Debates of Sept. 18th, 2003

Supply

[Stéphane Bergeron, Bloc, Verchères—Les Patriotes, QC]

I rise on a point of order, Mr. Speaker. I would just like you to enlighten me on whether it is in order for members to use the word hypocrisy in the House, as my hon. colleague just did.

[The Deputy Speaker]

The hon. member for Verchères—Les-Patriotes has raised a point that may be interpreted in different ways from time to time. I will try to explain as best as I can.

I would say that the word as such is not unparliamentary, when reference is made to hypocrisy in general.

However, if one member calls another—I am reluctant to use the term—a hypocrite, I would say that things are really getting serious. Then, one might certainly expect the Chair to intervene.

I thank the hon. member for his point of order. I take this opportunity to remind members to choose their words carefully.

The hon. member for Etobicoke North.

[Roy Cullen, Liberal, Etobicoke North, ON]

Mr. Speaker, the hon. member for Rosemont—Petite-Patrie is talking about special tax systems for banks.

I find that especially difficult to understand because when the OECD did its review of all the OECD countries in terms of any harmful tax policies, it singled out the international banking centres and the tax treatment of those here in Canada. Those apply to the international banking centres in Montreal and Vancouver.

I will tell everyone the history of those centres. Those centres were set up because of lobbying pressure from the province of Quebec, and probably the deputies opposite and the Parti Québécois, to set up an international banking centre regime in Montreal and, likewise, some pressure to set up an international banking centre in Vancouver because they could not effectively compete with the strength of the banking centre in the city of Toronto. The government, perhaps in its wisdom, decided to give Montreal and Vancouver a chance. Does anyone know what Montreal did? It did not use it very effectively. It hardly used it at all, so it was a wasted effort.

On the one hand they talk about the special tax treatment for banks and, on the other hand, this is the very treatment to which the OECD objects. I wonder if the member for Rosemont—Petite-Patrie is aware of that provision, and if he would come clean to the House.

[Bernard Bigras, Bloc, Rosemont—Petite-Patrie, QC]

Mr. Speaker, it takes quite some nerve to compare these centres to big banks. Must I remind the House that big banks make astronomical profits, while the cost of banking services is not going down, far from it?

We can look at the subsidiaries of big banks that are located in tax havens. I will remind the House that there are 21 subsidiaries of Canadian banks in Barbados, 10 in the Cayman Islands, nine in the Bahamas, three in Bermuda, two in Jersey.

In fact, I invite my colleague to say this in his riding and to ask his constituents for their opinion, to find out if they consider it normal for big banks, which make astronomical profits and do not hesitate to increase banking fees, to be protected by tax conventions that benefit them and their senior executives, to the detriment of Quebeckers and Canadians?

So I am turning the question around and inviting him to ask it to his constituents.

[The Deputy Speaker]

There is a little less than two minutes left. I would therefore ask that the question be quite brief.

The hon. member for Argenteuil—Papineau—Mirabel.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Mr. Speaker, I only want to ask one question of my colleague for Rosemont—Petite-Patrie.

Given that he looked at the organization chart showing the investments of the member for LaSalle—Émard in tax havens, what does he thinks about the fact that it was the member for LaSalle—Émard himself, when he was the Minister of Finance, who negotiated the agreement with Barbados? Now that my colleague has looked at these investments, does he understand better why the member for LaSalle—Émard negotiated this agreement?

[Bernard Bigras, Bloc, Rosemont—Petite-Patrie, QC]

Mr. Speaker, the least we can say is that when the member for LaSalle—Émard negotiated this agreement, he apparently was both judge and jury. When we actually look at the subsidiaries that I mentioned a while ago, we realize that a tax treaty was negotiated with Barbados while the member had assets in that very jurisdiction.

Therefore, and this is important, the member for LaSalle—Émard should not necessarily turn this over to his son, as he did. I would point out that the ethics counsellor, who is independent, set out some safeguards on July 28, 2003. He recommended to the member for LaSalle—Émard that he take care with regard to future policies.

[Yves Rocheleau, Bloc, Trois-Rivières, QC]

Mr. Speaker, I too am very pleased to participate in this crucial debate brought about by my colleague, the member for Joliette. It is in line with a issue of concern to the Bloc Quebecois ever since we came to the House in 1993, the issue of tax havens.

Let me read the motion for the benefit of the House:

That, in the opinion of thider to ensure tax equits House, in ory, the government should terminate Canada’s tax convention with Barbados, a tax haven, which enables wealthy Canadian taxpayers and companies to avoid their tax obligations, and should play a leadership role at the international level in activities to eliminate tax havens.

