tax rate of foreign companies operating on its territory. We need to ensure that there is a monitoring and control mechanism. We need to monitor the 94 conventions that are in place to ensure that they do not become tax conventions that can be abused. That is extremely important. Unfortunately, the government did not commit to monitor the conventions and ensure that they do not become gateways to tax evasion and aggressive tax avoidance for Canadian companies. As everyone knows, tax evasion is reprehensible and illegal.

The government talks a lot about tax evasion and says it is doing great things to address it, but the Liberals do not have any results to show Canadians.

The Conservatives got zero results in that regard, and they had no intention of doing anything to address tax evasion. For the benefit of Conservatives who may be listening, I repeat, a former minister of national revenue even admitted that tax evasion was not a priority. I did not address that in my speech, but I did mention it in a question I asked my Conservative colleague, although that member made no reference to the issue. Jean-Pierre Blackburn admitted that tax evasion was not a priority.

This government promised to do more to combat tax evasion, but it has no results to show for it either, even though concrete results are all that matter. It is all well and good for the government to say that it is doing what is necessary, it has invested $1 billion and it hired 1,300 auditors, but if there is nothing to prove that the plan is effective, then clearly it is not working. This government does not have the motivation or any real intention of getting to the heart of the problem. The government is actually only scratching the surface.

Since the Liberals took power, there have been three tax and financial scandals: the Bahama leaks, the Paradise papers and the Panama papers. In all three cases, it was determined that many Canadians were involved in these scandals. Today, three years later, no taxpayers have been convicted of tax evasion. Worse still, no charges have been laid against even one taxpayer involved in these financial and tax scandals. This clearly shows that the system is not working and that it is flawed.

Even if they invested $1 billion and hired 1,300 auditors—as the Minister of National Revenue says every day—if the system is flawed, nothing will change. Taxpayers will still be able to shirk their responsibilities. That is the crux of the matter, but the government refuses to see it.

The tax system needs to be reformed as a whole. It is not enough to close a few loopholes here and there. The first version of the tax code was 15 pages long. Today, the code is 1,800 pages long. This is proof that the system is flawed.

Canada's chartered accountants are calling for a comprehensive reform of the tax system. That is what is at issue today, and that is what the government needs to address. Otherwise, investing $1 billion and hiring 1,300 auditors will not change anything. The government must review the Canadian tax code from top to bottom, to simplify it and ensure that everyone pays their fair share. It is often easier to comply with something simple.

I hope that the government will also study this issue. The NDP is committed to reviewing the entire tax code in order to close all loopholes and have a simple tax code.

Canadians expect to receive quality services commensurate with the money they invest in the system.

[Joël Lightbound, Parliamentary Secretary to the Minister of Finance]

Thank you, Mr. Chair.

I want to thank the committee members for having me here today.

This is my first presentation of this nature before a parliamentary committee. Please bear with me.

I want to thank you, Mr. Chair, for allowing me to speak about Bill C-82. This bill will be an important new tool in the government's arsenal to combat aggressive international tax avoidance. When some Canadians choose not to pay their fair share of taxes, all of us are short-changed. It means less money for important social programs such as the Canada child benefit. It means less money for vital infrastructure such as roads, railways, ports and airports, which help us move people and goods to where they need to go safely and on time. It means less money to protect our communities and less money for health care.

Our government believes that all Canadians deserve to share in the fruits of a strong and vibrant economy. That is why our government takes seriously its responsibility to ensure that Canada's tax system is fair and efficient. Tax fairness is a cornerstone of our plan to grow a stronger middle class and create economic growth. In each of our government's last three budgets we've introduced measures to enhance the integrity of Canada's tax system and give Canadians greater confidence that the system is fair for everyone.

Thanks to these investments, the Canada Revenue Agency is armed with better tools and approaches, which are leading to better results. These tools help the CRA collect valuable information and allow its agents to work smarter and more effectively to ensure all Canadians follow the rules.

For example, Canada continues to be a member of the expanded Joint International Taskforce on Shared Intelligence and Collaboration. This 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 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—the J5 group. The J5 will share criminal investigation strategies, intelligence 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 funds transfers of 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 related to eight jurisdictions or financial institutions of concern. Reviewing these transfers helps identify transactions for which taxes should potentially have been paid and better assess the risk of individuals and businesses.

Through these efforts, Canada is taking concrete measures to secure tax fairness for Canadians. Our government will continue to work to maintain and improve our enforcement of tax compliance so that we can have a society that works not only for a select few, but for all Canadians.

Mr. Chair, we're also taking important measures to counter third parties that promote the tax avoidance scheme. In the last fiscal year, administrative penalties amounting to almost $48 million were imposed on the third parties. As a result of the implementation of the common reporting standard, we're also gaining easier access to information on Canadians' overseas bank accounts. This new system will make it possible for Canada and over 100 other countries to exchange financial account information. This information will help us identify instances where Canadians hide money in offshore accounts to avoid paying taxes.

We've also expanded our specialist audit teams who focus on high net worth taxpayers. These teams are comprised of approximately 250 auditors responsible for scrutinizing high income earners and more than 800 high net worth individuals and their associated corporate structures.

In addition, in December 2017, the Minister of Finance and his provincial and territorial counterparts committed to ensuring that Canadian authorities know the beneficial owners of corporations in Canada and better align the ownership and corporate requirements of the different administrations.

As a result of this agreement, through the most recent budget implementation bill, we amended the Canada Business Corporations Act to require federally incorporated corporations to maintain a register of individuals with significant control over the corporation.

Budget 2018 also proposed enhanced income tax reporting requirements for certain trusts to improve the availability of beneficial ownership information. This type of information will help Canadian authorities take measures to counter international tax avoidance or criminal activity, such as tax evasion and money laundering.

The bill that we're discussing today builds on our government's previous measures.

Bill C-82 would allow Canada to better counter a practice known as base erosion and profit shifting, or BEPS. BEPS refers to tax avoidance strategies in which businesses and wealthy individuals use gaps and mismatches in tax rules to avoid tax or to shift profits to low tax or no tax jurisdictions. These strategies make it possible for businesses and wealthy individuals to avoid paying their fair and full share of taxes. This means less money to fund essential services that people depend on.

We've worked hard to counter this loss of tax revenue. In particular, I want to highlight our work with our international partners on this front. The OECD and G20 member countries collaborated to identify a number of instances in which the terms of current tax treaties are vulnerable to potential abuse. These organizations then developed measures that countries could incorporate into their tax treaties to address these vulnerabilities.

The fact that it would take an extraordinary amount of time to renegotiate existing tax treaties required a new approach. That new approach is the multilateral convention contained in this bill, otherwise known as the multilateral instrument, or MLI. This instrument is the product of a global initiative involving the work of more than 100 countries and jurisdictions, including Canada. The purpose of the multilateral instrument is to allow participating jurisdictions to adopt the OECD and G20 measures to combat BEPS without having to separately renegotiate each of their tax treaties. By implementing the MLI, the government would be taking steps to protect the integrity of our tax system and to guard against the abuse of our tax treaties.

Moreover, the implementation of the MLI would demonstrate Canada's willingness, in collaboration with our treaty partners, to take coordinated action to combat international tax avoidance.

Mr. Chair, I'll finish by stating that the Canadian economy is well positioned for future growth. Canadians have every reason to be confident in their ability to compete. However, it's always possible to do more. The government remains committed to investing in the middle class and in the things that matter the most to the middle class. These things include good, well-paid jobs; strong communities; environmental protection; and better opportunities for future generations.

One of the first things we did was to ask the wealthiest 1% to pay a little more so we could cut taxes for the middle class.

We're implementing our plan to make all communities stronger and more resilient, in particular through our significant investments in infrastructure across the country. We've approved more than 30,000 infrastructure projects since 2016 as part of the investing in Canada plan. Most of the projects are under way and are currently creating good jobs for the middle class.

We've also introduced the Canada child benefit, which is giving nine out of 10 Canadian families more money to provide for their children. To ensure that the Canada child benefit keeps pace with the cost of living and continues to deliver effective support to those who need it, our government indexed the Canada child benefit as of July 2018, a full two years ahead of schedule.

A typical middle-class family of four is receiving, on average, about $2,000 more each year as a result of the middle-class tax cuts and the Canada child benefit when you compare that to 2015.

When we add the impact of measures such as the Canada child benefit, the new and more generous Canada workers benefit implemented by our government, and our increased support for seniors, we're on track to help lift approximately 650,000 Canadians out of poverty. I think that all Canadians can be very proud of this result. These concrete and significant measures have improved the lives of Canadians and the economy across the country.

We know that our plan is working. As a result of the hard work of Canadians, over 800,000 jobs have been created since 2015. The unemployment rate is currently the lowest in over 40 years, and we have one of the fastest-growing economies in the G7.

We're committed to building an economy that works for everyone, where every person has a real and fair chance at success. To continue on that trajectory of growth, Canada's economic health needs everyone to pay their fair share of taxes. The legislation before us gets Canada closer to meeting that goal. I encourage all members of the committee to support it accordingly.

As this work today includes a focus on the Treasury Board Secretariat's supplementary and interim estimates for the Department of Finance, I would be happy to take any questions, with the department officials, that the members might have about these or the government's plans to improve tax fairness.

Thank you very much for your attention.

[The Chair, Liberal, Wayne Easter]

We'll call the meeting to order.

Today, we're doing two issues, pursuant to the order of reference of Monday, October 15: Bill C-82, which is an act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit sharing.

We're also going to deal with the interim estimates under the Department of Finance. We have with us the Parliamentary Secretary, Joël Lightbound; Mr. Rochon, Deputy Minister; Mr. Ernewein, Assistant Deputy Minister, Tax Legislation; Ms. Bess, Chief Financial Officer; and Ms. Smith, Senior Director, Tax Treaties.

Mr. Parliamentary Secretary, the floor is yours.

[Jim Eglinski, Conservative, Yellowhead, AB]

Mr. Speaker, we can come up with all the regulations we want as an individual country. Parts of Bill S-6 and Bill C-82 are about that. However, he talked about the importance of working with other governments from other countries.

Could he perhaps exemplify what he meant when he said that it was important that we work with other countries?

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

Mr. Speaker, I thank my colleague for endeavouring to give the House a straight answer. I believe that this is a fundamental issue related to today's debate.

The other question that I would like to ask is whether the government is prepared to continuously monitor tax conventions.

I will come back to the debate on Bill C-82. The one thing the government and its officials have admitted is that tax treaty abuse does occur. Bill C-82 is before us so we can renew and improve tax conventions.

The question I have for my colleague concerns the conventions in general. I would like to know if the government is engaging in any monitoring or some sort of control of conventions to ensure that, over time, countries with which Canada has double taxation conventions do not become tax havens. Naturally, we hope they are not, but we need to ensure that, over time, they do not become countries with low rates of taxation.

Is the government carefully and continually checking that those countries that Canada has agreements with do not become tax havens and that taxpayers cannot abuse these conventions?

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

Mr. Speaker, I thank my colleague for her speech. I am always happy to debate with her.

I would like to come back to Bill S-6, which is before us today.

Bill C-82, which is currently being examined by the Standing Committee on Finance, would renew all tax conventions, if the two countries come to an agreement that, according to the government, is renewed and improved.

We have before us a new tax convention with Madagascar. I have a very specific question about this bill. I would like to know whether the convention with Madagascar uses the same renewed and improved text that is set out in Bill C-82 and whether the government is trying to incorporate it and renew it with all of the other partners with whom we have tax conventions.

Are we in the process of passing a bill that contains the old version or the new version of the conventions?

[The Chair, Liberal, Wayne Easter]

I reluctantly have to interrupt, as we are at the end of our meeting time.

We will pick up where we left off when we come to committee business again. You will have the floor to start.

The notice has gone out for the meeting on Thursday on Bill C-82 and the supplementary estimates.

With that, the meeting is adjourned.

[Peter Fragiskatos]

With a complex matter like this, I think we have to proceed in a way where we are addressing things in an incremental approach because addressing the problem with one fell swoop is bound to create all sorts of uncertainties and questions. I don't think you can do it that way.

Can I go back to Mr. Marley?

Bill C-82 is a bill that all parties supported at second reading, which is very encouraging.

What's good about this? What's good about the MLI? I that know you pointed to some concerns that you have with it, but, if I remember from your earlier testimony, you said that you're generally supportive of this bill.

Why are you generally supportive? What's good here?

[Patrick Marley]

I'll just be very quick. I think your question is largely addressing our broader domestic international tax system and not the tax treaty network, which is what this addresses. I think your question is more aimed at our FAPI regime and our domestic anti-deferral regime. I just don't think it touches on Bill C-82.

[Patrick Marley]

Okay.

I'd start by saying that the Canadian tax system cannot be abused by just shifting profits, passive income, into Barbados or any country. That isn't affected at all by this multilateral instrument or Bill C-82. It's our detailed foreign accrual property income, or FAPI, rules.

We have a detailed anti-deferral system that has been developed and enhanced over several decades. It's aimed at taxing in Canada on a current basis any passive profits or income with sufficient connections to Canada, immediately in Canada, whether it's in a tax treaty country such as Barbados, a tax information exchange agreement country such as the Cayman Islands, or a country in which we have no treaty whatsoever. I don't find abusive in any way the fact that some countries impose low rates of tax.

A good example would be that if you want to open a hotel in Barbados, you might pay a low rate of tax in Barbados, but that allows you to compete with other hotels in Barbados, and that's a very appropriate result. Our FAPI regime is for stopping investment activities in foreign countries, and that's what our other anti-deferral rules are for. That has nothing to do with the tax treaty process.

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

Thank you, Mr. Chair.

I'm pleased to be back at the Standing Committee on Finance and to discuss my favourite topic.

So far, the interesting thing about the debate on Bill C-82 is that the government is confirming, and admitting, that tax treaties are useful to people who want to abuse the Canadian tax system. It said openly, on Tuesday, and this is also found in its documents, that tax treaties can be abused. This is indeed the case, and I have two quotes in English to prove it.

The first quote is from a lawyer with the Rogerson Law Group, located on Bay Street, in Toronto. The lawyer explained how to take advantage of the tax treaty with Barbados. His article is entitled

“Taking Advantage of The Double Tax Treaty with Barbados”.

