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

[David Graham, Liberal, Laurentides—Labelle, QC]

Madam Speaker, certainly, every time we reach an agreement with any country, we need to consider the current status of both countries. We cannot conclude a single agreement with the rest of the world and think that it would always work the same way.

I think we have tax agreements because they allow us to exchange information so we can determine who is tyring to evade the local tax laws. It is important to do this. I agree completely that it might not always be perfect.

However, the goal is to find those who are abusing the system, not to destroy the system because people are abusing it, and I think we need to look at it from that perspective going forward.

[Monique Pauzé, Bloc, Repentigny, QC]

Madam Speaker, I thank my colleague for his speech.

I am tempted to ask him why we are debating Bill S-4, when the government is regulating things well enough through the regulations. For instance, in the case of Barbados, the regulations make it easy to avoid taxes. There are currently 22 tax havens with which we do not have a treaty, but the government treats them as though we do.

If the government is running everything through regulations, why brother with Bill S-4?

[David Graham, Liberal, Laurentides—Labelle, QC]

Madam Speaker, Bill S-4 implements two treaties. For reasons unknown to me, those treaties are being implemented by a bill, which is perfectly fine.

In that regard, I do not see how Bill S-4 is problematic.

[Lloyd Longfield, Liberal, Guelph, ON]

Madam Speaker, I was in Israel on a parliamentary trip this summer and saw enormous potential for investment through venture capital and some of the items the member discussed, such as royalties. The movement of money between our two countries could help stimulate growth and the jobs we are looking for.

How significant is this in terms of non-tariff trade barriers, and how could that help venture capital move between our two countries?

[David Graham, Liberal, Laurentides—Labelle, QC]

Madam Speaker, any time we have a new treaty to help our relations on fiscal policy and investment policy, it does help, with our relationship with those countries, to build out our economy and theirs.

We are one planet, and I think we should see it that way. We should work as best we can to work as a team within the bounds of what we find acceptable in each place.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

Madam Speaker, the issue of tax treaties is interesting and actually hits close to home for me, because my wife gets an income from another country, with which we have a tax treaty.

One of the issues that comes up, though, is the difference between employment income and pension income. I wonder if the bill accurately reflects the situation where in some countries they tax one's employment income but not one's pension income. The alternate takes place here. We do not tax income, because it is being taxed in another location, but if pension income is not being taxed in the home country, it can be taxed here.

Does the member know which way we are going on this particular treaty?

[David Graham, Liberal, Laurentides—Labelle, QC]

Madam Speaker, I do not know the answer to that question. I read through what I could, and I know that pensions were specifically addressed, but I do not know the specific details and cannot answer in a helpful way.

However, I know that Bill S-4 will be a positive bill for us in working with these other countries.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Madam Speaker, I am very pleased to speak at this stage of the debate on Bill S-4. Before I get into the meat of the matter, I would like to thank the people of the provincial riding of Chauveau for honouring me with their trust and launching my wonderful career eight years ago to this day. I thank the people of Chauveau, whom I now represent to the best of my ability here in the House of Commons as the member for Louis-Saint-Laurent.

We are at second reading of Bill S-4, which, as the title suggests, is a Senate bill. This is basically a technical, not to say mechanical, bill about the application of certain trade agreements with Taiwan and Israel. To be precise, it is about a convention and an arrangement for the avoidance of double taxation and the prevention of fiscal evasion for people who do business in Canada and Israel or Canada and Taiwan.

As people keep saying during this debate, no one wants to pay taxes twice on the same income. Once is enough and sometimes even more than enough. A second time is unnecessary and can even make investors less keen. International trade and free trade agreements between our country and other parts of the world contribute to growing our country's economy. It is therefore important to have agreements that facilitate these exchanges. This bill seeks to facilitate the process for the two partner jurisdictions. I will come back to the benefits of free trade between different countries.

