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.

Canada–Madagascar Tax Convention Implementation Act, 2018

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

Madam Speaker, I have listened to the debate on Bill S-6 this morning and I must say there are plenty of things that one can draw upon in order to shed more light and to be a bit more forthright with respect to the bill.

The Government of Canada and the Liberal Party of Canada recognize the important role that trade plays in the development of our nation. Having observed the NDP for many years now, it is my experience that as a general rule that party does not support trade agreements.

There have been dozens of trade agreements. On one occasion, the vote was not a recorded vote, so NDP members claimed not to have voted against the bill. They might have voted in favour of one other bill. A couple of MPs have indicated they have voted in favour of trade, but as a general rule the NDP does not support trade agreements between Canada and other countries, and that is somewhat unfortunate.

Bill S-6 is about a tax treaty with Madagascar. Madagascar has wonderful opportunities for Canadians, and individuals from that country have opportunities here in Canada. We have many tax treaties with countries around the world, and tax treaties provide significant benefits to both countries.

That is why it is with pleasure that I rise today to address this legislation and to add my comments on a wide variety of issues, all stemming from our economy, social justice and the tax laws that we currently have. I have a fairly wide spectrum to work from based on the debate I have heard so far today. Let me attempt to do it in the best way I can.

The number that comes to my mind, which ultimately demonstrates what this government has been able to accomplish by working with Canadians, is one million, and that is a fairly recent number that has come out relating to employment.

It is worth mentioning that since we took office in October 2015, we have seen the generation of over one million new jobs. That is historic, in the sense of the last 40 or 50 years. It is an incredible number of jobs, and it is due in good part to the policies that this government has put in place, budgetary measures and legislative measures, all with the idea of supporting Canada's middle class and those aspiring to be a part of it.

Day after day, for weeks, months and years, our government has taken Canada's middle class seriously. We have developed progressive measures to assist middle-class Canadians, bringing forward policies that will support them, policies such as the Canada child benefit program and the guaranteed income supplement for our seniors, which have added great value to our economy.

We hear a lot about taxation. People expect to pay their fair share. From day one, our government has taken this very seriously.

Members will recall that during the last election, today's Prime Minister made a commitment to Canadians that there would be a tax cut for the middle class. If members look at Bill C-2, which was our first piece of legislation, they will see that we delivered on that tax cut, which put hundreds of millions of dollars into the pockets of Canadians. I would argue that the money going into the pockets of Canadians enabled them to increase their disposable income, allowing them to spend more into the economy, and it is one of the reasons for the one million-plus jobs that have been generated. Working with Canadians, investing in Canadians, allowing Canadians to have more disposable income has allowed Canada's economy to perform that much better.

Taxation policy matters. The NDP and the most recent speaker talked about tax fairness and said that the rich need to pay more. That was an important part of the very first budget we brought forward, in which Canada's wealthiest 1% had to pay more. The millions raised through that one initiative supported giving Canada's middle class a tax break. The issue of tax fairness, much like the tax break, has been of the utmost importance to this government. It was one of the very first actions taken when we assumed office in 2015, recognizing some of the comments made today, whether it was the NDP talking about tax fairness or the Conservatives talking about the tax on Canada's middle class.

When the member for Calgary Shepard asked who benefits from the tax break that we gave to the middle class and then said it is members of Parliament who benefit, I think of the tens of thousands of teachers, the tens of thousands of nurses, the tens of thousands of factory workers or the tens of thousands of people who work for our financial institutions. Those individuals also benefited from that tax break.

I indicated that when I had the opportunity, I would put some facts on the record, and there is no disputing what I have said, because it is all factually correct. The government has consistently gone out of its way to develop policy through legislation and budgetary measures that has had a positive impact on Canada's middle class.

The tax treaty that we are debating today is all about international relationships and ways for these treaties to further advance Canadian interests. This is not the only tax treaty legislation that we have put forward in the last three years. Bill S-4 also dealt with tax treaties. It is not the first time we have had to deal with tax treaties, because we understand and appreciate the true value of having these types of treaties with countries. It allows us to have a better sense of taxes flowing, both here in Canada and in the country in question. It provides additional security, if I can put it that way, for investments flowing to countries with which we have tax treaties.

We recognize, as we do on the broader picture, trade and international relations. No government in recent history has done more with respect to trade agreements than this government. The previous government likes to say that it had 30-plus trade agreements, but that is just not true. Through this administration, we have been able to sign more trade agreements than any other government in the last 40 to 50 years. Since trade agreements have been tied into tax agreements or tax treaties, I would challenge any member in the House to list a government that has been able to accomplish so much in such a short period of time on that file.

[Professor Ian Kerr, Professor and holder of the Canada Research Chair in Ethics, Law and Technology, University of Ottawa, As an Individual]

Mr. Chair, honourable members, thank you and good afternoon. I appreciate the opportunity to appear before you today as part of your PIPEDA review, a statute in desperate need of legal reform.

My name is Ian Kerr. I'm a professor at the University of Ottawa, where I hold a unique four-way position in the Faculty of Law, Faculty of Medicine, school for information studies, and the department of philosophy. For the past 17 years, I have held the Canada research chair in ethics, law, and technology. Canada research chairs are awarded to “outstanding researchers acknowledged by their peers as world leaders in their fields.”

I come before you today in my personal capacity.

I'd like to begin by reinforcing some points that have already been made in previous testimony.

First, to put it colloquially, and to disagree with my colleague David Young, the call for stronger enforcement through order-making power, the ability of the OPC to impose meaningful penalties, including fines, is by now a total no-brainer.

As Micheal Vonn of the BCCLA who recently testified before you said, “There is no longer any credible argument for retaining the so-called ombudsperson model”. This has already been acknowledged by Commissioner Therrien, former commissioner Stoddart, and assistant commissioner Bernier, and has been fortified by testimony from other Canadian jurisdictions that already have order-making power, which commissioners Clayton and McArthur have testified before you as being advantageous. Strong investigatory and order-making powers are a necessary component of effective privacy enforcement, especially in a global environment. Let's get it done.

Second, I agree with former commissioner Stoddart and with overlapping testimony of Professor Valerie Steeves, both of whom have stated that PIPEDA's language needs to be strengthened in ways that reassert its orientation towards human rights. As Professor Steeves attests, privacy rights are no longer reducible to data protection, which itself is not reducible to a balancing of interests. Enshrining privacy as a human right, as PIPEDA does, reflects a profound and crucial set of underlying democratic values and commitments. Privacy rights are not merely trade-offs for business or governmental convenience. PIPEDA needs stronger human rights language.

Having reinforced these views, the majority of my remarks will focus on two central themes raised by this study, transparency and meaningful consent. I will use this framing language to orient your thinking, but in truth, both of these concepts themselves require expansion in light of dizzying technological process.

When PIPEDA was enacted, the dominant metaphor was George Orwell's 1984, “Big Brother is Watching You.” Strong privacy rights were seen as an antidote to the new possibility of dataveillance, the application of information technology by government and industry to watch, track, and monitor individuals by investigating the data trails they leave behind through their activities. Though perhaps no panacea, PIPEDA's technology-neutral attempt to limit collection, use, and disclosure was thought to be a sufficient corrective.

However, technological developments in the last 17 years since PIPEDA go well beyond watching. Today, I will focus on a single example, the use of artificial intelligence, AI, to perform risk assessment and delegated decision-making. The substitution of machines for humans shifts the metaphor away from the watchful eye of Big Brother towards what Professor Daniel Solove has characterized as:

...a more thoughtless process of bureaucratic indifference, arbitrary errors, and dehumanization, a world where people feel powerless and vulnerable, without any meaningful form of participation in the collection and use of their information.

This isn't George Orwell's 1984; this is Franz Kafka's trial of Joseph K.

Since the enactment of PIPEDA, the world we now occupy permits complex, inscrutable artificial intelligence to make significant decisions that affect our life chances and opportunities. These decisions are often processed with little or no input from the people they affect, and little or no explanation of how these decisions were made. Such decisions may be unnerving, unfair, unsafe, unpredictable, unaccountable, and unconstitutional. They interfere with fundamental rights, including the right to due process and even the presumption of innocence.

It's worth taking a moment to drill down on some real-life examples. IBM Watson is used by H&R Block to make expert decisions about people's taxes. At the same time, governments are using AI to determine who is cheating on their taxes.

Big Law uses ROSS to help its clients avoid legal risk. Meanwhile law enforcement agencies use similar applications to decide which individuals will commit crimes and which prisoners will reoffend. Banks use AI to decide who will default on a loan. Universities use AI to decide which students should be admitted. Employers use AI to decide which people get the jobs, and so on.

But here's the rub. These AIs are designed in ways that raise unique privacy challenges. Many use machine learning to excel at decision-making. This means that AI can go beyond its original programming to make discoveries in the data that human decision-makers would neither see nor understand.

This emergent behaviour is what makes AI so useful. It's also what makes it inscrutable. Machine learning, knowledge discovery in databases, and other AI techniques produce decision-making models differing so radically from the way that human decisions are made that they resist our ability to make sense of them. Ironically, AIs display great accuracy, but those who use them and even their programmers often don't know exactly how or why.

Permitting such decisions without an ability to understand them can have the effect of eliminating challenges that are essential to the rule of law. When an institution uses your personal information and data about you to decide that you don't get a loan, your neighbourhood's going to be the one under more police surveillance, you don't get to go to university, you don't get the job, or you don't get out of jail, and those decisions can't be explained by anyone in a meaningful way, such uses of your data interfere with your privacy rights.

I think this is the sort of reason that a number of experts have come before you to talk about what they called algorithmic transparency, but in my respectful submission, transparency doesn't go far enough. It's not enough for governments or companies to disclose what information's been used or collected when AIs affect our life chances and opportunities. Those who use AIs have a duty to explain those decisions in ways that allow us to challenge the decision-making process itself. That's a basic privacy principle that's enshrined in data protection worldwide.

I would therefore submit that PIPEDA requires a duty to explain decision-making by machines. A duty to explain addresses transparency and consent but goes further in order to ensure fundamental rights to due process and the presumption of innocence. This is the approach that's taken in GDPR. I would go even further, following EU GDPR article 22, and suggest that PIPEDA should also enshrine “a right not to be subject to decisions based solely on automated processing”.

PIPEDA was enacted to protect human beings from technological encroachment. Decision-making about people must therefore maintain meaningful human control. PIPEDA should prohibit fully automated decision-making that does not permit human understanding or human intervention, and to be clear, I make this submission not to ensure EU adequacy but because it's necessary to protect human rights.

Mama raised me right. Among other things, she taught me that you don't accept a dinner invitation and then complain to your hosts about what is being served. Mama's gentle wisdom notwithstanding I would like to conclude my remarks with two uncomfortable observations.

First, as I appear before you today, I think it's fair to say that my sense of déjà vu is not unwarranted. With the exception of a few new points like my submission in favour of a duty to explain, much of what I have said, indeed much of what everyone who has appeared before you has said, has all been said before.

Although many honourable members of this committee are new to these issues, those who have done their homework will surely know that we've already done this dance in hearings around Bill S-4, Bill C-13, the Privacy Act, the privacy and social media hearings, and of course the PIPEDA review of 2006. Yet we see very little in the way of substantive legislative change.

Although ongoing study is important, I say with respect that you are not Zamboni drivers. The time has come to stop circling around the same ice. The time has come to make some important legislative changes.

Second, as I prepare for the question period, I look around the table and pretty much all I see are men. Inexplicably, your committee itself is composed entirely of men. Yes, I realize that you have called upon a number of women to testify during the course of these proceedings. This, of course, makes sense. After all, a significant majority of privacy professionals are women. Indeed, I think it's fair to say that the global thought leadership in the field of privacy is by majority the results of contributions by women.

