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.

Canada–Madagascar Tax Convention Implementation Act, 2018

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

Mr. Speaker, I thank my colleague from Quebec for his speech.

Today, we are talking about tax evasion. This is the 94th agreement that Canada has proposed signing with another country.

My question is very simple. On the one hand, the government claims to want to put an end to tax evasion, but on the other hand, it is not controlling its spending. The gap between the government's potential revenue and the revenue it actually receives is growing. We must remember that families are spending more on taxes than on food and shelter.

Where is the government going? What does my colleague think could be done so that Quebeckers pay less tax?

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

Mr. Speaker, I thank my colleague from Bellechasse—Les Etchemins—Lévis for his question and comments.

I too find this troubling. Year after year, we have a deficit. The idea of running a deficit to stimulate the economy during a recession is plausible. However, since the economy is doing relatively well, it is really troubling that our deficit is so huge.

That money could be used to further stimulate Quebec's economy. We know that it has significant needs. We could support the green economy and transport electrification, for instance. Money has been earmarked for infrastructure, but the funds set aside for Quebec keep getting held up. That is deeply troubling.

My colleague also said the government wants to fight tax evasion. Let me add a caveat. The government is always saying it wants to fight tax evasion and tax havens. In reality, we are still a long way away from achieving the expected results or matching the practices of European countries and the United States. My colleague from Sherbrooke mentioned the recent allegations published in the Journal de Montréal about the Panama papers. Of the 900 files that have been identified, only 12 have resulted in notices of assessment being sent out, and no criminal charges have been laid, as far as I know. We are still a long way away from a real solution.

The real problem with tax havens is the legal tactic used by big corporations, multinationals and especially Bay Street banks. The profits they earn in Canada and their biggest revenue-generating activities are reported in tax havens, enabling them to avoid paying taxes here in Canada. The most profitable companies are siphoning off value generated in Canada and shirking their social obligations. That is a serious problem.

The government should make the immoral illegal right away and ban companies, especially Bay Street banks, from legally using tax havens.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Mr. Speaker, tax treaties involve more than just issues of tax avoidance. I would be interested in my colleague's comments with regard to this. In many ways, tax treaties take down barriers for trade and investment, which facilitates potential growth between both of the countries in question.

Could my colleague comment on that?

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

Mr. Speaker, I thank my colleague for his question.

I completely agree with him. It is important to have rules to prevent double taxation in countries that have real tax laws instead of agreements with tax havens that facilitate tax avoidance. If a Canadian company does business with France and declares part of its income in France, or vice versa, it just makes sense that that income should not be taxed at 100% in France and 100% in Canada. That company should pay the right amount of taxes, but just once.

We in the Bloc Québécois support international trade agreements. Quebec is a small, open economy and it needs to have several international partners. We have expertise in high tech sectors, such as aerospace and forestry, and so, exporting and importing are possible. It is important to facilitate trade. That creates jobs and improves quality of life. That is a general rule, but when it is applied correctly, it works.

The problem with tax information exchange agreements, in some cases, arises when the spirit of the agreement, with which I totally agree, is twisted to allow certain companies to take advantage of a situation and not pay taxes, which is what the big banks do.

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

Mr. Speaker, I will be sharing my time with my colleague from British Columbia, the hon. member for Cariboo—Prince George.

The hon. member came to Lévis in his role as the Coast Guard critic and we proceeded to launch the supply ship Asterix. That ship is the pride of the Royal Canadian Navy. It was a contract that the former Conservative government wanted to give to the Davie shipyard. We all remember the whole political interference mess. We will not talk about the Norman case here this morning or the scandal surrounding how this contract was awarded by the Liberals. Instead we will talk about tax evasion.

I want to thank my colleague from Cariboo—Prince George for his involvement in ensuring that the coast guard can play a role on the three oceans and on maintaining the St. Lawrence Seaway. The coast guard is currently struggling with its aging fleet to ensure that these major waterways can be used for shipping, and so, I thank the hon. member. Like me, he will rise to speak to the bill today. This is Canada's 94th tax agreement. This one is being concluded with Madagascar to reduce and prevent tax evasion and also to avoid double taxation.

We need agreements like this so that the state can fulfill its responsibilities. I just gave an example. The Canadian government is responsible for ensuring that our waterways are navigable and for protecting our sovereignty on the three coasts. This is why we need agreements with other countries, and this is why the countries need revenue to carry out their constitutional duties.

