Finance Committee on Nov. 8th, 2017

[Bill Morneau, Liberal, Toronto Centre, ON]

As I said, we think it's important to make sure that our system works. We have a small business rate that we think will be hugely advantageous for small businesses to invest in their active business. At the same time, we want to make sure that we don't create a deferral opportunity for people in those companies that's not related to the active investment in their business, or for that matter, related to their legitimate needs to perhaps take maternity leave or build up retirement because the RRSP system doesn't work effectively for them, given their needs to invest in their business.

[Pierre Poilievre, Conservative, Carleton, ON]

You don't know if it's $50,000 per company or $50,000 per shareholder.

[Bill Morneau, Liberal, Toronto Centre, ON]

I'm pleased to continue.

[The Chair, Liberal, Wayne Easter]

Go ahead. The floor is yours.

[Bill Morneau, Liberal, Toronto Centre, ON]

Our goal in doing that was to put in place a measure that would limit the amount per company that people would be able to—

[Pierre Poilievre, Conservative, Carleton, ON]

Oh, it's per company.

[Bill Morneau, Liberal, Toronto Centre, ON]

—keep passively inside their business for potential future investments or for their retirement. We will be releasing more complete details about this in our budget 2018 so there's absolute clarity for businesses moving forward. We know we've created an opportunity for people to invest in their businesses at a good rate, and to have the ability to save for their long-term needs at the same time.

[The Chair, Liberal, Wayne Easter]

This is your last question.

[Pierre Poilievre, Conservative, Carleton, ON]

I think the minister may have accidentally answered the question at a brief moment during his last statement. He seemed to suggest it was $50,000 per company. That means that in a situation that is relatively normal, in which, say, 10 shareholders jointly own a small business, whether a restaurant or a landscaping company, they'll only have $5,000 per shareholder, per business owner, in passive income before his new double taxation takes effect on those people.

Does he really think it's fair to hit people who are earning only $5,000 per year in passive income with tax rates that are far higher than would be paid by, say, Morneau Shepell, on its passive income?

[The Chair, Liberal, Wayne Easter]

That's your last question, Mr. Poilievre.

Mr. Minister.

[Bill Morneau, Liberal, Toronto Centre, ON]

We know that getting our economy going means we need to continue to enable small businesses to invest in their business. We also need to make sure they have the capacity to save for things they might need to save for, whether for retirement or maternity leave. Creating that balance was important to us. What we've done by lowering the small business tax rate is that we've given the opportunity for small businesses to invest more. What we've done for a company as well is that we've given them the capacity to save passively for those eventualities. Of course, any active investments will continue to be at that low rate. We will provide absolute clarity for people in budget 2018.

For those 85% of businesses that don't have any passive investments, of course, they are not thinking about this right now, but for all businesses we want to make sure that they have the capacity to invest at the small business rate, save appropriately, and continue to create success for themselves and their families.

[The Chair, Liberal, Wayne Easter]

Mr. Dusseault.

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

Thank you, Mr. Chair.

Minister and Mr. Rochon, thank you for being here.

Since we are talking about the budget today, we also have to talk about income. I am referring to the Income Tax Act, which falls under your authority. Bill C-63 includes dozens of pages of amendments to the act.

I'd like to ask you about Canadian direct investment abroad. Among the top 10 countries where Canadians invest the most, Barbados ranks third, Luxembourg ranks fourth, the Cayman Islands ranks fifth, Bermuda comes in six, the Netherlands is seventh, and, the Bahamas is in ninth place.

I am especially interested in the third country on the list, Barbados, where Canadians invested $68.3 billion in 2016.

Can you, as finance minister, give us an idea of the type of investments that $68.3 billion represents?

[Bill Morneau, Liberal, Toronto Centre, ON]

Of course, I can't tell you every investment of every Canadian; those are very specific details. I can say, however, that we want to make sure Canadians pay their fair share of taxes. That is very important to us, and that is why, since first coming into power, our government has put mechanisms in place to that end.