I find it astonishing and unjustifiable that you have no women on this committee, a decision to me as incomprehensible as many of those made by algorithms.

I feel compelled to close my remarks by making this observation a part of the public record.

Thank you for your careful attention. I look forward to questions.

Message from the Senate

[The Deputy Speaker, Conservative, Bruce Stanton]

I have the honour to inform the House that when the House did attend His Excellency the Governor General in the Senate chamber, His Excellency was pleased to give, in Her Majesty's name, the royal assent to the following bills:

C-2, An Act to amend the Income Tax Act—Chapter 11, 2016.

C-26, An Act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act and the Income Tax Act—Chapter 14, 2016.

C-29, A second Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures—Chapter 12, 2016.

C-35, An Act for granting to Her Majesty certain sums of money for the federal public administration for the fiscal year ending March 31, 2017—Chapter 10, 2016.

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—Chapter 13, 2016.

It being 4:53 p.m., 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 4:57 p.m.)

Tax Convention and Arrangement Implementation Act, 2016

[The Assistant Deputy Speaker, NDP, 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)

[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 tyring 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.

[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.

[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.

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.

[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.

[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.

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Thank you.

Of course, this is deemed moved under the terms of the motion that I objected to but which this committee passed and which requires that I be here. There are always conflicts; if I weren't here, I could be speaking to Bill S-4 in the House. That is one of the reasons that I find these provisions that require members of parties with fewer than 12 members to submit amendments 48 hours in advance and have them deemed moved not really a fair or equal opportunity, but it's the one I have. I appreciate that you've given me the floor, Mr. Chair.

The amendment here, just to situate you in the proper part of the bill, is to clause 11, which deals with approval and representation on the CETA joint committee, and specifically the powers of the minister under clause 11. You may recall the evidence of Professor Gus Van Harten from Osgoode Hall Law School, when he testified before the committee. He made a number of very quick points, but one of them was that under clause 11, in his words:

...the Minister of Trade is given the power to appoint members of the roster.... I...want to stress...this is a very significant power, because we could think of the members of that roster as, very simply, almost equivalent to Supreme Court of Canada judges in the extent of their powers to review the passage of laws, passage of regulations, and so on in Canada.

I won't read the rest of his testimony, but his point was that to have this solely vested in the trade minister without a broader consultation could leave some public interest matters.... No offence to any current or future trade minister, but these are very significant powers to appoint members of the tribunals. The amendment I'm proposing is in two parts, as follows:

(1) The Minister may, in consultation with the Attorney General of Canada,

It's just like appointing a judge. It's in consultation with the Attorney General, the Minister of Justice.

Then we add another line to ensure that, for the roster, the pool of potential nominees from which the minister, in consultation with the the Attorney General, chooses someone to be a member of the tribunals, should exclude any individual:

who has served as legal counsel in an arbitration proceeding in respect of an investment dispute.

Let me just say, as you may anticipate this, that we do know that the text of the comprehensive economic trade agreement specifically says that people can't be members of the tribunal if they have served or take up a position as an advocate in a CETA dispute. This amendment is to broaden that, so that we couldn't have people serving as members of a tribunal on CETA who had been, for instance, legal counsel under a chapter 11 suit, where they were representing a corporation against the Government of Canada, or under a bilateral investment agreement, such as we have with Ukraine, a one-off bilateral.

If you've worked in that investment climate as an advocate, the argument that I'm asserting is that you don't have the same neutrality that you really want for a judge. That principle of neutrality is enshrined in CETA, but they just kept it to the comprehensive economic trade agreement, not that whole other sphere of work of a very elite group of lawyers who have a pattern of, can we say, not necessarily fair or neutral arbitration.

I have put these before you. I hope you'll consider them. I'm certainly, at the chair's discretion, happy to answer any questions.

Finance

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

Mr. Speaker, I have the honour to present, in both official languages, the 12th report of the Standing Committee on Finance in relation to 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. The committee has studied the bill and has decided to report the bill back to the House without amendment.

[The Chair, Liberal, Wayne Easter]

I call the meeting to order. This meeting is called pursuant to the order of reference of Thursday, December 8, 2016, in regard to 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.

With us we have Ms. Smith and Mr. McGowan, who we seem to see a fair bit of at this committee. Welcome, both of you.

If anybody has any questions on the bill generally, we can start with that or we can go to clause-by-clause consideration.

Pierre.

Tax Convention and Arrangement Implementation Act, 2016

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

Madam Speaker, I would like to give a different twist to the debate that I have been listening to all afternoon and try to relate it in part to my constituency.

Companies in Winnipeg manufacture all sort of wonderful things. Two of the things that come to my mind are windows and buses. Some of the best windows are manufactured in the city of Winnipeg. Some of the best buses in the world are manufactured in the city of Winnipeg. Many of the employees who produce those windows and buses are my constituents.

Canada is very dependent on exports. We export all sorts of products that are manufactured in communities throughout our country. In virtually all regions of this country some form of manufacturing is taking place. When I think of how important the trade file is to Canadians, I get a better understanding when it is brought down to the level of the people who work in factories throughout our country.

The Minister of Finance held round tables throughout the country and I was able to participate in one of them. At one of the discussions the issue of the Canadian dollar came up and whether it was better for our manufacturing industry if the dollar is high or low. I would suggest that depends on the manufacturer. For example, window manufacturers in Winnipeg gave me the distinct impression that it was better for them if the dollar is low because of where the material comes from, which is Canada. The company that manufactures the very best buses in the world as far as I am concerned is called New Flyer Industries Inc. and its employees are my constituents. The parts for the buses quite often come from all around the world, which is not unique. For New Flyer, a low dollar is not a positive thing because it has to buy the parts it needs from countries around the world.

Why am I using these companies as examples? It is because policies and price factors need to be taken into consideration, the importance of taxation for example, in what we are debating today, and trying to level the playing field. There are other things that need to be taken into consideration beyond that, however.

It is important that we recognize the value of trade but in many ways we also need to recognize the very real nuances that impact the bottom line. That is really what Bill S-4 is about.

We have great trade links today with Taiwan, Hong Kong, and Israel. We do a great deal of trade with these three countries but today illustrates that there is always room for improvement. If Bill S-4 gets passed, Canadian industries will benefit from it.

This should come as no surprise. This government has been more aggressive on the trade file than the Conservative government before us and I will demonstrate that shortly.

To indicate how important trade is, I would say that Canada is a trading nation, and we are very much dependent on world trade. I expect that it will continue to be a priority for this government for a number of good reasons, but there is one that comes to mind. If we look at the last budget that we presented, we see the focus of that budget, in good part, was on Canada's middle class and those aspiring to be a part of the middle class. Good solid trade and a foundation that allows us to expand upon that will build upon Canada's middle class. Many of the jobs, both direct and indirect, that can be generated would assist Canada's middle class and provide those jobs into the future. Therefore, it is really important that we get this right, because if we have a healthy middle class we will have a healthier economy. By having a healthier economy, we will continue to move forward overall as a society. It would be difficult to do so if we did not have trade.

The specifics of the bill we are debating today can be broken down into three parts. The main purpose of this enactment is to implement a previously publicly announced convention concluded with the state of Israel, and an arrangement concluded with the jurisdiction of Taiwan. It also would amend the Canada-Hong Kong Tax Agreement Act of 2013 to add greater certainty and interpretation provisions.

The sheer number of trade and investment agreements we have entered into over the years is a fairly impressive list. One of the things that I truly appreciate about the Library of Parliament is its research capability and the manner in which it is able to present such high-calibre and high-quality documents. Let me extend a compliment to those individuals who work for our parliamentary library. I posed a question to it with respect to how many trade and investment agreements we have, where they are, and when they were entered into. In looking at it, I did a quick count. We are talking about a dozen trade agreements with a number of countries, many of which have been highlighted during the debate.

I look at this as a positive. Whenever we can get into trade arrangements, it helps us build a relationship with those countries. There are a couple that have been signed but not implemented, and they will not be implemented until we have the opportunity to have that debate and that vote. The two that I am referring to are the Canada-European Union comprehensive economic and trade agreement, better known as CETA, and the Canada-Ukraine trade agreement. I am very proud of the efforts of this government with respect to both those. Although they may have been started years ago, the CETA agreement in particular, it was this Minister of International Trade who was able to pick up that file. To give the impression that it was a foregone conclusion, that it was something that would just happen, is not truthful, because we as a government have had to invest a great deal of resources, ministerial time, and dependence on our bureaucracy, those highly qualified individuals in particular, to assist us in negotiating on behalf of all Canadians. I am pleased that we were able to get that signature in place on October 30 of this year.

It was not that long ago that the newly elected president of Ukraine delivered a speech to the House of Commons, and he talked about how he wanted to further the relationship with Canada in regard to trade with Ukraine. He put a challenge out to us to attempt to get a special Ukraine trade agreement. That was only a few years ago. When we look at what we have today, we see that it was back on July 11, 2016, that we actually had that deal signed. Again, we appreciate the efforts put in by the Conservative government at the time. I am so grateful that we had the opportunity to sign it, and we are anticipating debate to come, and hopefully, passage. How wonderful that would be.

There are some agreements still being debated; at least, discussed with Canadians. I am thinking of the trans-Pacific partnership, best known as the TPP. We understand where both the opposition parties stand on that issue. We have taken a position that we want to continue to work with Canadians and other stakeholders to see where we are going on that particular vote. I anticipate that in due course we will see more direction coming from the government, after thorough consultations to allow Canadians to have the opportunity to provide some input. The reason we are being so thorough, specifically on the TPP, is that we made a commitment to Canadians that we would be very thorough.

I listed three trade deals, two that are very close, and we are not too sure what is going to happen with the third one. We also have another dozen trade deals that have actually been implemented.

Then, if we look at the investment agreements, this is where we would find it very interesting. I found it interesting, just reading through. There is an investment agreement between Canada and Hong Kong. The bill we are debating today deals, at least in part, with that through the taxation issues. If we continue to go through it, we see there is a Canada-Israel agreement that was signed also. I am trying to quickly find it.

I know there is the Thailand one. It was signed on January 17, 1997. The Hong Kong agreement was signed on February 10, 2016. The Canada-Israel agreement was not actually an investment agreement. It was a trade agreement, and there is a difference, and that is why I had trouble finding it. That trade agreement with Israel was signed in July 1996.

I am not going to remind members who was in government and who was not. We have a very good sense that there have been political parties on both sides of the House that have recognized the value of trade. However, I want to emphasize that this government, specifically, has seen the value of trade, and we have acted accordingly. We have been exceptionally aggressive at pursuing all sorts and forms of trade with our counterpart countries. That is best illustrated by the two trade agreements I referenced.

We have also had investment agreements signed in the last 12 months. I could make reference to either the Hong Kong one or the one with Mongolia.

It was not that long ago that we had other legislation brought into the House. Many members might recall the world trade agreement, the Agreement on Trade Facilitation, that was introduced to the House through Bill C-13, and I was pleased to see that passed. Remember, that particular agreement from the World Trade Organization represents well over 100 countries around the world. Again, this is an agreement that this government brought forward. There is a certain number of countries that have to sign on to have it implemented, and we saw that as a high priority, brought it to the House of Commons, and passed it through.

It does not stop there. We also have an agreement on internal trade, which again is something that has been debated in this chamber. We have seen this government take a very positive approach, not only to say that it is important that we further trade opportunities abroad, but it is also important that we look at ways to take down trade barriers between provinces. This is something that we constantly hear about. There is room for improvement to make the system better, and if we talk to the Minister of International Trade or other ministers related to internal trade here in Canada, we will learn it is an important issue. Again, we recognize how important it is for Canada as a whole.

