Finance Committee on Nov. 17th, 2025

[Julien Martin]

In general, Statistics Canada has a relatively restrictive policy when it comes to corporate data. For example, take the foreign direct investment data presented by Professor Loomer earlier. Certainly, the data exists, but the income generated by corporations in tax havens is not public. I have tried to get it, but that data is not public. It is only aggregated among several countries.

That is a signal that Statistics Canada has trouble disclosing this type of data. But that institution collects the data, because it is bound to do so via the country by country reporting. Making that data public would be a first step. However, it is up to Parliament to make it so that data is public. We have the data, but we need the political will to make it public.

[Sandra Cobena, Conservative, Newmarket—Aurora, ON]

With that, of course, there is no transparency for Canadians in these aggressive tax avoiders. That would be helpful, even when making legislation to be able to address that issue.

What level of—

[The Chair, Liberal, Karina Gould]

I'm sorry, Ms. Cobena. That's the time for you.

[Sandra Cobena, Conservative, Newmarket—Aurora, ON]

Okay, thank you.

[The Chair, Liberal, Karina Gould]

Thank you very much.

I'm going to turn it over now to Mr. MacDonald for five minutes, who I understand will be sharing his time with Mr. Sawatzky.

[Kent MacDonald, Liberal, Cardigan, PE]

Thank you.

Thank you to the witnesses today.

I have a question for Professor Loomer.

You mentioned that Parliaments in the past have failed to introduce changes to the Income Tax Act, and you identified the Income Tax Act as being the most effective way to bring about change in reducing tax avoidance. If Parliaments continue not to be able to change the Income Tax Act, do you feel tax avoidance is going to increase, stay flat or decrease because of some of the international efforts?

[Geoffrey Loomer]

I think the current international efforts, over the last 10 years, are reducing the various strategies that one could use to avoid Canadian tax. There has been progress—without getting all legalistic—with the anti-hybrid rules, the excessive interest limitation rules and some of our rules on so-called treaty shopping when we're talking about the inbound side. Through those multilateral efforts, prompted by the OECD BEPS project, and some of our own, there has been progress.

The global minimum tax, again, is progress. I agree with the other commentators that it's not perfect, because we've been forced, one would say, to allow the U.S. to have this side-by-side system of their own, the so-called GILTI rules, and of course OECD pillar one, to have a source-based tax on digital services, has just been jettisoned in Canada because of pressure from the United States.

There has been progress. It's come from international co-operation. I think the global minimum tax, if we can really get there, with a 15% floor, doesn't eliminate tax competition, of course, but it makes moving your profits to Bermuda and paying zero impossible. Bermuda has introduced a corporate tax of 15% on some multinationals to respond to that.

I think there has been progress, but yes, the fundamental system still has problems.

[Kent MacDonald, Liberal, Cardigan, PE]

Okay, thank you.

I'll turn it over to MP Sawatzky.

[Jake Sawatzky, Liberal, New Westminster—Burnaby—Maillardville, BC]

Thank you.

Thank you, Mr. Loomer.

I just have a few more questions to build on what you mentioned in your introduction.

You mentioned that the most substantial issue was the law itself, so I was just wondering if you could touch on a few things that the Government of Canada has taken steps on, such as adopting the OECD common reporting standard, developing the federal beneficial ownership registry and increasing the CRA audit capacity. Could we build on these steps to increase the strength of tax laws?

[Geoffrey Loomer]

Yes, I think all of those are good developments.

My colleagues on the panel have talked about CBC—country-by-country—reporting, and certainly we've had that in Canada since 2016, but they're quite right that it's not public. I understand the privacy concerns about that, but other countries are doing it, so maybe we'll move in that direction. I guess I don't have strong views on that.

Reporting on beneficial ownership is important. These sorts of moves toward transparency are good. If your offshore structures are legitimate and you say, “Look, everything is consistent with the text, context and purpose of the law,” then you shouldn't be worried about sharing the information.

I understand the privacy concerns and not wanting your competitors to be reading through all your financial statements and your amount of tax paid, but those information-sharing efforts are a positive thing, both on the evasion side and on the avoidance side, so that is progress.

[Jake Sawatzky, Liberal, New Westminster—Burnaby—Maillardville, BC]

Thank you.