At the end of the article, in describing how to take advantage of this, he says:

The net result of the above is as follows. A Canadian resident corporation establishes a foreign affiliate in Barbados in the form of an IBC. The IBC makes $100 profit. Barbadian tax on the profit is levied at 2.5% leaving $97.50 to be remitted by the Barbadian foreign affiliate to its parent company in Canada. The parent company receives the dividend completely free of Canadian taxation.

An IBC is an international business corporation.

It's clear. The fact is, it's so clear that you don't even have to read between the lines. It's legal to do that.

Another proof of this is from what's called “Barbados Offshore Advisor”. An adviser based in Barbados says:

The foreign office must have “mind and management” on the island to qualify for attractive tax incentives. By providing an out-of-the-box solution with a full team at your disposal, service providers eliminate the human resource hassles and expensive start-up costs involved when opening an overseas office. Our team is responsive to your company's needs, providing rapid turnaround and dedicated management.

At this time, the most well-known and abused treaty is the treaty with Barbados. Do the witnesses also believe that tax treaties, such as the treaty with Barbados that has been in effect since 1980, are being abused, and that, as a result, Canadian taxpayers have lost billions of dollars in tax revenue?

[Patrick Marley]

Yes, the Luxembourg example.

You're absolutely right. If it's determined that one of the principal purposes, in that example, for using a Luxembourg holding company, is to invest into Canada, the principal purpose test turns off treaty benefits under the Canada-Luxembourg tax treaty. For dividends, Canada would impose a 25% withholding-tax rate on dividends to Luxembourg. Article 7(4) says that even if we're applying the principal purpose test, countries like Canada are nevertheless allowed to apply whatever withholding tax rate would be reasonable in the circumstances, rather than applying our full 25% withholding-tax rate.

If your ultimate investors in this example could have been entitled to either a 5% or 15% rate, it would be reasonable in the circumstances for the CRA to apply either a 5% or a 15% withholding rate, rather than the 25% withholding rate, which is what I think we have under Bill C-82.

[Patrick Marley]

Thank you for having me here today. I just want to start by saying that I, too, generally support Bill C-82 and the ratification of the MLI in Canada. However, I do have some important concerns that I want to mention to you with respect to the process and manner in which it's ratified and adopted in Canada. I'm going to break that down into four points. I'll touch on each of them in more detail.

The first is on the principal purpose test, which I think is one of the most significant aspects of the multilateral instrument. We're in dire need of more guidance on how that's going to apply in Canada. Because it's the result of an OECD project, where they strived to get consensus among a broad group of nations, the text is very broad and ambiguous, and the examples that the OECD has provided give very little practical guidance as to how it's going to work in practice.

In contrast, when Canada introduced the general anti-avoidance rule domestically, the CRA, at the same time, came out with a detailed information circular, going through different examples in how they would apply in Canada. I think more guidance is needed on the principal purpose test, particularly with respect to private equity and other collective investments, which is an area that the OECD has struggled with in terms of how that test should apply to collective investors. Really, there's a huge amount of capital that gets invested into Canada that way.

The second point is that I think Canada should be opting into article 7(4). We've currently reserved on that. I'll touch on why it's inappropriate to not have article 7(4) applying, and, really, the double tax or the unfairness that could result without that.

My third point is that Canada should continue to reserve on all of the changes to the permanent establishment threshold. I think that's consistent with the approach Canada has taken to date, and it's really for two reasons. One is that what we have now, in terms of when you have a permanent establishment, is effectively a bright-line test. It's easy to understand. It's well recognized. What the changes bring in the permanent establishment test is a lot of uncertainty, ambiguity, and, really, the ability for countries to argue that there's a permanent establishment when otherwise there might not have been. That, again, can lead to a potential explosion in tax disputes among countries, and could have negative implications for Canadian revenue.

The last point I was going to make is with respect to binding arbitration. I think we should continue to push for binding arbitration in as many treaties as we can. Our firm is perhaps the largest tax litigation disputes firm in the country. I can say, from working at Osler for the past 20 years, the amount of tax disputes in the country have really continued to expand year after year. Binding arbitration is really an effective process for resolving disputes among countries on allocating taxing rights and who should have the right to tax different countries.

To turn back to my first point on the need for more guidance on the principal purpose test, again, the test applies if one of the principal purposes of an investment is to avoid tax. It's often difficult to determine what is a purpose versus a principal purpose, let alone what all of the principal purposes are and whether tax avoidance was a principal purpose. Particularly, as I said, with private equity or other investments, I'll just give a quick example, obviously oversimplified, to illustrate that, together with, in my view, the need for article 7(4) to be applicable.

If you have two investors, one in the U.S. and one in India, each wanting to invest collectively into different countries, including Canada, what will generally happen in this example is the U.S. investor would not want to invest through an Indian company, the Indian investor would not want to invest through a U.S. company. What they would often do is form a holding company, in a third country, to invest collectively. That serves a number of business purposes, including raising larger pools of capital to make larger investments in, say, mines or other development projects.

In my example, if the U.S. and the Indian companies invest, say, in a Luxembourg holding company, the Luxembourg holding company, in turn, could invest in Canada or other jurisdictions around the world. In that simple example, under our current system, if Canada pays a dividend to the Luxembourg company, we would have a 5% withholding tax, which is the same withholding tax that would apply if the Canadian company paid directly to the U.S. company. However, it's different from what would apply if it paid a dividend directly to the Indian company, because we have a 15% withholding tax rate under the Canada-India treaty.

What happens under the MLI is that if the principal purpose test applies—if you determine, in my example, that tax avoidance was the purpose of using this Luxembourg company—then treaty benefits are denied. There's a 25% withholding rate applicable on dividends out of Canada, which is more than what would have applied if either the Indian or U.S. companies had invested directly. Article 7(4) turns off that tap, or allows Canada, in this example, to apply a 5% or 15% withholding tax rate rather than revert to a 25% rate, particularly if it was as a result of commercial reasons that the Indian and U.S. companies invested together.

Admittedly, that's an overly simplified example. What typically would happen is that you'd have a larger number of jurisdictions of investors. Obviously, the U.S. is a major capital-exporting country, so it's not uncommon for large pools of U.S. investments to come into Canada. It's often commingled with investors in Europe or Asia or other jurisdictions. Because we have 93 tax treaties, in most cases the ultimate investors are in one of those 93 countries. That's where the largest capital pools are.

I'll turn now to the “permanent establishment” changes. As I mentioned, if we opt in to that change, it would have a permanent effect, because the election is irreversible, and it would apply to a vast number of treaties. As I believe Stephanie and Trevor mentioned two days ago, Canada might win or lose on that. To give a quick example, in the resource sector right now, resource companies in Canada can sell their resources around the world and pay taxes in Canada based on not having permanent establishments in those other countries. If we were to opt in to that test, it would allow foreign countries in Asia or Europe or other jurisdictions to potentially tax some of Canada's resource profits by arguing that those resource companies have permanent establishments around the world in their jurisdictions based on facilitating contracts or facilitating access to the local markets. It creates significant uncertainty. The taxpayer will always lose, because they'd have to file returns in more jurisdictions, and potentially pay taxes in more jurisdictions, but Canada could lose because it could be ceding taxing rights to other jurisdictions.

As well, because it's such a fundamental change and is irreversible, in my view it should have parliamentary approval; an order in council and subsequent governments should not be allowed to make those changes. As we stand now, any significant changes to tax treaties go through Parliament. In my view, removing that reservation on the permanent establishment changes is of such significance that it should be something for Parliament to decide, and not be done by order in council.

Thank you.

[Toby Sanger, Executive Director, Canadians for Tax Fairness]

Thank you very much, Mr. Chair, and members of the committee.

First of all, I'd like to express my condolences at the loss of a colleague and friend of many of you, former Ottawa Centre MP Paul Dewar. Paul was the same age as me. He was a neighbour and a friend. He always built on the positive side of people and situations all through his life of public service. He was devoted to the less fortunate right through to his final days, and I hope he inspires many others to do the same.

This legislation, Bill C-82, which would enable Canada and other countries to effectively implement wholesale changes to their numerous bilateral tax treaties is, in general, very much a positive step forward to reduce the hundreds of billions in revenues that are lost annually around the world from aggressive international tax avoidance, primarily by larger corporations. This represents approximately $1 billion in Canada, if you include everything.

This multilateral instrument is the culmination of five years work through the OECD's base erosion and profit shifting initiative. It's an efficient way of consistently adjusting the thousands of bilateral tax treaties that have been signed between nations in order to implement a number of action measures of the whole BEPS process. By having a generally consistent set of measures, it will limit but not entirely eliminate the practice of treaty shopping that many large corporations have engaged in to avoid taxes and drive a race to the bottom.

The introduction of these changes will be especially beneficial for lower-income countries by strengthening the rules for taxation based on the source of the economic activity and not the putative residence, often in the tax haven of the corporation. It will limit tax avoidance through hybrid mismatch arrangements that exploit differences in tax treatments, treaty abuse through double non-taxation, and the avoidance of permanent establishment. These are all positive measures.

At the same time, there are some concerns about the part IV provisions for mandatory binding arbitration, as these opaque and secret panels rarely favour source countries, and they should consider not opting into them.

Article 17 also has some problematic measures, and countries should consider making a reservation under this section.

While this bill and the 2015 BEPS initiative that it stems from are positive, they are limited. They are all about patching a system that has a lot of problems, and they are now about to be eclipsed by much more important and fundamental changes that need to be made to the international corporate tax system.

Two weeks ago, following meetings with almost 100 countries in Paris, the OECD issued a policy note entitled “Addressing the Tax Challenges of the Digital Economy”. In the words of Alex Cobham, chief executive of the Tax Justice Network, “The three pages of text in this...policy note may be more significant than the thousands that made up the BEPS project.”

The archaic arm's-length transfer pricing system that underlies our international corporate tax system, which this bill is trying to patch up in different ways, is so broken and ineffective for our new economy that major countries around the world, including the United States, the U.K., France, Germany and others are already leapfrogging it with a range of different measures to tax large digital corporations using different approaches based on their actual economic activity in their country.

National revenue authorities have found that the transfer pricing approach also enables traditional and resource sector corporations such as Cameco to easily avoid billions in tax. There has been a case of CRA taking Cameco to court, but the courts have sometimes sided with the companies over transfer pricing.

What we ultimately need to do is to move to a unitary international corporate tax system with an apportionment of corporate profits to different countries based on their share of sales, payroll and/or other factors, preferably with a minimum corporate tax rate. This is a very straightforward system, and it's exactly what we have in place in Canada to apportion corporate profits for tax purposes between provinces. It's also the system used by American states and other federal countries to apportion corporate profit. We have this in place within Canada and other countries. We need to move to this globally as well.

In addition to its simplicity, the beauty of this approach is that a global agreement isn't necessary to proceed. It's preferable that Canada could move forward in this way, just as the United States, the U.K. and other European countries are doing.

The other beauty of this approach is that it would increase tax revenues from multinational corporations by about 33% to 50% according to the IMF, and by significant amounts for lower-income countries, which are the ones most harmed by the existing system.

In conclusion, this bill is a positive step, but we can and must take much bigger steps forward to develop a more equitable and functional international corporate tax system, and it doesn't need to be that complicated. It's the smaller and medium-sized businesses that lose out, mostly from the international corporate tax system that we have right now. They often pay a higher rate of tax than do the large corporations that are able to exploit the system that exists right now.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

We'll call the meeting to order as we look further at Bill C-82, An Act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting.

We have two witnesses: Patrick Marley, partner and co-chair of taxation at Osler, Hoskin & Harcourt LLP; and Toby Sanger, executive director of Canadians for Tax Fairness.

I assume you probably have opening remarks, and then we'll go to questions.

Who wants to start?

Go ahead, Toby. You've been here before.

I don't know if you have ever been here, Patrick.

[Stephanie Smith, Senior Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance]

The bill was signed in June 2017. Following that, the government tabled this implementing bill, Bill C-82, to enact the MLI into Canadian domestic legislation. Following royal assent to this bill, Canada would be in a position to notify the depositary of this convention that it has completed all necessary procedures to implement the bill in domestic law. Then the multilateral instrument would be in force, in respect of Canada, a three-month period after such notification.

[Trevor McGowan, Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance]

Thank you, Chair.

We appreciate the opportunity to appear before the committee today to speak about Bill C-82, an act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting. This convention is generally referred to as the MLI.

The substantive provisions of the MLI are based on the results of the OECD/G20 base erosion and profit shifting project, the BEPS project. This includes the final report on BEPS action 6, entitled “Preventing the Granting of Treaty Benefits in Inappropriate Circumstances”, and the final report on BEPS action 14, entitled “Making Dispute Resolution Mechanisms More Effective”.

The OECD and G20 BEPS project was initiated in 2013 with the objective of developing a coordinated approach to addressing concerns over BEPS. The project now involves not only OECD and G20 countries but also more than 120 jurisdictions known collectively as the “inclusive framework” on BEPS. BEPS is a term used to describe aggressive, but nonetheless legal, tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift income to low- or no-tax jurisdictions. Countering such strategies requires a coordinated international response. The MLI is an important component of that coordinated international response.

Over 100 jurisdictions participated in the negotiations that led to the conclusion of the multilateral instrument. To date, 87 jurisdictions have signed the MLI. Bill C-82 would bring the MLI into force with respect to Canada and allow Canada to swiftly modify the application of many of our bilateral tax treaties to include BEPS countermeasures without the need for separate bilateral negotiations.

The MLI represents a big step forward in strengthening international tax integrity and tax fairness. Specifically, the MLI would allow Canada to address treaty abuse in accordance with the minimum standards established by the OECD/G20 base erosion and profit shifting project. This includes the adoption of a new treaty preamble, which states that the object of a tax treaty is not to create opportunities for tax avoidance, and also a principal purpose test, which is a substantive anti-abuse rule designed to counter treaty abuse.

ln addition, the MLI would allow Canada to incorporate provisions in its tax treaties dealing with the resolution of tax disputes that are in accordance with the minimum standards and to adopt mandatory binding arbitration with many of our key treaty partners. Mandatory binding arbitration is a mechanism that obligates the parties to a tax treaty to submit unresolved cases to an independent and impartial decision-maker—an arbitration panel. The decision reached by the arbitration panel is binding on the parties and resolves the case.

