Mr. Speaker, it is with pleasure that I rise today to speak to Bill S-16, passed by the Senate on June 2, 1998.
The purpose of Bill S-16 is to implement an agreement between Canada and the Socialist Republic of Vietnam, an agreement between Canada and Croatia, and a convention between Canada and the Republic of Chile for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.
As my Bloc Quebecois colleague mentioned, our party will not oppose the tax conventions signed between Canada and the three countries I have just named, in so far as the purpose of these agreements is to ensure fair and equitable tax treatment of persons, and to encourage trade and investments between the countries. I would point out that the term “person” includes private individuals, corporations, trusts and any other group of individuals.
Since the countries concerned in this bill have a rate of taxation that is almost the same as Canada's, I will not speak against the bill. But, while we are on the topic, I would like to use the time I have to speak about tax conventions in force between Canada and certain countries.
Although tax conventions avoid double taxation, they are in many cases a source of problems and tax evasion. Care must therefor be taken that these treaties do not open the door to tax evasion. To that end, tax conventions must be limited to countries with a tax rate comparable to Canada's.
If the tax conventions avoid double taxation on people's incomes, in certain cases they are a source of problems and encourage serious tax evasion. Although the most recent treaties, which are based the OECD model, are relatively standard, Canada does have some older ones with countries considered tax havens because their individual and corporate tax rates are low, or non-existent.
In this connection, let us keep in mind that the Auditor General of Canada has raised this matter on more than one occasion. I would like to quote to you what he wrote in his 1992 report.
A Netherlands Antilles subsidiary of a Canadian company had assets of $865 million and income of $92 million not subject to the FAPI rules.
Although the income of the foreign subsidiary has not been taxed at a rate that approximates Canadian rates, it can be transferred to the Canadian parent as tax-free dividends.
The auditor continues:
The offshore income is not taxed on entering Canada, but it carries with it federal and provincial tax credits on dividends paid out to Canadian shareholders.
And he concluded:
The Canadian parent incurred the financing costs for its investment in the subsidiary and reported a tax loss in Canada of $29 million.
This is shameful. I could talk about many other similar instances, in the case of the government, but it would fall on deaf ears.
There is another danger in certain tax treaties, namely that of being able to change tax rules in favour of friends of the government or in favour of people in the government. I am referring here to Bill C-28. Members will recall that the Minister of Finance is both judge and jury in this bill and that, should this bill become law, it will bring millions of dollars to his company, Canada Steamship Lines.
That outrageous stunt was discovered by my colleague from Saint-Hyacinthe—Bagot. Members will also recall that all opposition parties supported the Bloc in this matter.
The Minister of Finance should protect the interests of Canadian taxpayers the same way he protects his own interests.
Tax treaties and the manipulation of legislation cost billions of dollars to taxpayers. These are billions of dollars in tax revenues that are lost to the detriment of Canadians.
Any serious and responsible government, however, would spend a lot of resources to assess, adjust and renegotiate the tax treaties that cause problems, especially those most likely to cost Canada a lot of tax money.
But guess how many public servants in the finance department are working on these tax treaties: 100, 25, 12? No, in fact, the finance department has only one employee working on tax treaties, but fortunately, he works full time.
We do not question the competence and seriousness of this public servant. Our only regret is that, in Canada, we only have one public servant to oversee some 60 tax treaties and work on 30 more to come, when there are hundreds of millions, if not billions of dollars, at stake.
What we have here is a government turning a blind eye to the potential exodus of hundreds of millions of dollars in unpaid taxes.
This is a very serious issue because it undermines the overall integrity of our tax system. With all these holes in our system, Canada's reputation is also tarnished. It is very troublesome.
Given the billions of dollars the Minister of Finance has cut in transfers to the provinces for hospitals, schools and social assistance, the honest citizens of our country, who pay their taxes to Ottawa, want their government to at least ensure that everyone pays his fair share.
One good thing is that, in some cases, tax conventions apply to our performers and all Canadian and Quebec artists who perform abroad, even our athletes, like our hockey players and all the others who are earning a living abroad.
On the other hand, we know that tax agreements are nothing new. They have always existed and will always exist, and will even increase in numbers with globalization.
Tax agreements establish what we call reciprocal taxation, insofar as Canada's corporate tax rates and those of the countries with which Canada signed these agreements are equivalent or comparable.
In closing, I repeat that the Bloc Quebecois is in favour of tax agreements signed between Canada and other countries when these treaties are aimed at ensuring fair and equitable taxation of residents and non-residents, thus encouraging trade and investments between countries.
But make no mistake: these treaties should not open the door to excessive tax evasion.