Finance Committee on Feb. 16th, 2021

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Perfect.

One thing the Liberal Party has raised as a criticism is that if these negotiations are successful, it would call on Quebec to enter into new tax treaties with every single country we have a tax treaty with right now. I would like, on friendly terms, to give you an opportunity to respond to that criticism.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you for the question.

Indeed, this question is often raised when it comes to international tax treaties. I want to remind the committee that this is a fairly common procedure. It's an amendment to the existing treaty. There is no question of drafting or concluding new treaties. It's an amendment by exchange of letters, which is a very common process.

Barbados does not have the mandate to interpret the Constitution and laws of Canada. It is the government that is going to tell it that it will be the Canada Revenue Agency, for example, that will have the right to exchange tax information. In this case, it could be Revenu Québec.

An agreement between Quebec and Ottawa would limit the power of Revenue Québec to Quebec taxpayers.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

I'll follow up on one comment you made in your opening statement. You said that it might give Quebec the ability to close loopholes that the federal government is currently allowing in terms of tax havens. I'm a little bit confused by that, to be honest, because we can't really change the legislation or the tax. As you said, we're just going to amend those tax treaties.

How is the Province of Quebec going to enforce things that the federal government cannot?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Quebec will do it by simple political will, if I can put it that way.

Let's take the example of the taxation of the Web giants. Quebec has started to do it, and it works well. Similarly, if Quebec chooses to do more investigations of Quebec residents who use tax havens illegally, Revenu Québec could obtain the information directly. The Canada Revenue Agency has the power to do so at this time, but the government is being lax in this area, so not much progress is being made on the file. One can think of the leak of confidential documents—the Panama Papers or the Paradise Papers. Every country has gone looking for cases, but Canada has done nothing, due to a lack of political will.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you.

Do I have any time left, Chair? Can I give that last time to my colleague, Mr. Berthold?

[The Chair, Liberal, Wayne Easter]

Yes, you can.

You have time for one question, Mr. Berthold.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

I just wanted to reassure Mr. Therrien. We are in favour of a single tax return. Otherwise, we would not have been in favour of the committee studying this issue and we wouldn't be here talking about it.

However, we have concerns about the intentions of the bill. Mr. Ste-Marie's last quote was about Québec solidaire and the single tax. The single tax and the single tax return are two very different things. Mr. Marissal, from Québec solidaire, wants Quebec to manage federal and provincial taxes alone, which we strongly disagree with. What we want is for Quebeckers to be able to file a single tax return and for there to be an administrative agreement between the two governments in this regard. We don't want this to touch on treaties. That's where the nuance lies.

If we are going to go further and pass this bill, I would like Mr. Ste-Marie to be much clearer about the intentions of the bill. Do we want Quebeckers to fill out only one tax return, and federal employees to continue working at the Canada Revenue Agency, or do we want to take control of income tax, which is a completely different option?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

The bill talks about an agreement between Quebec and Ottawa, a single tax return and a single window. Businesses are currently accountable to Revenu Québec and again to the Canada Revenue Agency. Can this duplication be stopped? This will require negotiations between Quebec and Ottawa.

[The Chair, Liberal, Wayne Easter]

Thank you, all.

We'll now go to Ms. Dzerowicz, who will be followed by Mr. Therrien.

Ms. Dzerowicz, go ahead.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair.

I'm just going to turn up my volume, pump up the jam, as they say.

Thank you so much, Mr. Ste-Marie. Thank you for your presentation today.

Mr. Lawrence actually started on the track that I was going to go on.

In your original comments, when you introduced this bill in the House, you talked about how this law would enable Quebec to fight more effectively against the use of tax havens. For the record, I want to dispute your next comment here, that Ottawa is dragging its feet in that regard.

I will tell you that Davenport residents, the people of my riding, really care about people paying their fair share of taxes. They get very angry when they start hearing about tax havens. I will tell you that I was very proud of our government for putting over $400 million, I believe, within the first year of our being in office, to fight these tax havens and to fight those who are trying to avoid paying their fair share of taxes. We've actually increased it to over $1 billion now. We did that, Mr. Ste-Marie, because it has actually been effective. I know the Minister of National Revenue is very passionate about this issue, and I don't want to do a disservice to her and the amazing team of people who are working very hard on this.

I didn't hear an answer in terms of how Quebec is going to be more effective on its own against the use of tax havens. Perhaps I'll give you a few minutes to tell me how you think you can be more effective, and then I have another question for you.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Fine, thank you.

If we look at what Canada is doing to combat the use of tax havens, both the illegal part and the legal part that should be illegal, or if we compare it to the United States, European countries and other countries around the world, we see that our country is doing poorly, unfortunately. I repeat that it is dragging its feet and that it is a dunce in this area.

