Bill S-6 (Historical)

Canada–Madagascar Tax Convention Implementation Act, 2018

An Act to implement the Convention between Canada and the Republic of Madagascar for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income

This enactment implements the Convention between Canada and the Republic of Madagascar for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and a related protocol.
The convention is 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 has two main objectives: the avoidance of double taxation and the prevention of fiscal evasion. Once implemented, it will provide relief from taxation rules set out in, or related to, the Income Tax Act. That implementation requires the enactment of this Act.

The House proceeded to the consideration of Bill S-6, An Act to implement the Convention between Canada and the Republic of Madagascar for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, as reported (without amendment) from the committee.

Canada–Madagascar Tax Convention Implementation Act, 2018

[The Speaker, Geoff Regan]

There being no motions at report stage, the House will now proceed, without debate, to the putting of the question on the motion to concur in the bill at report stage.

[Ahmed Hussen, Liberal, York South—Weston, ON]

moved that the bill be concurred in.

[The Speaker, Geoff Regan]

Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[The Speaker, Geoff Regan]

(Motion agreed to)

[The Speaker, Geoff Regan]

When shall the bill be read the third time? By leave, now?

[Some hon. members]

Agreed.

[Ahmed Hussen, Liberal, York South—Weston, ON]

moved that the bill be read the third time and passed.

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

Mr. Speaker, it is a pleasure for me to rise in the House to speak to Bill S-6, an act to implement the convention between Canada and the Republic of Madagascar for the avoidance of double taxation, which is another important step forward in our government's continued commitment to Canadians to strengthen tax fairness.

The measures proposed in this bill strengthen our efforts to build a fair and equitable tax regime that will benefit all Canadians. Bill S-6 is a tax convention that complements other tax treaties we already have with many other international partners.

To ensure that our economy is really working for everyone, we must have a fair tax system, and all Canadians must pay their fair share.

After all, through the taxes we pay as Canadians, we can provide greater support to the middle class, reduce inequality and build modern infrastructure that will get our products to new markets and help create good jobs all across the country.

For nearly four years now, we have been committed to taking action to foster growth and inclusive prosperity, while maintaining fairness for all taxpayers.

A fair tax system is crucial to ensuring that more and more people benefit from a growing economy. When Canadians have more money to invest, save and grow the economy, everyone benefits. Our government began taking steps in that direction from the very beginning.

In fact, one of our first legislative actions was to raise taxes on the wealthiest Canadians in order to cut taxes for the middle class. Over nine million Canadians are benefiting from our middle-class tax cut. Single individuals who benefit from the middle-class tax cut are saving on average $330 each year, and couples that benefit are saving an average of $540 each year.

We also took action to provide simpler, more generous and better targeted support to those Canadian families that needed it the most. We did so in 2016 by replacing the old child benefit system with the Canada child benefit. Across Canada, the CCB payments are worth about $24 billion and benefit 3.4 million Canadian families every year. As a result of the Canada child benefit, nine out of 10 Canadian families are better off. I am very proud to mention to the House that the Canada child benefit has helped lift over 300,000 kids out of poverty.

To ensure that the Canada child benefit continues to play a vital role in helping Canadian families, our government strengthened the benefit by indexing it to the cost of living, as of July 2018, which is two full years ahead of schedule.

Thanks to the middle-class tax cut and the CCB, a typical middle-class family of four receives on average about $2,000 more each year to help with the costs of raising their children, which is $2,000 more than they received in 2015. Those numbers are not according to me, they are according to the OECD, which published a study last summer, highlighting how big a difference those two measures had made in the lives of so many Canadian families.

We are not stopping there. Small businesses are one of the key drivers of the Canadian economy. They represent 70% of all private sector jobs, and that is why our government also lowered the small business tax rate. We did that because, when small businesses succeed, all of Canada benefits. We lowered the small business tax rate not once, but twice. As members know, we first lowered it from 10.5% to 10% in 2018 and then we lowered it to 9% in January of this year. For a medium-sized SME, that represents an additional $1,600 a year compared to 2017. That money can be used to create jobs, invest and buy new equipment. With those two consecutive reductions in the small business tax rate, the combined federal-provincial-territorial average tax rate for SMEs is now 12.2%. That is by far the lowest in the G7 and the fourth-lowest among the Organisation for Economic Cooperation and Development, or OECD, countries.

Thanks to these measures that have helped boost Canadians' confidence and stimulate economic growth, over a million jobs have been created in Canada since 2015. These new jobs brought Canada's unemployment rate down to the lowest it has been in 40 years and fostered economic growth, making Canada one of the strongest economies in the G7. Our goal is to maintain that growth in the long term.