We've taken a number of actions, as you know. One of the main things we've done thus far is implement the Common Reporting Standard in Canada. It's a way for us to see accounts held by Canadians in other countries. That is very important.

When did that come into effect, Mr. Rochon?

[Paul Rochon, Deputy Minister, Department of Finance]

It started a few months ago.

[Bill Morneau, Liberal, Toronto Centre, ON]

It's a very significant measure, and it gives us a sense of which places are potentially problematic and how to rectify the situation. We reached an agreement with the OECD to ensure that companies making a profit in Canada pay their fair share of taxes in Canada, and not in some other jurisdiction. That's very important, and the agreement is helping us do that.

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

Mr. Chair, I do not know why the minister is telling me about the fight against tax evasion.

Mr. Minister, I simply asked you about the countries in which Canadians invest. I'm asking you what Canada's economic ties with Barbados and foreign investments look like. Why are you making a connection with tax evasion?

[Bill Morneau, Liberal, Toronto Centre, ON]

That's usually the question I'm asked. That is why I explained that it is important to consider the situation of other countries.

I do not have specific information about investments in Barbados here with me, but I can provide it to the committee later.

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

I would like some of your officials to provide us with an overview of the types of investments made in Barbados. It would be very helpful to know more about that.

Six countries have one thing in common: tax agreements, information exchange agreements or tax treaties. These numbers continue to grow every year. I think that's a good reason to look at tax agreements and tax treaties.

You voted in favour of an NDP motion calling for the review of tax information exchange agreements and double taxation agreements. What is the status of the review? Which agreements or treaties have you reviewed to date? Are Barbados, Luxembourg, the Cayman Islands, Bermuda, the Netherlands or the Bahamas included?

[Bill Morneau, Liberal, Toronto Centre, ON]

We will continue to work with other countries and multilateral institutions to ensure that the BEPS project is working. That's a major undertaking. In fact, it's difficult to look at every investment, but our intention is to get information, in order to monitor the situation and to ensure that companies pay their fair share—

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

Thank you.

I would like to continue on this issue. In my opinion, the BEPS project does not seem to be working very well, since the numbers continue to increase.

You just mentioned that all companies should pay their fair share and that they should be on a level playing field. Recently, your colleague, the Minister of Canadian Heritage, signed a $500-million agreement with Netflix. Netflix continues to be exempt from collecting—I did say “collecting”—the goods and services tax, the GST. It is exempt. I'm not the one saying it. In fact, the Minister of Finance of Quebec has said it again today. This company is exempted by the federal government from collecting the goods and services tax.

Quebec has committed to rectifying the situation and to asking the company to collect taxes, as all the other companies are doing.

Will you commit today to doing the same thing?

The Minister of Canadian Heritage has sometimes even thrown the ball into your court, saying that tax matters are the responsibility of the Minister of Finance.

My question is really for you, Mr. Minister. Do you commit to asking Netflix to collect the goods and services tax, as all other Canadian companies are doing?

[Bill Morneau, Liberal, Toronto Centre, ON]

Actually, there is no exemption. We base our tax decisions on our budget. If the Quebec government decides to do something about it, we will clearly work with them, because we are the system administrator, but we have clearly said that the situation is important for Quebec. So, it's Quebec's decision.

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

Why do you say there is no exemption?

When you buy a product from a Canadian company headquartered in Canada and doing business in Canada, you pay the goods and services tax. Why would a company like Netflix, which sells products and services, not have to collect this tax from consumers? Why do you say there is no exemption?

[The Chair, Liberal, Wayne Easter]

That will be your last question, Pierre-Luc.

Go ahead, Mr. Minister.

[Bill Morneau, Liberal, Toronto Centre, ON]

We explained that we would not go any further with Netflix. However, if Quebec wants to do something, we will work with them, because that is the way our system works.