Certainly. That would be fine.
Again, we are here to talk about Bill S-4, which includes two new or revised income tax agreements with other jurisdictions.
Canada actually has one of the most extensive networks of income tax treaties in the world, with 92 treaties currently in force. Of course, there's an ongoing need to update and modernize our network of tax treaties with foreign jurisdictions. That's essentially what Bill S-4 proposes to do with respect to two jurisdictions.
The first part of the bill is a convention between the Government of Canada and the State of Israel for the avoidance of double taxation and the prevention of fiscal evasion with respect to income taxes. The second portion is an arrangement, so-called, between the Canadian Trade Office in Taipei and the Taipei Economic and Cultural Office in Canada for the avoidance of double taxation and the prevention of fiscal evasion. The bill would also amend the Canada-Hong Kong Tax Agreement Act, 2013, in order to add to it, for greater certainty, an interpretation provision.
There is currently no double taxation arrangement between Canada and Taiwan, although it is a significant trading partner for Canada, ranking as our fifth-largest trading partner in the Asia-Pacific region and twelfth worldwide in 2015. In keeping with Canada's “one China” policy, the double tax arrangement with Taiwan has been concluded as an arrangement, as I say, between the Canadian Trade Office in Taipei and the Taipei Economic and Cultural Office in Canada, as opposed to an agreement between sovereign countries. Once implemented, and with the legislation that accompanies the convention or arrangement itself, this bill is intended to constitute a functional equivalent to a tax treaty.
Bill S-4 would also implement a revised double tax convention with the State of Israel to replace the existing tax treaty, which dates back to 1975. This convention has been updated to make it consistent with Canada's current treaty tax policy.
As I mentioned earlier, the double tax convention and arrangement will facilitate cross-border trade, investment, and other activities between Canada and each of its signatory jurisdictions. Our tax treaties are all designed with two general objectives in mind. The first objective is to eliminate tax barriers between two jurisdictions in order to promote bilateral trade and investment. Obviously, removing barriers to trade and investment are paramount in today's global economy. Investors, traders, and others with international dealings want clear information on the tax implications associated with their activities both in Canada and abroad. Equally important, Canadians with business interests or investments abroad want to be sure that they receive fair and consistent tax treatment. It follows that one of the objectives of Bill S-4 is to remove uncertainty about the tax implications associated with doing business, working, or investing abroad.
Bill S-4 would also reduce double taxation and encourage investment by reducing withholding taxes. It would provide for a maximum withholding tax rate of 15% in the State of Israel and the jurisdiction of Taiwan on portfolio dividends paid to non-residents—that is, paid between Canada and Taiwan, or between Canada and Israel. For dividends paid by subsidiaries to their parent companies, the maximum withholding tax rate under these agreements is reduced to 5% in the State of Israel and 10% in the case of the jurisdiction of Taiwan. Finally, on withholding taxes, this bill would also cap the maximum withholding tax rate on interest and royalties at 10% and on periodic pension payments at 15%.
The second objective, generally, of treaties is to prevent tax avoidance and evasion. A key element of Canada's tax treaties is their provisions authorizing the exchange of information relevant to administering domestic tax laws, helping to combat tax evasion. Bill S-4 would allow Canadian tax authorities to do so.
The final point is one on timing. Both of these, the agreement and the arrangement, would apply for the year following the year in which they are brought into force. If the Senate, the committee, and the House of Commons should approve this bill this year, and if it's possible to get the required notices in place between ourselves and Taiwan and Israel respectively, the treaty can have effect beginning at the start of 2017. That would make it important, if it were possible, to have it enacted this year. Failing that, if it should be enacted only sometime in 2017, it would only take effect for the following year.
I'll stop there. Thank you.