Finance Committee on Oct. 4th, 2010

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

So Canada would be charging 15% and Turkey would be charging 15%?

[Alain Castonguay]

That's right. The rate is bilateral, obviously.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

It's bilateral, okay.

Thank you, Mr. Chairman.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Pacetti.

Mr. Carrier, do you have any questions?

[Robert Carrier, Bloc, Alfred-Pellan, QC]

No, thank you.

[The Chair, Conservative, James Rajotte]

Monsieur Mulcair? Okay?

Mr. Szabo, any questions?

[Paul Szabo, Liberal, Mississauga South, ON]

You've had an opportunity to prepare for this meeting and I know you have a nice briefing book. Is there anything there that you would like to suggest or bring to our attention related to this bill that may require some further discussion? Is there anything at all that you've detected in your preparation for this meeting?

[Alain Castonguay]

As I said earlier, there are no tax treaties that are alike. But essentially they follow our policy. Obviously, withholding stands out in the case of Turkey. I've already talked about the provision of services.

One other thing--and it is not major--is that in the case of the selling of insurance across the border, we would insist that it requires a permanent establishment to authorize taxation. But some of those countries prefer that simply the selling of insurance is sufficient to trigger taxation. So it is not in accordance with what we do but it's part of the give and take of treaty negotiations.

But by and large those three conventions follow our model and the OECD model.

[Paul Szabo, Liberal, Mississauga South, ON]

Is there a deadline or a sunset clause that the government is prescribing?

[Alain Castonguay]

Treaties are in force until they are either terminated or amended. We have a network of 87 treaties. Some of them are quite old and they require periodic revision, but these treaties are in force until they are terminated.

[Paul Szabo, Liberal, Mississauga South, ON]

Okay. And finally, in terms of the crafting of this particular bill and the provisions there, have we in fact identified areas in which previous legislation does not meet the same standards or requirements that would require amendments to be recommended to the government?

[Tim Wach]

The reason these treaties are enacted as legislation is so they can override the Income Tax Act. So these treaties and the legislative provisions enacting them specifically provide that where there's a conflict between the Income Tax Act and the provisions of the treaty, the treaty governs. That's why they're enacted as legislation.

[Paul Szabo, Liberal, Mississauga South, ON]

Thank you. That's helpful.

Thank you, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Szabo.

Mr. Mulcair, you have the floor.

[Thomas Mulcair, NDP, Outremont, QC]

I will keep it brief. Mr. Castonguay brought up this subject; he explained, and rightly so, that even if no two treaties are alike, there are always adjustments. That is why we do these exercises. He referred to a framework, a template that could serve as a standard.

I just wanted to ask him whether liability, in terms of human rights, factored into his analysis. I am thinking specifically about what is planned in Colombia regarding these treaties.

[Alain Castonguay]

We negotiate treaties in terms of broader government policies. We ask the department of foreign affairs to advise us of its opinion on these issues. In the case of Colombia, the position of the department of foreign affairs was that a tax treaty was desirable given the trade volume between the two countries. That is all I can say.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you. I understand the difference between your job and mine. I was not trying to press the matter any further.

[The Chair, Conservative, James Rajotte]

Mr. Carrier, your turn.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Mr. Castonguay, I am directing this at you because you speak French well. The policy aspect of this bill has to do with tax evasion. I think the bill's passage will go a long way toward solving the problem. It is a scourge condemned by everyone. It involves losing money, losing taxes in the course of commercial transactions. With this bill, will Canada recover a significant amount of the money lost through tax evasion?

[Alain Castonguay]

One of the main goals of a tax treaty is to prevent tax evasion. The treaty sets out information-sharing mechanisms under which the Canada Revenue Agency can approach tax authorities in each of the three countries and request information on any taxpayer suspected of failing to meet their tax obligations in Canada. So there is a mechanism in place insofar as the agency has good reason to believe that Canadian taxpayers are not complying with Canadian tax laws. The agency can approach each of these countries. The government's policy is expected to include the most recent version approved by the OECD on the exchange of information. That is an important objective of tax treaties.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Could the bill solve the tax evasion problem in the three target countries completely? If not, can we say that it will solve just a part of the problem? That would still be worthwhile. Is further progress on this issue anticipated?

[Alain Castonguay]

That is a good question. Tax evasion is difficult to counter precisely because it is a covert practice. So we do not necessarily have information on that. The treaties give us the ability to approach another country when we have reason to believe that the government or institutions in that country have information pertaining to the administration of taxes in Canada. I cannot say that it is the complete and total solution, but it is certainly an important tool that will make the job of the Canada Revenue Agency easier.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Good, thank you.

[The Chair, Conservative, James Rajotte]

Mr. Pacetti, please.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chair.

I have two brief questions. First, is this the first time we are signing an agreement or treaty with these three countries?