Chair, this concludes my introductory remarks. My colleague and I would be pleased to answer any questions the committee may have.

[The Chair, Liberal, Wayne Easter]

I call the meeting to order.

This is our first full committee meeting in new digs. Welcome to everyone. Pursuant to the order of reference of Monday, October 15 of last year, we are here to discuss Bill C-82, an act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting.

To start on this bill, we have with us, from the Department of Finance, Stephanie Smith, Senior Chief, Tax Legislation Division; and Trevor McGowan, Director General, Tax Legislation Division.

Welcome to both of you. The floor is yours.

[The Chair, Liberal, Wayne Easter]

We need a motion to accept the committee report.

The subcommittee met on Monday, October 29. Members have a copy of the motion that was agreed to, which outlines the procedure and how we'll handle Bill C-86. I don't think there are any additions to it. Point 2 indicated that, in relation to the pre-budget consultations, the proposed travel to San Francisco and Houston, Texas, scheduled for the fall, be postponed until a later date. Third, the order of reference to commence the study of Bill C-82 would be dealt with in early 2019.

That's the motion, and members of all parties were there.

Is there agreement on the committee report?

Taxation

[Joël Lightbound, Liberal, Parliamentary Secretary to the Minister of Finance]

Mr. Speaker, I thank the member for Hull—Aylmer for his question and for the work he has done on this issue as a member of the Standing Committee on Finance. We have always made it clear that fighting international tax evasion and international tax avoidance is a priority.

We implemented the common reporting standard to allow us to share information with almost 100 other countries to help investigators track money hidden in offshore accounts.

We are also working with the provinces and territories to set up a registry of beneficial owners of companies, as requested by the anti-tax haven collective Échec aux paradis fiscaux.

This spring, we introduced Bill C-82. This bill would implement OECD reforms to existing international tax agreements to prevent corporations and individuals from using aggressive tax avoidance schemes.

Multilateral Instrument in Respect of Tax Conventions Act

[Tom Lukiwski, Conservative, Moose Jaw—Lake Centre—Lanigan, SK]

The answer is yes, Madam Speaker. I said it in my remarks earlier, and I say it again here. I will be supporting Bill C-82, because I agree with the intent of the bill. However, as I pointed out in my remarks, the government has failed in its ability to follow through on that intent.

I have not seen any meaningful recovery of tax dollars yet by the government. There has been some minor recovery, but certainly not to the extent the government should be attacking the problem.

The problem is that currently between $20 and $60 billion a year is leaving this country through tax avoidance measures by multinational corporations. Think of what that $20 to $60 billion could do for our country. Think of the benefits for our country in terms of health care, as one example.

The government has shown decidedly no desire whatsoever to go after some of these multinational companies that continuously flout the tax system by avoiding taxes. Instead, and I have to point this out, since my hon. colleague raised the question, all the government has done over the past couple of years is try to label small business people as tax cheats. If there are tax cheats out there, they are on the large multinational scale.

The government has done absolutely nothing to try to recover that money but instead tries to turn hard-working, small business people in Canada into tax cheats themselves with its own legislation, and that is shameful.

[Tom Lukiwski, Conservative, Moose Jaw—Lake Centre—Lanigan, SK]

Madam Speaker, I am very pleased to participate in this debate. I was thinking just the other day that one of the most offensive words in the English vocabulary, and perhaps the vocabulary of others throughout the world, has to be “taxes”. People hate taxes. More specifically, people hate paying taxes. This should come as no surprise to anyone. I do not like paying taxes. I do not think anyone does, but there is a huge difference between paying taxes as required by law and individuals or sometimes companies and multinational corporations deliberately finding ways to avoid paying taxes.

There are many old sayings that I could bring to the floor today and I will invoke a couple of them. One, of course, is that the only inevitable things in life are death and taxes. That just shows a predisposition by people to accept the fact that we are taxed, and perhaps over-taxed, unnecessarily. People have accepted it, but they do not have to do so willingly.

I recall many years ago a media broadcaster and commentator in the United States by the name of Arthur Godfrey, who once said, “I am proud to pay taxes in America”—because he understood understand that the taxes paid for all of the benefits, programs and services he received—“but I could be just as proud for half the money.” That is the reality that we face today in our everyday lives. We understand that we need to pay taxes to be able to pay for the programs and services that we receive, but do we really have to be paying as much as we currently do?

That debate we can have, but what is non-debatable is the fact that everyone needs to pay their fair share, and I emphasize the word “fair”. What we have seen over the last number of years is the proliferation of multinational companies that are not paying their fair share of taxes. That is the genesis of Bill C-82 that we are debating today.

In fact, we have seen, and there has been empirical evidence provided, that many multinational corporations are not just attempting to reduce their tax obligations and tax burden, but are actively trying to avoid paying taxes. That is where I have to disagree, and disagree vehemently, with those who would try to take advantage of what is undoubtedly a complicated tax code and tax system and deliberately try to undermine that tax system that affects all of us by deliberately avoiding their fair share of taxes.

Over the last number of years, certain articles have come to light, most specifically the Panama papers, which contain the names of Canadians who have been avoiding paying their fair share. I have been a firm believer all my life that every single person understands, from the first moment they are able to achieve cognition, the difference between right and wrong. I have no issue and take no issue whatsoever with individuals, corporations or companies that do everything they can to legally reduce their tax burden, which is fair game, but I do take issue with multinational corporations that have sometimes deliberately used illegal methods to avoid paying taxes.

I support Bill C-82. It is a step in the right direction. Quite frankly, I have criticized the current government for not going far enough. It has talked a good talk, but I have not seen it walk the walk yet in terms of recovering lost money that should have been paid into government coffers to provide the very programs and services we all enjoy. However, I at least applaud and agree with the initiative to bring forward Bill C-82. I certainly will be supporting it, because I hope that over time this and perhaps future governments will be able to more effectively collect the monies duly owed this country through lost taxes.

I also believe that Bill C-82, while admirable in its intent, does not go far enough. In fact, I would suggest that what we need to engage in now is to talk about tax policy in general, because one is connects to the other. Indeed, we are losing money to tax avoiders and tax cheats. Moreover, we also need to have a conversation about the level of taxation in this country and how it affects this country's competitiveness.

I have been alarmed over the last number of years to discover the amount of money, the amount of investment, that is leaving this country to go south of the border primarily because of the reduction in taxes by the new U.S. administration. The United States has drastically reduced its corporate taxes to a point where Canadians and Canadian businesses are moving south of the border because they find it a more attractive tax environment than here in Canada. I find that truly alarming.

We have implored the current government to try to come to grips with that, to try to reduce the tax burden here in Canada both on the corporate side and the individual side. However, so far, we have not had a very receptive audience. We find time and again that whenever we get financial updates from very reputable organizations and financial observers, not just in Canada but throughout the world, they say that Canada is losing investment capital to the United States because of our failed tax policy. I believe that has to be addressed. I would again implore the current government to deal with this quickly.

I have seen over time that tax policies certainly vary from jurisdiction to jurisdiction. However, one thing that is undoubtedly true is that excessive taxation is a problem for the citizens of every jurisdiction. It creates a system where both individuals and companies, but primarily large companies, aggressively try to avoid taxes because they believe they are overtaxed to begin with. In fact, I believe that this regressive tax policy and taxation in general, and high taxes in particular, cause individuals and corporations to try to avoid paying their taxes. As a matter of fact, I recall a statement by an old Republican warhorse by the name of Barry Goldwater, who once opined many years ago that the taxation has created more criminals than any other single act of government. That is true. Excessive taxation creates criminals, because individuals will do whatever they can to avoid paying what they believe to be excessive or unfair taxes. Once again, that is a debate that perhaps we can have at another time.

Currently, the level of taxation, both corporate and individual, in this country is proving to be uncompetitive. I do not want to see a situation where months or years from now we have to tell our children that the best thing they can do is to move out of this country to a place that has a more favourable tax regime to start a business, because here in Canada it is uncompetitive and they will simply be unable to compete.

It does not have to be that way. If we put our minds to it, and if there is the political will, we can do something about this unfair tax regime and the uncompetitive environment we find ourselves in today.

Let me conclude simply by saying that while I agree with, and will certainly support, Bill C-82, much more work needs to be done. I have not yet seen the government prove that it is willing to take the steps necessary to improve the competitive situation in this country, and once again, I implore it to do so.

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

Madam Speaker, I thank my colleague for his excellent question and important work on all of these issues at the finance committee and here in the chamber. I think he is exactly right that when it comes to the activities of the CRA, we often do not see the same opportunities available to people who are not in that category of well connected and able to hire lawyers. Unfortunately, this often happens when people do not have the same sort of fiscal capacity to fight back against injustices that are affecting them and are necessarily more vulnerable to the actions of government, of regulators in government departments, and so forth.

It is sometimes presumed by my colleagues in other parties that bigger, more powerful government is somehow good for those in the middle and those who are struggling. I think the opposite is very often the case, that when we have bigger government, it becomes accessible to and aligned with the interests of those who are well connected. That is precisely the reason why I think we need limited government, a constrained government. A government that is constrained by an understanding of the rights of citizens ensures that those who do not have the connections, the lawyers, the lobbyists can have their rights and interests protected. That is what Motion No. 43, seconded by my colleague, would have achieved.

Bill C-82 certainly makes progress. However, there is so much more to do that could have been done. Hopefully, after the next election and the next parliament we will have an opportunity to finally move forward with some of the measures that Conservatives have been proposing for a long time to fix the CRA and ensure that people are treated fairly.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Madam Speaker, the member mentioned all of the opportunities the government and all members have had in the House to further simplify things for Canadians, both in applying for and receiving benefits from the Canada Revenue Agency and also avoiding four tax measures that would have drastically improved the lives of everyday Canadian families who are trying to make ends meet. It is a juxtaposition with Bill C-82. In this bill, the bill that I reference as the tax treaty for tax treaties, the government is proposing to make sure that large multinational corporations that are able to afford the best-paid lawyers and accountants are taken to task when they engage in aggressive tax planning.

There is also a cultural issue that has been mentioned before about the behaviour of the CRA when it comes to large corporations. We have seen it make deals with KPMG so its clients do not suffer, but the same type of willingness for the culture of settlement does not seem to exist for everyday Canadian families or single moms who are trying to get the child benefit.

Can the member comment more about his experience in his riding for families trying to comply with CRA regulations?

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

Mr. Speaker, we are continuing the discussion on Bill C-82, which is a bill dealing with implementing certain provisions of an international agreement with respect to tax avoidance. In my remarks prior to question period, I discussed the particulars of the bill. I discussed our support for the bill. I also touched on a number of other issues that have been important in the debate on this bill and relate to its provision. I want to come back to those likely areas of disagreement among the different parties.

This bill deals with, in substantial part, the activities and operations of the Canada Revenue Agency. It has been interesting throughout this debate to hear various members of different parties talk about how the CRA interacts with different people, how it should treat people. All of us as members of Parliament hear these stories when people come into our offices. We hear of people who have just had terrible disruption occur in their lives as a result of actions of the Canada Revenue Agency, people who are treated unfairly, who may actually have been in the right but are put through a long, disruptive process and are ultimately not compensated for the disruption that is caused to them as a result of CRA activities.

Very early in this Parliament, a member of the Conservative caucus, the member for Calgary Rocky Ridge, decided to do something about this. My colleague from Calgary Shepard seconded that motion and was very active in this initiative as well. Motion No. 43 was put forward. It created the opportunity for progress toward establishing a duty of care, which should not be that revolutionary, that in interacting with individual taxpayers, the tax authority has a duty of care, that it ought to be fair to them and accord them certain rights and the taxpayers bill of rights ought to have some concrete enforceability. I think if any members asked their constituents whether CRA should have a duty of care, they would say yes. If they asked constituents whether the taxpayers bill of rights should be enforceable, they would say yes.

This motion is very reflective of a Conservative philosophy toward government, which is, in this case, that government ought to be formally constrained in a way that protects the fundamental rights of individuals and that restraint requires us to constructively pass motions and initiatives that ensure government is bound to behave in a way that is proper toward citizens and that respects their rights as individuals and as taxpayers. However, when the motion came up for a vote, every member of every other party who was present chose to vote against it.

Today, when these different issues of challenges that individuals face in their interactions with CRA come up, my colleagues in other parties, the NDP and the Liberal Party, are keen to tell us about the actions they are taking and about the impact on individuals, yet they were unwilling to take the clear, obvious action which would have constrained forever the CRA from engaging in abuses of power in their interactions with individual taxpayers. Maybe I will hear from them during questions and comments. Maybe we will hear from some of the different members who have spoken already today about why they voted against providing taxpayers with that basic protection to ensure they are treated fairly.

I made the point as well that when it comes to issues of tax avoidance, a complicated tax code that limits the manoeuverability of those who cannot hire expensive tax lawyers is particularly regressive. The government has sought to implement tax changes that have always protected the most well connected and well off, while imposing new higher taxes on individuals.

I want to highlight specifically the issue of income splitting, because this is quite revealing about the approach the government took. Under the previous government, we had a policy of allowing everybody to split his or her income, recognizing that two families making the same amount of money should be able to split their incomes such that two families with the same income pay the same amount of tax. The Liberals opposed income splitting and repealed it. They repealed income splitting for the wage earner, and then they said it was a problem to have income sprinkling that potentially allows income splitting for people in the small business world, that somehow that is an inequality, an unfairness that exists in the system. There are a lot of things that argument totally misunderstands.

One could also point out that to the extent there might have been an inconsistency in terms of the ability of some people to do that and others not, it was an inconsistency created by a policy decision of the Liberal government, which was to raise taxes on families by undoing what had been the previous Conservative tax cut for families, which was to bring in income splitting.

We see all these different ways in which Liberals are increasing taxes: the carbon tax, getting rid of income splitting and refusing to pass concrete measures holding CRA accountable. It is important to note these measures target those who actually need tax relief the most. It was Conservatives who targeted tax relief to middle-income and low-income Canadians. We raised the base personal exemption. We lowered the GST. We lowered the lowest marginal tax rate. We did not make any changes to higher income brackets. That is our record: standing up for those who need the help most by cutting their taxes and giving them more power over their own lives.

