Mr. Chair, honourable members, thank you for this invitation to appear before you today. I am pleased to be here today to speak to you about Bill S-4, An Act to implement a Convention and an Arrangement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and to amend an Act in respect of a similar Agreement.
My name is Sarah Taylor. As mentioned, I'm the Director General for North Asia and Oceania bureau at what is now called, because we love to change our name, Global Affairs Canada. Given these areas of responsibility, my remarks today will focus principally on the avoidance of double taxation arrangement between the Taipei Economic and Cultural Office in Canada and the Canadian Trade Office in Taipei.
Why is a double taxation arrangement necessary with Taiwan?
Double taxation conventions or arrangements are specifically used to eliminate tax barriers to trade and investment. Canada has an extended network of double taxation conventions, with 92 in force.
Overall, the entry into force of this arrangement will assist to further solidify Canada's strong economic links with Taiwan by removing tax barriers to cross-border trade and investment.
As the Prime Minister said recently at APEC in Peru in November, "Trade and investment with Asia Pacific economies are critical to our country's economic future and to growing our middle class."
Taiwan is Canada's twelfth-largest trading partner and fifth-largest trading partner in Asia. In 2015 our exports to Taiwan exceeded $1.46 billion, and our imports exceeded $5.46 billion. In 2015 bilateral trade grew year on year by over 14%, from $6 billion to $6.91 billion. However, Taiwan is one of the few of Canada's large trading partners not covered by a double taxation convention.
Investment relations between Canada and Taiwan remain underdeveloped, as a result, in the context of Canada's overall inward and outward FDI, or foreign direct investment. According to figures from Statistics Canada, the stock of Taiwanese FDI in Canada stood at $108 million at year-end 2015. By the same token, the stock of Canadian direct investment in Taiwan at the end of 2015 was $115 million. This is partly due to the lack of an avoidance of double taxation arrangement, as many Taiwanese and Canadian companies are forced to make investments through an indirect route by going through a third country that already has an existing ADTA. This is a significant barrier to investment, in our view.
Taiwan clearly offers great potential for Canadian investors: it is a vital link to Asian and global supply chains, especially in the information, communications and technology sector, and is used by many businesses as a test site for products aimed at wider Chinese markets.
We've heard from Canadian and Taiwanese businesses, and they welcome this arrangement, as it will significantly reduce their tax burden and make investing in each other's jurisdictions more compelling. Further, it will support the competitiveness of Canadian companies vis-à-vis companies from other countries that already have a double taxation agreement with Taiwan.
Just very briefly—Mr. Houlden also mentioned it—why has this been concluded as an “arrangement”? In keeping with our one China policy, the arrangement with Taiwan is an arrangement, rather than an agreement, between the Canadian Trade Office in Taipei and the Taipei Economic and Cultural Office in Canada. Canada has arrangements in a wide range of areas with Taiwan—air transportation, agricultural market access, visa exemptions, etc. The arrangement is also consistent with what other countries that have a one China policy have done in their respective double taxation conventions or arrangements with Taiwan. Taiwan has accepted Canada's position to present this instrument as an arrangement.
To conclude, Global Affairs Canada fully supports Bill S-4. It will facilitate trade between and investment between Canada and Taiwan and lead to job-creating investment for our Canadian businesses.
I would be pleased to take your questions afterwards.