Bill S-4 (Historical)

Tax Convention and Arrangement Implementation Act, 2016

An Act to implement a Convention and an Arrangement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and to amend an Act in respect of a similar Agreement

This enactment implements a convention between the Government of Canada and the Government of the State of Israel for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and an arrangement between the Canadian Trade Office in Taipei and the Taipei Economic and Cultural Office in Canada for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. It also amends the Canada–Hong Kong Tax Agreement Act, 2013 to add to it, for greater certainty, an interpretation provision.
The convention and arrangement are generally patterned on the Model Tax Convention on Income and on Capital developed by the Organisation for Economic Co-operation and Development (OECD).
The convention and arrangement have two main objectives: the avoidance of double taxation and the prevention of fiscal evasion. Once implemented, they will provide relief from taxation rules in, or related to, the Income Tax Act. Their implementation requires the enactment of this Act.

Tax Convention and Arrangement Implementation Act, 2016

[Amarjeet Sohi, Liberal, Edmonton Mill Woods, AB]

moved that Bill S-4, An Act to implement a Convention and an Arrangement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and to amend an Act in respect of a similar Agreement, be read the third time and passed.

[François-Philippe Champagne, Liberal, Parliamentary Secretary to the Minister of Finance]

Madam Speaker, I believe that this will be one of the last speeches, if not the last, of this session that is coming to a close.

We have taken a historic step with Bill C-29. I know that one day, when current members are all retired and, like many Canadians, will be able to enjoy the enhanced pension plan, we will remember this historic day when we took a step forward for Canadian society by advancing the rights of seniors, young people, and the middle class. It is a great day for Canada.

I would like to talk about Bill S-4, which concerns another very important issue.

I welcome the opportunity today to speak to Bill S-4, the tax convention and arrangement implementation act, 2016. I know a number of members of the House have spoken already to this important bill. This is in the best interests of Canada. It is about ensuring we grow our economy and tax fairness.

People understand the objective, and I think all members in the House will support the bill. It is the right thing to do for Canada. It is also the smart thing to do for Canadians. Canadians gave us a mandate to grow the economy and ensure we engage with our trading partners, whether it is the state of Israel, Taiwan, or Hong Kong, and work with them to grow our economy. This is what I will talk about today.

I seek the support of all members. They know we need to send our notice before the end of the year in order for these agreements to come into force in 2018. This is very important for Canada and our trade relationships with Taiwan, the state of Israel, and Hong Kong.

As Canada's economy is increasingly intertwined with that of the global economy, the importance of eliminating tax impediments to international trade and investment has grown in importance. I think every member in the House understands that. Whether one sits as a Conservative, NDP, Liberal, or Bloc Québécois, one must understand that it is in our best interest to invest and ensure we have more trade and trade that is fair.

One way to remove these impediments is through tax treaties or double taxation agreements. These treaties are used internationally to eliminate tax barriers to trade and investment.

Canada's network of 92 income tax treaties currently enforces one of the most extensive in the world, and that is something we should be proud of as Canadians. We are a fair trading nation. However, as with any measure of efficiency, there is an ongoing need to update and modernize this network with foreign jurisdictions.

By modernizing our tax treaties and expanding our network, we will help facilitate international trade and make it easier for our treaty partners to invest in Canada. That is the mandate we have been given. The people who sent us to the House expect us to grow the economy, create jobs for Canadians all across our nation, in every riding in our country. They want us to work for them. I hope my colleagues from the NDP, the Bloc, and the Conservatives will support this, because I am sure they too believe in creating jobs for Canadians.

This will help our economy and businesses, and strengthen the middle class. I still believe that everyone in the House should be working with us to help the middle class. There is nothing more important in our country that we can do than to support the middle class, families, youth, and seniors.

On the international scene, the Canadian economy always faces headwinds. However, Canada can count on some solid economic fundamentals in order to seize the opportunities presented by the global economy.