Canada has a constitutional responsibility to ensure that we have a fleet of Coast Guard ships to respond to increasing demands. As we are seeing now, this is a challenge. This winter, a number of ships got stuck in the ice on the St. Lawrence, and it is time for the Liberal government to take concrete action.

As my colleague saw at Davie shipyard, the workers are able to meet the Canadian government's needs. This is relevant, because we are talking about revenue. This revenue would be well spent by the government, because the workers have shown that they can meet deadlines, as was the case with the Asterix.

That being said, I would simply like to remind the people listening that, if we count only the amounts owed by Canadian taxpayers, it is estimated that the government is losing up to $17 billion as a result of tax evasion and tax avoidance. That is how much the public treasury loses each year in unpaid taxes, often because of wealthy people hiding income in tax havens.

Quebec authors have studied this issue, and in addition to individuals, there are companies as well. On that subject, I have here a study by the Conference Board of Canada, which indicates that, compared to other countries that experience loss of revenue due to tax evasion, if we consider the entire tax gap, including taxpayers and companies, we could talk about annual losses of up to $47 billion. That is the magnitude of the problem.

Imagine what we could do with those billions of dollars. I gave the example earlier of the ships we could have for the Coast Guard. Those are just some of the needs that we have.

Just two days ago, a constituent in my riding called me because he has a serious health problem. He has paid into employment insurance all his life. Now, he is in a situation where he has to leave his job to focus on his treatments, and he is limited to 15 meagre weeks of employment insurance. He is unable to get any more assistance from EI.

I would like to remind the House that employers and employees pay the same amounts into the EI program. Of course, the government has financial needs and responsibilities. In this case, it is important that the government be able to collect all of the revenue to which it is entitled. However, the government also has a responsibility to control its spending. That is the important issue before us today. We are talking about a 94th agreement with another country, namely Madagascar. My colleague from Louis-Saint-Laurent reminded us of the relative importance of this agreement compared to our trade with countries like the United States or China. He also reminded us that we must be vigilant in implementing such agreements. As they say, the devil is in the details.

My colleague from Louis-Saint-Laurent gave us a good example of that this morning. Louis St. Laurent was the prime minister who opened the St. Lawrence Seaway, which the Liberals are currently neglecting to maintain.

My colleague reminded us of the importance of having agreements on tax evasion. He also mentioned that we need to ensure that our laws do not contain any irrelevant provisions or provisions that could constitute loopholes. In its most recent budget bill, the government included legal provisions to create a sort of remediation agreement. That puts the government in a difficult situation. We want to know what this government is trying to hide.

We will support the bill, but we also want to remind the government that it has the responsibility to allow us to openly debate the bills it introduces. Adding legal measures to an 800-page bill that will be studied by the Standing Committee on Finance is not the way to go about that.

Today we are discussing tax evasion, taxation and an agreement with Madagascar. The government is very bad at making sure that taxpayers receive value for their money. The average family pays more income tax. The government has problems when it comes to spending. It is addicted to spending; although it earns revenue, it spends more than it takes in. The irony in Canada is that Canadian families pay more income tax. I have here a very recent study from the Fraser Institute. It is dated February 21. According to this study, most middle-income Canadian families pay higher income tax. According to the same study, middle-income Canadian families pay $1,000 more in income tax each year.

Many studies and many statistics have shown this. We know that the Liberal government is always trying to increase its revenue. We believe that it should at least balance its budgets, but we are in a bottomless pit. Not only must families pay more income tax, their children will have to pick up the pieces. In terms of taxation, the government has no idea where it is going.

On March 19, the government will present its next and last budget. It was supposed to herald a return to a balanced budget, but that will not be the case. The government has lost control of the deficit. As we saw this morning, our veterans are paying the price.

We agree that we should have agreements with other countries—in this case, Madagascar—to limit tax evasion. However, that is not an excuse to make a mockery of Parliament by introducing bills or important elements concerning public confidence in institutions that are being threatened by certain sections of the bill. I hope to be able to address this again a bit later.

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

Mr. Speaker, in a question earlier, my friend across the way was talking about the issue of taxation. For me, I guess the proof is in the pudding. One of the very first things this government did, which I believe was in Bill C-2, was to give Canada's middle class a tax break, literally putting hundreds of millions of dollars in the pockets of Canada's middle class. That very member and the Conservative opposition voted against that measure.