Let us look more specifically at what is going on in this bill with regard to Israel. Bill S-4 seeks to update an agreement that was concluded many years ago in 1975. A lot has happened since then. That was more than 40 years ago. In any international dealings, especially international trade, it is appropriate to comb through the previous piece of legislation to ensure that it meets modern standards and is adapted to the new realities that investors face in Canada and abroad.

For Israel the agreement dates back to 1975; for Taiwan, it is an entirely different story. A tax convention was drawn up by the previous government, but it had to be updated by Bill S-4, which has already been passed by the Senate. It is important to know that if the House of Commons does not pass the bill before the end of the fiscal year, December 31, the process will be delayed by one year. This could negatively impact our economy and trade between Canada and Israel and between Canada and Taiwan next year. That would mean one less year to stimulate our economy, which is not a good thing.

Furthermore, I would like to state that the Canada-Hong Kong Tax Agreement Act, 2013 is also affected by Bill S-4, which we are studying today.

As I was saying earlier, this bill is extremely technical. I read a little of it to ensure that it made sense, and I noted that all aspects were examined in great detail. To be honest it is rather well written. This kind of agreement is often a bunch of gibberish and can be difficult to deal with.

About ten years ago, when I was a journalist, I did a story on the Hon. Lawrence Bergman, who was the Quebec minister of revenue at the time, and who drafted laws concerning income. Those laws are really something. They are very thick documents that are technical in the extreme, so much so, that you cannot follow them. However, the Hon. Lawrence Bergman, who was a notary, took great pleasure in reading every word of the bills he introduced. Some would say that it was his work and that it was his duty to do a good job.

We understand that when it comes to more general laws. However, the details of trade agreements or agreements affecting income tax returns can be a very sensitive subject. That is why we need experts to draft these laws. That is exactly what happened with Bill S-4.

A few days ago, a parliamentary committee examined the issue. We were able to speak to experts, to those who helped draft the bill. We did our best to leave no stone unturned. We are not perfect, but we did the best we could. There were concerns on this side of the House.

Yes, these are direct agreements to avoid double taxation for those involved in trade between Canada and Israel and Canada and Taiwan. Taiwan is a territory that is central to the potential economic development that could occur under the trans-Pacific partnership agreement, if somehow everything goes well and this government supports the agreement that we signed a year and a half ago. It is at the heart of the economic development resulting from Canada's trade with its partners and hundreds of millions of customers.

We asked questions about the consequences this could have on Japan and China, two major trading nations in the Asian economy. The officials we spoke with assured us that everything would be done properly, that Bill S-4 would have no negative consequences on potential trade with Japan and China. That is a good thing.

However, I did not get an answer to one of my questions. That is unfortunate, but that will not stop me from supporting the bill. It is always a good idea to examine the potential and the economic impact of every piece of legislation we are voting on. My question was quite simple. I asked if they had measured the economic impact that these new agreements could have on Canadian production.

The agreements were considered from a legal and political standpoint to make sure that diplomatic relations between the three countries—Canada, Taiwan and Israel—would carry on. The economic impact, however, was not assessed. Still, let us be confident that our investors and our business people will better be able to take part in rich and dynamic economic activity abroad, which is good for Canada's economy. That is very important for us.

We need to consider these things when examining a bill. We need to understand the real impact this will have on the economy, on businesspeople, and on those who will be directly affected, in other words, people who do international trade between Canada, Israel, and Taiwan.

Let us now look more carefully at what is really involved with these two jurisdictions. As the members know, Taiwan is a major economic player. It is known as one of the four Asian tigers. Yes, it is important that our country have strong economic relationships with all of them, and it does. Obviously, and as everyone knows, Taiwan exports a great deal and has limited natural resources compared to our magnificent and huge country, but it is doing well globally. In fact, it is nothing short of spectacular and impressive, economically speaking.

Imagine how many thousands of items we have held in our hands in our lifetimes that say, “Made in Taiwan”. Yes, we trade with Taiwan, but trade has to be a two-way street. There may have been some flaws in the previous agreements that might have led to double taxation. That is what we call a spoke in the wheels. That is the case for Taiwan.