As there are only a few seconds left before we adjourn, I just want to wish every member a merry Christmas. I thank members for working with us to make sure that we do what matters to Canadians.

Let us always remember when we rise in the House and raise our voice to bring something forward that we do it on behalf of the good people who have sent us here to make a difference in their lives, not just for the current state of affairs, but for the future. Canadians expect the best.

To will quote our Prime Minister “better is always possible”, so let us work together in 2017 to make sure we strive to always be at our best, not for ourselves, but for the people we serve who have sent us to Ottawa. These people expect the best out of us, and that is what we will deliver.

[Andrew Scheer, Conservative, Regina—Qu'Appelle, SK]

Madam Speaker, I rise on a point of order. I believe you will find unanimous consent to allow me to table a petition. I know with all the Christmas greetings that went on after question period, I was not able to do this during routine proceedings. It is a very well thought out petition from my constituents.

[The Assistant Deputy Speaker, Carol Hughes]

Does the hon. member have unanimous consent of the House to table the document?

[Some hon. members]

Agreed.

The House resumed consideration of the motion that Bill S-4, An Act to implement a Convention and an Arrangement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and to amend an Act in respect of a similar Agreement, be read the third time and passed.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Madam Speaker, first, I would like to thank all my colleagues for allowing my colleague from Regina—Qu'Appelle to table a petition. It was a very nice gesture with Christmas just around the corner. I would like to say that we are really in the spirit of Christmas. It really shone through in the last speech that we heard. However, this evening, I am a bit torn between the happiness I feel about going back to my riding for Christmas and the sadness I feel at having to react to the speech that my colleague before me gave with regard to the passing of Bill C-29 today.

He said himself that Bill C-29 is something that Canadians will remember. Unfortunately, yes, young Canadians will remember this bill when they have to pay off the $100-billion deficit that Bill C-29 will leave them. They will remember a $100-billion deficit for a long time to come.

That is why I cannot share my colleague's enthusiasm for the Christmas spirit that he did such a fine job of expressing.

Let us come back to the very important bill before us, Bill S-4, an act to implement a convention and an arrangement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and to amend an act in respect of a similar agreement.

I want to highlight the work that our critic, the member for Louis-Saint-Laurent has done on this file. To most Canadians, tax agreements are pretty abstract. Here in Ottawa, we talk about issues that may or may not be interesting, but tax agreements and free trade agreements between different countries create jobs for Canadians. They create jobs for young Canadians. That is important because the market is now global. We have to acknowledge the tremendous work that all members of the House have done in recent years to sign more and more free trade agreements under the leadership of our former prime minister, Stephen Harper.

We have free trade agreements with Europe, Peru, Colombia, Jordan, Panama, Honduras, and South Korea. Under the previous government, we signed other major free trade agreements with Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, the United Kingdom, Slovakia, Slovenia, Spain, and Sweden. Santa Claus will be visiting all of those countries in just a few days. I am sure that he will be bringing the children in those countries gifts that may have been made here in Canada. Why? Because free trade agreements enable Canadian companies, perhaps with the help of Santa Claus, to export their products to other countries. That is the good thing about free trade agreements.

Regarding our relationship with Israel, when it comes to trade, I would remind the House that in 1996, trade between Canada and Israel was worth only $507 million. In 2012, it totalled $1.4 billion. Bill S-4 will mean that companies will not have to pay taxes in both countries if they are doing business in both countries. If we do not want to stand in the way of those companies, stand in the way of increased investments and trade with Israel, it is important to create an environment that facilitates trade and, above all, does not penalize them.

I wanted to read a passage from the press release issued at the time by the former prime minister, Mr. Harper, on the advantages of signing and improving free trade agreements, particularly with Israel. Unfortunately, all of Mr. Harper's press releases have been removed from the Global Affairs Canada website by the current government. I cannot read it, but I certainly share Mr. Harper's intention at the time, which was to sign agreements and make sure that Canadians benefit as much as possible.

