Debates of Sept. 18th, 2003

Question No. 236

[The Acting Speaker (Mr. Bélair)]

Is that agreed?

[Some hon. members]

Agreed.

Supply

[Pierre Paquette, Bloc, Joliette, QC]

moved:

That, in the opinion of this House, in order to ensure tax equity, 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.

Mr. Speaker, I am extremely pleased to rise today to bring this motion forward in the House. It is a recurring and worsening issue and an issue Canada has ignored here in the House. All hon. members will agree with me that the Bloc Quebecois has taken an excellent initiative in addressing this issue right away.

I think the motion deserves to be read again.

That, in the opinion of this House, in order to ensure tax equity, 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.

Why is this motion being brought forward? First of all, tax havens are places or jurisdictions which attract individuals and businesses who refuse to pay income tax like everyone else.

We must remember that governments do not levy taxes simply for their own pleasure, but in order to have the collective tools, public services, and wealth redistribution programs available to improve the welfare of the population, in this case, the population of Canada and Quebec.

Those who take advantage of tax havens are setting themselves apart from the rest of Canadians and Quebeckers, and that ought to be exposed.

Obviously, the current context allows this to go on. To a certain extent, it is not illegal to use tax havens, but in my opinion, it is illegitimate and immoral, particularly when the individual in question is a former minister of finance who wants to be the next Prime Minister.

This is what I call grey money. It is the result of tax evasion. Sometimes, this money is also the result of tax fraud. I will expand on this later.

It gets worse. This grey money gets mixed with dirty money. International organized crime groups use tax havens to launder money. Their method of choice to launder money, be it related to drugs, prostitution, arms trafficking, the corruption of politicians in certain countries or terrorism, is tax havens.

According to current estimates, some $5,000 billion is sheltered in tax havens, $1,000 billion of which is laundered money used by international crime rings for various purposes.

It is somewhat surprising that so little has been done about tax havens in the wake of the tragic events of September 11, when governments agreed in the weeks that followed to tighten various national and international laws, so that international terrorist groups could not use the loopholes in the international financial system to obtain funds by sending them from one anonymous account to another.

I said this to the Auditor General. In her most recent report, she included an appendix explaining the various schemes used by organized crime to launder money. She made no reference to tax havens. I told her that there is an immediate and direct link between money laundering and tax havens. She promised me that she would examine this matter. Knowing her as I do, I am certain that her next report will make the connection.

In 1999, Canadians invested $17 billion in tax shelters in Barbados, to give one example. It is not peanuts. Two years later, in 2001, Canadian taxpayers, both individuals and corporations, put $23.3 billion in tax shelters in Barbados.

You will be surprised to learn that Barbados is the third most favoured destination for Canadians as far as direct investments are concerned. One might have expected Canadian investors to send money to developed countries like France, Japan, Italy or Germany in order to profit from their economy. But no, after the United States and Great Britain, Barbados is their favourite.

There is no way I am convinced that these investments going to Barbados are always used to generate income. A very considerable portion of this $23 billion is sometimes there for the purpose of tax evasion, sometimes for tax fraud, or sometimes for money laundering by organized crime.

What is more, this money is protected by an agreement between Canada and Barbados signed by the former Minister of Finance. As a result, the Canadians concerned can avoid paying taxes here in Canada.

Obviously, it will be argued that Barbados has been taken off the list of countries the OECD considers tax havens.

If it has been taken off the list, this was because 13 countries, Canada among them, said that if certain countries were not removed, they would withdraw from the proceedings under way at the time to tighten the rules on money laundering.

So Canada, which generally boasts of its lead role in connection with all manner of rights and concerns, is one of only seven signatories of a tax convention with Barbados. Of all the countries on this planet, a mere seven—one of these the U.S., I must point out—have signed a convention with Barbados. This shows just how immoral this Canadian initiative is, sanctioning as it does the existence of this tax haven.

