Good afternoon, and thank you very much for inviting us.
Most come here asking you to spend more money, whether through tax cuts or increasing spending in particular areas. We're coming here with ways for you to generate more revenue so you can pay for some of those other recommendations. I hope you welcome our suggestions.
As you are well aware, there is much pressure from business lobby groups, including the Business Council of Canada, the Chamber of Commerce, the C.D. Howe Institute, and the Fraser Institute, to respond to Trump's tax cuts with additional cuts for business and high incomes in Canada as well. I strongly urge you not to succumb to this pressure. The reality is that Canada has had declining rates of business investment for the past two decades. Deep cuts to corporate and business taxes have done nothing to stop that, as you can see clearly from the chart included in our submission.
Instead, business tax cuts have contributed to over $700 billion in corporate surpluses, dead money that isn't being reinvested in the economy. More of the same tax cuts that primarily benefit larger profitable corporations will not change this. The tax cuts south of the border are primarily benefiting top incomes and shareholders, with much going into unproductive share buybacks.
I'm also skeptical of the economic wisdom of allowing full immediate expensing of capital investments, for reasons I would be happy to explain later. Instead, we should focus on measures that will improve productivity and competitiveness for all businesses—for example, a national universal comprehensive pharmacare program. This could save employers approximately $4.5 billion annually, not to mention many billions for households as well.
As a top priority, the federal government must eliminate the tax preferences it provides to foreign e-commerce companies at the expense of Canadian businesses, producers and workers. It has been five years since the OECD first identified this as a top priority in their BEPS, or base erosion and profit shifting, action plan. Over 50 nations, including the overwhelming majority of G20 and OECD nations, have adopted rules in accordance with the OECD guidelines. Despite the loss of tens of thousands of jobs and the closure of dozens of media outlets, our federal government has been missing in action on this issue. Why are we giving tax preference to foreign digital giants, the largest companies in the world, at the expense of Canadian businesses, Canadian workers, Canadian culture, and also at the expense of federal and provincial revenues?
We also urge the federal government to take additional specific actions to crack down on international tax evasion and aggressive tax avoidance, consistent with the OECD recommendations. There should be a cap on the interest payments that corporations can expense to offshore subsidiaries, and corporations must be required to demonstrate that their offshore subsidiaries carry out actual economic activity.
The federal government should also invest more in training and technology at the CRA to better combat sophisticated tax evasion, which the Professional Institute of the Public Service has called for.
We were pleased this summer that federal and provincial finance ministers pledged to improve Canada's corporate and beneficial ownership transparency rules, another area where we rank poorly in relation to other G20 countries. Canada is increasingly a destination for money laundering, including through real estate and casinos, with billions lost through tax avoidance. To combat this, we need a publicly accessible registry of the beneficial owners of companies. More details are included in our submission.
We also urge the government to follow through on its election commitment to conduct a wide-ranging review of tax expenditures and cancel unfairly targeted tax breaks. Some action has been taken, which is appreciated, but more needs to be done. Most tax expenditures provide greater benefits for top incomes. Eliminating just a few of these could raise billions in additional revenues and make the tax system fairer.
Finally, we support the federal government's proposal for a national carbon price backstop, but it should be progressive, with measures to ensure that lower and middle incomes are fully compensated for their increased costs, and with border adjustment tariffs so Canadian producers remain competitive.
Thank you very much. I look forward to your questions or comments.