Thank you, Mr. Chair.
In Bill C-29, the government is eliminating a series of small tax loopholes. For instance, SMEs were recording one deduction twice, and small savers reported the income from stripped coupons as capital gains. However, Bill C-29 has failed to eliminate the biggest tax loophole, which is the use of tax havens. I suppose that was just forgotten, hence this amendment.
Those who followed the debate concerning motion M-42 on tax havens, which I introduced, know this: the use of tax havens is due to the regulations that exceed the scope of the law and of treaties. Amendment BQ-1 does not really change the laws, and scrupulously respects fiscal treaties. It only repeats what is in the Income Tax Act, but does it in a direct way that makes it very clear that certain tax regulations are illegal.
Subparagraph (ii) reiterates that in order to be tax exempt, income derived from a foreign branch must be covered by a tax treaty. Through this clause, Parliament will invalidate paragraph 5907(11) of the Income Tax Regulations. In those regulations, the government discreetly exempted from taxation income generated in 22 tax havens with whom we had not even concluded tax treaties.
As for the third paragraph of amendment BQ-1, it repeats word for word what clause XXX of the tax treaty with Barbados says. If businesses open branches in Barbados to avoid paying tax, they will simply not be covered by the treaty.
However, unfortunately, the government again discreetly adopted a regulation to exempt them from paying tax, despite what the law and the treaty said. I am referring to paragraph 5907(11.2) of the regulations. These two provisions may well be illegal. By adopting this amendment we will say so clearly, and this will invalidate them. For the five big banks alone, we are talking about $6 billion a year that will stop going up in smoke.
Thank you, Mr. Chair.