Debates of Oct. 19th, 1995

Law Commission Of Canada

[The Acting Speaker (Mr. Kilger)]

All those opposed will please say nay.

[Some hon. members]

Nay.

[The Acting Speaker (Mr. Kilger)]

In my opinion, the yeas have it.

And more than five members having risen:

[The Acting Speaker (Mr. Kilger)]

Call in the members.

And the bells having rung:

[The Acting Speaker (Mr. Kilger)]

The chief government whip has asked us to defer the vote until Monday of next week at 5.30 p.m.

Income Tax Conventionsimplementation Act, 1995

[Ron Irwin, Liberal, for the Minister of Finance]

moved that Bill C-105, an act to implement a convention between Canada and the Republic of Latvia, a convention between Canada and the Republic of Estonia, a convention between Canada and the Republic of Trinidad and Tobago and a protocol between Canada and the Republic of Hungary, for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, be read the second time and referred to a committee.

[David Walker, Liberal, Parliamentary Secretary to Minister of Finance]

Mr. Speaker, I am pleased to have the opportunity to speak today at second reading of Bill C-105.

Bill C-105 implements reciprocal income tax conventions between Canada and Latvia, Canada and Estonia, Canada and Trini-

dad and Tobago and a protocol to the current income tax treaty between Canada and Hungary.

These tax conventions or treaties, as they are also sometimes called, and their amending protocols, are similar to other conventions already approved by this House.

Tax conventions two main purposes: firstly, to avoid double taxation of income and, secondly, to prevent tax evasion. However, not all tax conventions require Parliament approval. Certain tax agreements require no legislative measure when the Income Tax Act already contains equivalent provisions.

For example, an agreement respecting the profits of airline and shipping companies confirming the exemption they are entitled to under the Income Tax Act would not require legislative authorization.

On the other hand, double taxation conventions all require parliamentary approval, because they change the effect of national legislation, specifically the Income Tax Act. The same criteria apply to amending protocols.

This is why we are considering Bill C-105.

A few minutes ago, I mentioned conventions that have already been approved. Those in Bill C-105 are no different. They are part of a series of tax conventions dating back to 1971, when reform of our tax system necessitated Canada's developing a network of double taxation treaties with other countries.

Bill C-105 continues along this path. Canada now has double taxation treaties in place with 55 other countries. This point brings me to a related topic, the selection of countries for reciprocal tax treaties. How does the government decide with which countries to negotiate tax treaties? Are there benefits to having tax treaties with other countries? Let me take a moment and review this process. Canada does not need any legislative authority to negotiate and sign a tax treaty relationship with a country. Legislation comes later, such as with this bill, when measures in the ensuing convention differ from those affected by our Income Tax Act, as I have explained.

A tax treaty with a specific country is usually pursued because the government wants to encourage foreign investment in Canada and investment by Canadians abroad or as a result of budget measures.

The 1992 budget announced Canada's willingness to reduce its withholding tax on direct dividends to meet with the national norms. The 1993 budget subsequently announced Canada's willingness to eliminate the withholding tax on specific royalties to ensure the competitiveness of our technological industries.

There are three primary factors to be considered when negotiating a tax treaty with a country: how much Canadian investment is planned for that country, Canada's desire to encourage economic reforms there, and that country's interest in expanding its trade and economic relations with Canada. The tax treaties in Bill C-105 meet each of these three criteria.

Bill C-105 is neither earth shattering nor housekeeping legislation. Rather, it is the workaday legislation that addresses the dual issue of fair taxation and good international relations.

In this era of governments reappraising their roles, particularly their economic roles, and an increasingly interdependent open, global economy, reciprocal trade tax treaties make sense. They certainly do not hinder economic competition, which for Canada is an important factor of life.

Canada is above all a trading nation and we must keep expanding our trading boundaries and therefore our relationships with other countries.

A few items apply to all four treaties in this bill. First, while tax treaties vary from one country to another, these proposed conventions are similar to other treaties already concluded by Canada. They are patterned on the model double taxation convention prepared by the Organization for Economic Co-operation and Development.

Second, each treaty has been negotiated individually and has taken into account the relevant policies in each country.

Third, Bill C-105 provides an equitable solution to the double taxation problems that exist between Canada and these countries. Double taxation occurs when international transactions result in the same income being taxable in the hands of the same person by more than one nation.

In addition, the protocol brings the convention with Hungary in line with current Canadian tax policy, particularly with regard to the rates of withholding tax.

Here are some of the technical aspects of Bill C-105 that apply to the treaties with Estonia, Latvia and Trinidad and Tobago. There will be a withholding tax rate of 5 per cent on dividends paid to a parent company and on branch profits and 10 per cent on interest and royalties and management fees in the case of Trinidad and Tobago. A 15 per cent rate of withholding tax will apply on other dividends.

The conventions also provide for a number of exemptions in the case of interest. For Estonia and Latvia a zero rate will apply to interest paid to the governments, the central banks, the Export Development Corporation and from sales made on credit.

For Trinidad and Tobago a zero rate will apply to interest paid for government indebtedness and on loans or credit from the Export Development Corporation or its equivalent there and to interest paid to pension funds.

Canadians will benefit from any future changes extended by Estonia and Latvia to other OECD member countries with respect to the withholding tax on copyright and patent royalties. Trinidad and Tobago will maintain the exemption on copyright royalties. Pension payments and annuity payments in the case of Trinidad and Tobago will be taxed at a maximum rate of 15 per cent in the source country. However, war pensions in Trinidad and Tobago will be exempt.

