Mr. Speaker, I am pleased to rise on Bill S-2, to implement an agreement, conventions and protocols concluded between Canada and Kuwait, Mongolia, the United Arab Emirates, Moldova, Norway, Belgium and Italy for the avoidance of double taxation and the prevention of fiscal evasion and to amend the enacted text of three tax treaties.
First, I would like to point out that, in the title of the bill, there is an error in the French version, because Moldova is the name of the country in the language of the country, but in French, we say Moldavie or république de Moldavie. It seems to me that this could be corrected without us having to go through a lengthy procedure. I remind the House that, otherwise, we would have written Italia, instead of Italie and, in this sense, it seems to me that we must write it correctly in French. Perhaps in English it is indeed Moldova.
I also remind the House that Moldova became independent in 1991. It is interesting to see that the Canadian government is capable of making agreements with newly sovereign countries. I am convinced that this will be the case when Quebec decides to become a sovereign country.
Bill S-2 does not pose any problem with regard to its content and the Bloc Quebecois will support it. However, the problem is what is not in the bill, particularly concerning the issue of tax havens, and this is not the first time that the Bloc Quebecois has pointed this out. I know that, since 1994, my colleague from Saint-Hyacinthe—Bagot has constantly been mentioning this issue of tax havens.
Bill S-2 would have been a good opportunity to denounce tax conventions that are a problem. To give an example, tax conventions between Canada and Italy, and between Canada and Barbados were signed at the same time. In the case of Bill S-2, we are re-opening the agreement with Italia to improve it. In the case of Barbados, we could easily have done the same to put an end to this tax agreement, because Barbados is indeed a tax haven.
There is a rationale for not wanting to force businesses or individuals that already pay taxes in another jurisdiction to pay taxes on the same income in Canada. If it is logical to have these kinds of tax treaties, it is because those countries, like the ones mentioned earlier, have tax rates that are normal for a responsible state that has to collect a certain amount of money to provide services to its people.
In the case of Barbados, it seems to me that we are not dealing with a country that has normal tax rates. Here are a few example. In Barbados, the tax rate is 1% when profits exceed $15 million US. It goes up to 2.5% for profits under $5 million US.
We can see that not only is the tax rate totally ridiculous, but the approach used is completely opposite to the one that we have developed in Canada and in Quebec, where we have progressive tax systems. In this case, small businesses, or relatively small businesses, are paying the most tax. When I say that they are paying the most tax, again it is relative; we are talking here about a 2.5% tax rate, compared to slightly less than 30% in Canada.
Barbados has no capital gains tax, no payroll deductions, and no monitoring or control with regard to trade. Therefore, it is clear that, in the case of Barbados, there is no double taxation and that, in these circumstances, a tax treaty makes no sense. A tax treaty to avoid double taxation implies that both jurisdictions have an appropriate tax rate, one that is normal for a responsible state, as I was saying earlier.
On February 27, 2001, the Auditor General even said that “one of the biggest threats to the tax base lies” in our openness to countries some Canadian taxpayers and corporations use as tax havens. This should be a concern to all of us. When a Canadian corporation decides to avoid paying taxes by opening a branch in a tax haven, it is the taxes of those who choose to take their responsibilities in Quebec and in Canada that go up.
I think it would have been important to use the bill before us to put an end to our tax treaty with Barbados. This is not an immaterial or insubstantial issue. The Auditor General referred to it in her 2001 report, as I mentioned earlier. What caught my attention is that Canada's direct investments abroad totalled $257 billion in 1999 figures.
Some $134 billion were invested in the United States and $29.2 billion in the U.K. That is understandable. But I was quite surprised to see that the third country where Canadians invest the most is Barbados, with $16.8 billion.
I just cannot believe that those investments of $16.8 billion have all contributed to the economy of Barbados. For the most part, these direct investments were done to avoid paying taxes in Canada with the consent of the Canadian government, because, as we know, it is not illegal. This has to stop.
Let me give more examples showing how important this system has become. Out of our total investments abroad of $257 billion, $27.9 billion were invested in Barbados, the Bahamas and Bermuda, three countries the OECD considers tax havens. This represented 10% of all Canadian investments abroad in 1999. This is more than all Canadian investments in Asia, Latin America and Africa. This is far from insignificant. It is therefore imperative that the Canadian government take the bull by the horns and terminate these tax treaties with tax havens.
At this time, the total amount of money invested in tax havens—there are 40 or so in the world—is estimated at $5,000 billion, one fifth of which is considered laundered money.
