Debates of Oct. 18th, 1995

Canada-United States Tax Convention Act, 1984

[An hon. member]

It's a reciprocal agreement.

[George Baker, Liberal, Gander—Grand Falls, NL]

He says that it is a reciprocal agreement. Reciprocal? This is a one-way agreement. Did he not listen to what I just read? Does he not know what the estate tax is compared with the capital gains in Canada? You cannot have a reciprocal agreement if it is not equal on both sides. You can have it, but why would you want to do it?

[Ian McClelland, Reform, Edmonton Southwest, AB]

Mr. Speaker, I want to ask the member opposite to expand on one aspect that is very important and of which Canadians should be much more aware. By and large Canada is a branch plant operation of the United States. The vast majority of the industries in Canada are branch plant operations of the United States. The real profit is derived by American corporations in transfer pricing where the American parent charges the American marketing arm a price and the Canadian marketing arm a substantially higher price. Therefore, there are very few profits relative to the amount of business activity generated in Canada, thus very limited corporate profit taxes paid in Canada.

Given the fact we know this to be the case, why are there just 12 auditors involved in this, as evidenced by his speaking notes? The member opposite thinks we should be doing something. We are stuck with this legislation as it is a treaty that we have already signed. It is going through. Should we not put more emphasis into that part of the audit?

[George Baker, Liberal, Gander—Grand Falls, NL]

Mr. Speaker, I was not actually speaking from notes, I was speaking from my head on those subjects. Let me tell the hon. member this. In the United States of America a term called formulary apportionment is used rather than the arm's length procedures of transfer pricing.

The present system is this. The Canadian government discovered in the auditing branch one case where a company was selling paper clips for $200 to a Canadian subsidiary to bring down the Canadian subsidiary's profits and then from the Canadian subsidiary was buying tires back for 6 cents each that were made in Canada to bring down the Canadian profits.

The Canadian government looked at that and at all the different systems in effect throughout the world. In the United States there is a system called formulary apportionment promoted by the state of California. Most states in the United States have this. They did it with foreign multinationals but they even did it with domestic tax. They made a judgment on the portion of the company's operations in each state.

In other words California said, we are going to make a judgment here. We are going to decide after looking at the entire operations-the company would have to open its books-how much the operations are paying in each one of the states. That led to double taxation.

The international multinational companies will not go to California because of that. California had to drop it but it is still a principle that is being promoted.

We should have more investigators in Canada. The hon. member and I agree on that. A lot of money is tied up here. There is $10, $20 billion at stake. However, what has been done in Canada, which is probably the best system, is sign an agreement.

The investigators go after each one of the multinationals and sign a pre-agreement, an agreement in advance. It is a secret agreement, because one cannot go around telling everybody what one's operations are.

An agreement is made in advance. That has cut down on a lot of the violations in Canada. That is the reason why the office is so small. It is a very effective and well run office.

[René Laurin, Bloc, Joliette, QC]

Mr. Speaker, since the hon. member for Gander-Grands Falls has decided to turn himself into a member of the opposition, I would be delighted to invite him to cross the floor and join us. We have several other causes to defend against his party. We would be delighted to welcome you, Sir.

[George Baker, Liberal, Gander—Grand Falls, NL]

Mr. Speaker, I will be very brief. No thanks.

[Elwin Hermanson, Reform, Kindersley—Lloydminster, SK]

Mr. Speaker, I understand that the debating skills of the hon. member for Gander-Grand Falls are legendary in the House. They go back to his days in opposition.

We really had not experienced them until the debate on Bill S-9. Now we see his passion and his fervour. I wonder if the member would assure the House that he will back up this passion and fervour with deeds. Does he intend to vote against the government and against Bill S-9 when it comes forward for a third reading vote?

In other words, will he be in the House and will he vote against Bill S-9?

[George Baker, Liberal, Gander—Grand Falls, NL]

Mr. Speaker, the hon. member puts forward an interesting proposition. I think my friend behind me and to my left answered quite appropriately one day when he said: "If you vote against the government on a finance bill, it is a vote of no confidence in the government".

The assumption is made under our rules, that if one has no confidence in the government then that person must have confidence in one of the opposition parties. Unfortunately with the positions taken by the opposition parties, I have less confidence in them than I have in the present Government of Canada.

[Leon Benoit, Reform, Vegreville, AB]

Mr. Speaker, I too wish to congratulate the hon. member for Gander-Grand Falls on the eloquence of his speech. He is truly a fantastic speaker. He is interesting and fun to listen to.

The hon. member has spoken against the bill presented by his party. I congratulate him for that, for coming out and expressing his thoughts on the bill even though they are different from what his party endorses.

Will he be in the House to vote against the bill at third reading? Why did the hon. member not vote against the bill at second reading? The hon. member was here before the vote and chose not to be here during the vote.

How can he tolerate being a member of a party which is so anti-democratic that it will not let its own members vote the wishes of their constituents? The hon. member obviously believes he is representing the wishes of his constituents on this issue.

[George Baker, Liberal, Gander—Grand Falls, NL]

Mr. Speaker, I respect the hon. member's question. It is very interesting.

The hon. member will notice that in the last couple of days I have had a rather bad back. It is difficult sometimes to stand and to be seated. Hopefully my back will improve as the days go on.

However, I can tell the hon. member what I intend to do tomorrow. The only flight I can get to Newfoundland is early tomorrow morning and so I may have to miss the vote.

[The Deputy Speaker]

Is the House ready for the question?

[Some hon. members]

Question.

[The Deputy Speaker]

Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[Some hon. members]

No.

[The Deputy Speaker]

All those in favour of the motion will please say yea.

[Some hon. members]

Yea.

[The Deputy Speaker]

All those opposed will please say nay.

[Some hon. members]

No.

[The Deputy Speaker]

In my opinion the yeas have it.

[Some hon. members]

On division.

(Bill read the third time and passed.)

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

Mr. Speaker, I rise on a point of order. I wonder if the House would consent to calling it 5.40 p.m. so we could proceed to private members' hour.

[The Deputy Speaker]

Is there unanimous consent to call it 5.40 p.m.?

[Some hon. members]

Agreed.

[The Deputy Speaker]

Since, as we decided, it is now 5.40 p.m., the House will now proceed to consideration of Private Members' Business as indicated on today's Order Paper.