In addition, social security pensions will be taxed in the originating country and the withholding tax rate on annuity payments will be dropped to 10 per cent.

Also with respect to Trinidad and Tobago, the two-year exemption for visiting teachers will no longer exist and seasonal workers will not have to pay Canadian tax if they earn under $8,500.

I turn now to the protocol negotiated with Hungary. For historical purposes I should mention that Income Tax Act amendments in 1976 increased the rate of withholding tax paid to non-residents from 15 per cent to 25 per cent unless reduced by a tax treaty.

The existing treaty between Canada and Hungary reduced the withholding tax rate to 10 per cent on dividends paid to a parent company and 15 per cent in all other cases. However, that convention was negotiated before the 1992 budget announced Canada's willingness to reduce its withholding tax on direct dividends to 5 per cent. The revised protocol before us today reduces that rate and the rate of branch tax to 5 per cent by 1997. There are no changes in the rates of withholding tax on other dividends.

Tax treaties such as this are important tools for countries. The benefits they provide in helping to stabilize tax systems foster international trade and investment which are very important in today's global environment.

Canada will not lose any revenue from the concessions in these conventions. Not only will Canada gain from increased trade and investment, we will gain from the reduced withholding tax rates and other concessions.

There is nothing in the view of the government contentious in the bill. By passing this legislation the number of countries with which Canada has tax arrangements will increase to 57.

I urge my colleagues to give Bill C-105 speedy consideration so that we may get on with more pressing issues.

[André Caron, Bloc, Jonquière, QC]

Mr. Speaker, I am pleased to rise to express the Bloc Quebecois' assessment of Bill C-105.

As the government spokesperson said before me, this bill is not controversial, it is a matter of course in trade relations between countries.

The bill concerns the implementation of conventions between Canada and various countries, including Latvia, Estonia, Trinidad and Tobago, and Hungary to avoid double taxation and prevent fiscal evasion with respect to taxes on income.

It is a very technical bill that was first negotiated by officials in Canada's diplomatic corps and public service, and we are ratifying the treaties they concluded, with this bill.

As the government spokesperson put it so well, this sort of thing is standard between sovereign countries, countries that want to promote trade. The bill is based on the standards defined by the OECD, the Organization for Economic Co-operation and Development.

You might be wondering why I wanted to speak on behalf of the official opposition. Because this bill, which has been described as arising as a matter of course, could serve as an example, a point of comparison, for the events that could occur the day after a yes vote in the referendum in trade and economic relations between Canada, the United States, Quebec and other countries in the world.

In their trade, diplomatic and political relations, countries look after their own interests, as the opposition member clearly pointed out. In a proposal like the one before us, before concluding a treaty or an agreement-and there are now such treaties and agreements with 55 countries in the world-, we look after Canada's interests. We look at these countries' investments in the Canadian economy and at Canada's investments in the countries with which we have treaties.

At some point, after assessing our trade and economic interests, we sign a treaty. So there is nothing contentious in all of this. Negotiations take place, the various countries check their laws, and it is quite normal to sign an agreement so that Canada and its partners can maintain and improve their regular trade and economic relations.

In the debate currently taking place in Quebec and Canada on the prospect of a sovereign Quebec, economic and trade arguments are often on the agenda. Just the day before yesterday, the Minister of Finance claimed that Quebec's sovereignty would threaten 1 million jobs in that province. When we examine the finance minister's speech, we see that these million jobs would be

threatened if trade between Canada and Quebec and between the U.S. and Quebec was reduced to zero.

Can trade between Canada, Quebec and the U.S. be reduced to zero? Will Quebecers and people in Jonquière stop buying Ford cars if these cars meet their requirements? Will people in the U.S. stop-

[Jesse Flis, Liberal, Parkdale—High Park, ON]

Mr. Speaker, I thought we were debating Bill C-105, an act to implement tax conventions between Canada and Latvia, Estonia, Trinidad and Tobago, and a protocol for the tax treaty with Hungary. I find it very difficult to see how what the hon. member is saying is relevant to the bill.

[The Acting Speaker (Mr. Kilger)]

The hon. parliamentary secretary of course is a very experienced parliamentarian. The question of relevance does come up from time to time in the House. In the past few days it has come up and possibly in the days to come it will come up more often. It is good that we are reminded of it and we should be mindful of it.

The question of relevance is raised from time to time. It was probably raised a bit more often this past little while and it is likely to come up more often yet in the weeks to come. While I wish to remain sympathetic to both sides I just want to say that the hon. parliamentary secretary reminded us of the need for relevance and I hope we will be mindful of this requirement in all our remarks. I will be monitoring the debate very closely.

The hon. member for Jonquière still has the floor.

[André Caron, Bloc, Jonquière, QC]

Mr. Speaker, I am very happy that the hon. Parliamentary Secretary to the Minister of Foreign Affairs called me on relevance because I thought it was rather obvious. Here is a country, Canada, with 28 million people. This country may well rank sixth in the world in terms of per capita gross domestic product, given purchasing power parity. This is based on 1991 figures.

This country, this great country which is a member of the G-7 and the international jet set, sees fit to enter into trade relations with countries that I would not describe as small-I will not use this qualifier often used by our friends opposite, because it evokes little people and conveys the somewhat pejorative idea of being of minor importance-but rather as countries with not as large a population as Canada.