I started off by talking about the constituents I represent in Winnipeg North, and I want to emphasize that I represent a mostly working-class riding. Often I have been invited over the years to take tours of different facilities. I made reference to, for example, New Flyer Industries as one of those companies. I have been afforded the opportunity to meet with many of my constituents who, with their amazing skills and hard work, manufacture all sorts of products out of the city.

I have stood in this chamber and talked about the importance of the hog industry, which is of critical importance to the province of Manitoba. It has derived many benefits through trade agreements.

All of these jobs that I referenced are direct jobs, but there are many thousands more indirect jobs that are a direct result of having and developing industries that actually export.

It does not have to be a manufactured product. Many colleagues of mine, particularly from the Ontario caucus, boast about how technology is being developed and ideas are being developed. I know that there is a fairly significant industry of ideas being generated in the province of Ontario and other provinces that also reach out beyond Canadian borders and provide good-quality jobs. I say all of this because I truly believe that, if we collectively recognize the value of trade, we will do that much more.

I am very proud of the fact that we have a Prime Minister who is very well received in virtually all countries around the world where there is an expectation that, as a relatively new government, we are going to be able to bring Canada back on the international scene. There are many ways that people will pull for attention. For me personally, I am hoping we will see the government continue to push on the trade file, because it is so very important.

I understand that my time has expired. I might be able to expand on that in the question and answer period.

[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.

[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 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.

[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.

[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.

[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, I thank my colleague from Vaughan—Woodbridge for sharing his time with me.

I am pleased to rise in the House to address the important matter of Bill S-4. As members will know, this bill implements a convention and an arrangement on double taxation that were recently signed and announced. The convention was concluded with the State of Israel, and the arrangement with Taiwan.

Canada now has 92 tax treaties in force, and it continues to work on developing other such treaties with other jurisdictions. Bill S-4 builds on Canada's ongoing efforts to update and modernize its network of tax treaties, which helps prevent double taxation and tax evasion.

Indeed, Canada currently has one of the world’s largest networks of tax treaties. This is an important feature of Canada’s international tax system, a feature that is key to promoting our ability to compete. At the same time, the system needs to ensure that everyone pays their fair share of taxes. We do not want certain foreign and domestic firms to be able to take advantage of Canadian tax rules to evade taxes, or for certain wealthy individuals to turn to foreign countries to hide their income and avoid paying taxes.

Every time that happens, workers and small businesses in Canada end up having to pay more taxes than they should have to. It is not right. The Canada Revenue Agency needs information from foreign countries in order to identify and discourage the hiding of income.

To that end, the convention and the arrangement on double taxation in Bill S-4 implement the current international standard on tax information exchange on request established by the Organisation for Economic Co-operation and Development, thus enabling Canadian tax authorities to obtain the necessary information for the administration and enforcement of Canadian tax laws, while helping them prevent international tax evasion.

Here at home, the Government of Canada continues to work to keep our tax system up to date and competitive, so that Canada can remain a leading player in the global economy. It is essential to take measures in support of a more competitive tax system in order to foster conditions that allow Canada's entrepreneurs and industries to excel, thus clearing their path to success.

Clearly, having modern tax conventions, such as those contained in Bill S-4, is a key component of that goal. Canada remains committed to maintaining a tax system that will continue to help Canadian businesses in their drive to be world leaders, while ensuring that everyone pays their fair share of taxes.

The tax conventions complement our government's broader commitment to implementing a more competitive tax system that will raise the standard of living of all Canadians. The convention and arrangement for the avoidance of double taxation set out in Bill S-4 directly support and encourage cross-border trade in goods and services, which in turn helps Canada's domestic economic performance.

Moreover, every year, Canada's economic wealth depends on foreign direct investment, as well as the entry of information, capital, and technology. In short, the convention and arrangement for the avoidance of double taxation set out in Bill S-4 provide individuals and businesses in Canada and the other countries involved with predictable and equitable tax results in their cross-border dealings.

I would now like to talk about two things that this bill proposes to do, namely reduce withholding taxes and prevent double taxation. Withholding taxes are a common feature of the international taxation system. They are levied by a country on certain items of income earned in that country and paid to the residents of the other country. The types of income normally subjected to withholding taxes would include, for example, interest, dividends, and royalties.

Without tax treaties, Canada usually taxes this income at the rate of 25%, which is a set rate under our own legislation for income tax, more specifically, the Income Tax Act. Withholding tax rates in other countries are often as high or even higher.

Since one of the main functions of a tax convention is to divide the powers of taxation among the signatory partners, the conventions contain provisions that reduce and, in some cases, eliminate withholding taxes that could be applied by the jurisdiction where certain payments originate.

For example, the convention and the arrangement for the avoidance of double taxation in Bill S-4 provides for a maximum withholding tax rate of 15% on portfolio dividends paid to non-residents in the case of the State of Israel and Taiwan. The maximum withholding tax rate for dividends paid by subsidiaries to their parent companies is reduced to a rate of 5% for the State of Israel and 10% for Taiwan.

Withholding rate reductions also apply to royalty, interest, and pension payments. The convention and the arrangement for the avoidance of double taxation covered by this bill caps the maximum withholding tax rate on interest and royalty payments to 10%, and the maximum withholding tax rate for periodic pension payments to 15%.

The other issue I want to talk about is double taxation. Double taxation at the international level happens when taxes are collected on the same taxable income for the same period in at least two jurisdictions. The convention and arrangement regarding double taxation in Bill S-4 will help prevent double taxation so that any given income is taxed only once.

Generally speaking, the Canadian tax system applies to the income earned by Canadian residents anywhere in the world. However, foreign authorities can also invoke their right to tax any income earned in their jurisdiction by Canadian residents. Canada usually gives a credit for foreign tax paid on that income. This duplication of taxes paid in the jurisdiction where the income was earned and in the taxpayer's country of residence can have unfair negative consequences for taxpayers. No one should have to pay taxes twice on the same income.

Without any convention or arrangement for the avoidance of double taxation such as the ones provided for in Bill S-4, that is exactly what happens. Both countries could claim taxes on the income without providing the taxpayer with any measures of relief for the tax paid in the other country.

In closing, the convention and arrangement for the avoidance of double taxation proposed in the bill will provide certainty and stability and create a favourable climate for trade, to the benefit of taxpayers and businesses in Canada and in the partner countries.

What is more, the convention and arrangement for the avoidance of double taxation proposed in the bill will strengthen Canada's position in an increasingly competitive global trade and investment environment.

Those are the reasons why I ask my colleagues to vote in favour of the bill.

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

Madam Speaker, this type of treaty encourages greater links between Canada and the State of Israel, and greater investment and trade flows between Canada and Taiwan. That is what is important and what we need to focus on within this bill. It would allow Canada and Israel to continue to create stronger links between the two entities, and that is very important.

I had the pleasure of visiting the State of Israel this summer. It was a learning experience, indeed. I was in Ramallah as well, and it Tel Aviv and Jerusalem. It was an eye-opening experience and a learning experience, and I am the better for it.

Bill S-4 would allow our government to move the needle forward in creating a strong economy for Canadians and strong middle-class jobs. Overall, it is a win-win for us.

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

Madam Speaker, parts 1 and 2 of Bill S-4 include provisions dealing with the issues my hon. colleague mentioned: part 1 deals with Israel, and part 2, Taiwan.

I sit on the Standing Committee on Finance and I am proud to state that I was a member of the committee when it presented a motion on tax avoidance and tax evasion so the committee could to examine those issues. It is something that is paramount to our government. We have invested $444 million over five years to ensure that the CRA has the resources and tools to ensure that all Canadians and all Canadian companies, organizations, and foreign subsidiaries operating in Canada are paying their fair share; that Canadians have confidence in the tax system; and that the revenues coming into our coffers are then used to fund programs that Canadians value and are dear to their hearts.

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

Madam Speaker, I am pleased to rise today to speak on Bill S-4.

At first glance, members might ask why a bill dealing with international tax treaties and measures would be of much importance. On the face of it, Bill S-4 does not appear to have much to do with economic growth, but if we look at it a little, the thrust of the bill is entirely consistent with our government's commitment to growing the middle class and to help those looking to join it.

Canada is a trading nation and improving economic growth in our country is highly dependent on international trade and investment. Removing barriers to incoming business and capital is essential to these efforts. Let me reiterate, our government has been relentless in its efforts to produce economic activity and has made historic investments in infrastructure.

In addition to the investments made in budget 2016, the Minister of Finance recently announced the creation of an infrastructure bank, which will help to leverage federal government commitments even further.

Our government recognizes that to further grow the economy, we need to attract investment and talent to our country. International tax competitiveness is a key element of Canada's economic performance that we must not overlook. A tax agreement with other jurisdictions, including Taiwan and Israel, is an important part of attracting new investments and talented individuals, boosting economic growth, and creating jobs.

While large-scale tax measures generally get more attention in terms of their efforts on Canada's international competitiveness, there are many other components that can be easily integrated into the tax system and strengthen Canada's tax advantage.

Tax treaties with other countries and jurisdictions play an important part in the goal of making Canada's tax system as efficient as possible, and thus more competitive. Canada currently enjoys the benefits of a network of bilateral double taxation conventions currently enforced with 92 foreign jurisdictions, one of the largest such networks in the world.

I will be splitting my time with the hon. member for Laurentides—Labelle.

There is an ongoing to need to expand and modernize this network, and we are continually working to secure additional agreements and update existing ones. These treaties of mutual benefit to both signatories and to their respective taxpayers provide clarity on the rules relating to cross-border trade and investment, and remove barriers to augmenting them.

Furthermore, these agreements help to combat tax avoidance and evasion through the exchange of information that permits our government to uncover income that may be concealed elsewhere. It is very important, and our government has spent a lot of time and energy on this, ensuring that Canadians have a tax system that they can have confidence in and that all Canadians and Canadian corporations are paying their fair share.

To these ends, Bill S-4 implements a double taxation convention and a double taxation arrangement recently concluded and publicly announced with the State of Israel and with respect to the jurisdiction of Taiwan. Bill S-4 also adds an interpretation provision to the legislation that implemented the Canada-Hong Kong double taxation agreement, for greater certainty.

Relief from double taxation is desirable because of the harmful effects double taxation can have on the expansion of trade and the movement of capital and labour between countries. Double taxation conventions require countries to clarify the respective jurisdiction to tax income and provide certain forms of relief from double taxation. There is currently no double taxation arrangement between Canada and Taiwan, Canada's fifth-largest Asia-Pacific trading partner and 12th overall in 2013. This means that Taiwan is one of the few remaining of Canada's larger, and I would say one of the most important, trading partners to enter into our tax treaty network.

The bill also implements a revised double taxation convention with the State of Israel. This replaces an existing tax treaty that was signed here in Ottawa in 1975. The revised double taxation convention has been updated to make it consistent with Canada's current tax treaty policy.

This revised double taxation convention with the State of Israel builds upon strong, multi-dimensional, bilateral relations, as evidenced by our close political, economic, social, and cultural ties.

Underlying the strength of the Canada-Israel bilateral relationship is a breadth of personal connections between the two countries. There are approximately 20,000 Canadian citizens living in Israel and many Canadians, of course, have family in Israel. The Canadian Jewish community, which stands at around 350,000, acts as an important bridge between Canada and Israel. These informal ties have led to significant co-operation in business, philanthropy, and tourism.

Canada and Israel have a number of bilateral agreements in place, including the air transportation agreement from 2015; a renewed and funded science and technology agreement; the Canadian Space Agency and Israeli Space Agency memorandum of understanding for space co-operation, dated 2005; and the 1975 convention.

On the trade side, Canada-Israel merchandise trade totalled approximately $1.4 billion in 2015, comprising $342 million in Canadian exports to, and $1.2 billion imports, from Israel. Israel was Canada's forty-fourth-largest export destination worldwide in 2013. In that year, it was Canada's forty-third-largest source of imports globally.