Perhaps you could summarize what your suggestions would be, in a general sense, for increased tax laws.

[Geoffrey Loomer]

There are many. We certainly have, as I mentioned, a variety of specific anti-avoidance rules, and those have been increased.

Tax laws are very complicated, and reading them is difficult. Trying, as much as we can, to make those simpler would be a good thing, but it's challenging, and I know that. It's easy to say, “Let's make them simpler,” but you're dealing with complicated international structures.

Underlying it, our exemption system favours Canadian-based multinationals. Here's the best analogy I could give: You say the speed limit in your neighbourhood is too high at 60 kilometres per hour and you decide to pass a law to reduce it to 40 kilometres per hour, but you say that for someone who drives a Canadian-made automobile it is unlimited. So—

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Loomer. I'm sorry, but we're going to have to end it there for time.

Thank you, Mr. Sawatzky.

Mr. Garon, you have the floor for two and a half minutes.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Thank you, Madam Chair.

Mr. Meinzer, subsection 5907(11.2) of the income tax regulations provides a tax exemption for income that is repatriated from zero or low-tax jurisdictions, provided that an agreement for the exchange of information is in place, even where no active business is carried on in those jurisdictions. Essentially, a corporation is exempt from tax if it is honest enough to tell us that it is swindling us. That is what I understand.

Could you tell me why provisions like these exist when your organization has estimated the revenue shortfall associated with the tax gap for Canada to be $8 billion or $9 billion dollars per year? Why would we not simply repeal that provision?

I see Professor Loomer smiling, so I will let him answer my question as well.

[Markus Meinzer]

Thank you very much for the question. Was it for me or for Mr. Loomer?

[Jean-Denis Garon, Bloc, Mirabel, QC]

You can answer first, and I will then ask Professor Loomer.

[Markus Meinzer]

Thank you very much.

I think the reason for this is the widespread belief that lowering taxes would, in the end, increase economic activity and attract greenfield investment—the kinds of things that everybody wants, like new factories, new research and new jobs.

However, what we see in the data over the last decades is that what you achieve by lowering your taxes and exempting, for example, foreign dividends as part of that policy is that you attract, at best, profit-shifting activities, which is phantom investment. The IMF is calling “phantom investment” a good share of the global FDI data that is not made up of what we usually believe is the greenfield investment, but it's mergers and acquisitions or it's loaded onto companies, which will then reduce the tax base and therefore erode the tax revenues.

What I think is a policy to attract investment has been followed by Germany, for example. They also exempt the foreign dividends when repatriated. I think you should switch this to a credit system that is a simple policy. Many countries have this in place. It's safe. It still ensures that you are not double-taxing any multinational activity, whether it's abroad or domestic, so you treat equally the economic activity whether it's here or elsewhere. I also think switching from dividend exemption, even if subject to certain conditions, like a treaty or something in place—

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Meinzer.

Time is up.

[Jean-Denis Garon, Bloc, Mirabel, QC]

I have a point of order, Madam Chair: I ask for unanimous consent to allow Professor Loomer one minute to answer this question.

[The Chair, Liberal, Karina Gould]

Do we have UC to allow one minute?

Then we'll need to have UC to extend the meeting for a couple of minutes.

[Some hon. members]

Agreed.

[Jean-Denis Garon, Bloc, Mirabel, QC]

It's just for one minute.

[The Chair, Liberal, Karina Gould]

Okay, you have one more minute.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Professor Loomer, you have one minute to answer.

[Geoffrey Loomer]

Thank you.

There are things we have done, like the enhanced general anti-avoidance rule and other, new rules.

There was a report just last month from the OECD about the progress of the BEPS project in the last 10 years. It quotes a lot of good economic data, mostly by European economists. It shows there has been progress. If you look at the ratio of profits to employees in a jurisdiction, it's better. It's not perfect, but it's better than it used to be, which means you have less profit in places where it's just a letterbox with no employees. That's a positive change.

What else could Canada do to improve its system? If we want to stop or limit the use of low-tax jurisdictions, the global minimum tax will help, but....

I could send draft amendments for the Income Tax Act on paragraph 20(1)(c) on interest deductibility or paragraph 95(2)(a) on income characterization of foreign affiliates, but it won't be adopted.