Latvia, for example, has a population of 2.6 million; Estonia, 1.5 million; Trinidad and Tobago, 1.3 million; and Hungary, 10 million. While these countries do not have the economic prestige and stature of Canada, as it stands and as our friends opposite see it, Canada has negotiated tax treaties with them based on the OECD model. This is normal. Earlier, the spokesperson for the opposition said: this is normal; this is the way things are done between civilized countries of the world, that is those countries which look after their best interest.

We did not see or hear anything from Latvia, Hungary, Trinidad and Tobago to the effect that Canada is too big, that its economy is too strong, or that it will impose unacceptable conditions to those countries.

I do not know for sure, since we do not have newspaper articles from Latvia, Hungary, Trinidad and Tobago, and all the other countries, but we do not feel that Canada acted improperly with sovereign nations.

The point which I am making is that, right now, English language newspapers in Canada are constantly saying: "If Quebec becomes a sovereign nation, Canada will not deal with it because Canada is twice as big as Quebec. You will not count at all on the North American market. You will probably not be able to trade any more. Americans will probably stop buying your aluminum or your paper, and you will stop buying their cars, their refrigerators and IBM computers. You will have to go down on your knees and pay twice the price, because the United States is too big. Americans will not comply with international standards; they will try to crush you".

When I look at the bill before us this morning, I realize that this will not be the case. We are talking about Latvia, Estonia, Hungary, Trinidad and Tobago. We are talking about countries which do not have close relations with Canada, which have not been part of Canada for 130 years; there is no problem with these countries. Canada does some trading and has good diplomatic relations with these countries, and there is no problem when the time comes to sign conventions.

However, when they are talking about Quebec, which has been part of Canada for 130 years, they kowtow to the U.S. They seek a statement from the U.S. secretary of state, in the hope that he will say: "Should Quebec become sovereign, we may decide to renegotiate NAFTA, we may impose additional conditions; your cultural industry may be crushed; American movies will flood the Saguenay-Lac-Saint-Jean market, which is 98 per cent French. Movie theatres showing French language movies will close; French language newspapers will have to be highly subsidized and may even have to stop publishing. It will be the end of the world".

When you see bills such as this one, which is described by the government's spokesperson as being the normal thing to do, without any problem, you tell yourself: "Indeed, there is no problem signing commercial treaties with Latvia, Hungary or any other country. Why then should there be problems if Quebec becomes a sovereign nation"?

I think it might be worthwhile to use some examples. If they had said "We will make an exception for Latvia and Estonia, because

they were part of the soviet block for a long time, because they lived through difficulties, because they are small countries which valiantly defended their sovereignty, which survived the soviet empire's steamroller, which maintained their language, which maintained their cultural identity, which defended themselves, and which succeeded against all odds in becoming sovereign as soon as the soviet empire loosened its hold slightly. If they have succeeded in doing so, it might then have been said that we Canadians, rightfully considered the boy scouts of the world, are prepared to defend widows and orphans everywhere in the world."

As soon as Estonia and Latvia were free of the Soviet Union, the first thing they did was to demand sovereignty and seek recognition. We could have said "We will give Estonia and Latvia special treatment, we will help them, we will support them because this is an acknowledgment of their contribution to the world balance of democracy." But no. We echo what the spokesman for the opposition said just now: "It is a matter of interest. We have investments over there; they probably have some here. We sign. No problem. A matter of interest. Not a matter of politics. Not a matter of feelings. Not a matter of anything at all. Not of acknowledging countries which have succeeded in gaining sovereignty, which have lived through 50 years of communism and the Russian steamroller. Which have survived all that. No, just a matter of interest. Well, all right then.

Take the example of Hungary. We know what happened in Hungary in the 1950s, an attempted revolt against the Soviet empire. The Hungarians were crushed. Canada took many of them in, to its credit. Although I was very young at the time, I remember it because it made a strong impression upon me. But the bill does not say "We are entering into a protocol with Hungary because it did great things during the 1950s and because there are many Hungarians in Canada and so we will help them now". No. They say: "No, we signed a protocol with Hungary because it is in our interest to do so. Hungarians have investments in Canada, and we have investments in Hungary. We want to continue to trade with them, so we sign agreements. That is how things work at the international level". The same for Trinidad and Tobago. In fact, the opposition critic explained that some harmonization was necessary in our trade with Trinidad and Tobago. No problem at all.

So I read this bill and, speaking on behalf of the official opposition, I say: "We have agreements with Latvia, Estonia, Trinidad and Tobago, Hungary and 55 other countries in the world. Wonderful". So I start off by saying: "There are certain things that are done involving large countries and small countries. Small countries which Canada does not seem to look down on, which it respects because they are sovereign". That is the beauty of sovereignty: you get respect. Whether you are big or small, when you are sovereign, you are respected because there are international conventions and practices, and the rules of the game are clearly

established. And that is why certain countries want to become sovereign. Today, Quebec is one of those countries. I say country, because to me, Quebec is a country.

Look at Quebec. When you see Quebecers and hear them talk and look at their history, you realize that, like it or not, Quebec is different from other parts of Canada. This is not to denigrate the people of Newfoundland, Franco-Ontarians, Westerners and British Columbians, but Quebecers are a bit different, and today, some of them are saying: At the international level, we are going to make this country a sovereign state. And now, one of the arguments being made in this debate is that Quebec will be in for hard times.