This is a major issue. Personally, I think this is one of the ugliest aspects of international capitalism, which involves great fortunes and the most important stakeholders of this world. Approximately 250 large corporations secretly control the universe using all the possible means and pulling all the strings available to them.

These corporations manipulate governments through election funds. We have to know that there is a direct link between the attitudes of western governments, the complacency with which they treat large corporations, and their electoral funds. Those people are all good friends. This colours the whole debate.

Yet, organizations have examined this phenomenon, which, one must also realize, is about impoverishing societies.

The Organization for Economic Co-operation and Development, better known by its acronym OECD, worked on this issue and in 1998, set out parameters for identifying tax havens. It is good, for our purposes, to repeat them here.

There are four major criteria for identifying a tax haven. First, it is a place where taxes are non-existent or insignificant. Second, there is no real exchange of tax information; things are done in secret. The most legendary example of that is Switzerland. Third, there is a lack of transparency in the laws or taxation. Fourth, there are no substantial activities or obligations for a corporation to truly operate in the country. In many places it is just a mailing address or a desk with a phone, but likely no secretary to answer it.

At the time, 35 countries met these criteria and could be called tax havens. If we broadened the parameters slightly, 12 more countries would be added for a total of 47, including Canada. In the eyes of the OECD, our tax policy is linked to international freight transportation.

In Canada, there are very few entities that transport freight internationally in a serious and institutional manner. The former finance minister has always developed his talents not only here, on the backs of the provinces and the unemployed, but also with his financial advisers.

For instance, in 1992, he created four subsidiaries to his Canada Steamship Lines group in Liberia. Liberia is sure to be on the list of 35 tax havens. Every company, no matter what their profits are, pays Liberia a maximum of $350 a year in taxes. Companies benefit from tax conventions with countries like that.

That is another element of the debate. There have to be tax conventions between countries, in all honesty, in order for taxes to be paid. If a Canadian or Quebec company invested in Germany, for example, tax rules and laws would ensure that taxes would have to be paid either in Canada or in Germany.

But when one does business in Barbados, things are not quite the same. The tax rate is 2.5% in that country, compared to 30% here, which means that one would pay ten times less taxes under an advantageous tax agreement with Barbados. This means that the economy of Quebec and of Canada is deprived of all these revenues that would normally be used to develop new services.

A law-abiding and socially responsible corporation pays its taxes.

When people do not pay their taxes in a society like ours—and this is not a phony debate, far from it, it is a question of public morality—when people do not pay their taxes, either they do not have access to public services or other people pay taxes for them.

That is what is happening in Quebec and in Canada. Other people pay the taxes that the banks and Canada Steamship Lines do not pay. That is what is immoral.

This is why Canadians and Quebeckers may complain about the high tax rate. The federal government is not dealing with this issue, which the Bloc Quebecois has been raising for 10 years. It has dealt with the unemployed, though. It made sure that in Trois-Rivières, for example, where there may have been some abuse under the old act—but that is another issue—employment insurance benefits are no longer available to 85% of those who lose their job, as used to be the case, but to a much smaller percentage of people.

It is well known that $45 billion has been taken from the EI fund, first to eliminate the deficit and then to pay down the national debt. Instead of making the rich people pay, we are forcing the poor and less fortunate people to do so.

Let us take, for instance, the guaranteed income supplement. The Canadian government has, in an underhanded and despicable manner, pocketed $3 billion in the last five years by attacking those who are most vulnerable in society. In the meantime, the five major banks in Canada have deprived the tax man of $5 billion in the last five years, if I am not mistaken.

Some of the communicating vessels seem to be blocked up. That has not happened as if by magic. They are blocked up because there is a lack of political will to do take action, or rather a political will to maintain the status quo.

It might be that the campaign fund is ever-present in people's minds. It might be because good friends have agreed to pay $500, $1,000, $1,500 or even $3,000 a ticket to attend a cocktail party, for a total of $9 million—and you know just how fast that was collected—to help someone become the next prime minister. We know that.

All that is related. The Canadian government is not doing anything to straighten out this mess. To the contrary, it part of the problem. People should know that there is an Internet site called Barbados International Business Centre, where Canadian exporters are invited to invest in Barbados. It is the Department of Foreign Affairs and International Trade that is inviting people to invest in Barbados, where they pay practically no income tax. These Internet sites are harmful to the Canadian economy.

This is nothing short of outrageous. The more I think of it, the more outrageous it seems. I am convinced that what we are experiencing as citizens of the world is almost anarchy. There is a total disregard for the citizens and the taxpayers. We urgently need an international mechanism to try, with limited means, given the clout these people have, to find something like the Tobin tax that will make the rich pay, as the CSN used to say in its heyday. By levying a modest tax of 0.5% on the $1,500 billion in daily transactions, we could create a fund of a few billion dollars each year. It could help provide drinking water in Africa, for example, and thus help alleviate problems that should not even exist in this day and age.