For Israel, look at the deep, sincere, productive, and globally inspiring ties that exist between Canada and Israel. We know that this state was born in controversy after the second world war. Everyone knows it. The day after its creation, Israel was already at war. That is why I say it was created in controversy. I am not saying it was right or wrong, but obviously when a state is created one day and invaded the next, one might call that a rocky start. However, without rewriting history, everyone knows that today, Israel is the democratic state in the Middle East that can inspire all the other countries. Israel is our friend and ally. Canada is a friend and ally to Israel.

We know that Israel's population is eight million. It is the 38th-largest economy in the world, second only to the United States in terms of start-ups, brand-new companies with big potential and definite risk.

People go on and on about Israel's outstanding economic performance. Despite being the perpetual target of neighbouring enemies' hostile ambitions, Israel continues its extraordinary advance on all fronts and in all economic sectors.

I had the privilege of visiting this magnificent country in 2009 at the invitation of a charity very familiar to the member for Mount Royal, CJPAC. I would like to thank the group for inviting me. I went with my former colleagues from the National Assembly, and I learned so much about this magnificent democracy, an eternally optimistic country that is an inspiration to us all.

Like everyone else, I was impressed because anyone who visits Israel is impressed by its vitality and surprising agricultural capacity. Let us not forget that things can be hard to grow in that part of the world. It takes a lot of hard work because it is basically a desert. However, thanks to hard work and engineering together with Israeli ingenuity, a country that many thought of as basically a pile of sand is a place that creates jobs, wealth and remarkable agricultural output.

It seems, and I see my colleagues nodding, that dairy production is impressive. It is even said, and this may be a bit of folklore, that Israeli cows produce the most milk in the world. I know this because I have spoken with local farmers who told me that if the cows do not produce they are sent out into the desert. Members believe I am kidding. In some way, this illustrates the extraordinary will of the Israelis to develop the full potential of their country, which should inspire all of us here, in Canada, to develop our full potential in an orderly way.

In some areas, such as the environment, they do not have to take lessons from anyone. They are leaders in solar energy. Some will say that is obvious because it is always sunny in that country. Naturally, that does help. Nevertheless, they do not have a lot of water in Israel.

Israel is a world leader in water conservation, water desalinization, and water recycling. All that potential is extraordinary. We could talk at length about the economic vitality of this fascinating country.

Israel is a leading nation in research and development, in terms of the R and D-to-GDP ratio. Of course, there are bigger economies. We need only think of our American friends, who invest a lot more money than Israel in R and D. Still, a country like Israel, with a population of 8 million people, has the best R and D-to-GDP ratio in the world. That is inspiring.

I will digress a little bit while we are on the subject of to-GDP ratios. I remind members that Canada had the best debt-to-GDP ratio in the G7 when our government left office, and that allowed the current government to make a few foolish economic decisions. Still, the fact of the matter is that we left the house in order.

Let us return to the subject of Israel, a country where high technology is front and centre. Beyond the capacity to take advantage of its natural resources, when a country puts its most brilliant minds to work, then that country really shines because it is generating pure wealth. Israel is such a country, a high-tech hub where what does not yet exist is being invented and created. Microsoft, Intel, Appel, Google and all the other high-tech communications corporations have highly specialized and developed research facilities. That is where the action is, where things happen.

In closing, what is happening in Israel is inspiring and must be acknowledged. We especially need to recognize that these people are able to fully realize their potential, particularly when it comes to natural resources. They managed to draw from their arid land a tremendous amount of potential, and the potential they are drawing from their minds—which are anything but arid—is just as amazing. That is why Canada needs to be friends with Israel.

Here is one last interesting figure: Israel has the best ratio of scientists to workers in the entire world. In Israel, there are 140 scientists for every 10,000 workers. That is the best record on the planet, and it explains why these people are such great leaders in research.