Daniel Johnson said: "Oops, if you become sovereign, there go 92,000 jobs". The very next day or three or four days or a week later, when they had a chance to think about it, they realized that 92,000 jobs was perhaps not impressive enough. So a respected federal finance minister told Quebec: "92,000? Probably more like one million". Not 900,000, not 900,100 or 909,150 but one million. That is impressive. We are "millionaires" in terms of job losses. He is not saying: "Oh, you will not lose one million jobs", but: "You might lose one million jobs", because if you ever do, since you are not big guys but little guys, with a small economy, you will definitely not be in the big league. If you are little, maybe Canada, which is bigger than you, or the United States, which is bigger than you, will say, we do not trade with the little guys, we only trade with the big guys.

So then there would be no more trade with Canada, no more trade between Quebec and Canada, no more trade between Quebec and the United States-this means a million jobs. Obviously it is a million jobs, if nobody buys what we produce and we do not buy what others want to sell us. Obviously, in trade and in production, there are going to be losses, but that is the way it works.

How does it work internationally? It works the way it does in this bill. Countries, states, make treaties and agreements based on their interests. That is how it works. For sure, some people are touchy because of certain events, they are unhappy, they say that things are going to work differently, and we hope this is not the way it is going to be.

The Leader of the Official Opposition, Lucien Bouchard, will come and start negotiations. Maybe people will say they do not want to negotiate with us, they do not like us, we are demagogues, we are ethnic, we are out to do a number on ourselves and we are shrinking our economy. We will say to them: well, we had a vote, we want to reach an agreement with you, and we will reach it even if we do not reach it on the basis of the friendship that still developed over the years and centuries.

Quebec and Canada, and Quebec and the United States are not the same as Quebec and Latvia. With all due respect to Latvia, it is not the same. I see a member opposite listening intently and rolling his eyes skyward saying: "Oh, what clever remarks". The hon. member was born in Hull, and I congratulate him on it. There are members like us; the hon. member for Québec-Est was born in Penetanguishene, Ontario. There are still ties. Perhaps there are ties between my hon. colleague opposite and people in Quebec. Perhaps he has ties with people living in Latvia and Estonia.

But it is not on that basis that we want to negotiate. We do not want you to negotiate with us because you like us, because we were with you for 130 years. It is not on that basis that we want to negotiate. We want to negotiate on the same basis as that in Bill C-105, which is not contentious and poses no problems. This basis is the interests of nations negotiating as equals because they are sovereign. This is the way things are done at the international level.

We in Quebec think we can do as well as Latvia, as Estonia, as Trinidad and Tobago. Why? For two good reasons. The first reason is that, if you look at what is currently happening in the world, according to some theories, the most populous countries, the countries with the largest domestic markets, are those that do best.

Then look at the most populous countries in the world and see how they are doing. Let us look at the U.S., which has the highest GDP. I will not talk about the other countries for fear of being accused of discrimination: "You said that France was No. 4 or 5. You are discriminating against the U.S. You like France a little less than the U.S. What is the matter?" "Would a Bloc member say that he liked France less? He is more of a Franco-American; he is not a francophile". In a campaign like the one under way, one must be prudent.

However, if we look at the world's countries on the basis of their GDP per capita and their population, we see Switzerland, with 6 million people, in second place, the Grand Duchy of Luxembourg in third place, Denmark, Austria, Belgium, Sweden, Iceland, Norway, the Netherlands, Finland- Did I mention any poor countries? These countries are among the top 20, and the top 10 include four or five countries with populations of five, six or seven million. Population is no longer as important a factor as it used to be.

Empires expanded. The British Empire, that my hon. colleague opposite is so fond of, expanded to increase business opportunities for British merchants who wanted to gain access to the market in India, Africa and so on. In those days, this was important, but it is no longer the case today. The size of any given country is not relevant. I am not theorizing. This is a fact confirmed in the economic accounts of respected countries such as Switzerland, Luxembourg, Denmark, Austria, Belgium, Sweden, and Iceland, which are not as large as some others.

The Austrian population is certainly not as large as the Chinese population, yet Austria does very well for itself. Back in 1991, Austria ranked 10th in terms of per capita gross domestic product. That is not bad at all. This country, a former empire, has had its problems and suffered greatly during the second world war. Today, Austria is a player.

What I mean by that is that globalization is giving smaller countries the change to enter the global markets. It is not up to their neighbours to decide whether or not they can enter these markets. There are international regulations for that as the OECD has regulations governing treaties between various countries or tax conventions. There are rules.

The size of the country is no longer the determining factor. The main thing is to gain access to international markets. Second, and this is a major factor, there must be a demand for what you produce, your products must be well made and you must have what the economists call a niche of your own, an area in which you excel. You need not be great at everything, just in certain areas and develop markets from there. That is why I think that, in terms of size, Quebec, as a country, would compare favourably with Austria, Denmark, Switzerland, Sweden and the like, and do quite well.

Quebec is not a poor nation. Some people seem to want to put up a fence around Quebec, including the Minister of Finance who says: "Listen, when that fence is up, you will lose one million jobs". I am sorry but there will be no such fence, because this is not the way things work. Why did the minister say one million jobs? One million, as in the word millionaire. The Minister of Finance knows about millionaires, but he would be better off talking about the billions of dollars worth of freight transported on his ships, or the millions in goods produced in his plants. It is inappropriate on the part of a finance minister to tell Quebecers that one million of them will become unemployed if sovereignty is achieved, and that a fence will be built around Quebec.