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

Madam Speaker, I am pleased to rise in the House at third reading stage of Bill S-4. I would like to take this opportunity to wish everyone happy holidays.

I realize that I will be the second last person to speak in the House and that my colleague from Pierre-Boucher—Les Patriotes—Verchères will be the next and last speaker. He will have the honour of ending the debate. I would just like to extend my best wishes to the House.

We are not debating the most controversial bill. All parties worked together making it possible for the government to move the bill quickly through all stages in the House, including study by committee. All parties collaborated to ensure that everything went smoothly.

Naturally, the government used the excuse that without royal assent and diplomatic notification before December 31, the convention with Taiwan could not go into effect on January 1, and if it was not in effect on January 1, 2017, we would have to wait until January 1, 2018.

It goes without saying that we have been working together in order to advance this file, even though we have some reservations about tax conventions overall. In this case, the new concerns with respect to Taiwan are not problematic, nor is the use of the OECD model to update the agreement with Israel, which was signed in 1975. There is also a technical update for the Hong Kong agreement, which clarifies the status of Hong Kong as a territory of China.

It goes without saying that we support the bill and that we are letting the government proceed. The Governor General will thus be able to sign it soon, give royal assent and, a few days later, notify Taiwan that the convention has been ratified and that it can take effect on January 1. We will be monitoring this file during the holidays.

During those proceedings, I gave a very serious yet broad overview of tax conventions that can be problematic in some instances. That is why, during my speech at second reading, I encouraged the government to keep a closer eye on our 92 and soon to be 93 tax conventions with 93 nations in the world, in order to ensure that these conventions are used properly and for the right reasons and that they do not facilitate tax evasion, as is the case in Barbados.

The title of Bill S-4 mentions combatting tax evasion. However, we know that in some situations tax conventions to avoid double taxation facilitate tax evasion because the businesses can claim resident status if they are sufficiently set up in the respective country and then claim the right to be taxed only once, which means, in the case of Barbados, to be taxed in Barbados only. When those businesses bring their money back here to Canada, they do not have to pay any additional tax since they already paid the taxes that they owe. Barbados has a low tax rate of 0.5% to 2.25%, if memory serves me correctly, and in that case, a tax convention is totally unacceptable.

However, it goes without saying that this sort of convention would work well in the case of Taiwan or Israel because they have tax rates similar to those in Canada. We do not see a problem with this. However, I would like to remind the government of the importance of having a formal mechanism for the periodic review of these conventions. This would ensure that the countries with which we have conventions continue to have tax rates similar to ours and that we are not creating an even bigger problem and acting contrary to the spirit of these conventions by not seeking to prevent tax evasion.

I wanted to mention that again in this debate at third reading and commend the government for passing this bill, which we hope will come into effect on January 1, if all goes well.

I would like to say happy holidays to all my colleagues, yourself included, Madam Speaker. I hope to see everyone back here in good health in 2017 so that we can continue the important work that we do in the House and that we will continue to do in co-operation with all parties. We will see everyone in 2017.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Mr. Speaker, I will begin by saying that the Bloc Québécois will be supporting Bill S-4, to implement various tax agreements with the countries listed therein.

I am mentioning this right away because I am going to be rather hard on the government with respect to its previous position and its approach to tax treaties, and also because I may not have enough time to finish my speech given that members only get five minutes.

It is becoming increasingly common for taxpayers, both individuals and businesses, to have revenue in more than one country given the rapid rate of globalization we are experiencing. This requires co-ordination and is an additional challenge for countries around the world. In fact, they have to adapt and have good legislation to deal with the problems that this situation creates. Hence, it is important that we enter into good tax treaties, like those we are debating today.

