Mr. Speaker, I am really very pleased to be able to take part in the debate on third reading of this bill from the Senate, Bill S-31, an act to implement agreements, conventions and protocols concluded between Canada and Slovenia, Ecuador, Venezuela, Peru, Senegal, the Czech Republic, the Slovak Republic and Germany. Its purpose is the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.
I would also like to point out that I am a last minute replacement for my colleague, the hon. member for Drummond, who is currently attending the Standing Committee on Health, where they are examining the report on assisted human reproduction within the framework of an analysis of the government's draft bill.
The bill we are debating at this time deals with the implementation of tax treaties, conventions and agreements with countries where there is a taxation system in place that is similar to that of Quebec and of Canada.
The Bloc will be in favour of this bill. I will, however, if I may, share our concerns about taxation conventions with tax havens, Barbados in particular. We are not only concerned about the Canada-Barbados agreement, we strongly object to it.
Last October, the seven most industrialized countries, Germany, Canada, the U.S., France, Italy, Japan and the United Kingdom, decided to wage battle against the networks that were financing terrorist organizations. As a result, the campaign against money laundering has become the leading edge of the efforts by member states of the Organization for Economic Co-operation and Development, the OECD.
In the wake of the tragic events of September 11, U.S. President George W. Bush changed his tune. Initially hostile to international co-operation against tax havens, he now is singing the praises of co-operation on all fronts.
Canada must have the courage of its convictions. It must speak out against its own tax convention with Barbados. It must strengthen the international component of Revenue Canada in order to discourage tax evasion through the use of tax shelters. It must carry out a blanket reform of Canada's tax system in order to eliminate all tax loopholes that enable companies to get out of paying their fair share of taxes while the average taxpayer bears the brunt. Finally, it must deal forcefully with both tax havens and money laundering.
Canada must fight against illicit money, money earned under the table, dirty money. To this end, it must know the clients of the banks in order to know who is dubious and who is depositing potentially questionable sums. Here, unfortunately, it runs into the problem of invading bank secrecy, the main obstacle in the fight against the darkened pathways of illicit money. The European Union is preparing to establish greater flexibility around bank secrecy, an impenetrable secret that ensures the survival of tax havens. Would Canada be prepared to take the same route?
The globalization of trade and, consequently, competition among countries have led governments to make their tax systems more attractive to investors. The lowering of global tax rates aside, a competitive environment can promote more effective public spending programs. However, some practices in the area of taxes and related fields impede competition and can deplete any gains generated by tax competition. This is the case of tax havens.
Last February, the auditor general declared that the international activities of Canadian taxpayers, in particular the use of tax havens, constituted one of the most serious threats to Canada's tax base.
This statement contrasts with the fact that Canada is a signatory to a tax convention with Barbados, quite the paradise to begin with, and a tax haven too.
It is strange that this convention encourages Canadians to use tax havens. In 1999, Canadian investors understood the government's message, putting Barbados on their list to such an extent that it became the third most popular site of Canadian investment abroad after the United States and Great Britain.
In the same year, direct Canadian investments abroad amounted to $257 billion, with 27.9% of it invested, if we can use the term, in Barbados, the Bahamas and Bermuda. This figure represents over 10% of all of Canada's investments abroad in 1999.
The OECD is critical of tax havens. It recommends that its members terminate all conventions with tax havens. What is Canada's reaction? It seems reluctant to follow the OECD's recommendations.
The financial action task force on money laundering started publishing a black list, last year, of countries deemed uncooperative in the fight against illicit money, while calling upon them to conform to international legislation or else face sanctions.
This list contains 19 countries or territories, including the Bahamas and Bermuda, two of Canadian investors' favourite countries.
In June 2000, the OECD published a list of 35 jurisdictions that meet the criteria set out for tax havens. Barbados is included in this list. Is Barbados a financial branch of Canada? After signing the 1980 tax treaty, Canada suggested that there would be amendments made to the existing treaty, but nothing happened.
Members can imagine how astonished my colleague, the member for Drummond, was when she saw on the website for the Department of Foreign Affairs and International Trade that it was possible to get a brochure entitled “Barbados: A Guide for Canadian Exporters”. According to the brochure, the offshore sector continues to expand and play an increasing role in the economy as a source of currency and employment.
This same Department of Foreign Affairs and International Trade did not hesitate to promote tax havens in 1999. In fact, in CanadExport it published its calendar of events, which included a “Tax Havens Conference”. This conference discussed tax havens and Canadian tax laws and information on how to use them properly.
The OECD is asking member countries to denounce tax treaties signed with tax havens. This request mirrors the one formulated by my colleague, the member for Saint-Hyacinthe—Bagot, in 1994. Neither the Bloc Quebecois nor the OECD have been able to influence the Minister of Finance of Canada yet.
The use of tax havens has been criticized by the Auditor General of Canada on numerous occasions. In 1998, he criticized the fact that Canada was not allocating enough resources to fight tax avoidance.
He alluded, among other things, to the increasing use of tax havens and to the growing number of bilateral income tax conventions. The auditor general went even further by giving this serious warning to the government, and I quote:
In our view, failure to take urgent action on these matters will severely limit Revenue Canada's ability to manage the risks to Canada's tax base that international transactions represent.
Canada, and particularly the Liberal government in office, are speaking from both sides of the mouth. In this issue, as in many others, the Canadian government does not hesitate to be heard on the international scene by supporting, for example, the OECD report asking that the treaties signed with tax havens be denounced. In reality the Canadian government continues to promote and encourage the use of tax havens such as Barbados.
How can we trust the Canadian Minister of Finance, particularly since he owns many companies that have their head office in Barbados? His companies benefit from tax havens that provide benefits such as: no tax on capital gains, no deductions at the source and no monitoring or control over exchanges.
Such a tax system is regressive and totally contrary to Quebec and Canadian values.
The whole picture makes one wonder, to say the least. As an individual and investor, the Minister of Finance benefits from tax havens. However, as Minister of Finance he knows that such practices are harmful to the tax base in Canada and Quebec. While this may not be a conflict of interest, it can at least be said that the minister has conflicting interests when he must take action and discuss abuse of the financial system.
Finally, journalist Stéphanie Grammond from La Presse reported in September that thousands of Quebecers had recently been approached by seemingly fraudulent organizations to invest in tax havens.
These organizations ask people to invest in companies or corporations whose names are strangely similar to those of well known and well established businesses, and they urge them to invest their money in far away countries.
Shares are exchanged through a bogus stock market set up on the Internet. As new investors join in, the market fluctuates until it crashes.
What seems certain for now is that some networks are based in Quebec, while others are apparently based in foreign countries. The North American Securities Administrators Association, the oldest investor protection organization, issued a warning to investors to be especially wary of anyone encouraging them to shelter their money in tax havens.
I will conclude by reiterating the demands of the Bloc Quebecois, which have not changed since the member for Saint-Hyacinthe—Bagot began making them in 1994.
We are demanding that Canada do as the OECD requests and denounce its tax convention with Barbados immediately.
We are demanding that Revenue Canada beef up its international unit in order to discourage tax avoidance through tax havens.
Since 1996, we have been calling for a comprehensive reform of Canadian taxation and we are returning to the charge today. This reform should eliminate all the tax loopholes which allow certain companies to avoid paying their fair share of taxes, to the detriment of the average taxpayer.
Finally, in the free trade area of the Americas negotiations, we are seeking the addition of a clause prohibiting harmful tax practices, as defined by the OECD.