Israel is our friend, and we should do everything we can to make sure that trade with that country goes well. Bill S-4 will help with that.

Let us now talk about the importance of free trade. I think that it is important to talk about free trade when it comes to international relations and international trade. The government and the official opposition agree on the principle of free trade. We sometimes disagree, are divided, or have different views on some aspects of it, but overall, we agree that free trade is the future and will drive economic development.

We cannot talk about free trade without remembering the epic battle that took place in the House of Commons and across Canada about 30 years ago in 1986, 1987, and 1988 under the leadership of the Right Hon. Brian Mulroney. At the time, Canada had entered into negations that were difficult at first but that produced an extraordinarily successful result, and that is the Canada-U.S. Free Trade Agreement.

The facts are the facts. We must remember that, in 1983, the man who gave us the free trade deal, Brian Mulroney, was against free trade. During the 1983 Conservative Party leadership race, John Crosbie, a Newfoundland MP running for the leadership, said that he was in favour of free trade. Mr. Mulroney, a Montreal businessman originally from Baie-Comeau, said it was not a good idea because it would be like an elephant sleeping with a mouse. Guess which one would crush the other. That was Brian Mulroney's analogy. I feel like I am channelling him here.

Mr. Mulroney, an intelligent man capable of recognizing when his opponent landed a good blow, was inspired by John Crosbie and said that Canada would do free trade. France even recognized his extraordinary leadership just a couple of days ago by inducting him into the Legion of Honour. I had the privilege of attending the event. What a great moment. The current Prime Minister, the member for Papineau, toasted him graciously.

This goes to show that Canadians have no political stripes. When great Canadians are honoured, we all win.

Sorry, I went from Quebec City to Ottawa via Sept-Îles. I went on a little detour. Since we were talking about Brian Mulroney, I could be even nicer and say that I went from Quebec City to Ottawa via Baie-Comeau.

On September 13, Brian Mulroney delivered a wonderful and very interesting speech at the University of Calgary. In his speech, he talked about free trade's track record over the past 30 years. I will quote from that speech:

“The statistics alone speak to the success of the FTA. Trade volumes more than tripled in less than 20 years – from $235-billion...[to $800 billion today]...Trade exploded into the largest bilateral exchanges between any two countries in the history of the world”.

We are more than just good friends with the Americans. We are also the Americans' best trading partner. We are also their biggest competition. We should be proud of that.

In the two hours or so, $250 million in goods and services will be exchanged by Canada and the U.S. This is more than $1 million every minute of every hour of every day, more than $2 billion in total each and every day of every week of every month of every year.

All that to say how important trade is between our two countries. That is why we need to support and promote free trade. We also know that we signed the trans-Pacific partnership just a year and half ago, and that agreement will also help create wealth. We should also support that. Other negotiations are under way, and we should encourage them because Canada is an export country.

I went to Vancouver for the Special Committee on Electoral Reform. To make a long story short, I was on the 27th floor of the hotel I stayed at. I had a magnificent view of the Vancouver harbour, and I counted no less than 12 container ships bound for Asia stacked full of merchandise. That is what it means to create wealth. When our goods and services can be exported overseas and other countries buy them, that means money coming into Canada. Let us hope that Bill S-4 will help create jobs and wealth.

[Anthony Housefather, Liberal, Mount Royal, QC]

Madam Speaker, I commend my friend from Louis-Saint-Laurent on his excellent speech.

He mentioned my former MNA for D'Arcy-McGee, Lawrence Bergman, his former colleague. I just want to say that I completely agree with the hon. member for Louis-Saint-Laurent. Mr. Bergman is a man of great honesty and integrity, and intellect.

I liked what my colleague said about Israel, the Silicon Valley of the Middle East. My colleague from Louis-Saint-Laurent surely knows that the mayor of Montreal, Denis Coderre, and the mayor of Toronto, John Tory, just got back from a mission in Israel. Some Israeli companies are setting up their head offices in Montreal and Toronto.