There are places in Africa where they do not yet have drinking water. They do not have clothes. They do not have a shelter where they can sleep. They still have just the bare minimum required for community living and human dignity. And people opposite tolerate and indeed condone this kind of scheme. When you accept tax rates of 2.5%, how could a developing country assess rates of 30%?

This is institutionalized underdevelopment. Not a single developing country will be able to make it, if the international community is not willing to bring these people into line. At a minimum, they should redistribute wealth in a decent way. The fact that this is not being done is a daily scandal.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Madam Speaker, I would first like to thank my hon. colleague for his brilliant presentation. I think he made a very good point that the people pay when big business does not.

I would just like him to say something more about the fact that in 2002 the banks did not pay their fair share to the provincial or federal governments. We are talking about $2.1 billion. I would ask the hon. member to tell us more about the fact that, through these tax conventions with Barbados alone, the banks have not paid, or were able to avoid paying, $2.1 billion in taxes.

[Yves Rocheleau, Bloc, Trois-Rivières, QC]

Madam Speaker, that is a good question. We need to get some sense of proportion. The banks are said to have deprived Canada of $2 billion in tax revenue. I have read that this figure represents the budget of the University of Montreal until 2009. These are extraordinary figures, and they are easier to understand when transposed to some other area.

I would also like to add this clarification. We have referred to Barbados, but there are the three Bs: the Bahamas, Bermuda and Barbados. Moreover, in 2001, Canadian investors just happen to have invested $34 billion in Barbados, Bermuda and the Bahamas. During that same period, we invested $24 billion in all of Latin America. So, it just so happens that these three tiny countries, with a total population of 270,000, got $34 billion of investments, while all of Latin America, with a population of 10 million, many times over, got $24 billion.

As for Africa, our Prime Minister's favourite place—and this shows the political will and influence this government has, and how it puts its money where its mouth is—investments totalled $2.8 billion, compared to $34 billion for the 3 Bs.

This shows the hypocrisy of this government. There is an huge gap between words and actions. This is an area where the just society really comes into play. They used to be so big on the just society and social justice, but no more. There is no political will there. The debates that have initiated by the Bloc Quebecois these past 10 years prove quite clearly that there is no such political will on that side, none at all.

[Marcel Gagnon, Bloc, Champlain, QC]

Madam Speaker, I, too, want to congratulate the member for Trois-Rivières for his excellent speech that showed the human side of this issue. The member showed us to what extent the pursuit of wealth can create an incredible imbalance in the world. He himself has worked closely with African countries. When he talks about this, he does it with conviction and great knowledge.

He also showed us how people in this country are treated unfairly. He mentioned the amounts of money that have been taken from the poorest in our society, and I am thinking of course about the elderly. There is always hope for those who are poor and young, but hope fades fast for those who are poor, old and sick.

We have a finance minister who, for the last five years, has deprived the poorest seniors of the guaranteed income supplement. I would like my colleague to elaborate on that. He probably knows that 270,000 Canadians, including 68,000 Quebeckers, among the poorest and the neediest, have been deprived of essential benefits from the guaranteed income supplement while other people have deprived the government of essential revenues through the use of tax havens. I would like my colleague from Trois-Rivières to elaborate on that.

[Yves Rocheleau, Bloc, Trois-Rivières, QC]

Madam Speaker, the statements by my hon. colleague from Champlain illustrate quite eloquently just how unfair this is to the poorest and most vulnerable in our society. These people are often living on their own, and their children are often far away. So they are completely vulnerable in such circumstances. This illustrates how horrible this situation is.

[Roy Cullen, Liberal, Etobicoke North, ON]

Madam Speaker, it is a pleasure for me to take part in the debate on the motion by the Bloc Quebecois.

It is unfortunate because we could have had a very good debate about tax havens and tax evasion. These are important issues and are of concern to members of the OECD, the developed economies. There may be income that is finding its way into tax havens in these low tax or no tax jurisdictions. In some cases it constitutes tax evasion. In other cases it constitutes tax avoidance. In any case, it takes away revenues from the federal Government of Canada and other governments and that is a serious matter.

First, unfortunately the debate today has been personalized. The former finance minister has been spoken about in his absence with no opportunity to rebut.

Second, if we look at the revenue losses that the Bloc Quebecois is concerned about, all we have to do is look at the province of Quebec and the separatist policies. These policies have driven investment and economic activity out of the province of Quebec, thereby diminishing the revenue sources of the government.

