Mr. Speaker, it is a pleasure to speak to Bill S-31, an act to implement income tax treaties between Canada and various other countries, namely, Slovenia, Ecuador, Venezuela, Peru, Senegal, the Czech Republic, the Slovak Republic and Germany.
This bill goes along with the coalition's position on approaches to international trade, international business and international agreements. Certainly with recent events it is obvious we are going to be broadening our international interests. This type of treaty is important.
There are two reasons to justify why the bill was brought forward. One is to avoid double taxation on foreigners working in Canada. The other is the prevention of evasion of taxes by foreigners working in Canada. I suspect the latter was the real catalyst that brought this bill to fruition.
We support the bill, but we would like to put some issues on the record about taxation. The bill raises other issues. In regard to competitiveness it tries to bring us into line with our international agreements and competitiveness, but there are other parts of our taxation system which leave us very non-competitive.
The first purpose of the bill is to remove barriers to cross-border trade and investment which is obviously in our interests as a trading country. Canada is very dependent on trade and it is important to us for this reason.
The second reason is to ensure unintended consequences, which means to not have tax evasion. This is done through the bill in a number of ways. It allows tax authorities to deal directly with each other to solve international transfer pricing issues, complete audits and engage in other discussions aimed at improving tax administration. Mostly it opens the lines of communication and sharing of information, which raises some concerns which I will deal with in a second. Basically, we agree with this philosophy, but it does raise concerns that should be watched. We must be careful and prudent.
With respect to the Canada-Germany agreement, this is the only set of treaties that provides for mutual assistance in the collection of outstanding taxes. We have other agreements with other major countries, including the United States and the Netherlands. We tend not to have such agreements with smaller partners.
Parts 1 to 7 of the bill implement tax treaties with Slovenia, Ecuador, Venezuela, Peru, Senegal, the Czech Republic and the Slovak Republic. This is the first time that Canada has concluded a tax agreement with any of these states.
The tax treaties implemented by this bill reflect efforts to update and expand Canada's network of tax treaties, so as to have better access to information back and forth. This will increase the ability of Canadian companies to invest and deal in these other countries through financial agreements, business agreements and treaties.
There are some of the pros that we recognize. It goes along with a broader vision of international trade which the coalition and the Progressive Conservative Party have really established and led the way on with respect to free trade agreements. We have been traditional leaders in reducing the taxes and trade barriers between countries.
There is strong support for the bill in our party. Income tax conventions have been signed with countries where a commonality of security and other linkages was sufficiently and traditionally entrenched. In that way there would be some confidence in their taxation systems and they would mirror ours. There would be consistencies at least in the two systems.
The bill primarily seeks to serve the best interests of Canadian investors and the Canadian government. We support foreign trade. The bill allows countries that are not fully developed to create quality jobs and allows us to export our abilities, technologies, services, money, traditions and values. All of those certainly hold a lot of appeal especially to smaller countries. This will help us provide those services.
Canada's philosophy has always been to promote the economic progress of these countries. The more the wealth is shared, the more jobs and the more opportunities there are to educate the public. Again, the more the wealth is shared, the more stresses and tensions between countries are reduced, with a resultant lowering in terrorism acts and all kinds of different manifestations of misunderstandings and hate.
The more we work with other countries the more we understand each other by sharing cultures, business, educational ties and health care ties to better the chances of avoiding things like September 11 and the ongoing threats of terrorism.
We have some disagreements with this proposal which does not focus on the tax issues. They focus on the human rights records of some of the countries involved. We feel that we should encourage countries to increase their focus on human rights as part of these ongoing negotiations.
We do not want to be seen endorsing countries that have bad human rights records. We could be perceived to be endorsing their policies by signing treaties with these countries. We want to ensure that is not what we are doing. We are signing business treaties and not endorsing human rights policies.
There are parts of the bill that we applaud. The bill was in fact referred not only to the Senate banking committee for the study of tax conventions but also d to the foreign affairs committee for the study of human rights aspects. That was a good feature of the bill and we would support future bills of this nature going through the same process.
Canada's influence has expanded into other countries around the world. The tax department does not perform a full and complete country by country analysis of the acceptability of the taxation system and the procedures surrounding taxation to determine what issues in those countries were receptive to such an agreement. It goes back to the human rights issues and should be an integral part of the negotiation process.
Another issue that concerned us was the privacy aspect. There is a lot of information in our tax files on Canadian citizens. If a double taxation agreement was in place the information could and often would get into the hands of other countries. We want to ensure that our privacy laws and standards would apply to other countries that had access to our information.
The coalition supports the bill and encourages it as a further step in the enhancement of Canada's international relationships.
I mentioned earlier that the bill raises other aspects of competitiveness as far as taxation is concerned. There are many ways in which Canada is not competitive in its tax regime. The bill would attempt to bring some tax aspects in line with other countries. However it does not address Canada's income tax rate, which is much higher than the average rate of OECD countries, and many other aspects of our capital gains tax and other taxes that discourage competitiveness, investment and jobs.
The United Kingdom, Germany, Norway and Sweden have adopted more aggressive tax cutting strategies than Canada with respect to capital gains. Germany reduced its capital gains tax by 50%, Great Britain by 75%, and Norway completely eliminated all forms of double taxation on capital income. The United States has an accommodating capital gains rate of approximately 20%. Last year Canada reduced the capital gains inclusion rate to 50% putting it closer to the U.S. level of 20%, but there is still a vast difference. It discourages investment and people from withdrawing their funds from one investment and reinvesting in another way.
The coalition encourages the government to review taxation at all levels to see if there are other ways to reduce taxes which would put Canada in line with other countries in the same way it is doing with Bill S-31.