Thank you.
I'll speak in French, but if you have any questions in English, that's no problem.
My name is Samuel-Élie Lesage. I am the coordinator of the Échec aux paradis fiscaux collective, a coalition that includes Quebec unions, community organizations and student associations.We represent the 1.5 million members. As our name indicates, we are working to put an end to the scandal of tax havens, either through citizen education, popular mobilization or co-operation with elected officials.
The use of tax havens by enterprises and individuals is increasing. The data on Canadian DFIs, direct foreign investments in tax havens, are crystal clear. For instance, from 2010 to 2017, Canadian DFIs in the Cayman Islands increased by 179.8% and those in Bermuda during the same period increased by 357.5%. It is likely that these investments are not being made to fund the real economic activities in those countries, but to reduce taxes paid here. We also know that in the main, large businesses and wealthy individuals are the ones who use tax havens. Finally, recent media revelations in Canada regarding tax havens, such as the Paradise Papers, Panama Papers, the KPMG affair, and many others, have undermined the population's confidence in Canadian tax authorities, and also, more broadly, in the tax regime in its entirety.
To re-establish the confidence of the population in the Canadian tax regime, but also to restore fairness among all taxpayers, individuals and corporations, it is essential that the issue of tax havens be tackled seriously. For some years, the Canadian government has responded to the growing indignation by making a few legislative adjustments and by cooperating with OECD countries on base erosion and profit shifting, or BEPS. That is good, but it is nevertheless clearly insufficient. The government has to make significant legislative changes to prevent businesses and wealthy individuals from using tax havens to avoid paying tax, and to put an end to the banking secrecy that protects offshore investments.
In keeping with the theme of these consultations, there are three reasons behind our arguments. First, if public services and social programs are to be funded adequately, taxes must be remitted in full, as they fund a large part of public services. These services make it possible to train and care for competent, highly qualified workers who have considerable spending power, which is of course advantageous for the growth of businesses. Public services also reduce socioeconomic inequality and mean that all citizens can be integrated into social, political and economic life. Increased revenues will allow the state to conduct structuring projects and to maintain and modernize infrastructure. In short, public services that are well funded by tax contributions that are fully paid are conducive to sound economic activity and social justice for all.
Secondly, we have to re-establish trust in the fiscal regime. Fighting against tax havens will contribute to restoring the confidence of the population and small businesses in the Canadian tax regime. That confidence is currently being shaken by the fact that affluent individuals and businesses are taking advantage of unacceptable largesse. The population has understood that funding public services rests increasingly and unfairly on its shoulders. The Canada Revenue Agency feels that it has made important efforts to track tax fraud. Unfortunately, that is not the public's impression of the CRA's efforts. Much more needs to be done to recover the large amounts of unpaid tax, give the CRA the necessary means to enforce compliance with tax laws, and restore public confidence in those institutions.
Thirdly, guaranteeing tax equity is a prerequisite for healthy competition. The fight against tax havens is thus equally necessary to restore fiscal equity among all businesses. That fairness is currently absent because the Canadian businesses that do not use tax havens have unfair competition from the ones that do. To that, I would add that the issue of unfairness in the digital sector and e-trade no longer needs to be proven. The Canadian government's lack of action in this sector is, unfortunately, deplorable.
What to do? What potential solutions must we examine? Last February, the Collectif submitted various suggestions to the CRA. They are in fact included in the document we have given you. We are pleased today to have the opportunity to do the same at these pre-budget consultations.
To wage a more active battle against the use of tax havens, Canada can and must, among other things, create a public registry of the true, ultimate beneficial owners of companies; consider new forms of income tax to counter the erosion of tax bases, for instance, like the U.K. Google Tax; prevent the tax free repatriation of profits generated by a company in Canada when it is no longer subject to tax or is very lightly taxed in the foreign state; review or abolish the tax treaties and tax information exchange agreements, TIEAs, with well-known tax havens, such as Barbados; and significantly increase the resources allocated to the CRA for the monitoring of abusive tax optimization strategies. Those are only a few examples, and that is not an exhaustive list.
In short, the tax laisser-faire which prevails in Canada is hindering the growth of enterprises that comply with tax rules, to the advantage of the large actors who have the means to abuse those laws. It undermines the confidence of citizens in the tax regime and undermines the state's ability to provide quality, accessible public services. All of these elements are, however, necessary if we are to have an economic growth system.
The fiscal status quo is no longer acceptable. We are simply asking the Canadian government to ensure that its tax laws are equitable, and are complied with by everyone.
Thank you.