Even though Israel's trade numbers with Canadian may not be in the top 10 or top 20, I would still certainly say, after having the honour of visiting the State of Israel this past summer, that expanding trade and investment ties between Canada and the State of Israel is very important.

What Israel has done with venture capital funding, specifically in Tel Aviv, is very impressive. Its venture capitalists are world-renowned. There are a lot of exciting things happening in the State of Israel that Canada needs to look at and emulate.

With respect to Bill S-4, the intention of this convention signed with the State of Israel on September 21 is to contribute to the elimination of tax barriers to trade and investment between Canada and Israel and to help solidify the economic links between the two countries. It is consistent with the government's commitment to seek new investment and trade opportunities for Canadians and to promote foreign investment in Canada.

As with the double taxation arrangement with Taiwan, the convention with the State of Israel generally follows the pattern of other double taxation conventions already concluded by Canada. Accordingly, it generally follows the format and language of the OECD model tax convention on income and on capital.

Most countries, including Canada and Israel, tax their residents on their global income. Additionally, when a resident of a country derives income from sources in another country, such as from a business located there, it is typical for the source country to subject that income to tax.

The convention recognizes this international taxation dynamic and sets out in which circumstances and to what extent Canada and Israel may tax the earnings of one another's residents and non-residents.

The convention also implements the current internationally agreed standard for the exchange of tax information upon request, as developed by the OECD and, therefore, allows Canadian tax authorities to obtain information relevant to the administration and enforcement of Canadian tax laws, and assists them in the prevention of international tax evasion and avoidance.

Bill S-4 would also reduce double taxation and encourage investment by reducing the withholding tax. It would provide for a maximum withholding tax rate of 15%, in the case of the State of Israel and the jurisdiction of Taiwan, on portfolio dividends paid to non-residents. This would help encourage and foster innovation and trade between Israel and Canada, and Taiwan and Canada.

For dividends paid by subsidiaries to their parent companies, the maximum withholding tax rate is reduced to 5% in the case of the State of Israel, and 10% in the case of the jurisdiction of Taiwan.

Again, these measures would encourage and facilitate trade and investment and increase ties between Canada and Israel, and Canada and Taiwan.

The bill would also cap the maximum withholding tax rate on interest and royalties at 10% and on periodic pension payments at 15%.

The provisions of the convention and arrangement contained in the bill are an excellent example of our government's efforts to create a more equitable and competitive tax system.

Bill S-4 would allow us to continue to grow our economy and create good middle-class jobs. It would allow for more predictable and fairer tax treatment of cross-border transactions and help the government to combat tax avoidance. We look forward to securing additional agreements such as these, and I encourage all members to support this legislation to help Canada become a more competitive jurisdiction for international business and investment.

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

Madam Speaker, the member across the way talked a great deal about tax evasion and avoidance, and even at one stage referenced the government providing literally hundreds of millions of dollars to deal with the issue. It is important to recognize that this government takes tax avoidance and evasion very seriously, and the budget clearly demonstrates that.

When we look at the trade file, we can talk about the investment agreements with Mongolia and Hong Kong that have been signed in the last year and we are debating the Ukraine and CETA agreements today. Those are some of the most obvious ones. Then there is Bill S-4 itself, which deals with the taxation policy, along with trade.

My question to the member is this. I thought I heard the member say he supports the bill. Does he not recognize that the bill is important and that there would be value in passing the bill in a relatively timely fashion so we can put in place the measures encompassed in this legislation?

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

Madam Speaker, I thank my colleague from Sherbrooke for his rather interesting speech.

During the debate and in his speech, he talked about risk a number of times. Bill S-4 applies to current treaties that have already been signed. I believe that if we intend to sign treaties with other countries we will.

I question the sincerity of his concern since he is looking at this bill through the lens of countries with which we have no agreement.

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

Mr. Speaker, I am pleased to rise in the House at second reading stage of Bill S-4. The bill passed third reading in the Senate on Monday. It was sent to us, and it is important that we debate it here in the House.

I understand that the government is rather eager to pass Bill S-4. If it receives royal assent by January 1, the two tax conventions that are listed in the bill, specifically with Israel and Taiwan, will come into effect. The ultimate goal of those conventions, as other members have said in their speeches, is to avoid double taxation. When you pay taxes in one jurisdiction and repatriate money that has already been taxed by another jurisdiction, it goes without saying that Canada does not tax that income a second time.

The bill contains two conventions. The one with Israel is in fact an update, since we have had a convention with Israel since 1975. We are simply updating it today, adding new OECD standards based on its model agreement for the avoidance of double taxation. The bill therefore aims to bring the previous convention with Israel in line with current OECD standards.

The second convention in the bill is completely new. We have never had this type of convention with Taiwan. It is something that did not exist before, which is rather positive.

The bill also includes a technical change to the Canada–Hong Kong Tax Agreement to clarify the situation of the convention with Hong Kong to make it parallel to that of Taiwan. These two territories have special status with respect to China. Since we are adopting a convention with Taiwan, we have to update the terminology used in the description of the convention with Hong Kong to ensure that it is identical to that of Taiwan.

I will not spend too much time on the convention with Hong Kong except to say that we have to be careful in this case because according to one expert who testified on the matter on Monday at the Standing Committee on Finance, the proposed change in the convention with Hong Kong could be interpreted as a reopening of the tax treaty. In a way, we might agree that the current convention with Hong Kong is not in force because of the inaccurate terminology. This could be looked at more closely. I believe that the technical change for ensuring consistency with the Taiwan convention is entirely appropriate.

I will also mention that we will support Bill S-4, introduced in the House today. It comes to us from the Senate because, traditionally, tax conventions come from the Senate. Last year, we saw this a number of times. As hon. members know, there are 92 tax conventions in Canada. Currently, some are being negotiated, while others are in line to be ratified, like the ones we are talking about today.

Traditionally, bills on such conventions originate in the Senate. They are subsequent to negotiations between the jurisdictions. I cannot use the term “country“ in this context, because we are talking about Taiwan. We have to be careful about the words we use. I know that we could make diplomatic mistakes with the status of Taiwan.

We need only think of what happened last week when the U.S. president-elect put his foot in his mouth on this issue. In diplomacy, we must pay attention to the words we use.

To summarize, these conventions are negotiated between two authorities, and that can take some time. In Taiwan's case, among others, negotiations were lengthy. We were discussing it back when the Conservatives were in power. This convention was finally signed in January 2016 by the Taipei Economic and Cultural Office in Ottawa and the Canadian Trade Office in Taipei.

This was done intentionally so that this arrangement would not be negotiated nation to nation, which could be perceived as a diplomatic faux pas. China could have believed that we recognized Taiwan as a separate state. We had to be careful and that is why it was the two offices that negotiated the Canada-Taiwan agreement, by following the instructions of their own governments, of course. These negotiations lasted a long time, and the agreement was finally signed on January 21, 2016, if my memory serves me correctly.

Nearly a year later, the government is now proposing to implement it. The Parliament of Taiwan ratified it fairly quickly in February 2016. It has taken us a little longer. I tried to find out why, but the government has not yet explained why it is only bringing this forward in December 2016. The government is saying that this is practically a national emergency because if the arrangement is not ratified before the end of December, it cannot be implemented until January 1, 2018. The reason is that the text of the arrangement stipulates that the arrangement will take effect on the first day of January in the year following its ratification. That is why the government is saying that it is urgent that the arrangement be ratified so that it can take effect on January 1, 2017.

As the parliamentary secretary mentioned, the convention with Israel has unfortunately not yet been ratified by Israel's parliament. We will see whether it can be ratified before December 31 so that it too can take effect before January 1, 2017.

We are going to support the bill because of these two agreements, but we have serious reservations regarding the tax conventions. I spoke about the risk associated with tax conventions when I asked my colleagues questions. I wanted to comment on it further because, in this case, the disparity between the tax rates of the countries and authorities with whom we are ratifying conventions for the avoidance of double taxation and our own are not necessarily problematic.

Thanks to the research done by the Library of Parliament staff, whom I would like to thank, we were able to find out the specific tax rates of individuals, businesses, and trusts in the two jurisdictions in question, Israel and Taiwan. They are very similar to those in Canada. Tax rates are a bit lower in Taiwan, but Israel has more progressive tax rates, which means that they are a bit higher than ours, so there is not necessarily a problem in this case.

However, tax conventions can be dangerous when they are signed with low or no tax jurisdictions. Indeed, there are countries that require no income tax to be paid whatsoever and that take part in this tax competition that puts downward pressure on tax rates. It is a serious problem for our society, and one that needs to be resolved. We need to pay particular attention to those countries. In this particular case, there is no problem.

However, as I was saying earlier, we have a tax treaty with Barbados. One of my colleagues in the Bloc Québécois raised this issue a few months ago and moved a motion to have this tax treaty with Barbados reviewed. That treaty is of the same nature as the ones we are studying today and very similar to the Organization for Economic Co-Operation and Development model, a convention adopted in 1980, and similar to the ones we are studying today. There are a few differences, because at the time, the OECD model was a little less detailed, but it is essentially the same model used today.

What might suggest that the tax treaty with Barbados is perhaps being used for the wrong reasons is that, in 2014, Barbados ranked second in terms of Canada's foreign investments abroad, after the United States of course, which is our largest trading partner given its proximity and the fact that our administrations are similar from a legal standpoint for both corporations and individuals. It goes without saying that the U.S. is our most important economic partner.

It is surprising, however, that according to Statistics Canada figures, Barbados ranked second in 2014—and not only in 2014, since Barbados was also near the top of the list in 2015, in third place. It also ranked second in 2013.

There is reason to wonder why the second largest recipient of Canadian foreign investment is Barbados, a tiny Caribbean country that has no major economic activity to speak of. It does raise questions.

Looking at the numbers, one cannot help but wonder what is going on there, what could possibly attract so much Canadian investment in Barbados, and whether an investigation is in order. However, there is no need to dig very deep to find out why Barbados is the number two destination for all of our foreign investments in the world. The main reason is that we have an agreement with Barbados to avoid double taxation.

That allows companies who decide to take advantage of this agreement to send money from their subsidiary in Barbados to Canada and then declare to the Canadian tax authorities that they have already paid their 0.5% tax in Barbados. As a result, they do not pay taxes in Canada because, according to the agreement, when a party pays taxes in another country and brings the money back to Canada, there is no second taxation.

As I said earlier, there is no problem with Taiwan and Israel. In other cases, however, there are huge issues because we allow companies to pay a lot less in taxes than what they would pay if taxation levels were similar to Canada's.

That is why it is with a note of caution that I support Bill S-4 today. I want to highlight the problem and raise a red flag for the government's benefit. The parliamentary secretary did not seem to know what the problem was when it was raised by my colleague—he did not seem to know what the problem was or want to consider it. Unfortunately, the Liberals voted against a motion to review the Canada-Barbados tax treaty. I would like to remind my honourable colleagues of that, and I call upon the government to at the very least commit to reviewing the 92 conventions we have with other governments around the world, because problems could arise.

If today we say yes to a treaty with Taiwan to avoid double taxation and if, a few years later, Taiwan decides to modify its regulations to become a competitor in the race to the lowest tax rates, then maybe our conventions would need to be reviewed.

That is the crux of the message I wanted to send the government today. It should start taking a close look at the tax situation in every country with which we have a convention because there could come a time when such conventions are used to subvert the very ideals underpinning them.

The title of the bill mentions preventing tax evasion. We have to ensure that these conventions stand the test of time as tools to prevent tax evasion, not to facilitate it. In some cases, they facilitate tax evasion.

I hope there will be at least one mechanism that enables the government to examine and monitor the tax situation in the jurisdictions with which we have tax conventions. It would be very disappointing if the government did not commit to monitoring the situation in those jurisdictions because such neglect could lead to serious problems. We know that tax evasion is an extremely serious problem, and it is definitely one of my priorities as the national revenue critic.