Now, it is not the first time Conservatives voted against a measure of this nature. In the debate so far, the bill has often been referred to as a bill dealing with tax avoidance. When the government invested hundreds of millions of dollars, close to a billion dollars, to marginalize tax avoidance, again this member and the Conservative Party voted against it. This is money going into the pockets of Canadians.

The member can cite whatever he wants to cite. However, when it comes time to vote on the issue, can he explain why the Conservatives continuously vote against Canada's middle class?

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

Mr. Speaker, I would like to thank my colleague for his question. My answer is simple: my vote is based on reality.

I am very proud to have voted against measures proposed by the government that increase income taxes for middle-class families so that the rich pay less and Canadians find themselves in an endless deficit and, on top of everything else, that do nothing to reduce greenhouse gas emissions.

When a student gets a grade of 55%, the teacher can choose whether to pass him or not. In this case, I think that teachers will have no problem failing the government.

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

Mr. Speaker, my colleague is talking about tax measures that need improvement.

As my colleague from Sherbrooke said earlier, after years of trying to fix the tax code, it now has more than 1800 pages, which makes it the ideal playground for tinkering. We at the NDP want a complete reform of the tax code. In fact, this has been recommended by Canada’s chartered accountants. We should clean up all the measures that were added to try to fix the system and address the current challenges and the problem we are now facing.

Our 94 tax agreements, many of which, unfortunately, were reached with tax havens, have ensured that not all individuals and businesses pay their fair share of income tax. Everyone needs to contribute if we are to provide the services Canadians need.

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

Mr. Speaker, I would like to thank my colleague for her question and her work. In my speech, I mentioned the importance of putting a human face on the Employment Insurance system. My colleague has made significant efforts in this area, and we fully endorse them.

We need tax measures adapted to the changing Canadian population. That is what our government did. My colleague may remember that the Conservative government made tax changes to stop the subsidies for oil sands development. It also implemented positive measures to encourage industries to reduce their greenhouse gas emissions. In fact, we did so while effectively cutting taxes for the middle class and balancing the budget.

Next October, Canadians will have an opportunity to return to smart tax measures with a Conservative government led by our leader.

[Todd Doherty, Conservative, Cariboo—Prince George, BC]

Mr. Speaker, it is an honour to stand in the House and speak to Bill S-6, an act to implement the convention between Canada and the Republic of Madagascar for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. It has been said that this is the 94th agreement of this type and it deals specifically with tax evasion.

In preparation for this debate, I did some research and homework on Canada's relationship with Madagascar. We established diplomatic ties with Madagascar in 1965. The latest data on our two-way merchandise trade shows a total of $115.5 million. I enter that into this debate because the hon. parliamentary secretary mentioned that very often tax treaties are seen as a way to break down barriers to trade. That is something of importance.

I want to thank my hon. colleague who hosted me as we toured the Davie shipyard. The day we were there we saw the pride of hundreds of workers in the product they put forth. The Asterix ship is the pride of our navy.

Our hon. colleague also touched on my file. I am the shadow minister for Fisheries and Oceans Canada and the Canadian Coast Guard. Did members know that Canada has the longest coastline in the world, yet we have the oldest marine fleet to protect our sovereignty? Our marine fleet also ensures that all of our waterways remain open and free for the coastal communities that depend on them. It ensures that the transportation of good and people flows freely, that our trade can take place and that our waterways are safe. That is what the brave men and women of our Canadian Coast Guard do every day. Their service to our country should never be forgotten.

It is shameful that we have a government that makes a lot of promises. The Liberals like to stand in the House and on stages right across our country with their hands on their hearts to talk about their most important relationships. I do not know what number they are at now in terms of their most important relationships but there are a lot, and that is why we are here again today talking about a relationship between Canada and Madagascar.

I want to talk about our most important relationships and I want to go back to something my hon. colleague brought up about our brave men and women who serve our Canadian Coast Guard. We need to make sure that we outfit our men and women who serve, whether as first responders or in the military. Our Canadian Coast Guard needs to have the equipment necessary to fulfill its job and we know the government has not done that. The Liberals talk a good game but they have failed to do that.

