Thank you.
I'd like to chip in a little bit here.
At this point, I think we have consensus that lower tax rates would reduce the incentive somewhat for money to go offshore. We have the consensus that paying taxes makes us less competitive. Ultimately, if there were no corporate taxes, we'd be really competitive.
Now, that being established, what I'm concerned about is more the fairness aspect of this. My understanding, like that of Mr. McCallum's, is evolving as we have these discussions. I understand that we have tax treaties with a number of other countries. Mr. Hines alluded to that. The intention of these tax treaties was to avoid double taxation, essentially. The principal intention was to make sure that once we enter into a tax treaty with another country.... As you've said, their sovereign authority over the taxation of the income rests with them, and we allow the money to be repatriated tax free.
What we've created then is a circumstance where companies, whether offshore or locating here, are Canadian, can lever, tax-deduct, reduce tax obligation in Canada, shift the money offshore, earn the money there, and then repatriate earnings back to Canada, with certain definitions being complied with, tax free.
Is that a fair overview?
Hearing no objection, I will proceed.
So we sign a tax treaty with Barbados when they have a comparable tax rate, and then they subsequently change it so that you can set up a Barbadian corporation and pay 1% tax. We keep the treaty intact and we see a 4,000% increase in the establishment of Canadian dollars going to Barbados, where they pay 1% tax, or perhaps in some extreme cases 2%. These same companies can then bring the money back to Canada, having deducted and reduced their Canadian tax initially, so paying essentially no tax at all. And none of you are saying that's a problem.
I'd be interested in hearing a little more intensive discussion on specifically the issue of havens. We're talking about OECD-defined tax havens with Barbados and Cyprus, who have been the principal attractions of increased Canadian outflow. I'm interested in knowing how you perceive that as fair in any way, shape, or form.
Does somebody want to comment?
Mr. Raizenne.