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 second time and referred to a committee.

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

Mr. Speaker, before I get to my prepared remarks, I just cannot let this moment with my colleague from Timmins—James Bay pass. It really is incredible to see the other parties, the Liberals and New Democrats, stand up as if they are champions of the underdog, yet when they have an opportunity to pass real, substantive measures that would hold government accountable, that would require government to treat people consistently with fairness and respect, every time they have a chance to put their votes where their mouths are, they are found wanting. Given the passion of that member today, I could not believe that he would have voted against the motion I referred to, so I had to look it up and confirm that it was only Conservatives who voted in favour of imposing a duty of care on the Canada Revenue Agency.

If people at home believe that the Canada Revenue Agency in its interactions with taxpayers should have a duty of care, there is only one party in the House that has stood up for that. It was the Conservative Party. There is only one party that said that single moms who are being attacked by the CRA and small businesses being pursued by the CRA for money they do not owe deserve to have a duty of care imposed on the CRA for their protection. This was a great initiative put forward by my colleague from Calgary Rocky Ridge. He said that a study should be done at committee to ensure there was an enforceable duty of care between the Canada Revenue Agency and individual taxpayers, which seems pretty reasonable, and that necessary steps be taken to make the provisions of the Taxpayer Bill of Rights legally enforceable, such as by amending the Canada Revenue Agency Act to establish a duty of care.

It was a motion, not legislation, so it would have set the terms for a study to begin this process. Therefore, crucially, my colleagues across the way had no excuse to vote against it on a technicality. It was to set out direction for a study by committee to move forward with bringing about this duty of care. However, they voted against it. They had a responsibility to put their votes where their mouths were, and they did not.

The holier-than-thou member for Timmins—James Bay says that he is standing up for his constituents in the House while voting against their interests. When I asked him about his vote on Motion No. 43, he had to talk about something completely unrelated, saying that the Conservative Party does not stand up for this, that, and the other thing. That is exactly the response we would expect from someone who realizes his votes in the past do not match the comments he has made.

Mr. Speaker, I am very pleased to rise in the House to speak to Bill C-82. This is a good opportunity to clarify international tax rules, more specifically those concerning base erosion and profit shifting.

It is no secret that many multinational corporations use a multitude of strategies to avoid paying higher taxes. They shift their profits to a territory with a lower tax rate in order to avoid paying taxes. This strategy of shifting profits from one territory to another, as well as other tax evasion strategies, costs the Government of Canada billions of dollars.

This multilateral convention seeks to mitigate this problem by clarifying in which territories profits must be declared and taxed. The hope is that with these new rules, multinational corporations will no longer be able to shift their profits from Canada to another territory to lower their tax burden.

It is important to note that this convention will not affect the small businesses that this Liberal government has often attacked. This bill will have more of an impact on multinational corporations. The Liberals may have realized that they cannot keep attacking small businesses if they want to win the next election, but I am not holding my breath.

In the past, the Liberals called small business owners tax cheats. They said they were wealthy people who set up businesses to avoid paying their fair share of taxes. The Liberals created new regulations that increased the tax burden on small businesses, and they justified these measures by saying that they wanted the system to be fairer.

I do not understand how making small business owners pay more taxes will make the system fairer. Perhaps the Liberals can justify these attacks by saying that small business owners are tax cheats. I believe that the Liberals are not going to change their minds about small businesses.

The multilateral convention will also eliminate double taxation. It will clarify which territory has the right to impose a tax on which profit. The Conservative Party has always been in favour of simplifying the tax system. We believe that this convention is a good first step. Of course, we have a lot more work to do to simplify our tax system, but if we can start with the international tax regime, that is a good first step.

Since attaining the objectives of the convention requires the exchange of information with the competent authorities of other territories, this convention also includes a provision on that.

There will be strict rules on how this information can be used and when it must be protected. This information is crucial to the fair enforcement of Canada's tax laws and the enforcement of this convention and the tax laws of the signatory countries.

These reforms are also important because simplifying the international tax system will strengthen relations between Canada and the other signatories. Clearer international tax rules and laws will facilitate trade between countries. When countries trade, they prosper and are more likely to maintain peace.

I am pleased to see that for now, the Liberals have decided to stop going after small business owners and ordinary Canadians to pay for the Liberals' reckless spending. I am pleased to see that they have decided to go after national corporations' taxes instead. Unfortunately, this is not usually the case. Usually, the Liberals go after small business owners, the middle class and those who are working hard to join it.

First, they increased taxes on small businesses, claiming their owners were wealthy people who were trying to avoid paying their fair share. Now, they want to impose a carbon tax, and it is not because they want to protect the environment. This tax will do nothing for the environment. It is because they have to find some way to pay for their reckless spending. The Liberals keep going after average Canadians so that they can pay for their irresponsible deficit. The Liberals do not seem to understand that they should not be going after Canadian workers and small businesses that are already paying their fair share.

Having explained some of the particulars of the bill, in the remaining time I have before question period I want to make a few other observations about how the philosophy of this bill relates to other actions of the government.

We are discussing the issue of tax avoidance. One observation that should come out of this is that those who have greater wealth and a greater capacity to hire lawyers to study the rules often have a greater capacity to engage in activities that involve tax avoidance. When we have a more complicated tax system, it generally advantages those who are well off, because they have the capacity to develop mechanisms for avoiding those taxes. However, in this party, we advocate simple, clear, low taxes that ensure that the benefits of low taxes are accrued equally, and in particular that we deliver tax relief to those who need tax relief the most. That has always been the record of Conservatives.

When we were in government, we lowered the lowest marginal rate of tax. We lowered the GST. We raised the base personal exemption. We increased the amount of money that a Canadian could earn before they pay any income tax. All of our tax measures were targeted on the income tax side and were targeted at those who needed the relief the most. We are very proud of that record. However, what has the current government done? It raised taxes in the name of helping the middle class. In reality, it never closed the tax loopholes that are advantageous for themselves and their friends.

When it comes to the capacity for tax avoidance, let us talk about the carbon tax. A single mother who is barely getting by cannot afford the home retrofits that might be required if she were to make a substantial change in the carbon tax she was paying. How about giving people the capacity to make decisions that are good for themselves and the environment rather than punishing people who actually do not have the capacity to make those kinds of investments?

There are some Canadians who have the wealth and resources to take advantage of things like the programs that the previous Ontario Liberal government put in place that really directed resources towards the wealthy, towards those who could take advantage of those opportunities. When we think that a climate policy is hitting people with a stick instead of giving them a carrot, if those are people who cannot actually change their situation because they do not have the capacity to participate in tax avoidance types of activities by changing aspects of their lifestyle, then they are stuck paying higher taxes.

We see consistently with the government, through aggressive tax policies, increases in taxes that perversely target those who can accept those increases the least. Meanwhile, when Conservatives were in government, we cut taxes and we have always targeted tax relief to those who need the tax relief the most.

[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.

[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.

[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, 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.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Mr. Speaker, I am glad to be back this Monday to talk about what I think is a tax treaty for tax treaties. I can think of no drier subject to debate in the House other than maybe ways and means motions.

Bill C-82 looks at base erosion and profit shifting. It is a problem that tax regimes and tax administrators across different countries are increasingly starting to grasp as a result of the digital age now upon us and the ability of companies to create sub-companies and larger holding companies to shift around money quite easily, as well as IT, or intellectual property. They are able to shift the work of employees in a digital sense, not in a physical sense, to other countries to take advantage of lower taxes and tax loopholes and tax avoidance schemes that currently are legal in some ways, but in other ways go against the spirit of tax treaties that legislatures have introduced across different countries.

The Tax Justice Network has done some estimates and provided an aggregate of different statistics from the OECD, World Bank and IMF of how much money we are talking about in base erosion and profit shifting. It could be an excess of $200 billion that developing countries are losing out on from that money being shifted around. This is revenue that could be taxed and possibly provide social services that we all live off of. We need police forces and EMS. Also, this place does not run for free. We have to pay the clerks. We have to pay all of those who provide administration for this building. Some of the lowest estimates are as low as $100 billion while some of the higher one go up to about $300 billion. Large multinational corporations are typically best able to take advantage of different tax treaties and tax treatments for the type of work they do. This is happening mostly because the digital age is upon us and the ease with which companies can hire experts in this field.

Let us be honest. I am not a tax lawyer. Neither are the vast majority of the members in the House. I am humble enough to say this. Whenever I see a tax bill before the House, it takes me an extra long time to go through it. When I have to file my taxes every single year, it takes me the better part of an afternoon to do it. Dealing with tax treaties and their tax implications for multinational corporations and how these could be used is not my area of specialty. Those companies know that. Multinational companies are able to hire high-paid accountants, high-paid lawyers and high-paid lobbyists to ensure that they get the best possible tax treatment for their businesses. In some cases it may be justified to avoid a situation of being double taxed.

In Bill C-82, a lot of the provisions in this tax treaty for tax treaties will get rid of the double taxation of some companies. However, many simply abuse the rules. There are 78 jurisdictions that will be covered by this and 1,200-plus matching treaties that will be looked at. Countries are joining this process every day.

This was not started by the current Liberal government, let us be clear. It began under the previous Conservative government as a result of multinational bodies starting to look at this matter. I have heard several members on the government benches say this is part of the their initiative to improve tax collection somehow. They are taking credit for something that others started. The government repeatedly takes credit for things that others have done, either things that civic society has done or charities are doing on their own, or that a previous government has done or a provincial government is doing. The government takes these as its own, claiming victory that somehow these meet the campaign promises that the Liberals were elected upon.

I have an example that I found in a package that the OECD made available on its website. I want to read it into the record because it is an example of base erosion and profit shifting.

In the example set out in the video, 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. I hope that everyone is still with me on this. However, a European country has concluded a tax treaty with South Africa that reduced its withholding tax rates on royalties. Also, 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, was to obtain the lower withholding tax rate available under the tax treaty between South Africa and the European country.

If everyone is still with me, that is what we call “base erosion profit shifting” in its simplest sense. Large international companies like Starbucks do this. Every time we go to Starbucks to get a triple spiced pumpkin latte, or whatever, that company engages in this type of behaviour. I am sure I am going to get a phone call from one of its lobbyists. Specifically, it is a popular thing to do with intellectual property and trademarks, particularly in the arts and cultural industries. At a certain size we are talking about large sums of money. In these cases, the trademarks and intellectual property have a very high value. A company's reputation and branding are how it differentiates itself from its competitors.

This matter is international. We also have it happening in a certain way domestically. We have a government that has been pursuing single moms, small business owners, and many residents in my riding who have been trying to make ends meet. The government wants to force them to provide documentation proving they are not engaging in tax avoidance or welfare fraud of some sort.

Other members have said that the Alberta registered corporation that the Minister of Finance uses is really a form of tax avoidance. It is not illegal in any way in Canada to go outside a jurisdiction where the work is being done in order to register in a lower tax jurisdiction, Alberta in this case, to avoid paying more taxes.

It is done domestically, which is why the Standing Committee on Finance has been doing a statutory review of the proceeds of crime and terrorist financing act. The reason I bring it up is that in the process of this study, the members of the committee would have had an amazing opportunity to learn from FINTRAC and other agencies of the government that are dedicated to tracking down illicit funds and suspicious transactions and activities.

What we do domestically has implications internationally. We know that business owners are engaging in aggressive tax planning, making use of tax firms and tax consultants, such as KPMG, PWC and all of the large firms out there. KPMG is notably the one that has made the news most often with its relationship with the Canada Revenue Agency. These companies are aggressively planning businesses' taxes to help them avoid paying their “fair share”. It is not a term I like to use, but it is one that has been used quite often in the House.

I wish we spent more time talking about how to get companies and Canadians to create more wealth. We spend an awful lot of time in the House trying to figure out ways to tax people and corporations in order to try to squeeze and get more water out of that stone in some way, but we do not really spend a whole lot of time talking about how to make sure that in the free market economy, where free people are working in their own best interests and figuring out how to make ends meet for their families, we can simplify and improve their lives. We are not doing that. We have been doing the opposite for the past three years. From this so-called middle-income tax cut, a Canadian who is earning $48,000 is saving $81.44 off their taxes. If we include carbon taxes, increased payroll taxes, depending on the provincial jurisdiction, where they are probably paying higher provincial taxes as well, costs are rising, including the costs of everyday essentials.

There are think tanks that say that the number one item on the average family's pay slip is taxes. They are paying more for taxes than for the essentials of life: rent, food, electricity or natural gas. For the first time ever, the average family is having to pay more in taxes than for anything else. We do not spend enough time talking about how to create more wealth and to broaden the base that has been a way of ensuring that more Canadians and corporations are at least paying a little bit into the system. When we pay into the system, it makes us part of it. There is a certain ownership in what the Government of Canada and what the Parliament of Canada do on our behalf. When we have to put a little money into it, we really do care what is being done with it.

The Liberals said in their campaign platform that a so-called tax hike on the top 1% would bring in $3 billion more. The Department of Finance then produced an estimate, saying it would bring in an extra $2 billion. The government actually lost money in its first year; $4.5 billion to $4.6 billion less money being brought in. Those are not my numbers. Those are Statistics Canada and CRA numbers, which say the government is bringing in less money than it did before.

The top 1% of income earners pay 20% of all taxes. The top 8% of income earners, including every member in the House, every cabinet minister, are paying half of all taxes right now. That is an incredible amount, just in the share of national revenue, that we are asking an increasingly smaller group of people to pay. It also speaks to the administration and the idea of taxing the rich, fleecing the rich, on a personal income side, which has been a total failure of the government.

Now we have Bill C-82, in which the Liberals want to go after multinational corporations and big business, and I am all for it. It is a fantastic idea. We have a tax treaty of tax treaties. It should be done right. I am glad we are at this point where we can talk about it.

However, where are we talking about the wealth creation to get small businesses and entrepreneurs to start creating more jobs, to want to invest? We had the aborted attempt by the Minister of Finance's department, and by him as well, to tax small businesses more because they were not paying their fair share. I heard loud and clear from general practitioners and small business owners in my riding who were just trying to make ends meet. They wondered how they could keep growing their small family businesses and eke out an existence to pay for the schooling for their kids and to continue living.