Until recently we also had a government in the province of Quebec that spent beyond its means. Of course government revenues in the province of Quebec are an issue. That is why the Bloc in its usual fashion would like to lay this problem at the feet of the federal government.

While it is a serious issue and while the government I am sure is seized with tax evasion, I would hope that we could have a more constructive debate and discussion on this important topic.

Tax treaties are signed with countries. Canada has a number of tax treaties. They are designed to facilitate trade and investment. They are designed to facilitate the exchange of information. They are designed to avoid double taxation. Therefore, if we have companies and individuals of Canadian citizenship doing business in these other countries, they will not be double taxed. This is the reason for these tax treaties.

As my hon. colleague already said, Canada and the other members of the Organization for Economic Cooperation and Development, the OECD, have long been aware of the importance of eliminating instances of double taxation and protecting against tax evasion.

The model of double taxation, the convention, is designed by the OECD. Essentially all the tax treaties that Canada has negotiated, while they are designed to meet our particular needs, are in conformity with the model that was developed by the OECD.

International taxation is a highly complex matter. There are some countries, like Canada, that tax income based largely on residency. There are other countries, like the United States, that tax largely on citizenship. There are yet other countries that tax largely on source of income. That makes for quite a complex quilt. For imaginative minds, tax lawyers, tax accountants and others, it is somewhat of a smorgasbord, especially given our global economy, the amount of interrelatedness of companies around the world, and the way that they operate globally.

Tax evasion and tax avoidance are challenges. I want to clarify at least my understanding of the difference. Tax avoidance means that companies or individuals take advantage of the provisions of, let us say, the Income Tax Act of Canada, within the rules. In other words, they take advantage of rules, or perhaps loopholes, in the income tax system that Canada has evolved.

It is then incumbent upon the Government of Canada, if those activities are contrary to the spirit of the Income Tax Act, to fix those loopholes. That is an ongoing exercise. As we close loopholes, creative people think of other schemes. This will never end in any type of developed society. There will be creative tax accountants and tax lawyers who will look at how to avoid taxes and governments will look for ways to close loopholes if they are outside the spirit of the legislation.

Tax evasion is a totally different thing. This involves evading taxes that clearly are otherwise payable. Essentially there are a number of ways to do this: not to report income that should be subject to Canadian income tax, or to claim expenses against income that clearly are outside the scope of what was intended. Tax evasion is a serious problem, as is tax avoidance, but they are problems that require different types of solutions.

Canada has been at the absolute forefront of the initiative by the OECD to deal with what is referred to as harmful tax competition. It was our former finance minister in particular who was leading the charge on that. In doing so, the exercise started out initially looking at tax havens and offshore operations, where there are essentially low-tax or no-tax regimes, and looking at how the OECD countries could examine those particular jurisdictions and try to deal with them.

The second part had to do with transparency and the wish of the developed economies to entertain those situations in those tax havens or offshore banking centres where, if there was a suspicion of tax evasion, there would be cooperation and a transfer of information and a willingness to share. The Canadian tax authorities could get the information and if they felt that there was a Canadian evading tax, they could take the appropriate action. It had to do with sharing of information.

This is a very complex and difficult task when one looks at tax havens and offshore centres like Switzerland, Luxembourg, the Bahamas and others where the very raison d'être is secrecy and confidentiality. This is not an easy problem to deal with but the developed economies are trying to deal with it because they realize that they are losing a lot of tax revenues because of this tax evasion.

The challenge occurs of course when looking at low-tax or no-tax regimes. There are some obvious examples like the Bahamas, like Bermuda, like Switzerland, like Luxembourg and many others where there are low-tax or no-tax regimes, especially for what is called offshore operations. Many of these countries tax income of companies that have operating income, or real income in a sense, in their own countries, but they provide exemptions for offshore companies that operate within their domain.

These operations are quite numerous and they can be very legitimate. There are a number of Canadian companies that have set up offshore operations. Those operations are managing businesses outside of Canada. They are not directed and controlled within Canada and therefore they are not subject to Canadian income tax. It is quite legitimate to do that.

In many cases we have offshore operations which I would not say they are against the rules or they are evading tax, but they certainly stretch the application of the rules in the Income Tax Act. One example is the transfer of goods or services between affiliates. The Canadian Income Tax Act says that if we are selling a product or service to what is called a non arm's length organization, such as a wholly owned subsidiary or something akin to that, we have to sell that product or service at a fair market value. However, there is a range within which it is very difficult to challenge whether or not it is fair market value.