The government often says that the purpose of tax agreements is to avoid double taxation and prevent tax avoidance. That is what they are supposed to do. However, tax agreements also make certain things possible. Any measure to avoid double taxation may be accompanied by a certain degree of non-taxation. That can cause problems. People who know how to game the system can find loopholes in the agreement to avoid double taxation and take advantage of them to end up paying no tax. We have to fight that, and that is why we cannot support any old tax agreement. Not every tax agreement is a good tax agreement.

Here is a good example. Here, as in most places around the world, taxation is based on residency. I live in my riding of Pierre-Boucher—Les Patriotes—Verchères, which is in Boucherville, which is in Quebec, which is in Canada, at least for now. I pay income tax to Quebec and I pay income tax to Canada even though I do not really like doing so.

However, all citizens must pay taxes in the country in which they reside. Normally it is easy to determine where someone lives: we look at where his credit card comes from, where his spouse lives, where his children live, and where his house is. That gives us a good idea of where he lives, and normally, it is hard to fake that.

The problem lies with businesses. We cannot always be sure where a company has set up shop. Sometimes a company claims to be located in one place, while its board of directors is somewhere else. Sometimes it is located in one place but all the shareholders are somewhere else. In those fuzzy situations, we have to ask what is really going on. We have to ask if they are not trying somehow to distract from the reality in order to take advantage of the system and avoid paying the taxes they owe.

It is in these situations that tax treaties and our fiscal regulations become important, which is why it is so important for governments to remain vigilant to this. The same is true in both Canada and Quebec. We are hitched to Canada's train, fiscally speaking, and so we are often subjected to Canada's decisions, even if we do not like them. In fact, we were almost subjected to the Canadian government's policy decision in Bill C-29.

We therefore have to look at who is making the real decisions and where things are really happening for the company. That is where the company needs to be taxed. It is not enough to register a company in Barbados. That should not be how it works. The company actually needs to be doing business in Barbados. The company needs to be located there.

The United States does not have the same rules as Canada. In the United States, a company is taxed in the place where it is registered. We therefore have a problem. In Canada, we are supposed to tax a company in the place where the board of directors is located and where the decisions are made, while in the U.S., it is where the company is registered.

If a company is registered in Canada but makes its decisions in the United States, the Americans see the company as Canadian,. while Canadians see it as American. The company is therefore in tax limbo. It does not make any sense. We need to do something to prevent situations like that. Some jokers came up with the idea of doing that in the past.

Fortunately, those types of situations were dealt with most of the time. However, this is not over because there are new ways to evade taxes, as we saw in the case of the tax treaty with Barbados.

My colleague to my right, Mr. Ste-Marie, the member for Joliette, tried to do something about that, but unfortunately the members across the way decided it was perfectly all right for companies to use the tax treaty with Barbados for tax evasion.

We hope that Bill S-4, which implements various tax conventions, will put an end to these situations.

Merry Christmas, everyone, especially the banks.

[The Assistant Deputy Speaker, Carol Hughes]

I would remind the member that he is not supposed to refer to members by their given names in the House of Commons. There is something to consider for the new year.

Pursuant to order made earlier this day, Bill S-4, an act to implement a convention and an arrangement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and to amend an act in respect of a similar agreement, is deemed read a third time and passed.

(Motion agreed to, bill read the third time and passed)

[The Assistant Deputy Speaker, Carol Hughes]

I want to wish everybody a very merry Christmas and happy holidays. I just ask members to remember that if they drink do not drive; if they drive do not drink.

I want to thank everyone in this House and everyone on Parliament Hill who makes the functioning of the Hill so smooth for us as MPs.

I have not forgotten the fine constituents in my riding of Algoma—Manitoulin—Kapuskasing.

To my constituents, I want to wish them a very merry Christmas and a happy new year, and to all Canadians at that. Be safe.

It being 5:04 p.m., pursuant to an order made earlier today, the House stands adjourned until Monday, January 30, 2017 at 11 a.m. pursuant to Standing Orders 28(2) and 24(1).

(The House adjourned at 5:04 p.m.)