This is a problem for every country in the world and every person on the planet seeking better government services. The government's role is to provide services to citizens, but when companies and individuals have more and more ways to avoid paying their fair share, our societies pay the price. The honest ones who pay their fair share end up having to pay more every year. They have to contribute more because some taxpayers decide to play by different rules and avail themselves of the services of unscrupulous tax experts who have no ethical qualms about trying to make their clients pay as little tax as possible. Sometimes they use questionable schemes that the Canada Revenue Agency disputes, thankfully. More often than not, it turns out that these schemes are perfectly legal.

These conventions to avoid double taxation are one of the components of the Income Tax Act that make tax evasion legal. There are many other ways to review our policies and legislative measures to fight tax evasion. The government should make this bill and this file a priority instead of talking only about investments. We are told repeatedly that $444 million has been invested in fighting tax evasion.

If tax evasion continues to be completely legal in some cases, tax experts will be able to defend their cases before the courts by saying that they obeyed the law and that there is no problem. The Canada Revenue Agency will challenge this by holding that they did not obey the spirit of the law. The tax experts will win and manage to find new ways every time to get around our tax measures and ensure that their clients do not pay their fair share in society. That is unacceptable.

It is the issue of the day, and I would like to see the government take it more seriously, not only by investing money to find the guilty parties, but also by making the necessary effort to make tax evasion as difficult as possible for the dishonest people who engage in it.

There is something relatively positive in these conventions that is not necessarily something we want to see, and that is a tax information exchange. For example, in this convention with Taiwan, it is good that a section of this agreement talks about a tax information exchange, but the best solution would have been a tax information exchange agreement that was separate from the convention on double taxation. This is a much more robust mechanism for exchanging information, even though any such exchange is on request, which is a major drawback. In fact, the government has to have its suspicions before it can request information from the jurisdiction with which it has an agreement. It is not an automatic exchange. I know we are heading toward an automatic information exchange, but that is not in the bill and it is something we would like to see in the future.

We would like to see more investments, legislative measures, and information exchanges that are truly effective and allow for information to be obtained in real time. We would like to see a shift from on request to an automatic exchange.

I would be pleased to answer my colleagues' questions.

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

Mr. Speaker, I do want to take this opportunity while I am on my feet to particularly thank you for your involvement in hosting a great Christmas event yesterday for the children on Parliament Hill. My daughter was much more excited about meeting you than Santa Claus.

Just briefly, in my final few minutes, I will summarize what I have been talking about on this important bill. Bill S-4 would implement a tax treaty between Canada and the Government of Israel, Canada and the Government of Taiwan, and Canada and Hong Kong. It is important that we take this time to reflect on the importance of trade liberalization, in general, and certainly the benefits that have come to Canada and will continue to come to Canada as the result of our commitment to open trade.

I have called on the government to continue with what it has been doing, which is moving forward with the kinds of trade deals that we began under the previous government, but also to move from inertia from the continuation of these things to actually starting new initiatives when it comes to trade. We need now, more than ever, leaders who are prepared to recognize and speak to the benefits of trade.

I spoke about the importance of understanding the relationship between trade and our strategic interests, and how our relationships with the countries that are identified in this legislation are particularly important, because of the strategic dynamics that are at play—the kind of relationship we have with Taiwan as a democracy in the Asia Pacific region and certainly the relationship we have with Israel as a democracy in the Middle East.

Our desire to pursue stronger commercial ties reflects Canada's economic interests but also reflects our values and the benefits of working together, in particular at a commercial level, with countries that share our values.

We are pleased to support this bill and hope to see it pass.

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 second time and referred to a committee.

Business of the House

[Bardish Chagger, Liberal, Leader of the Government in the House of Commons and Minister of Small Business and Tourism]

Mr. Speaker, for the rest of today, we will debate Bill S-4, on tax conventions.

Tomorrow, we will call Bill C-25, the business framework legislation, followed by Bill C-30, regarding CETA.

Monday and Tuesday we will proceed with Bill C-31, an act to implement the free trade agreement between Canada and Ukraine. In the days following, we will put Bill S-4 at the top of the Order Paper so that we can pass it before the Christmas recess.

Tax Convention and Arrangement Implementation Act, 2016

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

Mr. Speaker, it will make it that much easier for the government members who want to hear my speech to come now and then stay for question period. I know many of us are receiving a lot of correspondence from our constituents on Bill S-4, so it is important to talk about it and study it in detail.

Bill S-4, which come to us from the Senate, would implement a tax treaty with the Government of Israel as well as a tax arrangement with the Government of Taiwan. It would also amend the Canada-Hong Kong Income Tax Agreement.

These types of tax treaties are very important for facilitating international trade for investment between different countries. Certainly, in that light, our party is very much a pro-trade party, and that is why we support the bill.

The bill is about enforcement, fighting tax evasion, and more broadly about facilitating trade liberalization. It is about making it possible for companies to do business in multiple jurisdictions and, in particular, deepening our relationship with some very important partners, with Israel and Taiwan.

Today I will talk about three issues: trade liberalization in general, the Canada-Israel relationship, and the Canada-Taiwan relationship.

With respect to trade liberalization, I have said before that it is important for the government to move from inertia to action on trade. We have had a number of different bills and issues up for debate with respect to trade: the implementation of the trade facilitation agreement, the CETA deal, and next week I believe we will debate the Canada-Ukraine free trade deal. The Conservative Party supports these, in part because we recognize they are really the continuation of work that was begun under the previous government. One does not come up with a tax treaty overnight. In fact, these are cases where a lot of hard work was done by the previous trade minister and by Stephen Harper, the previous prime minister.

When it came to trade, we were quite aggressive in our trade agenda. We were negotiating and updating agreements. We were undertaking a vast array of different negotiations to expand Canadian access to trade, such that at the time of the election, there were trade deals that we had negotiated between TPP and CETA, which represented over 60% of the world's GDP. Therefore, Canada would have been uniquely positioned with respect to trade.

We know the story on the TPP, with the government not leading on TPP and backing away from it to a large extent, but still being supportive of some of these things we had done. Therefore, the government is putting these bills before the House, and this is one of them with which we agree. We see them as positive bills, but they reflect as well a certain inertia, the continuation of policies that were begun under the previous government. That much is good.

It is positive to see the continuation of good policies that were started under the Conservative government, but we also need to see the Liberals be proactive on trade and start new initiatives that reflect emerging opportunities and challenges. Inertia is not going to be enough, especially given the current global economic climate. The history of the Liberal Party in office has been continuing to leave in place trade deals that the previous Conservative government created but not necessarily implementing new original trade initiatives. This is the general context.

An emerging protectionist sentiment is happening around the world right now. We have a president-elect in the United States who has expressed in the past a certain degree of skepticism of the value of trade within North America, and perhaps more so of trade between the U.S. and Mexico, but there is generally a concern about trade coming from the new incoming administration. It is important for other world leaders, other nations in general, to make strong arguments about the importance and benefits of an open economy.

It is for us to be actively pursuing that discussion, but also to be seeking out opportunities to sign new agreements, to move a trade liberalization agenda forward, perhaps with other countries, perhaps in different kinds of arrangements than we have seen exist in the past. We can do that and at the same time we can show the benefits of those trade arrangements. Canada should seize this moment and continue to be a pro-trade country, a country that benefits from trade, not merely continuing with inertia but also undertaking new initiatives.

When we talk about trade liberalization, and specifically about the bill before us, it is important to recognize that these kinds of agreements have economic benefits, but they are also ways of affirming and deepening relationships between like-minded countries.

Certainly our strategic relationships with Israel and with Taiwan are important. They reflect our values. These are both places which are democracies in regions, in environments that are not as friendly to democracy as perhaps our context is, Israel, of course, being the only democracy in the Middle East. Then we have Taiwan, not declared as an independent state but as a self-governing jurisdiction, which is a democracy, and certainly beside the world's most influential non-democracy. That really speaks to why Taiwan and Israel, in a special way, reflect Canada's values.

When we sign these kinds of agreements, they create opportunities for commerce, which create economic benefits for Canadians and for people in these countries. However, it is also a powerful signal about the importance of these relationships, and it creates a deepening of people-to-people commercial and therefore social ties between these nations. We should recognize the economic benefits of trade, but not entirely see trade as being distinct from the opportunities to build a greater community among like-minded democracies.

The current environment, in which we may have an American administration more skeptical about trade, should not prevent us from seeking other opportunities to pursue new and deeper trading relationships with other like-minded and pro-trade countries. For example, in light of the Brexit vote in the U.K., the U.K. will be working through what exactly its new relationship with Europe will be. However, we know that many of those who were pro-Brexit were also supportive of having broader trading relationships for the U.K.

After the relationship between the U.K. and Europe is finalized, we certainly need to pursue the opportunity to deepen trading relationships and pursue free trade between Canada and the U.K., and possibly, depending on the trajectory of the trans-Pacific partnership, we need to deepen our trading relationships in Asia with like-minded countries like Japan, Australia and New Zealand.

Under the previous government as well we commenced free trade negotiations with India. I think there is a very strong opportunity to continue this process and hopefully be able to see the realization of a free trade agreement between Canada and India. Very strong people-to-people ties exist between Canada and India. Despite a lot of differences between the ways our economy is structured, there is a positive opportunity there for us to benefit from those ties and to establish deeper commercial relationships as well.

In that context, I am skeptical of the government's trade policy in that the only new trade initiative it has talked about is pursuing a free trade agreement with the People's Republic of China. From my perspective, the strategic genius of TPP was about establishing a trading agreement among like-minded countries in the Asia-Pacific region that would have really set the terms of trade within that region in a way that would invite the People's Republic of China and other countries to come up to that standard in environmental protection, human rights, labour rights and intellectual property.

Instead, the emphasis from the government, rather than negotiating those kinds of strategic partnerships with like-minded countries that will advance our values, is before we have even completed the process with countries like Japan, Australia and New Zealand, let us go and negotiate a bilateral trade agreement with China, a country where there are obviously significant problems with human rights, environmental protection, labour rights and intellectual property.

We see in that not a sufficient appreciation of that relationship between economic collaboration and our values, the benefit of having trading relationships that establish the strategic conditions for advancing our more fundamental and important convictions in our values and in terms of our ideas on human rights.

To sum up this point, we are in an environment where there are increasing challenges, rhetorical challenges coming from different quarters to the idea of trade liberalization. Therefore, it is important that we continue to move forward with initiatives like Bill S-4 that deepen trading relationships and create more opportunities for international commerce. It is also important that we not just continue with things that were done under the previous government, but that we also look for new initiatives and emerging opportunities to advance our trading position, our economic as well as our strategic position within the world.

Having said that as a general point, I would like to delve a bit into specifically the importance of the two principal relationships that are touched on by Bill S-4: our commercial relationship with Israel as well our commercial relationship with Taiwan.

I had an opportunity to visit Israel this summer. It was a great visit. I went as part of a parliamentary delegation with a number of colleagues from different parties. Whenever we hear about Israel in the news, it is often in the context of our important strategic and security relationship with perhaps Israel's relationship to different conflicts that are happening in the region. However, it is important for us to appreciate, and perhaps look into, an aspect that is not as often discussed, which is Israel's economic vitality and the unique innovation, how co-operation between Canada and Israel gives us opportunities to understand and benefit from that innovative culture and strong economy that exists in Israel. It was a real pleasure for me, and I think, for the other members who participated in the trip this summer, to understand and see first hand some of that innovation taking place.

The advanced tech and research and development that occurs within Israel has rendered it the nickname Silicon wadi. Wadi is an Arabic word for valley. It is kind of a Middle-Eastern adaptation of Silicon Valley. A lot of innovation happens in Israel, and we see that in a number of different indicators. The highest level of research and development spending relative to GDP anywhere in the world takes place in Israel and it is the largest destination for global venture capital per capita worldwide. There is significant investment and research happening there.