The issue of Quebec's population in relation to the prosperity which it can develop is not a factor here, because it is not for other countries either. As I said, Quebec is not without assets. Its GDP stands at 160 billion dollars. Quebec is a modern state with major institutions, including a deposit and investment fund, Hydro-Quebec and a pension board, and with large corporations which developed over the years, even though, at one point, some of these big entrepreneurs invested in Northern Ireland and in Belgium, and said: "In Quebec, we started off in a small village". I could mention the community of Valcourt, where a major Canadian and Quebec multinational is based. One would think that it is a Quebec company, but we were told: "It is not a Quebec corporation, it is a

Canadian one. And if Quebec becomes sovereign, do not expect us to stay here: we will move back to Canada".

Over the last 30 or 35 years, Quebec developed industrial structures and trade policies which will enable it to join the countries which I mentioned earlier. We rank 16th in terms of the GDP. This is quite something. Quebec is part of Canada. Our friends across the floor say: "Quebec is part of Canada. If you leave Canada, you will become poor, while Canada will keep on being rich".

That is all very fine, but the wealth of Quebec and the wealth of Canada are similar in terms of domestic product. Quebec sovereignty does not take our engineers from us. Quebec sovereignty does not take our capital from us. Quebec sovereignty does not take our administrators, our poets; it takes nothing from us.

Quebec sovereignty gives us additional powers in terms of laws, gives us additional powers in terms of treaties we can negotiate. Treaties like those Canada has with 55 countries, we will have too. We will have them because we have something to offer. There are people in those countries who may come to invest in Quebec and people in Quebec who may go and invest there. We will be able to have as many treaties as you have managed to have.

That is why it is most appropriate to bring up the case of Quebec in my intervention concerning Bill C-105, for it shows us that it is completely normal for the Government of Canada to have treaties with Latvia, with Estonia, with Trinidad and Tobago, with Hungary, as it will be completely normal for there to be one between Canada and Quebec, once its citizens have decided on sovereignty. And we will have such a treaty.

We keep hearing "But you are not telling Quebecers what you will do afterward. What will the partnership be like? We do not have much of an idea". Just do a bit of reading. I imagine that the hon. members have most definitely familiarized themselves with Quebec's bill on sovereignty, that they are also aware of the agreement signed this past June between Messrs. Bouchard, Parizeau and Dumont on the matter of the partnership treaty between Quebec and Canada.

And what will that partnership treaty cover? A customs union, free circulation of goods, free circulation of individuals, free circulation of services, free circulation of capital, monetary policy, manpower mobility, citizenship. It is a treaty between sovereign states. By the very fact that we shall be a sovereign state, we shall have the possibility of signing treaties. If Canada wants to sign treaties with Quebec in other areas, we are open to any and all discussion.

My point is that once we are sovereign, even if our economy is not as big as Canada's, we will be able to sign treaties just like Estonia, Hungary, Trinidad and Tobago and Latvia.

And they will be signed for the same reason they were signed with the countries I just referred to, because it is in our interest to do so. We claim, and I am sure that the people of Quebec will trust us to do the right thing, that this is in the interest of Quebec and of Canada.

Of course Canada will maintain up to the last minute that there will be no negotiations and no agreement ever. Our Canadian friends are so anxious to make this point that yesterday, when the Prime Minister of Canada was in Quebec, he said: "There will be nothing, because Canada will disappear if Quebec leaves. We do not know what will happen. There will be nothing left, because once Quebec has gone, there will be no more Canada". That is how we understood Mr. Chrétien's speech.

[The Acting Speaker (Mr. Kilger)]

I realize one tends to forget this from time to time, but I may remind the House that members are to be referred to by their ridings or departments.

[André Caron, Bloc, Jonquière, QC]

This was of course an oversight, Mr. Speaker. We always refer to him in conversation as Mr. Chrétien, but it is the hon. Prime Minister.

The hon. Prime Minister-Mr. Speaker, do you not think this is extraordinary? -the hon. Prime Minister of Canada said last night in a speech in Quebec, and I should have brought the quote with me, the hon. Prime Minister of Canada said there would be no more Canada if Quebec were to leave. This is really incredible.

If the province of Newfoundland ever decided to withdraw from Canada, would there still be a Canada? The people of Newfoundland-I have met a number of members from that province-are people of great warmth who was very attached to their province.

However, if Newfoundland were no longer a part of Canada, we can assume there would still be a Canada, as there was in 1948 and 1945, when Newfoundland was not part of Canada.

Similarly, if British Columbia withdrew from Canada, saying: "Listen, we are on the west coast, that is where the markets are", because it is always a matter of markets. Today, countries are markets, and their purpose is to engage in trade, not to protect the well-being of their citizens or ensure the continuity of nations. Let us suppose that the people of British Columbia decide that they face west, towards Japan, the Rockies are too big, there will probably be no more train service through the Rockies, with privatization and all that, the train costs too much. If they decide to become a sovereign country and then, to improve trading with Asia, they form a sort of North American Singapore, will Canada still exist?

I do not think the Prime Minister of Canada would go to Vancouver and say: "Do not leave Canada; if you leave Canada, the country will no longer exist." But this is what happened yesterday. The Prime Minister of Canada said that Canada would cease to exist if Quebec left. Is Canada only Ontario and Quebec? This is what we will end up thinking. It is as if this were 1840 and Canada were Lower and Upper Canada-joined later by other provinces and territories-but they remained the heart of the country. Ontario and Quebec form the heart of Canada, why, because they are the two biggest markets?