Our long-term plan is working, and Canadians can feel confident their government is working hard to ensure they can keep more of their hard-earned dollars.

Tax fairness is an important step in this process. Tax fairness has been, and will continue to be, a cornerstone of the government's promise to Canadians to strengthen and grow the middle class and grow the economy now and over the long term. In each of our budgets, we have taken legislative action on both international and domestic fronts to enhance the integrity of Canada's tax system and give Canadians greater confidence that the system is fair for everyone.

Our government has also boosted the capacity of the Canada Revenue Agency, or the CRA, to crack down on tax fraud and tax avoidance. Investments made over the past two years have enabled the CRA to better target persons who pose the highest risk of tax avoidance and evasion. The CRA now has better access to information on Canadians' overseas bank accounts as we have put in place the common reporting standard. With this new system, Canada and more than 100 other countries now exchange financial account information to help us identify when Canadians are avoiding taxes by hiding money in offshore accounts.

The CRA needs other types of information from foreign countries to ensure that all taxpayers pay their fair share of taxes. That is why the tax convention to be implemented by Bill S-6 establishes a system for the exchange of tax information between Canada and Madagascar. Our efforts have focused mainly on fighting tax evasion and fraud because these practices result in heavy financial losses for the government and, by extension, for all Canadian taxpayers.

Recently, we passed important legislation through the House to introduce a multilateral convention to allow Canada and many of its treaty partners to implement tax treaty-related measures to counter a practice known as base erosion and profit shifting, BEPS. BEPS refers to the international planning used by some corporations and wealthy individuals to inappropriately avoid paying taxes by shifting profits earned in Canada to other offshore jurisdictions.

Just last month, budget 2019 proposed to invest an additional $150 million over five years, starting in 2019-20, to step up our efforts on tax evasion. This new investment would allow the CRA to fund new initiatives and extend existing programs. This includes taking action to enhance tax compliance in the real estate sector by investing in the creation of four new dedicated real estate audit teams at the CRA that focus on high-risk areas, notably in Vancouver and Toronto.

Budget 2019 also takes action so the CRA can stay ahead of non-compliance schemes driven by the use of new advanced technologies. Budget 2019 proposes to invest $65.8 million over five years to improve the CRA's information technology system. This would replace legacy systems and modernize the infrastructure used to fight tax evasion.

A modern tax system will help provide more opportunities to Canadians. It will also help create a trading environment in which business owners and entrepreneurs will have the means to invest. They will be able to develop their businesses and create more well-paying jobs for the middle class. That is why, in a world of challenges and constant change, it is so important for Canada to continue developing and updating its network of tax treaties.

The bill we are looking at is part of those efforts. Because Canada is and always will be a trading nation, our tax system has to be designed in such a way to help Canadians seize the incredible opportunities that international trade and investment have to offer. Tax treaties with our trading partners are absolutely fundamental to creating those opportunities.

Canada's 93 tax treaties make up one of the broadest networks in the world. The tax treaty being considered with Madagascar in Bill S-6 is part of our countless efforts to strengthen Canada's ties and international co-operation.

Canada and Madagascar have had diplomatic relations since 1965 and share a common French-language heritage. Both Canada and Madagascar are members of the International Organisation of La Francophonie.

Enhancing our competitiveness depends on opening up more markets and ensuring those markets are available to Canadian businesses. Tax treaties provide the certainty needed to support trade and investment between two countries. They also permit the exchange of information needed to help prevent international tax evasion.

Bilateral double tax conventions are used to eliminate tax barriers to trade and investment between two countries. They achieve this in a number of ways.

Tax treaties also provide a mechanism for jurisdictions to resolve tax disputes. The Canada-Madagascar tax convention will promote certainty, stability and a better business climate for taxpayers and businesses in both Canada and Madagascar.

These are all important goals.

In closing, four years ago, we committed to investing in growth while maintaining tax fairness for all taxpayers. A fair tax system is essential to giving as many people as possible the opportunity to reap the benefits of economic growth.

As I said, tax fairness has been and will continue to be a cornerstone of our efforts ensure that Canadian prosperity is inclusive.

We are working with international partners and we are investing to give the Canada Revenue Agency the tools it needs to do its work and ensure that everyone pays their fair share.

We will also ensure that the government continues to provide programs that help all Canadians and that Canada remains positioned as an attractive country for those seeking to work, to invest and to do business.

The benefits of Bill S-6 are clear. The tax convention between Canada and Madagascar will promote fiscal certainty and a better business climate for taxpayers and businesses in both Canada and Madagascar. Furthermore, the convention will help solidify Canada's position in a world that thrives on competition to attract foreign business and investments. By increasing its number of convention partners, our government is helping to create the ideal conditions for the long-term economic growth needed to strengthen the middle class.