Calgary continues to have the highest unemployment rate in Canada. The reason for that is that the Government of Canada is in no way interested in ensuring that the energy industry of Alberta continues humming along. Most high-income earners come from Alberta. The Government of Canada has made changes to the tanker ban on the coast of British Columbia and the introduction of Bill C-69, which has passed through the House and is in another place. Every regulatory and legislative measure that the Government of Canada has been able to use to constrict and put the energy industry of Alberta into a pretzel, it has done it. The Liberals have succeeded in reducing our incomes. They have succeeded in undermining the ability of Albertans and Alberta families to make a living. They are not helping to create the wealth that they want to tax. We should be starting the conversation with how we can ensure people can create wealth for themselves and the Government of Canada can tax a reasonable amount from them to pay for common, public services that we all get to enjoy.

For multinational corporations, what we are talking about in this tax treaty is base erosion. They are using a digital economy to shift around so-called profits, and this is primarily used by big businesses. The ability of small businesses to do this is very limited because they need access to high-paid tax lawyers, lobbyists and accountants who know the details of these tax treaties, who can read the different tax treaties between different countries and take advantage of specific provisions in them.

After the paradise papers and the Panama papers, I think there is a general understanding among parliamentarians in both houses that something has to be done. It is not just in North America and in Canada that base erosion and profit-shifting for large multinationals is getting out of control. It is happening in European and developing countries as well. With the digital economy and the ability to cite their so-called work locations almost anywhere they wish, it has become profitable for companies to engage in this type of tax avoidance.

We also have to remember that they are trying to avoid taxes, sometimes punishing taxes, that limit their ability to continue working, to continue generating a profit for shareholders. If they are co-operatives, it limits their ability to provide a return to the members of the co-operatives. It goes back to the notion of whether we are creating an opportunity to create wealth. Instead, we usually talked about how we can tax more.

Another example is that during the whole cannabis decriminalization and legalization, the discussion primarily in the public was about how much taxes the Government of Canada would generate through the legalization provisions it had introduced. Oftentimes we did not talk about the potential for wealth creation through these businesses, through legalizing this one sector of the illegal economy, the black market that already exists.

The United States will not be a party to these international tax treaties that Canada and many other countries have, to this multinational effort on the base erosion of profit shifting, although it would be in its best interest to do so because it stands to gain quite a bit from it as well.

Canada's competitiveness is further eroding. We do not participate in measures such as this. The provisions in our federal corporate income taxes and the tax rates in comparison to those in the United States make us not competitive. In Canada, one of its champions for natural gas just cannot continue doing business in Canada at this pace. It costs it $100,000 in carbon taxes for every well drilled in British Columbia. That is a rig hand, an extra person on every rig who could be hired who did not need to be.

The Government of Canada crows about how great it is doing on the energy file, such as the LNG project that was approved. However, it does not talk about the $70 billion to $75 billion in projects that did not go ahead. It does not talk about the fact that this project, the LNG project, was approved in 2014. Businesses took until 2018 to decide to go ahead with it. They only went ahead when they got exempted from the carbon tax.

Large multinational corporations have been exempted from the domestic carbon tax that everyday Canadians will have to pay, every small business owner who owns a convenience store and every gentleman I meet who drives my Uber. Usually in Calgary it is a form of an oil and gas war. The drivers of my Ubers will pay higher carbon taxes, will pay a higher price on their gasoline, will pay a higher price on their natural gas to heat their homes. They will have to pay for that, but multinational corporations will not have to pay. That was the inducement, on top of other inducements, necessary to get them to invest in Canada.

I am all for Bill C-82, what I call the tax treaty of tax treaties, the driest subject we could possibly talk about. However, let us go back and talk about how we can get people to create more wealth. I do not mean the government-directed creation of wealth. I see this all the time in news releases, that the government created 100,000 jobs. It created no such thing. This place is not capable of creating jobs. People out there create jobs. They start businesses. They may start a family business. They go out and find a product or a service that somebody out there wants to buy. They fill a gap, a niche in the free market. That is popular capitalism. It is capitalism for the people. We do not talk about it enough in this place.

In this place what we often talk about is select industries that deserve a tax break or special treatment of some sort. I am glad we are going ahead and ensuring that base erosion and profit shifting stop happening as easily as they have been.

Let us go back to talking about how we can get junior oil and gas companies in Alberta to start drilling again, to start hiring again. Probably 10% to 15% of the people who live in my riding are either unemployed or underemployed. They are maybe working a day or two a week. This is years after the commodity prices, the so-called grand WTI went down. We do not even get that in Alberta. Last week, we were told that WCS, a standard Canadian mix of bitumen and dilbit, was selling at zero. Companies were paying others to take it for 8¢ to 18¢. They had to pay someone to take it because there was so much supply.

We rarely talk about all of these problems. We posture, which is pretty standard from that side of the benches. I do not hear us talk about wealth creation. How can we get people to create their own wealth? Then, at that time, the Government of Canada can come by and ask for a reasonable share of that amount.

However, for multinational corporations, I hope this treaty will be the starting point for reducing their ability to rob from the public purse, which should be justly paid to the Government of Canada for the provision of services that we all enjoy.

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

Mr. Speaker, I do not know if my colleague should share the bad news with the company or if he wants the CRA to do so, but if it is not paying its taxes, Bill C-82 would force it to pay them. The member may deliver the bad news if he wants to, or I will, but the company will pay.

The sharing of information between companies has increased, which is extremely important. As well, with the new tracking system that will be put in place, we will be able to ensure with regard to those who are moving money monthly, $10,000 or more, or $1 million a month or $12 million a year, that we can assess the risks and focus on them and find solutions. We will be able to see if a lot of activity is happening with one company or 10 companies.

Objectively, Bill C-82 would ensure that companies and individuals that need to pay their taxes will pay them so that the Canadian government can—

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

Mr. Speaker, this is a very esoteric topic, and I think it makes sense to talk about tangible examples.

I spent this past weekend in Saskatoon at the Saskatchewan NDP convention. One of the largest companies in that city is Cameco, which mines uranium in the northern part of the province. For many years, it had a contract with its own subsidiary, in Zug, Switzerland, to sell uranium for the rock-bottom price of only $10 per pound. The uranium was not being consumed in Switzerland. The whole point of this arrangement was to transfer profits from Canada to Switzerland, avoiding hundreds of millions of dollars in corporate tax both federally and in the Province of Saskatchewan.

Could the member for Sackville—Preston—Chezzetcook explain to us how Bill C-82 would help to stop companies from engaging in that type of tax avoidance?

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

Mr. Speaker, I am pleased to be back in the House this morning after our constituency week. Constituency weeks give us a chance to spend time with people in our communities, which is incredibly important work.

It is a pleasure for me to speak to Bill C-82 this morning. It is definitely another clear step by our government in moving forward on taxes and fairness. When I say fairness, it is extremely important to realize that the tax loopholes that exist need to be shut when it comes to international base erosion and profit shifting. We are seeing wealthy individuals or businesses moving their money to countries where low taxes are available to them, and Canadians lose out on those revenues. That is crucial. For example, many programs we offer to our people we will not be able to continue or improve if money keeps flowing outside the country.

For example, there was nothing better than this week when I went around and heard veterans indicating how happy they are that our government brought back the pension for life. That is something they were asking for over a number of years that is very important to them. I hear veterans talk about the $40,000 education investment or the $80,000 four-year education investment. Those are major investments for veterans.

I was chatting not so long ago with some youth about what our government has done thus far to help and work with them. We underlined, of course, that we doubled the Canada summer jobs for individuals. We also created the youth Canada program, where we hired 870 young people on the ground for competitive co-op programs or internships. We can talk about the 1,200 green jobs for young people under STEM, which is science, technology, engineering and math.

This is very good legislation. It would continue our philosophy of ensuring that we can continue to offer programs for Canadians.

This multilateral convention came about when the OECD and G20 countries worked together to look at base erosion and profit shifting. While they were doing that, they realized that many of the tax treaties that existed had many loopholes and some challenges. Trying to find solutions for each and every one in all the countries involved would be time consuming, very costly and probably not very efficient. Because of that, they brought forward this framework, this multilateral convention, which is a framework for countries to move forward quickly and effectively. Our government signed on to it on June 7, 2017, and then, of course, we tabled it in the House in January 2018.

It is not just Canada. Over 100 countries have already signed on to this, because they know that this is an area they need to streamline so they can continue to grow and prosper.

Talking about growth and prosperity, we need to talk about our country. Of course, we have created over half a million jobs in the last two and a half years. That is an enormous increase in jobs. We have the lowest unemployment rate in the last 40 years. That is again an indication of the strength of this country, and it puts us in a great position to continue to grow and prosper, and we are going to take advantage of it. This is an opportunity, not a challenge, in that way. We will crack down on these programs to ensure that the revenues due to Canadians are there so we can reinvest them for the middle class and for Canadians. That is our objective.

This important multilateral convention would deal with three major fronts. The first one would modify existing tax treaties. It is extremely important to look at the loopholes and see how we can find solutions and bring them forward. However, we have also added minimum standards for the abuse of tax treaties. There is lots of abuse, so how we deal with those abuses is key. First are the loopholes. Second is finding tools or rules to reduce those abuses. That is what countries will have to find solutions for.

I want to talk about the minimum standards that focus on dispute resolution and arbitration. We have to make sure that there is dispute resolution where the objective is to find a solution. Instead of being very costly and fighting in court, we need to find a way to work together to find solutions that are acceptable and that ensure that Canadians receive the funds they are supposed to and can reinvest those funds in social programs for the middle class and less fortunate Canadians.

Tax fairness is our objective, and this would move another step closer to what we have introduced throughout the two and a half years the Liberals have been in government. I have to talk about the fact that we cut taxes for the middle class and raised taxes for the wealthiest one per cent. There were two objectives. One was to reduce taxes for the middle class and to increase those for the most fortunate, which is extremely important.

When I speak to young families in my riding about the Canada child benefit program, they recognize how important that investment is in their families for their children. It is essential. It is very touching to hear young families share that information, and it is not just in my riding but right across the country. In the riding of Sackville—Preston—Chezzetcook, which I represent, $5.2 million per month—yes, everyone heard me correctly, $5.2 million per month—goes to young families. That represents $60 million a year. If we multiply that by 338 members, everyone can see how much investment our government is putting into this important area.

This is Small Business Week, so we should be talking about small businesses and what our government has done to continue to improve the environment for small businesses to prosper. When we came into power, the tax rate was 11%. We reduced it to 10.5%, then 10%, and in April, we will reduce it once again to 9%. What does 9% represent? That 9% means that with the federal, provincial and territorial taxes together, it will be only 12%, which is the lowest in the G7 and one of the lowest in the OECD as well.

In conclusion, the money we invested, over $1 billion, in budgets 2016, 2017 and 2018 was to enhance a new program that will allow us to track closely any transactions of $10,000 or more that move about monthly. How big is this? It is very big. A million transactions per month is 12 million transactions of $10,000. We work closely with other countries to make sure that we share the information about foreign banking.

I am extremely happy to be here today to speak to this bill that will continue to allow Canadians and our government to support the middle class and ensure that there are jobs and programs as we move forward in a strong country.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Mr. Speaker, in the first three budgets that our government brought forward, we invested about $1 billion into CRA to ensure that we keep an eye on aggressive tax-planning techniques or programs and tax avoidance. We are fighting those things and Bill C-82 is another large step in that direction.

As the member knows, tax planning is complex and tax measures need to be looked at. We have looked at certain tax expenditures in our budgets. For example, the multiplication of the small business tax deduction was something we eliminated so that people would not take advantage of it in ways it was not meant for.

Our government has invested a serious amount of funds, over $1 billion, into CRA to combat tax avoidance and tax evasion. We have also looked at our tax code with the goal of simplifying it. I personally feel that we have done a terrific job. There is always much work to do on all files. That is what life is about working in government, and what we all do here on a daily basis, but we need to ensure that we continue on as such.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Mr. Speaker, I will be splitting my time with my friend and colleague from the east coast from the riding of Sackville—Preston—Chezzetcook. It is great to see him in the House this morning.

It is great to be back in the House this morning and to hear some of the debate. It is not so great to hear the level of discourse coming from members on the other side, the opposition benches, where they will stay for a very long time if they continue as such. I say that through you, Mr. Speaker, to my friend from Carleton, who I sit on the finance committee with.

Bill C-82, an act to implement a multilateral convention to implement tax treaty-related measures to prevent base erosion and profit shifting, is one of those international accords we can all applaud. We can also applaud the tax cut for nine million Canadians, which brought about $20 billion in tax savings over a four-year period, or about $550 per year per couple. To a working couple benefiting from our tax cut for middle-class Canadians, $550 is a substantial amount of money. It helps pay for many activities for their kids. It helps put gas in their vehicle and to buy groceries and so forth. It is too bad the Conservatives voted against that, and I think they need to be held to account for that. It is too bad they also voted against the Canada child benefit, which benefits nine out of 10 Canadian families, representing an average of $2,300 more. In my riding of Vaughan—Woodbridge, I consistently hear about how the Canada child benefit is helping families fund their kids' day-to-day activities.

It was also noted about what is called “refundable” or “non-refundable” tax credits. A lot of the boutique tax credits the opposition party member referenced in his comments were ones working middle-class Canadians could not take advantage of because they did not have taxes payable, and only benefited wealthier working Canadians. It is a little fact that was missed.

Turning to Bill C-82, OECD Secretary-General Angel Gurría said the following:

The conclusion of this multilateral instrument marks a new turning point in tax treaty history. We are moving towards rapid implementation of the far-reaching reforms agreed under the BEPS Project in more than 1,200 tax treaties worldwide. In addition to saving the signatories form the burden of bilaterally renegotiating these treaties, the Convention will result in more certainty and predictability for businesses and a better functioning international tax system for the benefit of our citizens.

Bill C-82 basically follows our government agenda from budget 2016. In chapter 8, we talked about making our tax system fairer, simpler, more efficient and also ensuring all organizations, enterprises and high net worth individuals follow the tax rules that everyday businesses and people in my riding follow. It is great to see Bill C-82 come to the House for approval, and it is great to see our party is shepherding this as quickly as possible.