Certainly, with today's mentality, that is what those opposite will have us believe. Is it not, rather, that Canada at the outset was Ontario and Quebec, because Ontario was English Canadian and Quebec was French Canadian, and each country had minorities, official language minorities different from the majority. That was Canada.

Canada did what it could for minorities. Look at Quebec, there is a very strong English Canadian minority that has its universities, its school boards, its hospitals, its representatives in major institutions. I would like to be able to say the same of our Franco-Ontarian and Franco-Manitoban friends who had to fight for their schools, and who still have to fight for their schools, and for control over them. They are not fighting for control over universities, they are fighting for control over elementary schools and high schools, because that it where assimilation occurs.

We challenged, two days ago, statistics stating that there were a million francophones outside Quebec in Canada. We said that, out of the one million Canadians outside Quebec who claim French as their mother tongue, 650 speak French at home. We did not mean any disrespect to our Franco-Ontarian and Franco-Manitoban friends or our friends in the Yukon or the Northwest Territories. We just wanted to say how sad we were to see the French language die out outside Quebec. What we intend to achieve among other things through sovereignty, besides allowing Quebec to develop with its best interests in mind, is to ensure, through our own institutions, that French will still be spoken in America in a hundred years and that a French or Quebec culture will still be alive in Quebec at that time.

That is what we want to do. We want to live on without constantly having to protest, like our friends opposite do, just to survive. It is important to be able to survive. But we think that there are enough of us, and that we have enough education, enough capital, enough stamina, and enough willpower to do better than survive.

When I was in grade school, money was collected throughout the Quebec school system, a dime at a time, for the survival of the French language in Canada. Grade school children gave money for use in Manitoba and Ontario. This was fine. But look at where they now stand. It is sad in a sense to think that there are only 640 of them across Canada, including Acadians.

It is most unfortunate, but as a francophone and a Quebecer or a French Canadian living in Quebec who calls himself a Quebecer, I do not want anything to do with a system that will lead, fifty years from now, to a situation where we have a nice official languages act and many officially bilingual institutions, but where French will no longer be a living language in Quebec.

People can say we are spiteful, I say that we are just stating the facts. The fact is that Canada started off as a bicultural country, a bilingual country, where you had French and English Canadians. The very reason there is panic in some political back rooms is that, yes indeed, this is what Canada was initially.

The Prime Minister said so: If Quebec goes, that is it for Canada. Look, this is a basic issue. What is Quebec? It is not an economy; it is a culture, and a language. With this culture and language gone, Canada as we know it will no longer exist. This means that we have reached the bottom line.

Canada is more than a checkerboard with ten squares representing each of the ten provinces and that we call Canada. Try as we may, and Reformers will insist that that is Canada and that each little square should be assigned the same number of senators and the same responsibilities, we have to admit that this view of Canada does not agree with reality.

Initially, the real Canada was made up of French Canadians and English Canadians. French Canadians did not benefit from this agreement. And French Canadians in Quebec who are now called Quebecers decided to withdraw from the agreement, to declare themselves sovereign, that is to say, in control of their laws, taxes and treaties, and then to propose a partnership treaty with English Canada.

English Canada likes us so much that it is threatening to cut us off. It is so pleasant to stay in a country like this one. They like us so much that instead of telling us, "Stay with us and everything will be fine", they say, "If you vote Yes, we will cut you off; if you vote No, nothing will happen and you will stay the way you are now".

It is over for French Canadians in Quebec who are now called Quebecers, and I hope that, on October 30, these Quebecers will be able to sign treaties such as this one, agreements with other countries, so that they can benefit from international trade and eventually have access to the economic instruments they need to remain what they are, a French speaking people with their own culture in North America. This is my dearest wish and I think that the people of Quebec will listen to our proposal and vote Yes on October 30.

[Jim Silye, Reform, Calgary Centre, AB]

Mr. Speaker, I hope to stick to Bill C-105 and keep it kind of short.

[Some hon. members]

Hear, hear.

[Jim Silye, Reform, Calgary Centre, AB]

That is the second time in two years I have been applauded by members opposite; I appreciate it.

The purpose of Bill C-105 is to implement the tax conventions between Canada and the republics of Latvia, Estonia, Trinidad and Tobago and a protocol between Canada and the republic of Hungary for the avoidance of double taxation and the prevention of income tax evasion.

It is just like Bill S-9. We are here debating bills and for all intents and purposes they are already done deals. The agreements have already been signed by the bureaucrats and diplomats and now we have to give them a formal blessing. We have spent two days doing that. It is important to do it, so let us get on with the business of getting it done.

Tax treaties like this one along with their amending protocols have two main purposes: the elimination of double taxation on goods, services and people that flow back and forth across borders and the prevention of fiscal evasion by the same people. The treaties and protocols being signed are patterned on the model of the double taxation convention prepared by the OECD. That is supposed to be our guarantee that everything in here is wonderful, good for everybody, and we do not even have to look into the details. The Reform Party supports these and any initiatives that help eliminate barriers to the globalization of our economy.

However, in the debate on Bill C-105 I noticed when the parliamentary secretary to the finance minister made his presentation on the bill today that he said there was nothing contentious in the bill. That almost made me want to look into it and reread it, as if he were trying to hide some of the sneaky little deals found in Bill S-9 that the member for Gander-Grand Falls pointed out. That Liberal member pointed out how bad Bill S-9 was, that it was not really a Liberal bill, and that he was disappointed the Liberal Party could support it.