A lot of my colleagues and I asked about the policies that were in place in Israel to encourage this kind of innovative economic culture, and how we could learn from that in the context of our own discussions about encouraging innovation in Canada. Certainly there are opportunities to learn from each other. We can learn lessons from the incredibly innovative dynamic in Israel. However, it is also interesting to reflect on the connections between Israel's innovative economic environment and also the culture. Members who have read the famous book Start-up Nation will know that aspects of creativity and innovation are really encouraged throughout Israel's culture.

One of the discussions we had as part of our delegation, especially when we were in Israel, was learning about the strong sense of purpose and mission of those in Israel. For the most part, there is a real appreciation of Israel as a nation with a specific purpose, to be a homeland for the Jewish people. That sense of purpose and mission feeds people's desire to create, to contribute, and to build a stronger society. As well, the system in Israel is one of military service that takes place after high school. Virtually everybody participates in this national service. That as well is a time in which innovation and creativity are encouraged and people are given opportunities to learn skills they can then use as part of subsequent innovation throughout the rest of their lives.

There is this fascinating connection that exists between an innovative culture and the economy.

Obviously not all of those lessons are particularly applicable to the somewhat different kind of society we have here in Canada, but the opportunities that come from increased collaboration, commercially and otherwise, are very significant. We should appreciate the importance of security and strategic co-operation with Israel, but also understand it within the context of economic opportunities.

I would like to speak, as well, about the Canada-Taiwan relationship.

I think members know we have a bit of a curious relationship with Taiwan. We do not have formal diplomatic ties with Taiwan. That is why we speak here not about a tax treaty but a tax arrangement, which is different in name but similar in form to what we are talking about with Israel and what we deal with in other cases.

The kind of relationship that exists between Canada and Taiwan is extremely important and close, notwithstanding the uniqueness of the names we use, because Taiwan has not declared itself as an independent state. Taiwan is a major trading partner for Canada, and the great opportunities for us to share and to learn from each other, as I guess somewhat different kinds of societies, are very significant—obviously, Canada drawing on a rich wealth of natural resources.

Taiwan also is a—

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Mr. Speaker, I thank my colleague for giving me the opportunity to rise a second time to answer him in an entirely constructive manner.

I will talk about Bill S-4, since that is what is before us today. We note that in the tax convention and arrangement to be signed with Taiwan, that these two conventions contain standard provisions of the Organisation for Economic Co-operation and Development, or the OECD.

My colleague is well aware of the fact that we are modernizing our tax conventions. As I was saying, we have 92 of them and year after year we incorporate standard OECD provisions in the conventions. They allow us to have the best possible tools for combatting tax evasion and my colleague knows it.

That is one of the things we stated in this government's first budget. We invested $444 million precisely because fiscal integrity is important to Canadians. To us, this is another tool in our toolbox to ensure that people pay their fair share in taxes and at the same time to promote trade.

That is what we need to do for Canadians in order to promote trade here in Canada.

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

Mr. Speaker, it is an honour for me to speak today on the 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.

What we are going to be talking about today is implementing tax conventions that are going to be very beneficial for our country. They are going to create jobs, promote commerce, and favour the protection and the avoidance of tax evasion in our country.

I appreciate the opportunity to speak today on the second reading of Bill S-4.

Bill S-4 would implement a double taxation convention and a double taxation arrangement recently concluded and publicly announced with the State of Israel and with respect to the jurisdiction of Taiwan.

Bill S-4 would also amend the legislation that implemented the Canada-Hong Kong double taxation agreement, to add an interpretation provision for greater certainty.

The double taxation convention with the state of Israel replaces the current tax convention with that country which was signed in 1975. The revised double taxation convention brings us up to date with the current tax treaty policies of Canada and Israel.

There is currently no double taxation arrangement between Canada and Taiwan. Taiwan is one of the few remaining large world economies not covered by Canada's network of 92 tax treaties currently in force and, thus, the conclusion of a double taxation arrangement with Taiwan has been an important objective for Canada.

Taiwan is a significant trading partner for Canada, ranking as Canada's fifth-largest trading partner in the Asia-Pacific region and ranking 12th worldwide, in 2015. In 2015, Canadian exports to Taiwan were valued at $1.46 billion, while imports stood at $5.46 billion, for a total of more than $6.91 billion in trade between our two jurisdictions.

Taiwan currently has double taxation arrangements in force with 30 other countries, including Australia, Austria, Belgium, Denmark, France, Germany, the Netherlands, New Zealand, Sweden, Switzerland, and the United Kingdom.

In keeping with Canada's “one China” policy, a double taxation arrangement with Taiwan has been concluded as an arrangement between the Canadian trade office in Taipei and the Taipei economic and cultural office in Canada, as opposed to an agreement between sovereign countries.

This double taxation arrangement with Taiwan is consistent with other existing Canada-Taiwan instruments in a wide range of areas, from air transport, agricultural market access, visa exemptions, and postal services, to science and technology research, financial supervision, and youth mobility, among many others.

Once implemented in Canada, through this bill, the double taxation arrangement with the jurisdiction of Taiwan would constitute a functional equivalent to a tax treaty.

The convention and arrangement to avoid double taxation contained in Bill S-4 will facilitate trade and bilateral investment with the state of Israel and the territory of Taiwan, by eliminating or relieving double taxation on transborder transactions, which will mean that taxpayers will pay tax only once on a given income. This will also help to prevent income tax evasion, which is undermining the tax base and our taxation system.

Bill S-4 relates to the ongoing efforts being made by Canada to update and modernize its network of tax conventions with other territories. As was mentioned earlier, Canada relies on one of the most extensive tax convention networks in the world, with 92 tax treaties currently in force.

I want to make it clear that Bill S-4 does not represent any new or significant change in policy. In fact, the double taxation convention and arrangement covered by the bill, like its predecessors, is patterned on the model tax convention of the Organisation for Economic Co-operation and Development, OECD, which is accepted by most jurisdictions around the world.

The provisions in the particular double taxation convention and arrangement comply with the international norms that apply to such double tax conventions and arrangements.

As Canada’s economy is increasingly integrated with the global economy, the elimination of fiscal barriers to trade and international investment has become more important. Double taxation conventions and arrangements such as those we are discussing today are specifically designed to facilitate cross-border trade, investment, and other activities between Canada and each of the signatory jurisdictions.

The expression “tax convention” primarily designates income tax conventions and arrangements that establish the extent to which a jurisdiction can apply personal and corporate income tax to a resident of another jurisdiction.

For Canada, our tax treaty gives us assurances of how Canadians and Canadian businesses will be taxed abroad. Conversely, for our tax treaty partners, Canada's tax treaties give them the assurance of how their residents will be treated in Canada. Our tax treaties are all designed with two general objectives in mind. The first objective is to remove barriers to cross-border trade and investment, most notably the double taxation of income. I am sure that is something that every member in the House would agree with.

The second objective, and I am sure members would also agree, is to prevent tax evasion by encouraging co-operation between Canada's tax authorities and the tax authorities of the other signatory jurisdictions.

Those are two objectives that I am sure will get unanimous consent from all the members in the House.

Allow me to take a few minutes to expand on each of these very important objectives for our country. Let us talk first about removing barriers to trade and investment.

First of all, removing barriers to trade and investment is essential in today’s global economic context. Without question, investors, traders, merchants, and other stakeholders doing business on an international scale want to be certain of the tax repercussions of their activities in Canada and abroad.

Similarly, Canadians doing business or investing overseas want to be sure that they will be treated fairly and consistently with respect to the income tax they pay.

In other words, they want to know the rules of the game and they want to know the rules will not change in the middle of the game. That is one of the objectives of Bill S-4, to remove uncertainty about the tax implications associated with doing business, working, or investing abroad. Tax treaties establish a mutual understanding of how the tax regime of one jurisdiction will interface with that of another. This can only promote certainty and stability and help produce a better business climate especially with respect to eliminating double taxation.

Let me turn to double taxation.

No one wants to have their income taxed twice, something that should never happen in any case. However, in the absence of a convention or arrangement to avoid double taxation, such as those contained in Bill S-4, that is exactly what could happen. For example, in cross-border transactions, the two jurisdictions might apply their income tax without granting taxpayers relief with respect to the income tax paid to the other jurisdiction.

To reduce the possibility of double taxation, tax conventions apply either of two general methods, depending on the particular situation.

In some cases, the exclusive right to tax a particular income is granted to the jurisdiction where the taxpayer resides.

In other cases, that right is shared.

For example, if a Canadian resident employed by a Canadian company is sent on a short-term assignment, say for three months, to any one of the two signatory jurisdictions in this bill, Canada has the exclusive right to tax that person's employment income. If, on the other hand, that same person is employed abroad for a longer period of time, say for one year, then the jurisdiction where that person works can also tax the employment income. However, in this case, under the terms of the double taxation convention and arrangement in Bill S-4, Canada must credit the tax paid in that other country against the Canadian tax otherwise payable on that income. This is one example of how the allocation of taxing rights between jurisdictions under tax treaties ensures that individuals and businesses are taxed fairly.

Let me move to withholding tax.

One way to reduce the potential of double taxation is to reduce withholding taxes. These taxes are a common feature in international taxation. It is imposed by an authority on certain items of income earned within its jurisdiction and paid to the residents of another jurisdiction. Types of income usually subject to withholding taxes include, for example, interest, dividends, and royalties.

Withholding taxes are levied on the gross amount paid to non-residents and represent their final obligation with respect to income tax payable to Canada.

Without a tax treaty in place, Canada usually taxes this income at a rate of 25%, which is the rate set out under our own domestic tax legislation, the Income Tax Act. The double taxation convention and arrangement in Bill S-4, however, would provide for a maximum withholding tax rate on portfolio dividends paid to non-residents of 15% in the case of the State of Israel and the jurisdiction of Taiwan. For dividends paid by subsidiaries to their parent companies, the maximum withholding tax rate is reduced to 5% in the case of the State of Israel, and 10% in the case of the jurisdiction of Taiwan. Withholding rate reductions also apply to royalties, interest, and pension payments. The double taxation convention and arrangement in this bill would cap the maximum withholding tax rate on interest and royalties at 10%, and on periodic pension payments at 15%. The double taxation convention and arrangement also would provide that no tax may be withheld on cross-border payments of interest in specific situations, such as interest paid on loans made, guaranteed, or insured by Export Development Canada; or a similar institution in Israel or Taiwan.

withholding tax rates provided for in the convention and arrangement covered in Bill S-4 are consistent with current Canadian policies on double taxation.

Let me move now to encouraging co-operation.

I mentioned that tax treaties have two main objectives. I talked about the first objective, which is to remove barriers to cross-border trade and investment by eliminating double taxation.

The treaties' second objective, and I am sure everyone here will agree with me, is to encourage cooperation between tax authorities in Canada and in treaty countries. Bill S-4, for instance, has to do with a convention and an arrangement to avoid double taxation through cooperation with tax authorities specifically in the State of Israel and the jurisdiction of Taiwan.

For example, tax treaties include a mechanism for settling disputes or enforcement issues that arise after a treaty on double taxation comes into force.

In such cases, designated tax authorities of the two jurisdictions, known as the competent authorities, are to consult with a view to reaching a satisfactory solution, under which the taxpayer's income is allocated between the two taxing jurisdictions on a consistent basis, thereby preventing the double taxation that might otherwise result.

The Canadian competent authority under Canada's tax treaties is the Minister of National Revenue or the minister's authorized representative, who would normally be an official at the Canada Revenue Agency.