On a personal note, I sat on the Canadian Institute of Chartered Accountants user advisory council for a number of years. I understand full well the importance of working with our international partners at various accounting institutions in the world, and also with our partners for multilateral purposes, including the base erosion and profit shifting deal.

To give an indication of the annual losses that are occurring, the OECD estimates 10% of global corporate taxing income, or approximately $100 billion to $240 billion is lost, where little or no overall corporate tax is being paid. This agreement is far-reaching. Working together in the OECD G20 BEPS project, over 60 countries developed 15 actions to tackle tax avoidance, improve the coherence of international tax rules and ensure a more transparent tax environment. Leaders of OECD and G20 countries, as well as other leaders, urge the timely implementation of this comprehensive BEPS package.

That information comes right from the document I was reading over the weekend on the multilateral convention to implement tax treaty-related measures to prevent BEPS from OECD. I encourage my colleagues to read it because it is an interesting document.

It pertains to our economy and ensuring we have a strong middle class and that we continue to help those who are working hard to join the middle class. It pertains to ensuring that all corporations in Canada with operations in the world and vice versa, those foreign entities that operate in Canada domestically, pay their fair share, much like all our residents do in each of our ridings. With that, it is great to stand up and speak to Bill C-82.

Taxes paid by Canadians are what fund the programs and services that make our country thrive. When the wealthy use international tax avoidance schemes to avoid paying what they owe, it is the hard-working middle class, those folks in my riding of Vaughan—Woodbridge, who foot the bill. That is unacceptable.

Tax fairness continues to be a cornerstone of our government's promise to Canadians to grow a stronger middle class. In each of our three budgets, the government has passed laws on both the international and domestic fronts to enhance the integrity of Canada's tax system and give greater confidence that the system is fair for everyone. I encourage some of the opposition folks here this morning to look at our budgets. They are actually great documents that pertain to tax fairness for all Canadians, especially with respect to putting in resources. Over $1 billion was invested in the CRA, after those many years of cuts by the Conservatives. The Conservatives are synonymous with cuts to the system and the CRA. We want to ensure that all institutions in Canada are paying their fair share, because we know all hard-working Canadians go to work, pay their fair share of taxes, and want to make sure they create a better standard of living for their families and a better future for their children and for all Canadians.

Since our first budget in 2016, the government has continually strengthened the ability of the CRA to crack down on tax evasion and combat tax avoidance with increased funding. This funding has supported transformational changes to the CRA's compliance programs, allowing them to better target those posing the highest risk of tax avoidance, and more effectively fight tax evasion and aggressive tax avoidance.

Today we take another step toward levelling the playing field and ensuring all Canadians pay their fair share of taxes. With this legislation, the Government of Canada is upping the ante in the fight against aggressive international tax avoidance and safeguarding the government's ability to invest in the programs and services that help the middle class and people working hard to join it. Whether it is putting in place a 10% increase in the guaranteed income supplement for our most vulnerable seniors, increasing the Canada workers benefit for those hard-working Canadians at the lower end, giving them that bump up, that extra few hundred dollars a year to make a big difference in their lives, we are doing those things while ensuring that our tax system is sound, efficient and fair for all Canadians and all Canadian organizations.

Ensuring tax fairness is complex. I know that for a fact because I sat on the CICA user advisory council. Understanding tax and accounting language does require a certain amount of specialization. It requires that we work with a wide range of partners at home and around the world, which is what we have done with the legislation we are debating today.

Bill C-82 would implement treaty-related measures to counter base erosion and profit shifting, also known by its acronym BEPS. This term refers to tax avoidance strategies through which businesses and wealthy individuals can use gaps and loopholes in tax rules to shift profits inappropriately to low-tax or no-tax locations. It would also ensure that transfer pricing is done fairly.

My riding is blessed with entrepreneurs of all different stripes. The city of Vaughan has over 11,000 SMEs. We have some of the most successful entrepreneurs in the country. I applaud their efforts. I meet with them regularly. I like to listen to what is working to ensure they have the skills and resources for their workers and that they can invest in their Canadian operations, and they are doing that.

That is why our unemployment rate is at a 40-year low. That is why our growth rate is near 3%. That is why firms across the world are choosing Canada to invest in. I am proud of that. However, we also need to make sure that our social programs are funded, that investments are made in early learning, that we enhance the Canada pension plan, that we reduce taxes for nine million Canadians. Yes, we ask those who are very fortunate and privileged in our society, those who are doing well, to pay a bit more. I think that is fair. I wish my colleagues on the opposition benches would appreciate that as well.

With that, I would like to close by saying that Bill C-82 is a good piece of legislation. It concerns an instrument that has recently been ratified by our counterparts, by many European countries, by France, Australia, Singapore, and some of the South Asian countries which have also adopted it in the last few weeks.

It is something that moves the needle forward on combatting aggressive tax avoidance and tax evasion, which is something good for our society. It makes our society fairer but at the same time allows those companies and corporations that do the right thing day in and day out to make the right decisions for their employees and their employees' families. I will end with that.

The House resumed from September 28 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 second time and referred to a committee.

Business of the House

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

Mr. Speaker, this afternoon we will continue second reading of Bill C-78, the family justice act. Tomorrow we will begin debate at third reading of Bill C-79, the comprehensive and progressive agreement for trans-Pacific partnership implementation act.

Next week, members will be working with Canadians in their ridings. When we return, we will begin debate on Senate amendments to Bill C-65, the harassment prevention act. Priority will then be given to the following bills: Bill C-77 on the Victims Bill of Rights and Bill C-82, the multilateral instrument in respect of tax conventions act.

Lastly, I would like to take this opportunity to wish all of my colleagues and their families a happy Thanksgiving.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you.

I'm going to turn to Mr. Lesage from Collectif Échec aux paradis fiscaux.

Parliament has recently been seized with this issue. We had debate on Bill C-82 last week. Do you have any data on the size or scale of the problem of tax evasion through tax havens?

This is illegal activity that we're talking about. It is always difficult to quantify and difficult to understand what we're dealing with because the whole essence of the problem is to evade detection. However, can you share with this committee what you believe is the size and scale of the problem?

Bill C-82—Notice of time allocation motion

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

Madam Speaker, this is unfortunate because I know we can find a way, but an agreement could not be reached under the provisions of Standing Order 78(1) or 78(2) with respect to the second reading stage of Bill C-82, an act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting.

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

Multilateral Instrument in Respect of Tax Conventions Act

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Mr. Speaker, I am pleased to rise today to speak to this legislation. It is my pleasure to follow my colleague from Central Okanagan—Similkameen—Nicola and his excellent discussion on a topic that he is interested in and knows a great deal about.

Bill C-82 is a welcome step forward. It is the natural conclusion to work that was first undertaken by the previous government in 2013. This is a good, positive step forward by two governments now to help address the serious problem of base erosion and profit shifting.

This legislation seeks to address a global problem that Canada is a part of, namely tax evasion, whereby corporations, through a corporate domicile or clever accounting, can shift profits between different jurisdictions or shop for the most desirable tax treatment from any of a variety of different jurisdictions.

For years we have heard in the news criticism of many global giants, including Starbucks, Apple and a number of other familiar global brands, that will seek to minimize their taxes by shopping for the most favourable jurisdiction. This is a problem that confronts western governments.

If the bill passes, Canada would be able to participate in a protocol that the OECD has in place.

We heard a bit about the scale and scope of this problem at the finance committee, and we welcome the bill.

The bill is an effective and efficient means by which we could deal with a wide variety of different tax jurisdictions through the same instrument. We would not have to separately renegotiate dozens of different existing tax treaties. As a result, we could co-operate much more efficiently with our global trading partners and combat what has been described by some as a “race to the bottom”.

Perhaps close to $25 billion in taxes is not being collected from economic activity that takes place in Canada. During its first two years in office, the Liberal government claimed it was going to recoup this $25 billion. The Prime Minister in late 2017 said in the House that the government looked forward to collecting this money.

While I do support the bill and acknowledge that it is an important step forward, it is certainly not a panacea or a solution to deal with all of the problems. I do hope colleagues from all parties will support it.

With respect to this $25 billion, the government has yet to really tackle the issue at all and it is now three years into its mandate. That number has been debunked. It would seem that most of the money the government planned to collect, money from tax evasion and tax avoidance, through the steps it would take, would be on the domestic side, the majority of which is believed, even by the department, to be uncollectible.

The CRA, almost three years into the government's mandate, has failed to make significant progress on foreign tax evasion, but during that time period it has floated a number of, in some cases, strange ideas on how it would plug its gaps in revenue. These ideas do not involve foreign tax evasion and do not involve corporate profit shifting.

They involve ideas that arose when the CRA first floated the idea of taxing employer benefits, like health and dental benefits; taxing retail discounts to service industry employees; and the war that was being waged this time last year on disabled Canadians, including the rejection of the disability tax credit for type 1 diabetics and a number of people who suffer from other health ailments.

In my riding, I have spoken to people who suffer from different types of chronic fatigue, who had been receiving the disability tax credit for years and suddenly were denied it. In one case, someone had been receiving it for 10 years and was suddenly denied it while her medical evidence had not changed. We have also heard the parents of autistic children losing their disability tax credit at the hands of the CRA under the Liberal government.

None of these seemingly small and petty attempts to raise additional revenues address the issue at hand and fulfill the promise of the government to crack down on foreign tax evasion and tax avoidance. These are nickel-and-dime measures targeting low-hanging fruit. The CBC reported again last night how the Liberal government makes it very difficult for single parents, with its onerous requirements on their proving they are indeed separated. We have seen quite a number of cases of this, and it has been raised in the House.

The other side of this and what this bill does not address is a different type of base erosion. Base erosion from profit shifting is an important global phenomenon that must be addressed. However, perhaps a bigger threat to the Canadian economy and a bigger drain on the tax revenue of the government than base erosion from profit shifting is base erosion from capital flight taking place right now.

Since the Liberal government took office, we have seen the imposition of a carbon tax. My colleague from Central Okanagan—Similkameen—Nicola spoke about carbon leakage, how chasing economic activity with emissions into a different jurisdiction does not change global emissions, but does change the tax revenue base of the Canada Revenue Agency and costs jobs. We have seen the carbon tax and have seen Bill C-69, which should be titled, “an act to ensure no pipeline is ever built in Canada again”. We have also seen tax increases, which the government had indeed promised to impose on the wealthiest Canadians, actually result in a reduction in tax revenues from the wealthiest Canadians. That is a different type of base erosion that would not be addressed by this bill.

We have seen the debacle over the Trans Mountain expansion. That will also result in an erosion of the tax base, as that economic activity is curtailed. We also all know what is happening with the NAFTA negotiations, and we know how many hundreds of thousands, perhaps millions, of Canadians who fear for their jobs as this unfolds.

To conclude, this bill is an excellent step forward to address a serious global problem that Canada must play a part in solving for our own tax base and in participation with our economic partners. I look forward to its coming to committee, where it may be improved and where I could address some of the issues that have been raised by my colleagues.

I will be supporting this bill, and I commend the government for moving ahead with this initiative.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Mr. Speaker, it is always an honour to stand on behalf of the citizens of Central Okanagan—Similkameen—Nicola. I will be sharing my time with the very capable member for Calgary Rocky Ridge, who in addition to his duties as member of Parliament, also stands as the shadow minister for national revenue. Even though this is a finance bill, ultimately it is the CRA and the Minister of National Revenue that will become accountable for this. I know he will have many things to say on that end of it.

The two are very important, because, for example, in 2013-14 and particularly in the 2014 budget, the former minister of finance, the hon. Jim Flaherty, had opened consultations on the subject of base erosion and profit sharing. He did this specifically so he could go to the G20 and be able to make proposals and participate fully in those discussions on base erosion and profit sharing, which we are the beneficiaries of today.

I must give the government a little credit for taking its ideological blinders off. It does not seem to say that this is a Harper initiative. It has not blamed the former prime minister yet. I certainly hope that as we go through my speech today it will recognize sometimes there is much need for a new government to carry on the very good work of a previous government. We should not always judge something simply because of who had started an initiative.

During my time as the parliamentary secretary to the president of the Treasury Board in the previous Parliament, we worked on some pretty technical legislation from time to time. I will admit to having a certain affection for regulatory related bills that could provide benefits to Canadians and Canadian industry, particularly if they are done in such a way that is harmonized to reduce red tape. We recognize that Canada is increasingly becoming a competitor on the world stage, and we are likely to see more international trade, not less.

We must also recognize that with that come challenges. As one example, we have a situation where over this past summer the Liberal government was forced to modify its national carbon policy. Basically, it provided more carbon tax relief to some of Canada's biggest polluters. This is not unlike what happened in my home province of British Columbia, where greenhouse growers and cement manufacturers, to name a few, have been given so much in subsidies, exemptions or other kinds of carbon tax relief there is actually a word for it. It is called “carbon leakage”. It is defined in the 2018 B.C. NDP provincial budget as “...industries that compete with industry in countries that may have low or no carbon price. If BC loses market share to more polluting competitors, known as carbon leakage, it affects our economy and does not reduce global greenhouse gas emissions.” This is the same reason this Liberal government provided increased carbon tax relief to big polluters, because, ultimately, they compete with industry in the United States and elsewhere that do not have a nationally imposed carbon tax.

We are not here to debate the carbon tax. I am using it as an example because it illustrates the importance of being competitive. As we all know, being competitive in the corporate world often comes down to the bottom line, and we know how much the bottom line bears on our businesses, at least on this side of the House, as the Conservative Party has a very strong understanding. This creates a situation where, ultimately through creative, and some would argue dubious accounting practices, some companies can find creative ways to transfer wealth created in one country into another country with a much lower tax regime. Some countries even make a point of creating a regulatory and financial environment that actively encourages this sort of behaviour.

How do we fix that? Obviously, one approach would be an attempt to lower taxes to a level on par with some of these countries to stop the outflow of revenue. Many refer to this as the “race to the bottom” approach.

There is possibly another solution, which brings us to Bill C-82, which we are debating here today. What if we could get as many countries as possible to sign on to a common regulatory fiscal taxation approach that would better protect countries from this problem? Having similar fiscal language with respect to taxation would help reduce the regulatory red tape burden more than if we went at it piecemeal.