Our government is committed to growing the economy by helping all Canadians. We maintain that a strong economy is a result of a strong middle class, and our policies and our results reflect this.

Over the past three years, the government has invested in Canadians and in the things that matter most to them and we will continue to do so. Bill S-6 is part of that plan for inclusive and long-term prosperity in this country.

I urge all hon. members to vote yes on this important legislation.

[Cathay Wagantall, Conservative, Yorkton—Melville, SK]

Madam Speaker, near the beginning of the member's speech he talked about the child tax benefit. The Conservatives brought this in initially, making funds available to parents to use in the way they felt was best for their children. However, I am having trouble squaring his comments.

I am aware of one example of a family of five living above the poverty line, but definitely not within that middle-class framework. It also has a child with special needs. The family's total funding, including that CDB within their child tax credit, is barely over the $1,000 mark.

I would appreciate it if the member would repeat exactly what he said in regard to the average for a family of four.

[Joël Lightbound, Liberal, Louis-Hébert, QC]

Madam Speaker, I would be happy to provide the member with the OECD study conducted last summer. It clearly affirms that when we take into account the Canada child benefit and the middle-class tax cut, a typical average family of four with two children is $2,000 better off at the end of the year than they were in 2015 for various reasons.

Notably, with the Canada child benefit, we have made it a lot more progressive than it used to be under the Conservatives' scheme, where cheques would be sent to families of millionaires that did not necessarily need it as much as lower-income Canadian families. We decided to send more to families that needed it most and we stopped sending cheques to families of millionaires.

As a result, and it has been largely confirmed by academia and by Statistics Canada, we have reduced poverty considerably in the last three years. In fact, Statistics Canada published a report in the last month, saying that Canada had reduced poverty by 20% in three years and child poverty by 40%. That is so much more than the Conservatives were ever able to achieve in the decade they were in power. Why? Because reducing inequalities was never a priority for their government.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Madam Speaker, we are supporting Bill S-6 because Madagascar is not a tax haven. As well, a double taxation avoidance agreement means that companies have to pay their fair share of taxes either in Canada or Madagascar.

Unfortunately and tragically, the government's record has been absolutely deplorable. In the one case, the Liberals are presenting one bill that may help in one jurisdiction. At the same time, they have been multiplying their efforts to make special arrangements with overseas tax havens. It is even worse than the Conservatives. They picked the Conservatives as their example, but when we look at the Cook Islands, Antigua and Barbuda, and Grenada, notorious tax havens, what the government has done is set up special arrangements so companies can get off scot-free in paying their fair share of taxes.

How does this look to a single mother who is working full-time and paying her fair share of taxes? The government is allowing the corporate sector to get off scot-free and, at the same time, it is multiplying the number of arrangements with tax havens, refusing to allow some of the largest corporations on the planet, the web giants, to pay their fair share of taxes. As we have seen now in special reports that have come out in the last week, an acceleration of money laundering in our country is up to $50 billion annually. The government's record is deplorable.

Could the member comment on why the government has been so bad at tackling tax evasion?

[Joël Lightbound, Liberal, Louis-Hébert, QC]

Madam Speaker, I want to start by thanking the NDP for supporting Bill S-6. I think that shows how important this bill is for preventing double taxation and giving the Canada Revenue Agency the tools it needs to obtain information from foreign countries so it can better fight tax evasion and tax avoidance.

That being said, I would answer that, on the contrary, our approach is vastly different from that of the previous government. Just think of the measures this government has taken regarding beneficial ownership and the multilateral instrument, the work we are doing with OECD countries, the BEPS initiative that Canada is actively involved in, and the resources we have provided to the CRA to enforce our laws and go after tax cheats and anyone who attempts to avoid paying their fair share of taxes. I should also point out that the former Conservative minister, Mr. Blackburn, said that tax evasion was not a priority for them.

We have invested over $1 billion in the CRA to make sure it has the resources it needs. Of course, this work cannot be done unilaterally. It requires concerted action with our international allies, with the OECD. It will not happen overnight, but the initiatives are in place. We would have liked to see more support from the NDP for our fiscal reform to increase fairness.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Madam Speaker, I would like to follow up on the question my colleague just asked the parliamentary secretary. If we are creating these taxation agreements with other countries, would it not be simple to put a section into these agreements that links the agreement?

We all want to avoid double taxation, and we all want to be fair in that sense, but we want to stop this tax evasion. Therefore, would it not be simple to put a section in there that links the tax record of the other jurisdiction with Canada's? That way, we would not get countries that have a 1% tax rate allowing companies to avoid taxes by putting all of their investments in those countries instead of in Canada, where we would get the taxes from them.