The department has appeared before committee a number of times, yet the Liberals have failed to give any kind of schedule indicating when they will proceed with the procurement of new vessels to make sure that our waterways remain free. God forbid that we have an incident in the Arctic where we have to save a ship that is trapped or, heaven forbid, even in worse conditions.

This leads me to another part of why we are here today. We are talking about tax evasion and the estimated $47 billion annually that is lost to our economy. I want to talk about our economy. Not only are we losing an estimated $47 billion annually but we are losing investment in our country. Business is fleeing our country at record levels right now. The levels are astronomical. They are at 70-year highs. We have tax evasion and we have business investment fleeing our country at record levels.

Why is that? It is because of the policies and inconsistent messages the government has delivered in the short term it has been here. I would argue that it has been a long three and a half years. It feels very long.

Businesses appear before us every day. They come into our offices and talk to us about how concerned they are. They are no different than our constituents who come to us when we have our riding breaks.

This brings me to the experience I had last week. An accountant in my riding talked about the mineral exploration tax credit for start-up businesses. The CRA has now deemed it assistance, so now companies have to claim it as income. It is another barrier, when we are talking about breaking barriers to trade. We need to do whatever we can to break the barriers to investment for businesses.

The Liberals like to talk about how many jobs they have created, but here is a news flash. Governments do not create jobs. Their job is to create the environment so that businesses can invest and create jobs. We know that the numbers are staggering. It was recently reported that nowhere has a government spent so much and received so little, boasted so loudly and spent so much to achieve so little.

We know that the Prime Minister, in the 2015 campaign, made a lot of promises. He promised to be different. He promised real change. He promised that there would not be omnibus bills and that he would not sneak things into these big bills. What we have seen in the headlines lately is that in the Budget Implementation Act, there was a little clause snuck in that was really a justice clause. Some could argue that this was sneaky and underhanded. Why was it in there and not where it should have been? Why did the former attorney general not put that forward if that was something they wanted?

The Conservatives on this side of House support this. We see the importance of breaking down barriers to trade and of making sure that the flow of dollars lost to tax evasion is stemmed. We want the legislation coming before the House to have fulsome debate, and we want the 338 members of Parliament who were elected to be the voices of Canadians to all have a say in those pieces of legislation.

The Prime Minister campaigned on being open and transparent, but the Liberals tell us to just trust them and that when it gets to committee, we will have that fulsome debate. We also know that the Liberal majority on committees shuts down that debate, and the conversations are very one-sided, as much as they like to talk about it being very collaborative.

I want to bring this back to our committee. We do good work when we put aside our partisan ideas and the committee works at arm's-length from the minister. We managed to do some great work that actually helped expose the clam scam issue, which then saw the former fisheries minister quietly shuffled in the middle of the summer to another position. Why? It was because the Liberals awarded a lucrative surf clam quota to a sitting Liberal member of Parliament's brother and a former Liberal colleague, also a relative of the then fisheries minister, as court documents now show.

Why does this side of the House have concerns? The government says that the opposition is loud and boisterous, but our job is to give sober second thought to what those folks are doing on the other side.

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

That is the Senate.

[Todd Doherty, Conservative, Cariboo—Prince George, BC]

It might be the Senate, but someone has to take a reasoned approach to legislation because of the parliamentary tricks the current government has continued to use to pull the wool over Canadians' eyes.

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

Mr. Speaker, I heard the member say that never have we seen a government invest so much and receive so little, or at least he could not remember a time.

I can certainly remember a time. It was the former government. The Conservatives were renowned for saying that they were doing so much but were actually doing nothing. That was obvious in our communities. I remember being mayor of Kingston, and John Baird showed up, because they did not have anyone to come to Kingston, so they said, “Let's send a Queen's grad. That must mean something”. He showed up and dragged our municipal politicians to a bridge owned by the federal government just to announce that it was going to be repainting the bridge. It was taking care of its assets.

This government is actually investing in things that matter. It is building new infrastructure networks to grow our economy to see Canada develop and become a nation that can effectively trade and have new commerce opportunities.

The member opposite talked about an environment for businesses to thrive. This government lowered the small-business corporate tax rate to 9%. This government announced in the fall economic update measures to allow businesses to depreciate assets not only over a shorter period of time, but in some cases, in the year in which the expense is made. That is about creating an environment. For the member to stand up and say that this government is not creating an environment for businesses to thrive is disingenuous at best.