Not to mention there are greater efficiencies in adopting the kind of universal standard with OECD countries which sign on as opposed to having the same individual countries try to collect and negotiate separate tax treaty agreements among themselves.

To be fair, this multilateral instrument allows for Canada to quickly and efficiently update its agreements so that both the CRA and the tax authority in the adjoining country will immediately start to proceed, as the multilateral instrument has said, through the existing tax treaty. It is a very efficient way.

This is called, obviously, the multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting. Because that is a mouthful, we will simply refer to it as the MLI agreement. This work was started with the former Conservative government and I am pleased that the current government is continuing to work on this to the point we are here today debating the ratification agreement. Again, the agreement covers 75 jurisdictions worldwide and it is expected in the near future it will be over 100. That is a good thing.

While there are many benefits to the agreement, I should say it is not without some criticism. Some have suggested adopting the OECD MLI would result in the loss of tax autonomy for the country in question; however, I would point out there are provisions in the MLI agreement that allow countries to opt out of certain parts of the MLI at their discretion. This, by extension, can allow countries to still enable a specific tax structure but ultimately might provide unique tax benefits in certain areas. While some may consider that to be a bad thing, I also believe having a framework that allows some competitive incentive that keeps overall taxation levels in check is an important tool for countries to have.

Ultimately, this agreement is more targeted toward those who transfer money between countries for the sole purpose of avoiding taxation. Some people might say that some of this might be borderline tax evasion and in certain cases there may be, but let us be clear that Canada already has existing laws on tax evasion. That is not legal and the CRA should pursue those people who push the envelope much too far and know they are past the envelope.

I believe this agreement is more targeted toward specially transferred money between countries for the sole purpose of evading. In balance, I believe that is positive. Some have said that these types of agreements have not been successfully implemented in Canada before, but I would disagree with that. In the previous Parliament, we passed Bill S-12, An Act to amend the Statutory Instruments Act and to make consequential amendments to the Statutory Instruments Regulations. That bill proposed the ability to import standardized regulations from other jurisdictions so we have parity here in Canada. That makes it much more convenient for Canadian manufacturers as it can be extremely costly in addition to meeting a plethora of different standards in other jurisdictions.

Getting back to the MLI, time will tell the overall effect of this. The challenge right now is that some of these tax avoidance schemes are entirely legal, so this agreement creates a taxation environment that would provide common tax measures that will help to eliminate abusive taxation policy.

Before I close, I would like to take a moment and relay one concern I do have. As we know, the United States is not a signatory partner to this agreement. Given the close relationship in industry between our two countries, with many companies having U.S.A. and Canadian ties, there could be long-term impacts down the road. Obviously we also see concern over NAFTA where we will need to be vigilant in monitoring our competitiveness with our neighbours to the south.

Overall, I believe the bill is an important one and moves Canada in the right direction in parity with the majority of our G20 partners. I will be voting for the bill and believe that added scrutiny at committee stage, particularly on some of these thorny points, will be beneficial. I appreciate the House hearing my thoughts on the bill today.

[Matthew Dubé, NDP, Beloeil—Chambly, QC]

Mr. Speaker, I thank my colleague for his question and for all the work that he has done on this file.

The minister keeps repeating that, but the problem is that she did not actually recoup that money. She simply discovered it existed. The government needs to do a lot more. Obviously, Bill C-82 is a step in the right direction, but it just one step.

To come back to my colleague's question, I do not think that this bill is enough. The government needs to do more. By supporting this bill today, we are also making a plea to the government to make significant amendments to the act, and in doing so, finally implement our motion, which it supported a few short months ago, and actually collect that money.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Mr. Speaker, I would like to first commend my colleague from Beloeil—Chambly on his speech, which clearly supported progressive values. We definitely felt that.

In his speech, he reminded us that the Minister of National Revenue told the House that the government had spent $1 billion to recoup $25 billion lost to tax evasion and tax avoidance. However, according to the report signed by the minister, the government recovered hundreds of times less money than that.

Does my colleague believe that Bill C-82 will enable the minister to recoup the $25 billion she mentioned so many times in the House?

[Matthew Dubé, NDP, Beloeil—Chambly, QC]

Mr. Speaker, I thank my almost neighbour from Longueuil—Saint-Hubert for his warm welcome.

Today, we are debating Bill C-82, which does not exactly have the most exciting title in the world but does address an extremely important issue. I am referring to the Act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting. There may be complicated bills that come before the House, but it is rare to have one with a title that takes up a significant amount of the time we have to debate it.

All joking aside, tax avoidance and tax evasion are key issues. The urgency of dealing with these issues is becoming increasingly evident, not just to us as legislators, but also to Canadians. This may seem like a subject that is not necessarily of interest to the average person. When we go door to door in our ridings, when we have an opportunity to speak with constituents at various events held in our ridings, the income tax act and the tax agreements signed with other countries may seem like issues that are not top of mind. Our constituents are focused on daily life, sending their children to school, looking after their health and managing their own budgets.

The thing that stands out to people is the fundamental inequity of this situation. People pay their taxes and the Canada Revenue Agency chooses to relentlessly go after single mothers who may have simply misunderstood a form or whose situation may have changed—maybe they separated from their child's father for example. I personally know individuals who have gone through shameful situations. I am not sure if my colleagues have had the chance to read the letters that the CRA sends those people. Even as members of the Standing Committee on Finance, I wonder if we would be able to understand the pages and pages of text and wording that is so complicated it has no meaning. We should not have to hire an accountant or, in some cases, a lawyer, because of the actions of an agency that is supposed to be a sound manager of taxpayers' money.

This situation is bad enough, but it is even worse when we consider that CEOs, the wealthiest individuals and unfortunately quite often friends of those in power, benefit from all these exemptions, all these poorly drafted laws, all these agreements that do not go far enough. Unlike the single mother, to continue with that example, they are able to take vacations in Barbados. Then they leave their money there while they are at it. It is unacceptable.

As a society, we cannot accept that. Our collective wealth, the social contract in which we are engaged as citizens of a society by paying taxes, and the work we call on the government to do on our behalf with our money, is one of the most fundamental aspects of our society. When we consider that some people do not want to fulfill this contract, do not want to meet this commitment, then we realize that we have failed somehow. Somewhere the government has failed in one of its basic duties.

These policies, these failures, are opening up a deep, dark gap of inequality between the rich and the not-so-rich. It is odd, because the Prime Minister loves talking about the middle class and those working hard to join it. In reality, when I am in my riding, I do not see a middle class and people working hard to join it. What I see is that certain citizens are honest and hard-working, and others do not need to lift a finger because they know full well that they will always enjoy the favour of the people in power. That is what is deplorable.

In my riding, there are some people who are relatively well off. They are the kind of people the Prime Minister loves to go after and brand as cheats. They are business owners running small and medium-sized companies, and to some people, they may appear to belong to a more privileged class. They have earned a good living and worked very hard on their businesses, but they are not the ones who should be targeted.

There are also people in my riding who struggle to put food on the table and can barely scrape together their rent or mortgage payments. In terms of means and lifestyle, these people could not be further apart. However, they have one thing in common, and it is what motivates me as an MP. They are all honest, and they all believe this:

“A rising tide raises all ships.”

The idea is that we live in a society where the wealth we share should benefit us all. They agree on that. The issue is the wealthiest 1%, which sometimes means literally 1% of the population but sometimes means Liberal Party donors who are friends with the Minister of Finance. They are the ones benefiting from a system that is totally broken.

Let us dig into the substance of the bill. Kudos to the member for Sherbrooke, who has been doing excellent work as our national revenue critic. He is doing amazing work on this extremely complex issue. Some people find this hard to believe, but he is Canada's youngest ever federal MP. His hard work got him re-elected, and he is so up on his issues that he can handle this extremely complicated file.

I also want to give a shout-out to the member for New Westminster—Burnaby, who is doing great work as the NDP's finance critic. That is our job, after all.

We moved a motion in the House in this regard and so did our colleague from Joliette. We are calling on the government to do more and to solve the various problems and failures related the system that I just talked about a few moments ago in my speech.

The bill before us seeks to implement multilateral instruments and to address the fact that some of our agreements with other countries are expiring. These instruments are an important step that will enable to make changes to our multilateral and bilateral agreements more easily.

People need to understand that agreements, accords and conventions that Canada has signed with other countries often exacerbate the problem. We are being told that all of these agreements are being signed to prevent double taxation. For example, a business or individual would have to pay taxes in Canada or another country. However, the legislation and other aspects of the legal framework need to be updated because they facilitate tax evasion and tax avoidance, even though ideally they should not.

We will support the bill because we think it contains good measures that are a step in the right direction. However, let us be clear. Our support for this bill at second reading is not a blank cheque. We are far from supporting the Liberal government's approach, which has failed to date. The fact that we are supporting this bill also does not excuse the fact that the government has not taken action on any of the other issues related to tax evasion and tax avoidance that are of concern to us.

Let us look at subsection 95(1) of the Income Tax Act and section 5907 of the Income Tax Regulations. Dividends from a foreign subsidiary are exempt from taxes in Canada. That means that there are companies that are making a lot of money and they are even doing business with Quebec and Canadian consumers. They are making their money here but inflating their profits because they are exempt from paying taxes in Canada.

Closing loopholes is just a matter of common sense. We are not talking here about companies that do 95% of their business in other countries and 5% in Canada. We are talking about companies that do the opposite. We are basically talking about companies that conduct most of their business in Canada or the United States but that have opened a bank account in another country where they do almost no business at all. That is a major shortcoming, and the government has still not updated the legislation, even though it would have been quite easy to do. The bill that we are debating contains elements related to tax evasion and tax avoidance, but it does nothing to address the relevant aspects of the law.

It is funny, because earlier today, I heard a Liberal member say this has been one of the government's priorities since its first day in office. The Liberals have been in power for three years now, and nothing has been done despite pressure from civil society, prominent members of society, and even some former Liberal Party candidates. So many Quebeckers have called for action on this. We and our colleagues from other parties have been proud to speak on their behalf. Échec aux paradis fiscaux and the non-partisan Réseau pour la justice fiscale Québec are just two great examples of groups that are standing up and speaking out.

Just as an aside, not to be mean, but that is what happens when the 41 Liberal members from Quebec remain silent. When so many groups and individuals in Quebec are speaking up, those MPs come off as being not only silent, but also deaf because they are not getting their constituents' message.

I find it deeply troubling that no party that has ever been in power is blameless in this matter. I have only to come back to the example I mentioned earlier in my question to a Conservative MP. In the last Parliament, during debate on the bill on the free trade agreement with Panama, which was negotiated and signed by the Conservatives, I raised an extremely important point demonstrating that the issue of tax evasion and tax avoidance is nothing new. For years we have been talking about it, and for years the federal government has failed to take the necessary steps that Canadians expect.

To come back to the agreement with Panama, that country is known to be complicit in tax evasion and tax avoidance. The United States can hardly be called progressive, especially in light of recent events, but even they realized that when making free trade deals and opening up their markets to countries like Panama, it was vital to include a formal requirement demanding the return of any government or taxpayer money that had been stashed away by individuals who refuse to meet their obligations to our society. Through that agreement and other measures, the United States managed to recover some of the money, although there is still a lot of work to be done.

However, what has Canada done about this? We only raised the issue without even discussing the problems associated with environmental protection or labour conditions in Panama. We ignored these crucial issues. Even if we focus on just this one element, the government did nothing when we raised the issue.

This is very worrisome because the government keeps telling us that its negotiations will be based on progressive values and that it will discuss reconciliation with indigenous peoples, gender equality and environmental protection. Naturally, I agree with that. After all, the NDP are proud to raise these issues every day in the House of Commons.

However, when we have a progressive agenda, we must also promote fairness. We must take action to eliminate the gap between the friends of those in power, the people who can afford to vacation in Barbados and take their wallets with them, and the honest people working hard in our communities, the rich and the not so rich, business people, single mothers and everyone else who is harassed by the Canada Revenue Agency. That has to stop. I am repeating myself, but I have to.

I can only hope that when the government negotiates these agreements, it will recognize that we must continue on this path and demand better conduct from certain rogue international stakeholders. I may be suffering from misplaced optimism because this government has a bad track record on this.

When the Liberals came to power, they boasted that Canada is back, but what is Canada doing? It is allowing Netflix, Facebook, Google, and American multinational corporations to get away with not paying their fair share of taxes. Then it allows Liberal Party billionaire donors and friends of the Minister of Finance to do the same thing and shirk their obligations to our country. Then it allows environmental delinquents to evade their obligations. We do not even respect our own obligations. In addition, Canada keeps exporting arms to countries like Saudi Arabia. On that, we might say that the Liberals are trying to redeem themselves, according to media reports.

All of this is relevant to the debate on Bill C-82 because the bill talks about a multilateral instrument. If Canada really is back, then it should be showing some leadership in helping countries that want to combat tax evasion, tax avoidance and all the other problems I just listed. Instead, Canada is sheltering delinquent players and prolonging a situation that has existed for far too long.

I would like to explain why all of this is so important in a way that the people at home can understand. I do not mean to be condescending—far from it. When I myself get letters from the Canada Revenue Agency, my first reaction is often to wonder what it is all about. When people get these letters, they sometimes ask their friends if they are going to jail, because they cannot understand them. That is how single mothers, sick people and people with disabilities are treated when they try to claim benefits they are entitled to.

The member for Sarnia—Lambton said that this is criminal. She herself rose in the House of Commons to talk about diabetic people being targeted by the Canada Revenue Agency, which is totally unacceptable. However, the Minister of National Revenue keeps bringing up this $1-billion figure. She keeps talking about money, but unless the law and agreements are changed, we are just throwing money out the window. That is a very apt phrase in this case, because, after all, that is what the rich in our society are doing, and it is all the more laughable because this money is landing well outside the federal government's coffers. That is unacceptable.

I would now like to say a few words to all of my constituents. It is all well and good to debate the fiscal code of conduct and the Income Tax Act, but it is important to recognize that the government has consistently failed when it comes to closing the gap between the rich and the poor. To accomplish that, the government must start with simple, practical measures.