That brings me to another point on the Liberal government. It struck me interesting in reviewing and researching protocol bills and tax concession bills between countries how the Liberal government had flip-flopped on its anti-free trade policies of the past. It is actually approving bills that lower taxes. It is actually approving bills that eliminate the barriers to trade. It is actually doing something they were against when in opposition and we are for.

It makes me wonder whether the finance minister is in charge or the deputy minister is in charge who worked for the Conservative government? Which set of people, which grouping, the politicians or the bureaucrats, is in charge of the government?

In 1991 when the finance minister was in opposition he gave his opinion on trade conventions, treaties and tax concession conventions. What did he ask the government to do? What did he say to ensure the deals were in the best interests of all Canadians? To put it in context, when in opposition the finance minister in referring to the Conservative government said, as indicated in Hansard :

In the free trade agreement this government, so desperate for a success even if it was only paper thin, and so afraid of failure, sat down cowardly with the Americans and gave up the ghost before negotiations started.

[An hon. member]

Shame.

[Paul Martin, Liberal, LaSalle—Émard, QC]

It made every single concession. Every point it thought the Americans would raise at the table, it gave up before it got there, because this indeed is a craven government.

He was referring to Bill S-9, what we approved yesterday. He was criticizing the very bill that was passed in substantially the same form. He did not agree that the Conservative government was headed in the right direction.

That borders on the hypocritical. If a member who criticizes something vehemently and strongly in opposition has the chance to change it, to improve it, to fix it or to make it better when in power, he or she should do so. But the government goes along and in the course of the last two years has basically passed about 10 Conservative bills substantially in the form that were on the shelf gathering dust. Its members just took them off the shelf, blew off the dust, presented them in the House, put Liberal on them, and now they are being passed.

I am sure some members of the Liberal government are deeply hurt because their party said in the past that it would never cut the deficit on the backs of the sick or the poor and this is exactly what it is now doing.

The Liberals are cutting and transferring the debt from the federal government to the provincial governments. They are cutting health care and welfare services by $7 billion and are calling it the social transfer bill or whatever. This is what they said they would not do.

There have to be some Liberals over there who are hurting, who are bleeding internally, because they are losing their roots. They are losing what they are supposed to be doing in terms of protecting the people who elected them. They are not protecting them. They are going against their wishes. They are breaking a lot of the promises they made in the red book.

During the election they said on free trade that they did not like NAFTA and that they would renegotiate.

[Dennis Mills, Liberal, Broadview—Greenwood, ON]

This is not free trade.

[Sarkis Assadourian, Liberal, Don Valley North, ON]

Stick to the subject.

[Jim Silye, Reform, Calgary Centre, AB]

I am sticking to the subject a lot more than the previous speaker. I am straying a bit here when I am talking about an agreement with another country.

Once again, when they got elected did the Prime Minister renegotiate as he promised he would? He did not. He passed it in substantially the same form it was in when the Conservatives negotiated it. I find it ironic this government says one thing in opposition and does another thing when in power which means it is still the status quo. It means nothing has changed although we now have a Liberal government instead of a Conservative one.

While we support Bill C-105, there are still a few questions I would like to address. I would like to know why our diplomats abroad can initiate legislation that makes our taxes lower and our tax rules simpler when our politicians will not do the same.

Why is it that when the politicians approach the department heads and say: "We would like to make the Income Tax Act less confusing, less complicated and less convoluted. We would like to make it more simple. We understand it is fair but we would like to make it fair in a way that everybody understands it, and could we not lower spending a bit? Since they are making spending cuts they could pass the benefit to taxpayers". The bureaucrats say no because any time we give up a tax point or two we never get it back, so the answer is no. And that is it. That is as far as the politicians go.

Except for the member for Broadview-Greenwood who since 1989 has consistently pushed for a simplification of the taxation system, there is nobody else over there that has as openly, vocally and energetically pursued this topic. I would like to be another one of those people who pushes the government into doing it. To the politicians: Do not let the bureaucrats say it will not work. To the finance minister: Demand a review of the taxation system to see if it can be changed.

We all know high taxes are an impediment to growth in the economy. Why do we not remove the impediment? Why do we not lower taxes with some spending cuts that the Liberal government is now finally making? It is finally listening to us; it is finally doing something to the benefit of many Canadians. Combine that with a genuine review of the entire taxation system which will then help to create jobs.

The opportunities for gains in the economy by implementing tax reform are tremendous. By not doing it, by not exploring it, those doors remain closed and the opportunity to restore faith, hope and savings for taxpayers are eliminated. That debt will never, ever be addressed by adding to it. We have to get to a zero deficit, not a 3 per cent of GDP and dig the hole slower. They are still digging the hole and are just adding to the problem.

If we want to get rid of the problem, lower spending, raise taxes to a zero point and the deficit is gone, if that is what the Liberal government thinks is the problem. However, that is not the problem. The problem is the debt and our high levels of taxation.

Diplomats recognize globally that we must have equality, that we need to have the lowest rates of taxation possible to attract investment and capital while reciprocating with other countries by offering them the same deals in our country. They do that. Look through those agreements with the incentives and the opportunities between countries. It is great. It works well for exports and imports. What is saving our economy today? NAFTA. Trade with other nations.

We need to treat each of our provinces, including that wonderful province of Quebec which belongs in Canada and will stay in Canada, the same way we treat other nations. Let us make deals among ourselves, province to province, that eliminate the barriers to trade and introduce treaties. Let us have only one level of government looking after a service. Let us define specifically which level of government should look after which program. Let us get some savings and some gains into our system so we can lower spending thus lowering taxes, so we can remove the impediments to our sluggish economy.

