Thank you, Mr. Chair.
Good afternoon, Mr. Minister.
Mr. Minister, I would like to draw your attention to one point in the mandate letter that the Prime Minister issued to you. It reads as follows:
Modernize anti-avoidance rules to stop large multinational companies from being able to shop for lower tax rates by constructing complex schemes between countries.
When I read that, I gather that it is about something immoral being made illegal, namely the legal use of tax havens by large companies. I am referring to what the IMF calls offshore financial centres. In those countries, companies pay no taxes, or they pay peanuts, and then they use the principle of non-double taxation in order to pay nothing here. That is one example of a complex tax scheme and, for me, it is so unfair as to be despicable.
In Canada, two paragraphs in section 5907 of the Income Tax Act Regulations make this scheme legal. The first is paragraph 5907(11.2)(c), which specifies that the exclusion of companies that enjoy a special tax benefit in Barbados simply does not apply. It invalidates article XXX of the treaty between Canada and Barbados. As a result, despite what the treaty says, despite what the legislation says, Canadian companies will be able to repatriate the profits from their affiliates in Barbados without paying tax.
In 2009, in a schedule attached to one of the mammoth budget implementation bills, the government included a section called "tax credit for medical expenses". It had nothing to do with a tax credit and contained a proposed amendment to the Income Tax Act Regulations that had nothing to do with medical expenses. Subsection 5907(11) in the Income Tax Act Regulations was amended to specify that, although information exchange agreements are not treaties, and although the Income Tax Act exempts only income and companies protected by treaty, income is exempted if it comes from a country with which Canada has entered into a comprehensive tax information exchange agreement.
It was put into effect retroactively, as of 2007. We therefore ended up with 22 new tax havens, and another three have been added subsequently. For example, in the last Parliament, Grenada was added, where the income tax rate is 0%. As it is 0%, the country does ask companies to provide an annual report or declare its income. So no information can be found. This is just so the provision can be used.
Here's what I want to ask you: in order to address that point in your mandate letter, do you plan to drop those provisions in the Income Tax Act Regulations that allow tax havens to be legally used? If so, can we expect to see that in the budget?