Thank you very much, Mr. Chairman and honourable members, for inviting Export Development Canada to come and speak to you today. We appreciate your interest in EDC's work as it relates to Canadian exporters and our perspective as it relates to this issue today.
My name is Luisa Rebolledo, and I am the chief representative for Asia at Export Development Canada. EDC is a crown corporation whose mandate is to support and develop trade. This is done by helping Canadian exporters respond to international business opportunities. We provide insurance and financial services, bonding products, and small business solutions for Canadian exporters and investors, as well as their international counterparts.
EDC is financially sustainable and does not receive any appropriation from the government. That's particularly interesting to us, as we paid a $500-million dividend back to the Canadian government. Many Canadian exporters do benefit from EDC. Almost 7,400 Canadian exporters, of which 81% were small and medium-sized businesses, used EDC's services that facilitated $104 billion in trade. As it relates specifically to Taiwan, Taiwan is Canada's eleventh-largest trading partner. If you've been to Taiwan, you understand that Taiwan has a very dynamic economy and has a growing middle class, making it particularly appealing to Canadian companies.
Today I come before you to address the benefits that the proposed arrangement on avoidance of double taxation may have for Canadian exporters and how it will make these exporters more competitive when doing business with Taiwan. I should note that I am limiting my comments specifically to EDC's business and to EDC's mandate, and therefore I will allow my partners here to provide their expertise on other parts of the arrangement.
Current tax laws in Taiwan require borrowers to withhold 20% of interest payable on any loan. Practically, that means that Taiwanese borrowers must withhold 20% of interest and give it to the government. As is customary with most loan agreements, when there is a withholding required, the borrower has to gross up their payments such that the bank receives the full interest they are entitled to. From the borrower's perspective, this increases their costs on the interest by 20%. This very much dampens the competitiveness of a Canadian exporter's bid.
The proposed changes in article 11, paragraph 3(a), of the agreement specifically relate to EDC and EDC's activities as they relate to Taiwan. Essentially, when a loan or a credit is guaranteed or insured by EDC, the taxes payable on the interest are subject to Canadian tax laws. Given that EDC is tax-exempt, no withholding tax would be required on those loans.
In addition to making EDC loans tax-exempt, another key impact of the arrangement will be that many cross-border payments, such as dividends and royalties between Canada and Taiwan residents, will attract lower Canadian tax. In effect, this arrangement should reduce the tax costs of repatriating income or profits from Taiwan to Canada. EDC believes this arrangement will help create a friendlier environment for bilateral investment, especially considering the potential for further co-operation in technology, health care, clean tech, sustainable development, and the services sectors that Canadian companies are particularly strong at.
I would welcome any questions after my panel continues.