There are some schemes, if we want to call them that, which would put most of the profit margin in those jurisdictions where there is low tax or no tax to keep the profits in the low tax or no tax regimes. Again, the Canada Customs and Revenue Agency is charged through its mandate to make sure that transactions are priced at fair market value within a range and it does a very good job of that.

There are a number of what we call captive insurance companies that are set up offshore which are insuring the assets of multinationals and are really not attached directly to any particular country. They are directed and controlled from an offshore geographical location and they have real direction and control from that particular area.

The OECD found, in my recollection, that when it is looking at low tax or no tax regimes, it is very difficult to know exactly where to stop and where to start. As I said earlier, there are some obvious examples where there are no income taxes, but then there are examples like Ireland, which has gone to a very low tax regime.

I believe the OECD countries decided that it would be a bit of a mug's game to actually try to establish what was a harmful tax regime and what was not. In fact it was really outside the scope of the OECD's interest or what it could realistically deal with. It changed the focus from looking at harmful tax regimes in the sense of the actual amount or rate of tax and it focused more on transparency and the sharing of information. That exercise is ongoing.

Barbados is the example which was brought before the House today, and we know the reasons, but in terms of looking at it substantively, it actually has a very progressive and refined tax system. It taxes local companies at reasonably high rates. It does have provisions for the offshore banking and offshore operations, but it also has a very transparent system. It cooperates with countries like Canada. If there are concerns about tax evasion, there is a lot of information sharing.

The government of Barbados has committed not only in words but in deeds to actively fight money laundering. This was a very important initiative. In fact the financial action task force of the G-7 was set up to deal with fighting money laundering. Canada again, I am very proud to say, is right at the forefront of that. In fact a senior bureaucrat at the Department of Finance is chairing the working level group of the G-7 financial action task force that is looking at how to deal with fighting money laundering. As I said earlier, Barbados has made an absolute commitment to fight money laundering. Barbados does not want dirty money and I applaud it for that.

If Canada simply cancelled the tax treaty with Barbados, first of all it would jeopardize the 1,700-odd companies that are currently in Barbados and operating very legally and very appropriately. It might subject them to double taxation.

The other reality is that there are many tax havens around the world. Companies could easily move from one jurisdiction to another. In my judgment it is better to stick with an offshore operation in Barbados where the government is committed to clean money and the government is committed to transparency. I think that is how we are going to make progress on many of these issues.

The other interesting fact is the European Union has decided also to attack what it calls harmful tax competition and also tax evasion within the European Union. There are countries, as I said earlier, like Switzerland, Luxembourg and others that are a concern to some of the other economies in Europe. Those discussions are ongoing.

It is interesting that the European Union decided also to include manufacturing subsidies. It wants to avoid the kind of tax competition between European countries where they end up with a rush to the bottom. Unfortunately we are seeing some of this in North America. We are seeing some of this in some of the enormous subsidies that are available in the United States at the state level and the municipal level for manufacturing operations.

I can speak from personal experience. If we go to a U.S. state, Tennessee, Kentucky or wherever it might be, the state governor and local officials will absolutely line up to give out the sales tax abatements, property tax relief, cheap industrial land, cogeneration agreements and so on. Unfortunately this is causing some difficulty for us here in Canada because at the provincial and municipal levels we do not seem to have that same flexibility. Besides, our government has taken the position, I think with some wisdom, that we are not going to rush to the bottom. We are going to work on our natural competitive strengths and we are not going to be writing out cheques.

I have been a bit vocal in saying that we need to look at that seriously because we are in danger of losing a lot of investments. If we look at the automobile industry, I saw a report that was done not too long ago that there were 13 additions or new automotive plants in the United States within the last four to five years where the subsidies at the state and municipal levels were absolutely staggering. We have lost out on a few of those.

The one that piqued my interest was one in Georgia not too long ago. There was a $1.3 billion automotive plant investment. The subsidies that were attached to that were close to 58%. That is very difficult for us to compete with.

The reason I raise this is if we are going to look at harmful tax competition, we need to look at it holistically. It is not just harmful tax competition if it relates to offshore financial services. We have harmful tax competition right here in North America.

I think that medium to long term we need to sit down with our major trading partner and say that this is a rush to the bottom and we are all losing out. I know that the U.S. position at the federal level is that it does not have any control over what the states or local governments do. I think that is a bit of a cop-out. I think it is a little too easy to say that. We need to address this issue.

We also need to be mindful, if we are looking at countries like Barbados, Bahamas, Bermuda, the Seychelles and so on, of how these countries compete for manufacturing jobs and manufacturing investments. First of all in some cases they are constrained by their land mass. Bermuda is 22 square miles. I worked there as a young chartered accountant for two years and I would bump into the same people three or four times a day. Other countries have more space. Barbados in terms of geographic resources is more plentiful.