The problem goes back a few decades, and it is not unrelated to the role of finance ministers. Take the example of Mr. Paul Martin. While he was finance minister, his personal company, Canada Steamship Lines, was doing business in Nigeria. When the law was amended, that company was transferred to Barbados. Was it in his interest to stop using Barbados as a tax haven? He was taking advantage of it himself.

The former Minister of Finance, Mr. Morneau, for whom I have great respect, owns a family business. Even today, the company's website mentions that it can advise an insurance company or a pension fund administration company, for example, on how to make good use of tax havens so as not to pay taxes here. In Toronto, the big Bay Street banks all have subsidiaries in tax havens. Reducing their tax liability saves them a lot of money.

As far as I know, the banking sector is immune to foreign competition and it is very lucrative. Every quarter we see record payments. I'm proud of this system because it's very stable. Although I prefer the Quebec model of the co-operative, it's a good system, especially internationally. However, why allow such practices? It's the amalgamation of Canada's economic and political forces.

To get back to your question, currently, if Revenu Québec suspects a fraudulent user of doing business in tax havens, it is not able to confirm the information because the information it wants to obtain is kept by the Canada Revenue Agency; further, it does not receive a message from the federal government recommending that it respond to this request or intervene.

At the end of the day, Canada is doing very poorly in the fight against tax havens around the world. That needs to change.

[The Chair, Liberal, Wayne Easter]

You have time for one more question, Ms. Dzerowicz.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thanks so much, Mr. Chair.

I will share this. I think this has come up a few times just in terms of the potential for the loss of jobs. As you know, our federal government is always ready to work to simplify the lives of Quebeckers and all Canadians, but we're not aligned with the single provincial form. I think what I'm hearing you say is that if this were allowed to happen in Quebec, we'd be more efficient and there might be some impact on jobs, but you would rely on the federal government to save those jobs, even though they don't believe in the single provincial form and they don't think it will make us more efficient.

Is that what you're trying to say, that even though there might be an impact on jobs, it's up to the federal government to actually save those jobs in Quebec?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

I would say these two things.

It's a fact: workers are doing the same job twice and that creates duplication of work, which the bill wants to eliminate. However, this may threaten jobs. By the same token, I recognize the importance of providing jobs in the regions.

First, negotiations must be undertaken with the Quebec government. Many of these jobs may well move to Revenu Québec, and they would be subject to the terms and conditions of the relevant collective agreements. This is a possibility that should be considered, if it satisfies the parties involved in the negotiations and if it suits the employees.

Given that the public service is understaffed and centralized in Ottawa, doesn't the government have the ability, the opportunity and the desire to say that these are important jobs for the regions? Agency employees could be assigned to other duties or offered work in another department. This would send a strong signal.

The excellent research paper provided by the Library of Parliament on this bill notes that 11% of Canada Revenue Agency jobs are in Quebec, even though the province accounts for a quarter of the population. So we see that we are not getting our fair share. The same is true for the public service as a whole.

In my opinion, if the government does more decentralization, it will be possible to maintain the number of jobs. This subject is particularly close to my heart.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

We're turning to Mr. Therrien, who will be followed by Mr. Julian in two-and-a-half-minute rounds.

[Alain Therrien, Bloc, La Prairie, QC]

Thank you, Mr. Chair.

Mr. Ste-Marie, we have an extraordinary advantage, in this case the GST and QST, an area of taxation that is akin to a small laboratory. There is only one tax collector instead of two, saving $145 million a year. Each government puts $72.5 million in its pocket.

I would like you to explain how it works. If Quebec collects the GST and QST, does the federal government have the right to raise or lower the GST as it sees fit?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Yes, absolutely. Simply to make life easier for companies, there is a single point of contact, hence the harmonization. Ottawa retains full sovereignty over taxation, but Revenu Québec is responsible for collection. As you said, this saves some $145 million, or $72.5 million per government, which is not insignificant.

[Alain Therrien, Bloc, La Prairie, QC]

No one has ever challenged this or wanted to go back. It was a good idea, wasn't it?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

The implementation process was a bit long, but once we got there, no one wanted to go back. I think the same will be true for the single tax return.

[Alain Therrien, Bloc, La Prairie, QC]

So you propose that there be one tax collector, but two autonomous tax policies. The federal government can do what it wants with the taxes, but it tells Quebec precisely how to get the money out of taxpayers' pockets. Do I understand correctly?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Yes, absolutely. In addition, Revenu Québec will forward the relevant information to the Canada Revenue Agency regarding all possible payments.

[Alain Therrien, Bloc, La Prairie, QC]

The federal government is therefore not losing its fiscal autonomy. Is that right?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Entirely correct. This is not what the bill is about.

[Alain Therrien, Bloc, La Prairie, QC]

I talked earlier about 5,300 jobs, 2,332 of which would be used to continue collecting taxes. In other words, 2,968 workers would be available and paid by the federal government to perform other tasks. That is my understanding.