Furthermore, one of the most important benefits of increased co-operation between Canada and other jurisdictions is preventing tax evasion. Indeed, tax treaties are an important tool in protecting Canada's tax base in that they allow consultation with and information to be exchanged between our revenue authorities and their counterparts in jurisdictions with which we have a double taxation convention.

In that regard, the convention and arrangement to avoid double taxation listed in Bill S-4 implement the internationally agreed standard for the sharing of tax information on request created by the Organisation for Economic Co-operation and Development, or OECD, which gives Canadian tax authorities access to information needed for the administration and enforcement of Canadian tax laws, while also helping them prevent international tax evasion.

Thus, the convention and arrangement to avoid double taxation listed in Bill S-4 will help ensure that Canada's tax regime is fair by making sure that taxes owed are actually paid. Conversely, as I have already mentioned, these treaties also help ensure that taxpayers do not have to pay more than their fare share.

Let me move to timing and consideration.

Once this bill has been enacted, Canada will be in a position to send its notice of ratification of the convention and arrangement on double taxation contained in the bill. Taiwan has already sent its notice of ratification to Canada, and Israel has promised to do so and to make every effort to send its notice by the end of the year.

Under the terms provided in the double taxation convention and arrangement, it will take effect the first day of January in the year following that in which the latter of these notices of ratification have been exchanged. Thus, it is important that this legislation be enacted before the end of this year so that Canada can send its notices of ratification regarding the convention and arrangement in order for the double taxation convention and arrangement to have effect commencing January 1, 2017. Otherwise, the next opportunity for the coming into effect of the convention and arrangement would be January 1, 2018.

The benefits of Bill S-4 are clear. The double taxation convention and arrangement covered in Bill S-4 would promote certainty, stability, and a better business climate for taxpayers and businesses in Canada and in the partner jurisdictions.

Furthermore, the convention and arrangement to avoid double taxation will serve to further consolidate Canada’s position in the increasingly competitive circles of international trade and investment. They are in line with the OECD’s international standards, and they will help strengthen the taxation system to the benefit of Canadians and to achieve our tax fairness objective for all Canadians.

These actions are consistent with the basic principles of economic efficiency and responsible fiscal management.

For these reasons, I invite members of the House to support the bill. It will support trade. It will support tax integrity. I am sure that every member will support the bill, because it is not just the smart thing to do for Canada, it is the right thing to do.

[Lawrence MacAulay, Liberal, Cardigan, PE]

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 second time and referred to a committee.

[Marie-Claude Bibeau, Liberal, Compton—Stanstead, QC]

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 now read the first time and printed.

(Motions deemed adopted, bill read the first time and printed)

Message from the Senate

[The Speaker, Liberal, Geoff Regan]

I have the honour to inform the House that a message has been received from the Senate informing this House that the Senate has passed the following bill, to which the concurrence of the House is desired: 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.

[The Chair, Liberal, Wayne Easter]

Okay?

On Monday, then, we'll go to clause-by-clause on Bill S-4 should the Senate get it completed and it gets referred from the House.

Mr. Liepert.

[The Chair, Liberal, Wayne Easter]

Thank you.

Thank you to the witnesses for appearing.

To committee members, we had scheduled tomorrow's hearing for additional witnesses, but those witnesses are unable to appear tomorrow, so this will conclude the witnesses on Bill S-4.

Are people in agreement to do a review of the pre-budget consultations tomorrow? I don't think it will take two hours. We can get that off our deck and with some thoughts on how we might handle pre-budget consultations another year.

Ron.

[Raj Grewal, Liberal, Brampton East, ON]

Overall it has been positive testimony for getting Bill S-4 passed before the end of the year. Does anybody have anything negative to say, or any reservations, in terms of why we should hold off on doing this? You can respond by saying no.

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

Thank you, Mr. Chair.

Ladies and gentlemen, welcome to this House of Commons parliamentary committee.

My first remarks are for Ms. Alepin.

You were here earlier when we heard from the first group of witnesses. We asked them, among other things, whether Bill S-4, which includes a new agreement with Taiwan, Hong Kong, and so forth, could impact our relationship with China and Japan, our two most important partners and the two economic powerhouses of Asia. Those witnesses did not appear to have any concerns in this regard whatsoever, but I believe you said it could have an impact on China.

I know that some colleagues have already asked about this. In your opinion, are there any yellow lights or flags that should be raised regarding certain aspects of this bill that could unfortunately have a negative impact on our relationship and trade with China in particular?

[John Weston]

In the course of developing trade and investment between any two territories, it's a natural progression to make it easier to exchange goods and services without punishing taxes. We're doing that by looking at Bill S-4.

A foreign investment protection agreement is something that's been discussed widely in Canada recently because of the agreement with China. It's an agreement that gives equal status to a foreigner who invests in your country who will therefore face no discrimination because of the origin of the investment. The free trade agreement is designed to promote more flow in goods and services. We've seen many of those. You can remind me of the number that were passed under the previous government, which greatly enhanced the prosperity of Canadians.

All of these things are in the interest of Canada and of Canadian people. You mentioned the word “democracy” in your question. Many Canadians like the notion of dealing with other democratic places, and certainly Taiwan has a great track record in that respect.

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

Thank you, Mr. Chair.

Welcome, everyone.

My first question is to you, Mr. Weston. With your experience in living in Taiwan and dealing with Taiwan-Canada issues, going forward with Bill S-4, if it's implemented and comes into effect January 1, what sectors in both Canada and Taiwan will this deal benefit? Where do you see growth in trade and investment coming from with the implementation of Bill S-4?

[John Weston]

From 2013 through 2015, I headed the Canada-Taiwan Parliamentary Friendship Group, known for its hard work, cross-party camaraderie, and productivity. In that group, we learned the virtues of the type of agreement you are considering today. Such agreements are typical signs of progress between jurisdictions that encourage friendship, free trade, investment, and increased exchange between people.

Let me quickly cover ten benefits I see in this agreement. Deft drafting and careful diplomacy have eliminated the one impediment that delayed this agreement for the 20 years of negotiations it has taken.

One, it encourages trade with a decidedly democratic jurisdiction. Two, it allocates taxing rights between the two jurisdictions so that taxpayers are not subject to double taxation. Three, it reduces the risk of excessive taxation that may arise because of high withholding taxes on payments of dividends, interest, remittances, and royalties paid by a resident of one jurisdiction to a resident of the other. Four, it ensures that taxpayers will not be subject to discriminatory taxation in the foreign jurisdiction. Five, it provides greater certainty to taxpayers regarding their potential tax liability in the foreign jurisdiction. Six, it encourages adherence to the rule of law for people by promoting tax compliance. Seven, it increases tax revenues. Eight, it discourages good Canadians—those of Taiwan background—from renouncing their citizenship. In my experience, Canadians who hold dual U.S. citizenship are renouncing their U.S. citizenship in increasing numbers due to arbitrary and capricious practices by the IRS and the U.S. Treasury Department. Nine, the ADTA paves the way to other promising economic arrangements, including a foreign investment protection agreement and a free trade agreement. And ten, it takes advantage of great timing. There is peace across the Taiwan Strait, so it's easier for Canada to engage with both Beijing and Taipei while adhering resolutely to our one China policy.

In terms of the impact on Canada-Taiwan investment, we've heard about the underperforming rates of investment that are just out of step with the patterns of cross-border trade and the number of people in both places. On two-way investment, the CTOT reports that Taiwan is currently Canada's twelfth-largest trading partner, but we are looking at Taiwan as being only the 40th-largest investor in Canada, so there is much more that can be done in that file.

The CTOT also reports that a number of bilateral investment deals are pending that would benefit from the provisions within the ADTA. They can't be disclosed for reasons of confidentiality, but there is real margin to be had by getting this agreement passed.

The one negative downside has been alluded to by various persons who have testified. This agreement was signed in January of this year and passed by the Taiwan legislature in February. It took two decades to get here, and that is due solely to the concern of offending the one China policy. But the deft drafting includes words such as “territory” and “jurisdiction”, deliberately in there to avoid offending a state-to-state kind of...or proposing that there's a state-to-state kind of relationship here.

The signatories are the two trade offices, not governments directly—another sign of the genius behind this accord. It has been carefully designed to navigate the tightrope that all but Donald Trump require when promoting relations with Taiwan.

In conclusion, this accord is expected to help facilitate increased two-way investment by significantly lowering withholding tax rates. As I related, there are at least ten concrete benefits and no serious downside risks. If the committee and the House can get this through by Christmas, there will be a whole extra year of more value-added investment between the two sides.

I highly recommend that the committee support Bill S-4.

[Sarah Taylor, Director General, North Asia and Oceania, Department of Foreign Affairs, Trade and Development]

Mr. Chair, honourable members, thank you for this invitation to appear before you today. I am pleased to be here today to speak to you about 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.

My name is Sarah Taylor. As mentioned, I'm the Director General for North Asia and Oceania bureau at what is now called, because we love to change our name, Global Affairs Canada. Given these areas of responsibility, my remarks today will focus principally on the avoidance of double taxation arrangement between the Taipei Economic and Cultural Office in Canada and the Canadian Trade Office in Taipei.

Why is a double taxation arrangement necessary with Taiwan?

Double taxation conventions or arrangements are specifically used to eliminate tax barriers to trade and investment. Canada has an extended network of double taxation conventions, with 92 in force.

Overall, the entry into force of this arrangement will assist to further solidify Canada's strong economic links with Taiwan by removing tax barriers to cross-border trade and investment.

As the Prime Minister said recently at APEC in Peru in November, "Trade and investment with Asia Pacific economies are critical to our country's economic future and to growing our middle class."

Taiwan is Canada's twelfth-largest trading partner and fifth-largest trading partner in Asia. In 2015 our exports to Taiwan exceeded $1.46 billion, and our imports exceeded $5.46 billion. In 2015 bilateral trade grew year on year by over 14%, from $6 billion to $6.91 billion. However, Taiwan is one of the few of Canada's large trading partners not covered by a double taxation convention.

Investment relations between Canada and Taiwan remain underdeveloped, as a result, in the context of Canada's overall inward and outward FDI, or foreign direct investment. According to figures from Statistics Canada, the stock of Taiwanese FDI in Canada stood at $108 million at year-end 2015. By the same token, the stock of Canadian direct investment in Taiwan at the end of 2015 was $115 million. This is partly due to the lack of an avoidance of double taxation arrangement, as many Taiwanese and Canadian companies are forced to make investments through an indirect route by going through a third country that already has an existing ADTA. This is a significant barrier to investment, in our view.

Taiwan clearly offers great potential for Canadian investors: it is a vital link to Asian and global supply chains, especially in the information, communications and technology sector, and is used by many businesses as a test site for products aimed at wider Chinese markets.

We've heard from Canadian and Taiwanese businesses, and they welcome this arrangement, as it will significantly reduce their tax burden and make investing in each other's jurisdictions more compelling. Further, it will support the competitiveness of Canadian companies vis-à-vis companies from other countries that already have a double taxation agreement with Taiwan.

Just very briefly—Mr. Houlden also mentioned it—why has this been concluded as an “arrangement”? In keeping with our one China policy, the arrangement with Taiwan is an arrangement, rather than an agreement, between the Canadian Trade Office in Taipei and the Taipei Economic and Cultural Office in Canada. Canada has arrangements in a wide range of areas with Taiwan—air transportation, agricultural market access, visa exemptions, etc. The arrangement is also consistent with what other countries that have a one China policy have done in their respective double taxation conventions or arrangements with Taiwan. Taiwan has accepted Canada's position to present this instrument as an arrangement.

To conclude, Global Affairs Canada fully supports Bill S-4. It will facilitate trade between and investment between Canada and Taiwan and lead to job-creating investment for our Canadian businesses.

I would be pleased to take your questions afterwards.

[Brigitte Alepin, Tax Expert, Agora Fiscalité, As an Individual]

Thank you, Mr. Chair.