However these countries have gone into offshore banking and offshore financial services. It is a way for them to get some economic activity going into those jurisdictions because they do not have the land mass and perhaps the technical or workhorse experience or capabilities, at this point in any case, to attract the kind of manufacturing facilities that are always up for bid and for grab.

Is it appropriate to shelter income that evades taxes in other developed economies? No. I think that is wrong. I think we would find that most of these countries are prepared to deal with tax evasion. Some are not and they are on the OECD list of non-co-operating countries, which is quite a short list, but Barbados is not on that list because it is prepared to co-operate.

This is when we get into the fine point about tax avoidance versus tax evasion. They are two different things. Some creative people and companies have set up some tax avoidance schemes but that requires a different solution than tax evasion.

We have heard the example of shipowners and we know why that has been chosen as a target. I have had some experience with this in my business life. International shipping companies are all organized offshore. Whether we like it or not, whether we think that the better solution would be for these companies to be onshore and subject to the labour codes of countries like Canada, that is not the way it is. If companies want to be competitive internationally they simply have to organize offshore, and that is the way it is. Without that, those jobs, or even the ancillary jobs back at head office, would not be there because the company would not be able to compete at all.

I talked earlier about the international banking centres in Montreal and Vancouver. A number of us in the GTA tried to resuscitate the international banking centre concept for Toronto. We were rebuffed again because of the Montreal banking centre, which, unfortunately, Montreal has not done much with, and the one in Vancouver which was provided to give it a bit of a leg up in the very competitive world of international banking and finance.

We need to be better able to deal with countries that are committed to fighting money laundering and committed to transparency. Let us deal with tax evasion and banking centres that are illegitimate in a very aggressive way.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Madam Speaker, first of all, before asking my question, I will provide a brief overview of the recent history of Quebec.

At the time of the Quebec elections, in April, the unemployment rate was the lowest ever in the province. Since April and the change of government, the unemployment rate in Quebec has increased by more than 1.1%, and by 0.9% in August alone. Of course, we can make comparisons. The future will tell. History will tell what is happening in Quebec.

However, in the last few months, there is still a sad reality. The unemployment rate is increasing. Our colleague tells us that some investors are gone. In any case, they did not come running back, because the unemployment rate did not improve in Quebec. If anything, it worsened.

Quebeckers—I am proud of this—control more than 30% of the capital invested in Canada, despite those who left during the years when they were not satisfied with the way Quebec was being run.

I have a few questions for my colleague. Since he was an accountant in Bermuda, does he think that it is right that the big Canadian banks can avoid paying $2.1 billion in taxes in Canada? And does he not think that, perhaps, with this money, Canada could help businesses compete with other businesses to keep investments from going to the United States instead of Canada?

[Roy Cullen, Liberal, Etobicoke North, ON]

Madam Speaker, I was born in Montreal, which is something I am very proud of.

I am very happy to see that the economy in Quebec is picking up. That is a good thing. The more the better. The economy in Quebec has gone through a lot of difficulty and that is because of the policies of separatism. We know that to be very true. I am glad to see that Quebec is coming back. It is coincidental with the demise of the separatist feelings in Quebec, and I am sure that is no coincidence.

With respect to the other question, I noticed earlier that the same question was posed by the deputy to his colleague asking if he could explain how the $2 billion in the banking system was lost. His colleague did not really answer it. I think he was implying that if the operations were offshore that was lost revenue to the Government of Canada. If it is a legitimate offshore operation, be it in Barbados, the Caymans, Luxemburg, or Switzerland, it is not subject to the direction and control of Canadians. Companies operate internationally and we lose some tax revenues because companies are formed around the globe. That is just the reality of life. I did not really understand what the connection was with tax evasion and tax havens on this supposed loss of $2 billion.

[Gerald Keddy, Progressive Conservative, South Shore, NS]

Madam Speaker, I listened to the hon. member's speech with some consternation. He seemed to be all over the map and all over the place on his discussions.

He and other members on the government side kept referring to the hon. member for LaSalle—Émard and his stint as finance minister. I guess my question on tax conventions, which would roll easily into tax havens, would be what the hon. member actually thinks of the process that the member for LaSalle—Émard went through as a minister of finance for Canada to negotiate a tax haven that he eventually ended up using himself. Furthermore, we have to understand how important a person the minister of finance is in government, not only in business. It is a very tricky balance and I think it is one that we do need to discuss.