By supporting Bill C-82 at second reading today, I am once again imploring the government to take action to put an end to tax evasion and tax avoidance, which it could have done by supporting the NDP's motion. The government needs to put an end to this injustice, which weighs heavily on the minds of honest Canadians who are trying to live their lives and benefit from a community and from an important social contract under which everyone must contribute their fair share.

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 second time and referred to a committee.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Mr. Speaker, I have the pleasure to rise today to speak to an important piece of legislation, Bill C-82, an act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting. The bill would, upon royal assent, modify up to 75 of Canada's bilateral tax treaties, also known as covered tax agreements, or CTAs, in order to combat base erosion and profit sharing, or BEPS, as it is more commonly known in taxation vernacular, for those watching at home.

For those Canadians I just mentioned, and indeed for the members of the House who are not tax lawyers, including me, Bill C-82 is quite a mouthful, but basically, the bill purports to make it more difficult for corporations to hide money in offshore tax havens. At this early stage in debate, it is worth discussing a few of the concepts inherent in the bill so that we can have a more fulsome discussion moving forward.

First, the multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting is a multilateral instrument, or MLI, which is the product of the Organisation for Economic Co-operation and Development's G20 BEPS project, which began in 2013. Base erosion and profit shifting, or BEPS, refers to tax-planning strategies that exploit loopholes in tax rules to artificially shift profits to low- or no-tax jurisdictions where there is little or no economic activity, allowing little to no corporate tax to be paid. Moderate estimates indicate annual losses of anywhere from 4% to 10% of global corporate income tax revenues, or $177 billion to $425 billion annually. In Canada, we are looking at somewhere between $3 billion and $6 billion annually in taxes that could go to pay for any number of important programs or projects to benefit all Canadians. It might even buy us a pipeline or maybe pay off a third of the annual deficit, if the Liberals were so inclined.

Leaders of the OECD and G20 countries, as well as over 60 other countries, jointly developed 15 actions to tackle tax avoidance, improve the coherence of international tax rules and ensure more transparent tax regimes. The purpose of the MLI is to allow signatories to swiftly implement tax treaty related measures to prevent BEPS. The goal of implementing the measures in the MLI is to end treaty abuse and treaty shopping by transposing, in existing tax treaties, these jurisdictions' commitment to minimally include in their tax treaties tools to ensure that these treaties were used the way the signatories initially envisioned. Once implemented, the MLI would modify up to 75 existing bilateral tax treaties with, at minimum, the adoption of the OECD treaty-abuse and improved dispute-resolution standards.

It is important to note that there are scales on which Canada can adopt the 15 actions included in the MLI. Its treaty-abuse standard consists of two parts. First is an amended preamble, suggesting that covered tax treaties are intended to eliminate double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance. Second is a broad anti-avoidance rule, referred to as the principal purpose test, or PPT. Under the PPT, any tax benefit could be denied where it was reasonable to conclude that one of the main reasons for the transaction was to avoid paying taxes unless it was established that granting the benefit would be in accordance with the object and purposes of the relevant provisions within the treaty.

The other minimum standard is the adoption of mandatory binding arbitration to assist in resolving treaty-based disputes in a timely and efficient manner. Initially, Canada took a conservative approach toward the MLI, agreeing to implement the minimum standards. However, recently, the government has shifted that approach and has announced its intention to remove some of its initial reservations on optional MLI provisions, namely, those pertaining to dividends, article 8; capital gains, article 9; dual residency tie-breaker rules, article 4; and relief from double taxation, article 5.

I believe that this is an important factor to consider, because following ratification, Canada would be unable to add any reservations. However, signatories could withdraw or narrow a reservation following ratification.

The provisional MLI position of each country indicates the tax treaties it intends to cover, the options it has chosen and the reservations it has made. Signatories can amend their MLI positions until ratification. After ratification, countries choose to opt in with respect to optional provisions or to withdraw reservations. This makes the debate and analysis of Bill C-82 very important at committee stage.

Make no mistake, the Conservatives do support, in principle, Bill C-82. We want a full vetting at committee and we want to ensure the bill will meet the expectations of Canadians from coast to coast to coast. I think everyone in the House would agree we must get this right.

I would like to turn our attention now to the four additional provisions added to Bill C-82.

The first addition is to implement a one-year holding period to access treaty-based withholding tax reductions on dividends under a covered tax agreement. A covered tax agreement, or CTA, is an agreement for the avoidance of double taxation enforced between countries to the MLI and for which countries have made a notification that they wish to modify the agreement using the MLI. Double taxation is a taxation principle referring to income taxes paid twice on the same amount of earned income. It could occur when income is taxed at both the corporate level and the personal level.

Double taxation also occurs in international trade, when the same income is taxed in two different jurisdictions, and that is the area we are most concerned with here today. Income may be taxed in the jurisdiction where it is earned then taxed again when it is repatriated in the business's home country. To avoid these issues, countries sign treaties for the avoidance of double taxation. It is the abuse of that system which fosters the need for the bill we are discussing today.

The withholding tax reductions on dividends generally apply where the recipient of a dividend is a company that owns, holds or controls more than a certain amount of the shares or voting power of the dividend-paying company. However, article 8 of the MLI will deny access to the special relief if those ownership conditions are not met throughout a one-year period, including the day of the payment of the dividends.

The second optional provision would add an examination period of one year preceding alienation of the property in determining whether a CTA would exempt capital gains on the sale of equity interests that would not derive their value principally from immovable property.

According to Osler, Hoskin & Harcourt LLP's article, “Canada tables NWMM to ratify MLI; Updates MLI reservations”: It states:

Canada’s domestic “taxable Canadian property” rules impose a five-year lookback period for determining whether shares derive their value principally from certain types of Canadian properties (such as real property and resource properties). By contrast, many of Canada’s tax treaties exempt gains from being taxed in Canada where the shares sold by a resident of the other state do not derive their value principally from immovable property in Canada at the time of disposition. Article 9(1) of the MLI, which Canada proposes to adopt, will allow the source country to tax such gains if the relevant value threshold is met at any time during the 365 days preceding the disposition.

The new provision on capital gains will also extend the application of existing provisions in Covered Tax Agreements that do not already provide for such taxation to allow taxation of gains from both shares and other equity interests (such as interests in partnerships and trusts), in each case provided the relevant immovable property threshold is met during the 365-day testing period.

The third change [Article 4] is to adopt a provision for resolving dual resident entity cases...Article 4 of the MLI adds certain factors that the competent authorities should take into account when determining residency status: place of effective management, place where the entity is incorporated or otherwise constituted, “and any other relevant factors.”

The fourth and last addition is the adoption of a provision of the MLI that will allow certain treaty partners to move from an exemption system as their method of relieving double taxation, to a foreign tax credit system.

There are a number of considerations I would like to raise, considerations I hope will be addressed at committee.

On article 4, Osler, Hoskin & Harcourt LLP, in its analysis, warns:

The new article on dual resident entities does not provide for a clear result where the entity is a dual resident by virtue of a corporate continuance. Some such entities may be governed by the laws of both the jurisdiction under which they are created and the one to which they are continued. The U.S.-Canada treaty contains a tie-breaker rule that provides that such an entity would be resident only in the jurisdiction where the entity was created. By referring to the place where the entity is incorporated or otherwise constituted as a relevant factor, the new MLI provision may be signalling that a similar approach should be applied...

Whether there is a one-size-fits-all template that can be applied to address the concern or that this is best solved by an agreement between signatories is not clear. I again encourage the committee to look into this matter and provide some clarity on this.

Article 5 of the MLI allows countries to adopt one of three different options when removing such treaty-based guarantees. It is unclear at this moment which of the three options the government intends to implement. This may be a matter for the government to decide after ratification or it may not.

In any event, some time to consider witness testimony on the options available to eliminate the issues of double taxation will provide some guidance, I think, for the government when the time comes to implement an option.

The government did not announce an intention to remove its reservation on article 7(4), which would specifically allow treaty benefits that would otherwise be denied under the PPT to be granted in full or in part by the competent authorities in appropriate circumstances.

Osler, Hoskin & Harcourt LLP cautions that this is problem, illustrated with this example. It states:

...assume that an investor would be entitled to a 15% withholding tax rate on dividends had it made a direct investment into Canada, but instead invests into Canada through an intermediary that would have been entitled to a 10% withholding tax rate. A denial of treaty benefits under the PPT could lead to a 25% withholding tax rate on dividends to the investor.

Without the provisions in Article 7(4) the mechanism to allow for remedies will not exist.

According to Osler:

This is particularly important, for example, for private equity and other collective investors that may be resident in multiple jurisdictions. Canada has also not provided any additional guidance on when or how the PPT is intended to apply to private equity and other collective investment vehicles--despite many suggestions that further guidance is needed (either on a unilateral or bilateral basis).

I would strongly encourage the committee to examine this matter and pay particular attention to the very broadly worded PPT, which may be open to various interpretations.

Gowling WLG's partner, Laura Gheorghiu, in her article on the MLI tax treaty and what it means for taxpayers, brings to our attention concerns regarding article 8. She states that article 8:

...addresses the reduction of the 25% domestic dividend withholding rate under most CTAs to 5% where the dividend is paid to a corporation that, at the time of the payment, owns, holds or controls directly (and in certain CTAs, indirectly) at least 10% of votes (or in certain cases holds more than 10% of the shares) of the dividend payor. Article 8 will deny the reduced treaty withholding tax rate unless the applicable ownership conditions are met throughout a 365-day period that includes the day of the payment of the dividends. For this purpose, ownership changes resulting from corporate reorganizations (e.g. amalgamations) of the dividend payor or shareholder are ignored. This...holding period is meant to ensure that non-resident companies that engage in certain short-term share acquisitions will not benefit from the lower treaty dividend withholding tax rates.

The application of the hold period rule will be problematic in practice because the 365-day period can straddle the transaction date. Where the holding period test has not been met at the transaction time, the corporate dividend payor has a difficult choice to make. If it withholds at the lower rate, it exposes itself to the risk that the shareholder will not meet the holding period test and, therefore, the payor will be liable for the additional withholding tax and penalties. Alternatively, if it withholds on the dividend at the domestic rate, and the test is met, the shareholder will then need to apply for a refund of the excess withholding, which will engender additional costs and delays.

As of today, 84 countries have signed the MLI including Canada. Six more are interested in signing and 10 have ratified the convention.

It is interesting to me that the United States has chosen not to sign the MLI. Rather than pursuing legislation to recoup unpaid taxes in an investment like the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS, the U.S. has chosen a different approach.

When the OECD first announced its plan to go after tax planning and double taxation by multinationals, the U.S. had the highest statutory corporate tax rate in the OECD. Since then, the U.S. has passed historic corporate tax cuts as part of the tax cuts and jobs act, lowering its headline corporate tax rate from 35% to 21%, less than the OECD average.

The U.S. has also made significant changes to the international taxation of its U.S. multinationals.

The U.S. has taken steps to address BEPS and non-taxation of multilateral income by creating strong incentives for companies to relocate investment, economic activity and profits in the U.S. through a more competitive tax code..

To be clear, I am not advocating for the abandonment of Bill C-82 As I mentioned earlier, the Conservatives support the principles behind the bill, but we also support lower taxes for Canadians and businesses. Lower corporate taxes, reducing red tape and creating an investor-friendly climate is something we need to do in concert with Bill C-82. The more investment dollars we can attract and retain in Canada, the less taxes we need to spend in pursuit of those who exploit loopholes in tax rules.

In 2013, the previous Conservative government supported the effort to establish the OECD G20 BEPS working group to curtail profit shifting and tax avoidance.

The Conservatives support measures to crack down on tax evasion. Aggressive tax avoidance is a major source of lost tax revenue for high tax jurisdictions like Canada. However, let us remember that the vast majority of citizens, residents and businesses in Canada pay their taxes and follow the rules. Having a fair tax system for all Canadians and corporations that do business in Canada is fundamental to a healthy and equitable economy.

I want to quickly talk about what is happening when there is a lower-tax environment, something we do when we lower regulations and red tape and allow businesses to thrive in open and free markets. We are seeing that, as I mentioned, in the United States. The last number I saw was that there were 6.7 million unfilled jobs in the United States. Obviously, when that happens, wages go up, which we are seeing that all across the board, unemployment goes down, bonuses are given out and employees are better off than they were before. More money in more people's pockets gives them more options, more choices in their own lives to spend on projects and things they feel are important to them.

When we look at what is going on in Canada, we are almost doing the exact opposite: taxes are going up; red tape and regulations are grabbing onto businesses, they are strangling them; and businesses are looking for options elsewhere. We are already seeing it in the energy sector.

We have lost out on tens of billions of dollars worth of investment because of the government. Investment is fleeing; we are losing jobs, families are worse off than they were before; and we are going in the opposite direction in what most countries are doing, including one of our competitors, the United States. This is important to note because those of us on this side of the House believe that lowering taxes, allowing free markets to weed out bad actors, allowing people to have more choice and freedom in their daily lives is the best way to have a free and open society, like we do here.

With careful consideration of the bill and amendments at committee, these measures would prevent treaty abuse, improve dispute resolution and reduce the incidence of tax avoidance. However, I also laid out another case as well.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Mr. Speaker, I would like to commend my colleague on her speech.

I think that an agreement such as the one proposed by the G20 and the Organisation for Economic Co-operation and Development, the OECD, is a good initiative.

My colleague mentioned that this bill will help fight tax havens.

To her knowledge, if Bill C-82 is passed as it now stands and treaties are ratified between various parties, will it be possible to close the Barbados tax loopholes?

According to my colleague, will Bill C-82 ensure that Canadian financial firms that repatriate their taxes from subsidiaries in Barbados will be subject to Canadian taxes?

[Lawrence MacAulay, Liberal, Cardigan, PE]

moved 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 second time and referred to a committee.

Business of the House

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

Mr. Speaker, this afternoon, we will continue debate on the NDP opposition motion.

Tomorrow, we will start the second reading debate on Bill C-82, the multilateral instrument in respect of tax conventions act.

Monday, we will resume second reading debate of Bill C-77 on the Canadian Victims Bill of Rights and of Bill C-78, the family law act.

Next Tuesday, October 2, shall be an allotted day.

Finally, for the rest of the week, priority shall be given to report stage and third reading of Bill C-79, the CPTPP implementation act; and the Senate amendments on Bill C-65, the framework for the prevention of harassment.