Ladies and gentlemen, Canadians, my name is Brigitte Alepin. I am a Tax Expert, tax policy specialist, author, and scriptwriter.

Since I was invited on short notice, I will focus on my analysis of the agreement with Hong Kong. I also looked briefly at the agreement with Taiwan. Here are what I consider the most important findings of my analysis.

Since the corporate tax rate in Hong Kong is 16.5%, there must be an agreement to avoid double taxation of the corporate revenues of Canadian businesses in Hong Kong. However, since Hong Kong is a special case, where interest income, dividends, and capital gains are not taxed, and there is no tax deduction at source, we might expect that this convention between the two countries would reflect this, which does not appear to be the case at all right now.

Moreover, the proposed amendment in Bill S-4 must be considered in the context of the existing convention with Hong Kong. The bill provides as follows:

[...] references to a “country” or a “state” are, with such modifications as the circumstances require, to be read as including the Hong Kong Special Administrative Region of the People’s Republic of China.

Does that mean that, without Bill S-4, the current agreement between Canada and Hong Kong is not operative? In fact, the terminology used in the bill is not consistent with that used in the Income Tax Act, the Income Tax Conventions Interpretation Act, and the Income Tax Regulations.

Moreover, in Canada, all tax conventions are covered by the prevailing domestic legislation, pursuant to the Income Tax Conventions Implementation Act, 1999. Is this terminology legally appropriate in view of the latter act?

It would be helpful to have a clear answer to this question because, if the amendment proposed in Bill S-4 makes the tax convention between Canada and Hong Kong operative whereas it is not really at present, that means that the amendment proposed in Bill S-4 would be more important than a mere administrative adjustment. In that case, the issues involved would be more complex.

I know that the trade relationship with China is very important to Canada. Bill S-4 simultaneously approves tax conventions between Canada, Hong Kong and Taiwan. In the present circumstances, I think we should be concerned about how China would interpret this action by Canada in the era of the Trudeau government.

As to the added provisions specifically included in Bill S-4 regarding the convention with Hong Kong, I also wonder about the impact of the tax convention with Hong Kong that Prime Minister Stephen Harper himself signed on November 11, 2013. The world has changed since then in terms of taxation and politically. While the tax convention with Hong Kong is open and certain changes are being made to it, Canada should perhaps consider using the opportunity to make sure the agreement complies with the international commitments Canada has made since November 11, 2013.

Consider for example the automatic sharing of information. The current agreement and its protocol provide for the sharing of information at the request of tax administrations only, which runs counter to the commitment Canada made in 2015 to measures for the automatic sharing of tax information and the statements by the Minister of Finance, Mr. Bill Morneau, with regard to information sharing.

That concludes my presentation. I will be pleased to answer all of your questions.

Thank you.

[The Chair, Liberal, Wayne Easter]

We'll begin by welcoming the witnesses on Bill S-4.

We'll start with Ms. Rebolledo from Export Development Canada.

Go ahead, Ms. Rebolledo.

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

Holy smokes, you're generous today.

I'll just ask two very simple questions. On Bill S-4, in a situation where a company has its headquarters in Israel or Taiwan, would it receive any tax benefits related to its Canadian subsidiaries if Bill S-4 were to become law?

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

That's fine.

Are there provisions in Bill S-4 that have not appeared in previous tax treaties?

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

Thank you, Mr. Chair.

Thank you to our witnesses for the work you do for Canadians. I'll start by thanking you for bringing your comments in both official languages. That's a great courtesy to the committee.

Obviously, Canada works with the OECD on a number of different fronts, and most of these are based on conventions for tax treaties that have been negotiated or articulated at the OECD level. Is there anything in Bill S-4 that is different from the standard tax treaty as proposed by the OECD?

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

Thank you, Mr. Chair.

Dear colleagues, ladies and gentlemen, welcome to this House of Commons parliamentary committee.

To begin, let me say that our political party agrees with the general principle of creating and updating agreements with our trading partners. Clearly, we are not talking about a blank cheque. We have to do our homework, verify things, and that is what we will do today.

Let us begin with Taiwan. After that, we can talk about Israel.

I would like to know if Japan and China, two important partners and economic players in Asia, are affected by the agreement that you are proposing today in Bill S-4.

Have those impacts been measured and, if so, what is your assessment of them?

[Brian Ernewein]

Certainly. That would be fine.

Again, we are here to talk about Bill S-4, which includes two new or revised income tax agreements with other jurisdictions.

Canada actually has one of the most extensive networks of income tax treaties in the world, with 92 treaties currently in force. Of course, there's an ongoing need to update and modernize our network of tax treaties with foreign jurisdictions. That's essentially what Bill S-4 proposes to do with respect to two jurisdictions.

The first part of the bill is a convention between the Government of Canada and the State of Israel for the avoidance of double taxation and the prevention of fiscal evasion with respect to income taxes. The second portion is an arrangement, so-called, 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. The bill would also amend the Canada-Hong Kong Tax Agreement Act, 2013, in order to add to it, for greater certainty, an interpretation provision.

There is currently no double taxation arrangement between Canada and Taiwan, although it is a significant trading partner for Canada, ranking as our fifth-largest trading partner in the Asia-Pacific region and twelfth worldwide in 2015. In keeping with Canada's “one China” policy, the double tax arrangement with Taiwan has been concluded as an arrangement, as I say, between the Canadian Trade Office in Taipei and the Taipei Economic and Cultural Office in Canada, as opposed to an agreement between sovereign countries. Once implemented, and with the legislation that accompanies the convention or arrangement itself, this bill is intended to constitute a functional equivalent to a tax treaty.

Bill S-4 would also implement a revised double tax convention with the State of Israel to replace the existing tax treaty, which dates back to 1975. This convention has been updated to make it consistent with Canada's current treaty tax policy.

As I mentioned earlier, the double tax convention and arrangement will facilitate cross-border trade, investment, and other activities between Canada and each of its signatory jurisdictions. Our tax treaties are all designed with two general objectives in mind. The first objective is to eliminate tax barriers between two jurisdictions in order to promote bilateral trade and investment. Obviously, removing barriers to trade and investment are paramount in today's global economy. Investors, traders, and others with international dealings want clear information on the tax implications associated with their activities both in Canada and abroad. Equally important, Canadians with business interests or investments abroad want to be sure that they receive fair and consistent tax treatment. It follows that one of the objectives of Bill S-4 is to remove uncertainty about the tax implications associated with doing business, working, or investing abroad.

Bill S-4 would also reduce double taxation and encourage investment by reducing withholding taxes. It would provide for a maximum withholding tax rate of 15% in the State of Israel and the jurisdiction of Taiwan on portfolio dividends paid to non-residents—that is, paid between Canada and Taiwan, or between Canada and Israel. For dividends paid by subsidiaries to their parent companies, the maximum withholding tax rate under these agreements is reduced to 5% in the State of Israel and 10% in the case of the jurisdiction of Taiwan. Finally, on withholding taxes, this bill would also cap the maximum withholding tax rate on interest and royalties at 10% and on periodic pension payments at 15%.

The second objective, generally, of treaties is to prevent tax avoidance and evasion. A key element of Canada's tax treaties is their provisions authorizing the exchange of information relevant to administering domestic tax laws, helping to combat tax evasion. Bill S-4 would allow Canadian tax authorities to do so.

The final point is one on timing. Both of these, the agreement and the arrangement, would apply for the year following the year in which they are brought into force. If the Senate, the committee, and the House of Commons should approve this bill this year, and if it's possible to get the required notices in place between ourselves and Taiwan and Israel respectively, the treaty can have effect beginning at the start of 2017. That would make it important, if it were possible, to have it enacted this year. Failing that, if it should be enacted only sometime in 2017, it would only take effect for the following year.

I'll stop there. Thank you.

[Brian Ernewein, General Director, Tax Policy Branch, Department of Finance]

Yes, thank you, Chair.

My name is Brian Ernewein. I am the General Director of the Tax Policy Branch at the Department of Finance. I am joined by Stephanie Smith, who is the Chief Tax Treaty Negotiator with the Department of Finance, and Trevor McGowan, who is the Chair of our Legislative Drafting Unit.

I have an opening statement, but I haven't proposed to read it. I am happy to do so, if you would like me to read it. If not, I don't propose to. I understand that the clerk has received it and perhaps circulated it to members.

The only comment I would make is that I understand we are here, in some sense, to study the subject matter of Bill S-4. It was considered by the Senate committee last Friday. I don't think it has actually been reported back to the Senate or voted on third reading, but we are happy to take any questions. The subject matter is, of course, a new tax treaty with Israel, an arrangement with Taiwan that would have the same intended effect as a tax convention or tax treaty, and one clarifying change in relation to the tax agreement we have with Hong Kong.

[The Chair, Liberal, Wayne Easter]

Now we turn to the official business of the day, pursuant to Standing Order 108(2), on the subject matter of 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.

We'll start with the Department of Finance witnesses: Mr. Ernewein, Mr. McGowan, and Ms. Smith.

The floor is yours. Do you have an opening statement?

[The Chair, Liberal, Wayne Easter]

Let's come to order.

Before we start the official agenda for today, we do have a request for a project budget, which is basically to look after the costs of this hearing. The budget is in the amount of $6,000 for the subject matter of Bill S-4.

Does somebody want to move that?

Business of the House

[Bardish Chagger, Liberal, Leader of the Government in the House of Commons and Minister of Small Business and Tourism]

Mr. Speaker, today we are continuing with opposition day. Tomorrow the House will consider the report stage of Bill C-29, the second budget bill, and it will continue studying that bill Monday and Tuesday of next week.

For the remainder of the week, we plan to call the following bills: Bill S-4, the tax conventions legislation, and Bill S-3, the Indian tax amendment, provided we get these two bills from the Senate; Bill C-25, the business frameworks bill; and Bill C-30 concerning CETA. All these bills are at second reading.

It is my hope that parties will be able to negotiate on how to proceed in advancing these very important initiatives. Something I have committed to is working well with other parties, and I will continue to do that.

[The Chair, Liberal, Wayne Easter]

Then the amendment would be that the deadline to submit witness lists for Bill S-4 to the clerk will be Wednesday at noon.

The amendment is on the floor. That's what we're discussing.

(Amendment agreed to [See Minutes of Proceedings])

With discussion on the motion as amended, we have Mr. Albas and then Mr. Ouellette

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

Thank you, Mr. Chair.

I think I understand that the approach being presented here is, technically speaking, the usual approach. Bill S-4 is no small matter. The schedule is extremely tight.

Can we assume that everything can be done within the time frames set out in the motion? We first need to know the number of witnesses to determine whether that's possible. Seventeen hours and 33 minutes to find witnesses is not much time. We should at least extend the deadlines for submitting the list of witnesses. If necessary, we should provide more time. We can't get ahead of ourselves.

[The Chair, Liberal, Wayne Easter]

That's good.

Is there any discussion on the motion by Mr. MacKinnon regarding 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?

Go ahead, Mr. Caron.

[The Chair, Liberal, Wayne Easter]

We'll pass it out and then go with it.

The motion is with respect to Bill S-4.

Do you want to explain it a little, or do you want to just move it?

[Steven MacKinnon, Liberal, Gatineau, QC]

It's the one dealing with Bill S-4.

[John Cartwright]

I see this as a process that we're involved in now. We're taking our first step with Bill C-227 to start to set the stage for an expectation of community benefits, and these will be different in different regions and in different communities. Eventually, we should put into regulation what those community benefits would include, such as apprenticeship numbers and outreach to diverse communities where we've looked at other considerations. I think those could be put in regulation as we move forward, and then at some point as we've tested this, and as we've seen the areas of strength and weakness as it roles out, then perhaps it would be time to come back to create an infrastructure that has the benefit of real life experience.