The facts are this. There was a tax haven. A convention was formed between Canada and Liberia that allowed Canadian companies, in this case Canada Steamship Lines but other Canadian companies as well, to have some tax free status by sailing out of Liberia. There was a lot of thunder in the House. I read the speech. There was a lot of chest pounding about shutting down Liberia but there was no talk about the fact that Barbados was left open and companies were transferred directly from Liberia to Barbados.

I think it is a real flaw that we allow Canadian companies to be taxed offshore. It is a bigger flaw to allow a minister of finance to participate in that.

I do not know the answer, although I think I do, but I would like the hon. member's reply. Does he think that is the way a minister of finance should act?

We must understand that when a minister of finance owns an offshore company, sits on the board of the World Bank and has intimate dealings with the rest of the countries in the world regarding upcoming taxation schemes, he is the first person to know, long before anyone else, what proposed tax changes may be occurring in the European Union or in the United States. This is an individual who has access to a so-called blind trust at the average of four times a year while he is negotiating on the part of Canada and running a business. What is the member's opinion on that?

[Roy Cullen, Liberal, Etobicoke North, ON]

Madam Speaker, the member for South Shore wants to be very partisan and drag someone through something because he is not here to defend himself.

I know from my personal experience that the former minister of finance was absolutely pristine when it had to do with recusing himself from any decision that had anything even remotely to do with shipping.

It is interesting that the member raised Liberia. Liberia is one of the countries listed on the OECD list as a jurisdiction that has an unco-operative tax haven. These are jurisdictions, as I outlined before, that are currently unwilling to provide a commitment to exchange taxpayer information and to eliminate any non-transparent features of their tax system. It was quite appropriate that we dealt a blow to the tax treaty with Liberia.

I have not followed the former minister's business operations but the department was much involved in these discussions. In fact, I think the business operations initially were in Liberia. I am not sure about that but these are questions I know the former minister of finance was absolutely pristine about in terms of recusing himself from anything that was even remotely related to shipping. Even though the department might have concluded or not concluded various tax treaties, I am sure the minister had nothing to do with them, or he did not express his opinion one way or the other.

[Charlie Penson, Canadian Alliance, Peace River, AB]

Madam Speaker, I would like to ask the member a question. Is not the problem here, essentially, and the reason a lot of these Canadian companies, or any company for that matter, go to low taxation districts or areas a reflection that taxes within the domestic market where they operate or the country in which they are based are probably too high?

It seems to me that the fundamental question here is: Should we not be trying to drive down our tax rates in such a way that we could keep these companies' home base here and then we would be able to collect an appropriate amount of tax that would not be in excess of what they could handle?

It would seem to me that this would go a long way to solving Canada's productivity problem which has slipped substantially in the last 20 or 30 years and which we have not been able to regain. Maybe if we kept some of that business at home and taxed it at a reasonable level we would actually gain in the process.

[Roy Cullen, Liberal, Etobicoke North, ON]

Madam Speaker, the member for Peace River raises a good point. Some recent studies that I have read basically showed that taxpayers, rightly or wrongly, reach a level of taxation where they intuitively say that they will not pay more.

However I think there is a certain fallacy to that logic. It is akin to the idea that the laws are too tough in Canada. People have to abide by the rules and the laws of the land.

However the member raises an interesting point. We should be mindful of the tax burden that we have on Canadians. At the corporate level we have moved quite aggressively to the right level. I would be surprised if were promoting a lot of tax evasion on the corporate end, although, with creative corporate accountants and tax advisers, I am sure some of that will go on.

However, on a personal level, we still have some work to do. My own sort of anecdotal evidence would suggest that there are more individuals than there should be moving income offshore and we need to deal with that in a couple of different ways.

[Stéphane Bergeron, Bloc, Verchères—Les Patriotes, QC]

Madam Speaker, I am very pleased to take part in the debate which was instigated by my hon. colleague from Joliette and deals with tax evasion, especially in Barbados.

I said I was very pleased to speak on this motion, but let me add that it is not because I am very thrilled about the issue before the House, quite the opposite.

I am pleased because as members of Parliament it is our duty to take note of any situation that is completely contrary to the interests of our fellow citizens, to stand by our constituents and to expose such situations.

Earlier today, I heard the hon. member for Etobicoke North say that we were witch hunting, imputing motives to others and getting into name calling.

I just want to say that I would never resort to name calling or try to tarnish someone's reputation. First, it is not in my nature to do that, and second, I think it would be useless, pointless and superfluous. I think the members in this House and the people watching us are smart enough to come to the right conclusions and to make all of the obvious correlations.

I would like to begin by saying that, strangely enough, in 1999, the third most attractive destination in the world for private Canadian investments, after the United States and the United Kingdom, was Barbados.

