Thank you, Mr. Chair.
Ladies and gentlemen, Canadians, my name is Brigitte Alepin. I am a Tax Expert, tax policy specialist, author, and scriptwriter.
Since I was invited on short notice, I will focus on my analysis of the agreement with Hong Kong. I also looked briefly at the agreement with Taiwan. Here are what I consider the most important findings of my analysis.
Since the corporate tax rate in Hong Kong is 16.5%, there must be an agreement to avoid double taxation of the corporate revenues of Canadian businesses in Hong Kong. However, since Hong Kong is a special case, where interest income, dividends, and capital gains are not taxed, and there is no tax deduction at source, we might expect that this convention between the two countries would reflect this, which does not appear to be the case at all right now.
Moreover, the proposed amendment in Bill S-4 must be considered in the context of the existing convention with Hong Kong. The bill provides as follows:
[...] references to a “country” or a “state” are, with such modifications as the circumstances require, to be read as including the Hong Kong Special Administrative Region of the People’s Republic of China.
Does that mean that, without Bill S-4, the current agreement between Canada and Hong Kong is not operative? In fact, the terminology used in the bill is not consistent with that used in the Income Tax Act, the Income Tax Conventions Interpretation Act, and the Income Tax Regulations.
Moreover, in Canada, all tax conventions are covered by the prevailing domestic legislation, pursuant to the Income Tax Conventions Implementation Act, 1999. Is this terminology legally appropriate in view of the latter act?
It would be helpful to have a clear answer to this question because, if the amendment proposed in Bill S-4 makes the tax convention between Canada and Hong Kong operative whereas it is not really at present, that means that the amendment proposed in Bill S-4 would be more important than a mere administrative adjustment. In that case, the issues involved would be more complex.
I know that the trade relationship with China is very important to Canada. Bill S-4 simultaneously approves tax conventions between Canada, Hong Kong and Taiwan. In the present circumstances, I think we should be concerned about how China would interpret this action by Canada in the era of the Trudeau government.
As to the added provisions specifically included in Bill S-4 regarding the convention with Hong Kong, I also wonder about the impact of the tax convention with Hong Kong that Prime Minister Stephen Harper himself signed on November 11, 2013. The world has changed since then in terms of taxation and politically. While the tax convention with Hong Kong is open and certain changes are being made to it, Canada should perhaps consider using the opportunity to make sure the agreement complies with the international commitments Canada has made since November 11, 2013.
Consider for example the automatic sharing of information. The current agreement and its protocol provide for the sharing of information at the request of tax administrations only, which runs counter to the commitment Canada made in 2015 to measures for the automatic sharing of tax information and the statements by the Minister of Finance, Mr. Bill Morneau, with regard to information sharing.
That concludes my presentation. I will be pleased to answer all of your questions.
Thank you.