International Trade Committee on Nov. 7th, 2006

[A voice]

No.

[The Chair, Conservative, Leon Benoit]

There isn't unanimous consent. Please get on with it, Mr. Julian.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Clause 6 is extremely important. That's why more than three minutes are required to discuss how in this act the current clause is defined. In the current clause 6 it says:

6.(1) For the purposes of this Act, (a) related persons are deemed not to deal with each other at arm's length; and

(b) it is a question of fact whether persons not related to each other were, at any particular time, dealing with each other at arm’s length.

The difficulty here is that we are fundamentally changing the relationship of arm's length, what Canada has always defended as--

[The Chair, Conservative, Leon Benoit]

Have you moved your amendment?

[Peter Julian, NDP, Burnaby—New Westminster, BC]

I am moving the amendment and I am speaking to it.

[The Chair, Conservative, Leon Benoit]

Thank you. That was just for clarification.

Please continue.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you, Mr. Chair. I appreciate your clarifying with me.

Traditionally, Canada has defended the idea of arm's length being defined, even in the case of related persons when they deal with each other, as if they were at arm's length; in other words, when two parties have treated each other as if they were unrelated. That is essentially the issue here. When two parties, even if they are related to each other, deem to deal with each other as if they were unrelated, that should be how we define the question of related or unrelated persons for the purposes of clause 6.

To take the American interpretation--

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Julian, your time is up.

Is there any other debate on the motion?

Ms. Guergis.

[Helena Guergis, Conservative, Simcoe—Grey, ON]

Thank you, Mr. Chair.

The government side does not support this amendment. I consider it to be a “waste of our time” amendment.

It is a question of fact as to whether unrelated persons are dealing at arm's length with each other. Because the existing provision is mirrored in other tax statutes, this would be a significant change in policy, creating an adverse impact. “Related person” is the concept of tax law.

[The Chair, Conservative, Leon Benoit]

Monsieur Cardin.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chairman.

I just wanted to commend Mr. Julian for his efforts. He gets a score of 8. On the other hand, I find he always uses a negative formulation. We are just changing words. Rather than saying they are related persons when they are, we're saying they are not related when they are operating at arms' length. I hope all the NDP's amendments are not drafted like that, because it may be a long day if they are.

[The Chair, Conservative, Leon Benoit]

Merci, Monsieur Cardin.

(Amendment negatived: nays 10; yeas 1)

[The Chair, Conservative, Leon Benoit]

Now we'll go to clause 6.

Mr. Julian.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

I just have had very clear confirmation, Mr. Chair, of why this process is not working. We've had two interventions, from the Conservative Party and from the Bloc, who seemingly are completely unaware of the capitulation that is made by referring to clause 6 in this manner.

What we are doing is saying that regardless of whether or not they treat each other at arm's length, the related persons are deemed not to deal with each other at arm's length. This is something that has been a major issue in British Columbia, and yet we've had an amendment that was important and endorsed by many of the lumber industry in British Columbia, because of their concerns that this definition is the United States' definition of arm's-length transaction rather than the Canadian definition, thrown aside without any due consideration.

We've been dealing for five and a half hours with this bill. This is the first major case where we have a major capitulation that the government is refusing to bend on.

It is a definition that has consequences, Mr. Chair—enormous consequences, because what we're doing is throwing away our legal victories. We fought for this principle at the WTO; we fought for it at NAFTA. Now, in subclauses 6(1) and 6(2), what we are doing, essentially, is throwing away those legal victories.

Mr. Chair, there is no more potent and visible example of why this process of ramrodding through this entire bill in the course of a day does not make sense than this one in clause 6, where, after years of legal victory at the WTO—and the Liberals should know this, because they were in government at the time—and at NAFTA, we are simply, in the course of a few minutes, throwing all that away and putting into legislation a definition that now confirms what the coalition has been saying all along about Canadian companies: that it doesn't matter if you've been treating that related person at arm's length; what it means now is, according to the Canadian government, full capitulation—we'll simply take the American definition.

This has consequences not only for this bill. It's not at all clear whether this bill will even go through, as the deal falls apart. Only 25% of the companies have signed on. That tells you something, Mr. Chair: this badly botched bill is going down. But if we adopt this in legislation, you can bet your bottom dollar, Mr. Chair, the coalition will be coming back and pointing to this—this work done at 10:20 in the morning on a Tuesday, as we ramrod through Bill C-24—and they'll be pointing to it as an example that Canada accepts the American definition of what constitutes arm's-length transaction.

So here we have parties all uniting to sell out Canada's interest--

[The Chair, Conservative, Leon Benoit]

Mr. Julian, time is up. Thank you.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

It is shameful, Mr. Chair. It is shameful.

[The Chair, Conservative, Leon Benoit]

We now go to the recorded division on clause 6. We're voting on the clause, which wasn't amended.

[The Clerk]

There is a point of order.

[The Chair, Conservative, Leon Benoit]

Monsieur Cardin has a point of order.

[Serge Cardin, Bloc, Sherbrooke, QC]

I would like to put a question to the witnesses regarding clause 6. Even though I made that joke earlier, based on the information I have been given, even though Mr. Julian's rationale is correct, it would be inconsistent with the Agreement.

Are you able to confirm or deny that?

[The Chair, Conservative, Leon Benoit]

Gentlemen, who will answer that question?

Ms. McMahon, go ahead.

[Mary McMahon, Senior Counsel, Legal Services Branch, Canada Revenue Agency]

Thank you, Mr. Chair.

For tax purposes, the determination of whether in a particular transaction the parties are dealing at arm's length is a factual decision that's made on the basis of the circumstances at issue. One of the criteria that might be looked at is whether the parties are related to one another, but there are others.

This amendment would have the wrong result, because it would deem persons who are unrelated to each other not to be dealing at arm's length. They may, however, in fact be acting in collusion to provide an inappropriate tax result, so we do not want to have a provision that would deem them to be dealing at arm's length.

[The Chair, Conservative, Leon Benoit]

Is that okay, Monsieur Cardin?

Is there anybody else on that? I don't mean to pass people over.

Let's go to a recorded division on clause 6.

(Clause 6 agreed to: yeas 10; nays 1)

[The Chair, Conservative, Leon Benoit]

Clauses 7, 8, and 9 have carried already, so we now go to clause 10.

(On clause 10—Charge imposed)

Here is where we can start the process that was agreed to earlier in terms of discussing the amendments, including the one on page 5, dealing with clause 10. That's the first of that group. We will now deal with that group in the order agreed upon earlier.

Mr. Menzies, please go ahead with CPC-1, which is to clause 10, on page 5.

[Ted Menzies, Conservative, Macleod, AB]

Thank you, Mr. Chair.

I can repeat the explanation if that's necessary, but it is already read into the record. As stated before, the reason is that Mr. Casey was putting this forward simply as a point of clarification. It's to bring the language in the enabling legislation into line with the actual softwood lumber agreement itself. It's very simple and not controversial at all, in Mr. Casey's estimation. I would concur with that, so I would like to move the adoption of this amendment, if I could, Mr. Chair.