Was this because Barbados is a great growth country? Was it because Barbados has an incredibly large consumer market? Was it because Barbados is a place where there are absolutely enormous investments in terms of infrastructure? Was it because Barbados has a fabulous manufacturing capacity? No. Barbados was the third most attractive country in the world for Canadians investors for none of these reasons.

Barbados ranks third, surprisingly, among destinations for private Canadian investments for the simple reason that it is a tax haven, and that is the only reason. The OECD clearly identified tax havens as a plague and a scourge affecting tax policies and measures in many countries, both developing and developed. The OECD urged those countries identified as tax havens to change their tax policies to make them more consistent with the international standard.

That is not the only problem. If Barbados being a tax haven was the only problem, we could perhaps tell ourselves that Barbados is not the only tax haven in the world. The problem is that, on the international scene, Canada is swearing up and down that it does not condone tax havens and calling on these tax havens, following OECD orders, to take appropriate tax measures.

But at the same time Canada concluded a double taxation agreement with Barbados. What does this double taxation agreement with Barbados do? It is quite simple. It prevents individuals or businesses operating or travelling in the two countries in question from having to pay taxes twice.

Given that Barbados is in and of itself a tax haven, it is an attractive place for a number of Canadian companies to make investments, via dummy undertakings—commonly referred to as shell corporations—and bring back into the country profits which were minimally taxed in Barbados and will therefore not be taxed a second time in Canada.

Is that really so very dramatic? Why are we making such a fuss about it this afternoon?

I will just give you a few examples. I heard the hon. member from Etobicoke North give us a knowledgeable presentation on the distinction between tax evasion and tax loopholes.

As wise as it was, it was thoroughly disingenuous. We know that governments—particularly the Government of Canada—very often set up tax loopholes in order to permit tax evasion.

This tax convention between Canada and Barbados is the kind of loophole whose only purpose is to permit tax evasion.

I will give you some examples. In 2002, six Canadian banks were able, through foreign investments in their subsidiaries in tax havens, to save more than $2 billion. The tax savings were about $841 million for the Royal Bank, $530 million for the Bank of Montreal, $463 million for Scotiabank, $235 million for the Toronto-Dominion Bank and $92 million for the CIBC.

And what does $2 billion dollars mean in real terms? What does it represent? Each and every one of us needs to understand what it means.

The Minister of Finance is saying that things are not so terrible after all, since Canadians got tax reductions of $100 billion over five years. That is bogus.

Apparently, there is $100 billion in reduced taxes, but most often, these reductions are highest for those with the highest income instead of the lowest.

If the government had gotten the $2 billion that the Canadian banks saved by investing in so-called foreign subsidiaries, then it could have granted not $100 billion in tax reductions but $102 billion. It is not just banks either. Many other big businesses do the same to save the money they would otherwise pay in Canadian taxes.

Obviously, even if companies pay much lower taxes than individuals do in Canada, they pay way more here than the mere 2.5% they pay in Barbados.

Since there is a tax treaty precluding double taxation, it is much better to pay taxes in Barbados than in Canada. Billions and billions of dollars do not make it into the coffers of the state thanks to this government and its kind cooperation. The taxpayers as a whole, which means mostly the middle class, must support the costs of maintaining programs.

This government boasted about putting Canada's fiscal house back in order. It asked Canadians to tighten their belts. But at the same time as this government was reducing health and education transfers to the provinces, as it was picking the pockets of Canadian workers contributing to the employment insurance fund, it did nothing to plug that tax loophole.

This tax convention between Barbados and Canada allows a number of this country's large corporations, many of which are apparently good friends of the regime, to save taxes to the tune of several billion dollars. At the same time, they have the gall and the audacity to tell us that it is nothing serious. They are granting tax reductions of a hundred billion dollars over five years. It is totally outrageous.

[The Acting Speaker (Ms. Bakopanos)]

It being 5:15 p.m., pursuant to the order made earlier today, every question necessary to dispose of the business of supply is deemed to have been put, and the recorded division is deemed to have been demanded and deferred until Tuesday, September 23, at the end of government orders.

It being 5:15 p.m. the House will now proceed to the consideration of private members' business as listed on today's Order Paper.

The House proceeded to the consideration of Bill C-212, an act respecting user fees, as reported (with amendment) from the committee.

User Fees Act

[Roy Cullen, Liberal, Etobicoke North, ON]

moved that the bill be concurred in.

(Motion agreed to)

[The Acting Speaker (Ms. Bakopanos)]

When shall the bill be read the third time? By leave, now?

[Roy Cullen, Liberal, Etobicoke North, ON]

moved that the bill be read the third time and passed.