Good morning. Thank you for the invitation. It's a privilege to be here today to talk about the merits of Bill S-17.
I do not support Bill S-17 because it represents an additional step toward the implementation of a global tax system where wealthy corporations or individuals can legally benefit from tax havens and avoid paying their fair share of taxes.
With the support of tax-optimization strategies, the Canada-Hong Kong tax treaty, for example, which Bill S-17 refers to, enables the legalization of a partially or totally tax-free corridor between Canada and a number of Asian countries.
This tax privilege does not come under the specific sections of the treaty, but relates to the simple fact that the Canadian tax system doesn't tax income from subsidiaries of Canadian multinationals in countries with which Canada has signed a tax treaty or an agreement to exchange tax information.
Given that the corporate tax rate is 16.5% in Hong Kong and about 25% in Canada, the Canada-Hong Kong treaty does more than avoid double taxation. It provides a 40% savings to Canadian multinationals that will export revenue to Hong Kong.
In addition, tax plans are already being developed to legally increase this 40% tax savings to a total tax exemption.
In a recent special report presented by Tax Analysts, an international think tank intended mainly for tax practitioners, the renowned Montreal tax specialist, Nathan Boidman, explains that revenue made in Hong Kong could be 100% exempt from Canadian and foreign taxation when subsidiaries set up in Hong Kong collect interest income, earnings gained from licensing or when corporate structures set up in Asia include a number of jurisdictions and where the revenue only passes through Hong Kong.
Thousands of tax agreements similar to the Canada-Hong Kong treaty currently exist between countries, so much so that they are being manipulated strategically. It is now legal for the world's wealthy corporations to pay 2% tax, if not no tax.
To compensate for the erosion of the tax base caused by this tax exemption for revenue exported legally to tax havens or jurisdictions that are taxed less, other taxpayers, the workers, the SMEs, major corporations here, all these immobile taxpayers are the ones who have to pay. And if they try to partially or totally avoid paying Canadian tax by using tax havens, like the wealthy corporations or individuals do, it is considered illegal for them. Moreover, as indicated in the various provisions of Bill S-17 relating to the exchange of information, the Canadian government is serious about its mission to corner those offenders.
I do not support Bill S-17. However, I wonder if the effort made to implement these bills or even to contest them is the optimal way of stopping the implementation of this preferential tax treatment reserved for the wealthy. I might invest as much of our limited resources as possible in trying to replace international tax competition, which is the very essence of our current global problem, with some tax co-operation.
Thank you for your attention. I would be happy to answer any questions you may have.