I am trying to make an analogy between the good aspects of trade treaties we are making with other countries. Why do we not use those diplomats instead of the politicians sitting over there in the front row to make our negotiations with the deputy ministers in order to implement the kind of reforms we need in this country? These diplomats do a much better job than the elected politicians because the elected politicians are afraid to stand up to the bureaucracy. I encourage similar actions here at home in the form of tax reform as we find in deals like this.

In conclusion, I hope this is the last fluffy type bill we have before this House and that we can get on with more important bills. As far as I am concerned, Mr. Speaker, you could put the question, put the bill through committee of the whole and then we could debate the health act.

[The Acting Speaker (Mr. Kilger)]

We will now go to the next stage of debate where members will be entitled to a 20 minute maximum, subject to 10 minutes questions or comments.

[Jesse Flis, Liberal, Parliamentary Secretary to Minister of Foreign Affairs]

Mr. Speaker, it is a great pleasure for me to participate in the debate on Bill C-105, an act to implement a convention between Canada and the republic of Latvia, a conven-

tion between Canada and the republic of Estonia, a convention between Canada and the republic of Trinidad and Tobago, and a protocol between Canada and the republic of Hungary, for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

As the bill states, the purpose of this enactment is to implement income tax conventions that have been signed with Latvia, Estonia, Trinidad and Tobago, and a protocol to the income tax convention with Hungary. As the bill says, these treaties have been signed. The treaty with Latvia was signed in Ottawa on April 26, 1995. The agreement with Estonia was signed in Tallinn on June 2, 1995. The agreement with Trinidad and Tobago was signed in Toronto on September 11 of this year. The protocol with Hungary was signed back on May 3, 1994 in Budapest.

Tax treaties are designed to alleviate double taxation of income earned in one country by a person resident in another country. While the present position of Latvia, Estonia, Trinidad and Tobago, and Hungary limits the potential for additional investment by residents of these countries in Canada, the tax treaties in question will certainly be helpful to Canadian corporations and individuals with operations and investments in those countries.

As the parliamentary secretary has already alerted this House, these agreements contain provisions on withholding tax, on capital gains, on non-discrimination-discrimination is prohibited but only on the basis of the nationality of the taxpayers-pensions and annuities, and double taxation relief.

These are important agreements. They now must be approved by Parliament to make them official.

I have been in these countries, except for Trinidad and Tobago. I have visited Latvia, Estonia and Hungary. I was in these countries before they were sovereign countries, when they were forced to be under the Soviet Union. I have visited them after they obtained their independence. Canada was one of the first countries to recognize the independence of the three Baltic states and Hungary, et cetera.

I would like to differ with my colleague from Jonquière very strongly. He tries to compare Quebec to these countries. I hope he will read his history. Latvia and Estonia, which are mentioned in this bill, were sovereign countries at one time but they had their sovereignty taken away from them by the Molotov-Ribbentrop agreement. That was not the people's choice; it was forced on them. Now through democratic elections they are choosing their own governments. That is why these countries are now ready to do business with the western world and the entire globe.

I was in those two countries just last summer and in Hungary two years ago. All of those countries are open for business. So is Trinidad and Tobago, but I have never been there so I cannot speak for it, but the other three countries are open for business. They do not want handouts, although we have helped them a lot with our technical assistance program.

The technical co-operation program has been placed under CIDA. We have helped those countries in language training for example. Many people living in Estonia speak nothing but Russian. In order to obtain their citizenship they must learn Estonian. There is a big demand for learning Estonian very quickly. We are helping Estonians with the technology for teaching languages.

I wish the hon. member would read his history and not compare la belle province with sovereign countries like the three Baltic states, Hungary, et cetera.

I was very shocked to hear the hon. member say that Canadians want to see French disappear. Where has the hon. member been for the last 10 years? I was in education for 27 years. The big trend was to have children attend total immersion French programs. Children from British Columbia to Newfoundland are graduating having spoken the two official languages from as early as grade 3.

The hon. member was concerned that there is no preservation of the French language. The Constitution of Canada preserves the French language. If Quebec separates, that guarantee is gone. That is why Quebecers have to be shown very clearly what they are going to vote for on October 30. It is: Do you want to separate from Canada, period? If you do, along with everything else Quebec may lose is the protection of the French language and French culture.

I am very emotional about that because my wife happens to come from Quebec. Most of her family lives in la belle province. I am so pleased when my nieces and nephews write to me. I have a card in my office which I invite the hon. member to come and see. It reads: Mon oncle, je t'aime. My uncle, I love you. When my niece sees me she tells me the same thing: "Wujek, ja Cie kocham". She will also tell me: "Uncle, I love you". It is great that in a province, le beau Québec, Canadians can grow up with three languages. What more can we ask for? Not only protecting the French language, but also allow young Canadians to grow up in these other-

[The Speaker]

Colleague, I do hate to interrupt any member, but you will have the floor after question period. It being 2 p.m., we will now proceed to statements by members.

Quebec Referendum

[Ted McWhinney, Liberal, Vancouver Quadra, BC]

Mr. Speaker, as a former special constitutional adviser to several Quebec premiers, I can understand the wish for a flexible federalism that would readily and efficectively meet the particular needs of every region of Canada.

My constituents in British Columbia make the same constitutional claims. Consequently, let us build together a new pluralistic and co-operative federalism for the 21st century. Vote no in the referendum.