By being extremely permissive in tax treaty matters and allowing tax havens to be considered legitimate jurisdictions as far as taxation goes, the Canadian government is dodging its responsibility to control money laundering. I repeat that one fifth of the money invested in tax havens is laundered money.
What is cause for concern is the fact that the Department of Foreign Affairs and International Trade promotes tax havens. In a July 16, 1999 document, we can see that one of the conferences scheduled by CanadExport was to demystify tax havens. The items covered were: the origin of tax havens; their use as a financial strategy; the criteria for choosing a good tax haven--as if there could be such a thing as a good tax haven; tax havens and the Canadian tax system; and finally, the steps to follow in order to use them properly.
It is clear that not only did the government duck its obligation to put an end to tax treaties with tax havens, Barbados in particular, but it also promoted tax havens through some of its agencies. On the Department of Foreign Affairs and International Trade Web site, one can order a booklet entitled “Barbados: A Guide for Canadian Exporters”.
It is very worrisome to see that Canada promotes tax havens. I raised the issue a bit earlier; we all know that much of the money placed in these tax havens constitutes not only tax avoidance but money laundering as well, and is probably used by terrorist groups around the world.
There is a blatant contradiction here with what the government officially said about measures that were taken after September 11, 2001.
As I was mentioning earlier, it is interesting to see that, since 1994, not only has my colleague from Saint-Hyacinthe—Bagot, when he was the finance critic, asked that the Canadian government review its relations with tax havens, but the OECD has also asked members—we know that Canada is a member—to consider denouncing tax agreements that may have been concluded with tax havens.
Bill S-2 would therefore have been a good opportunity to raise this issue, particularly because the tax agreement with Italy was signed at the same time as the agreement with Barbados and Italy is one of the countries with which we have reviewed our provisions in Bill S-2.
Until now, the federal government has not listened to the OECD, to the Bloc Quebecois or all the groups in society, including ATTAC-Québec, which are asking the government to assume its responsibilities concerning this laxness toward tax havens. Since the finance minister's businesses were using tax havens—we have identified more than a dozen numbered companies that are operating in Barbados, in Bermuda or in the Bahamas and that are owned by Canada Steamship Lines—we thought that, being judge and jury, the finance minister was uncomfortable raising an issue that, I remind the House, is not illegal, but may have some illegitimacy. When the person responsible for the finances of a state such as Canada encourages his own businesses to operate in tax havens, we are justified in asking some questions.
However, now that we have a new finance minister, it seems to me that we should be able, especially since the former finance minister wants to be the next Prime Minister of Canada, to have a debate not only for the good of Canadian and Quebec taxpayers, but also for the good of politicians. It might raise questions when the public sees this lax attitude towards tax havens and businesses that use them and realizes that some of our most prominent politicians also take advantage of these tax havens.
Therefore, I think that in the next few weeks, maybe in the budget that will be coming in February or in March, the government should propose a number of ways to deal with this issue.
We have made suggestions and we are making them again today. We think that, in the free trade area of the Americas negotiations, we should seek the addition of a clause prohibiting harmful tax practices, as defined by the OECD. We know that a number of jurisdictions across the Americas have harmful tax practices.
The Bloc Quebecois is also demanding that Canada withdraw as soon as possible from its tax treaty with Barbados, as recommended by the OECD. We are also asking that the Canada Customs and Revenue Agency strengthen its international service to discourage tax avoidance through the use of tax havens. We have also been asking since 1996 that an overall reform of the Canadian tax system be undertaken to eliminate tax loopholes as well as certain abusive practices that are used at the expense of the average taxpayer. Taxes that are not paid by large businesses and by those individuals who are rich enough to use these schemes are paid by middle and low income people in our society.
Lastly, I would like to make two suggestions or recommendations concerning tax havens. I think the income earned by Canadian corporations in tax havens should be taxed at the rate in effect here in Canada. Again, I will use Barbados as an example. The tax rate there is 1%, compared to about 29% here. The income of the corporations and branches in operation in that country should be taxed here to make up the difference. In other words, a tax rate of around 28% should be applied. We should also prevent agencies and departments and the government as a whole from providing funding or any form of assistance to corporations which have decided to shirk their fiscal responsibilities. This would be consistent with the official position of the Canadian government.
As I said earlier, the problem with Bill S-2 is not really what is in it but rather what has been left out.
Having said that, as I mentioned at the beginning of my speech, the Bloc Quebecois will be voting in favour of this bill.