Yes.
Evidence of meeting #196 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was barbados.
A recording is available from Parliament.
Evidence of meeting #196 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was barbados.
A recording is available from Parliament.
11:45 a.m.
London North Centre, Lib.
With a complex matter like this, I think we have to proceed in a way where we are addressing things in an incremental approach because addressing the problem with one fell swoop is bound to create all sorts of uncertainties and questions. I don't think you can do it that way.
Can I go back to Mr. Marley?
Bill C-82 is a bill that all parties supported at second reading, which is very encouraging.
What's good about this? What's good about the MLI? I that know you pointed to some concerns that you have with it, but, if I remember from your earlier testimony, you said that you're generally supportive of this bill.
Why are you generally supportive? What's good here?
11:45 a.m.
Co-Chair of Tax Group, Osler, Hoskin & Harcourt LLP, As an Individual
There are two main benefits, I think. The first is that this is a very efficient process for amending tax treaties. This is the first time that the OECD or other countries have done this. Traditionally, Canada does all our negotiations on a bilateral basis. To amend over 70 of our tax treaties would likely take a decade just as a practical matter because it's a very slow process to amend bilateral treaties.
11:45 a.m.
Co-Chair of Tax Group, Osler, Hoskin & Harcourt LLP, As an Individual
I don't want to speak for the Department of Finance on how fast they could get it done, but—
11:50 a.m.
Co-Chair of Tax Group, Osler, Hoskin & Harcourt LLP, As an Individual
It would certainly take a lot longer than this process will take.
The first benefit is the efficiencies. The second benefit is the focus on the other mandatory aspect of this, which is dispute resolution. Even though the binding arbitration is optional, I think anything that we can do to not clog the courts up more than they are now is a good step in the right direction.
11:50 a.m.
London North Centre, Lib.
Right. It's about efficiencies. I'm tempted to ask you about the arbitration element of this. I think it's a really important part, particularly from an efficiency perspective.
I know it's just an estimate, but you talk about it taking 10 years if we wanted to have a bilateral approach. The amount of money, the amount of tax, that could be sacrificed in that period of time is no doubt substantial.
11:50 a.m.
Co-Chair of Tax Group, Osler, Hoskin & Harcourt LLP, As an Individual
It's hard for me to estimate what the amount would be.
11:50 a.m.
London North Centre, Lib.
I have one more minute, if I'm not mistaken, Mr. Chair.
You've hinted at this, but I think it's proper to capture it as I'm summing up here. I always like to look at things from a counter-factual perspective. If we didn't have the bill in place, what would be the results?
I know you're going to talk about bilateral approaches, but we're really dealing with inefficiencies, right?
11:50 a.m.
Co-Chair of Tax Group, Osler, Hoskin & Harcourt LLP, As an Individual
I think that's right. We could always renegotiate any of our tax treaties on a bilateral basis. As you said, if you wanted to negotiate bilateral treaties quickly, that could be done by just having more people within the Department of Finance involved in that function and meeting on an expedited basis with our counterparts.
11:50 a.m.
London North Centre, Lib.
From your perspective, it's a step in the right direction, generally speaking? With the proviso that you do have some reservations, but generally speaking, we're going in the right direction.
What I take from your comments—and this is the last point, Mr. Chair—is that there's more to do. This is an important patch, as Mr. Sanger said, but we are moving in a positive direction.
Thank you very much for your testimony this morning.
11:50 a.m.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
I won't time you this time, Mr. Chair. Wait until in camera.
11:50 a.m.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
On article 17, you mentioned in your opening remarks that you saw some problems with it. Article 17 is one of those reservation clauses, dealing with pricing and the corresponding adjustments that Canada is opting into.
Could you elaborate a little bit more about the problems you have with that particular provision?
11:50 a.m.
Executive Director, Canadians for Tax Fairness
Yes, I mentioned two. There's been discussion about mandatory binding arbitration. That's a concern because these panels meet in secret. There's not much transparency. It puts a lot of the source countries at a disadvantage on that.
In terms of the elements of article 17, it would require other countries to also adopt similar provisions on this, in terms of the relief from what they've called “economic double taxation” from transfer pricing. Some countries will want to opt out of that as well.
11:50 a.m.
Co-Chair of Tax Group, Osler, Hoskin & Harcourt LLP, As an Individual
Could I make one quick comment?
11:50 a.m.
Co-Chair of Tax Group, Osler, Hoskin & Harcourt LLP, As an Individual
I think article 17 is very important to have because it avoids the double taxation that could otherwise happen. If countries are in a dispute as to what the arm's-length price is and then finally agree on what it is, unless you have the corresponding adjustment, you're always going to have double taxation, which is what the treaties are trying to avoid.
11:50 a.m.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
You mentioned that the problem with some of the arbitration is that it's done in secret. It's parallel to the problem of allowing us to opt into the different provisions the government has chosen not to opt into at this point. Equally, with orders in council or cabinet-level decision-making, there are no extensive minutes. The debates are not published. There's simply an order in council, an enumerated number that's published along with the year that says in one line what the decision is about. It doesn't provide a debate.
I'm asking, because it's something, Mr. Marley, that you brought up with some of the other provisions related to permanent establishments—articles 10, 12, and 13—that right now Canada is reserving its position on. In the future, though, by cabinet decision, we could be opted into it. We could withdraw our opposition to it. Then we could go into it without having a parliamentary debate and broader discussion on it.
Is that the right way to go? Should we, then, amend this bill and provide for that parliamentary review of certain optional sections of this international tax treaty—the “tax treaty of tax treaties”, as I called it in debate—or should we just leave it as it is at the cabinet level?
February 7th, 2019 / 11:55 a.m.
Executive Director, Canadians for Tax Fairness
I agree with greater transparency. I think there should be greater transparency both in terms of the arbitration panels for.... Lower-income countries are at a disadvantage. They don't have expertise in that, and I'd absolutely agree about the need for transparency in making changes to the legislation.
This ends up being very complex legislation, and the application of it is complex. You have a number of law firms and highly paid accounting firms that employ their resources to deal with these issues. I think it's extremely important that we move to assist them in a way that is simpler and fairer for all companies. I want to underline the point that it is the larger corporations, in particular, that can most take advantage of these provisions and can afford to hire the higher-priced—