How does my colleague think we might contribute to increasing trade with Israel?

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Madam Speaker, the best way to boost trade between Canada and Israel is to continue being Israel's best friend and ensuring that the relationship is mutual, but also to allow individual interactions. When we travel, visit places and meet people, we are able to improve our interaction.

These fine speeches in the House are nice. It is nice to allow our businesses to export and to welcome scientists and Israelis here in Canada, but it is much better when we can have direct interactions.

Speaking of Montreal mayor Denis Coderre's meeting in Tel Aviv, without getting too personal, I will just say that the mayor of Montreal and Mayor Tory attended Cirque Éloize, a Quebec-Canada production. Mayor Coderre took the time to say hello to my son, Jean-Philippe, who is an artist and circus performer for Cirque Éloize.

[Brigitte Sansoucy, NDP, Saint-Hyacinthe—Bagot, QC]

Madam Speaker, I thank my colleague for his speech.

We too believe that it is a good idea to support this bill and to have this sort of agreement with Israel and Taiwan. However, when it comes to the fight against tax evasion and tax havens, it is important to include automatic tax information exchange provisions in agreements signed by Canada.

Does my colleague not believe that it is a good idea to include automatic tax information exchange provisions in the 92 existing agreements and in future agreements so that this sort of exchange does not just occur by request only, as is currently the case?

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Madam Speaker, I had the pleasure of working with the member for Saint-Hyacinthe—Bagot on the issue of physician-assisted dying, as well as other issues, and her comments are always very relevant, particularly in this case.

Right now, in article 25, on page 52, there are five paragraphs describing the types of information that will be exchanged to prevent tax evasion. Canada cannot resolve the problem of tax evasion on its own. Every country in the world must work together.

[Monique Pauzé, Bloc, Repentigny, QC]

Madam Speaker, I listened to my colleague with interest, and I can see how knowledgeable he is on this topic.

In his speech, he talked about the things that need to be taken into account in a treaty. I have two questions for him.

First, do we need to take into account Israel's borders? Are those living in the Israeli settlements part of Israel or not? I did not get a clear answer to that question earlier.

Second, my colleague talked about how urgent this treaty is. However, in 2009, when the Conservative government entered into treaties with 22 tax havens, it did so via regulation, never by means of a bill such as Bill S-4, so in my opinion, there is no urgency here.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Madam Speaker, I am not an expert in that field, but I will do my best to answer these pointed questions.

Who can do business with Israel and Canada? According to Bill S-4, those with an Israeli passport, and that is it.

As for the fact that we are proceeding with a piece of legislation instead of making a regulation or an order in council, the experts we heard in committee told us that with this specific kind of treaty, since it dated back to 1975 in Israel's case and there had been a few agreements with Taiwan over the last few years, we needed to take a legislative approach.

I am not a legal expert, so I will not go into too much detail, otherwise I might start talking nonsense and make a fool of myself. Some would say it is a bit too late for such concerns, but that would be a lie, a misrepresentation of the truth. I will simply reassure this House that we asked that question in committee, and the legal experts told us that in this specific case an order in council would not suffice, that a bill was necessary.

As I said earlier, Canada cannot resolve the problem of tax evasion on its own. All 162 countries of this beautiful earth must work together.

[Anthony Housefather, Liberal, Mount Royal, QC]

Madam Speaker, I am certain that my colleague from Louis-Saint-Laurent will say that the treaty is available. It clearly states that a resident of the State of Israel can use the treaty. There is a definition in the treaty. Since 1976, it has generally been the practice of governments to present this to the House of Commons.

My question is on free trade. My colleague was correct in saying that, in the beginning, Brian Mulroney was against it, but that he supported it later. The same thing happened with our party. First, we were against it, then we supported it. We agree with the official opposition that it is very important to have free trade agreements with as many countries as possible.

Does my colleague believe that the other members of the House who do not share this opinion today will change their minds?