As I have said, nothing has actually changed in Barbados, even though it was struck from the OECD list. Take its taxation system, for example: you may find it interesting that the tax rate varies between 1% and 2.5%.

If you have $15 million US or more in assets, you pay 1%. If you have less than $5 million US in assets, you pay 2.5%. That makes no sense, it should be the other way around. And yet, the less money you have, the more taxes you pay.

This is a regressive tax system, therefore. Of course, it applies to extremely rich individuals and companies. No one feels sorry for them, but a tax rate like that is unfair competition that erodes the tax base in Canada and in a number of other western countries.

There is no capital gains tax and no financial surveillance. It is total bank secrecy.

Canada's big five banks do not hesitate to use the tax havens. The big five banks have operations in 26 tax havens, including several that are blacklisted by the Financial Action Task Force on Money Laundering, or FATF, of the OECD.

Canadian banks have 61 branches in the tax havens. The Bank of Nova Scotia leads the way with branches in 23 tax havens, followed by the Royal Bank of Canada, which has 17, CIBC, 12, the Bank of Montreal, 5, and TD Bank, 3.

While the governments and states of these tax havens can be accused of being bad administrators or bad managers, there are those in Canada who are really taking advantage of the situation, notably some of our best known companies internationally.

That explains why the motion says that the tax convention with Barbados should be terminated immediately, I would even say do away with it completely. Canada must also take a firmer stand against tax havens.

I said earlier that some major Canadian banks have operations in the tax havens that are on the FTAF black list. A representative from ATTAC-Québec, François Gosselin, wrote to all the banks asking why they were active in the tax havens at his expense. It is the average citizen who pays, because those corporate citizens and individuals refuse to pay income tax like the rest of Canadians and Quebeckers.

The answer received from Mr. Dougall, of Scotiabank, which is the Canadian bank that has the most branches in tax havens, reads as follows:

If we went by the FATF (Financial Action Task Force on Money Laundering) list when it comes to starting up or shutting down operations, this would have a very adverse impact on the economies and workers of the countries concerned, especially since this list is constantly changing depending on the results of the review of local laws and procedures.

Scotiabank is apparently investing in these tax havens in the interest of the countries concerned. It says here, “especially since this list is constantly changing depending on the results of the review of local laws and procedures”. I refuse to believe that Scotiabank makes investments in the Bahamas and 23 other tax havens in the interest of the local people. It is well known that money invested in tax havens does not in any way benefit the local population or economy, but is used to fatten up a handful, and sometimes a corrupt handful, of local politicians.

Fortunately, there is one bank that is more honest, morally, than Scotiabank. I am talking about the Royal Bank. In reply to the same letter, the Royal Bank at least had the decency to tell the truth.

A Royal Bank official wrote:

RBC Financial Group would be at a competitive disadvantage, and its share value would decline, if it were to unilaterally decide to cease operations in any of these places.

We are still talking about tax havens, and those blacklisted by the FATF. He wrote further:

Unless specifically prohibited by law, RBC Financial Group must be able to take advantage of business opportunities in any region, in order to provide its clients with internationally integrated financial services.

That is the truth. At present, Canadian legislation does not prohibit this. The Royal Bank is taking advantage of it for its shareholders and clients. It is an accomplice of these tax havens. But again, this is not illegal. That is why the motion says that we must not only terminate the tax convention with Barbados but also play a leadership role in establishing laws and regulations at the international level, be it at the World Trade Organization or as part of the negotiation of the Free Trade Area of the Americas, to eliminate such practices or make them illegal.

I thank the Royal Bank official for at least enlightening us as to the real reason they have operations in these tax havens.

Who benefits from these tax havens? Canada's big banks, of course. Still, the major banks are not the only ones. There are individuals who benefit as well. It is interesting to note, as I said earlier, that tax havens are countries, or sometimes territories or free zones within certain countries, and not always developing countries. There are such zones in European countries and in the United States, too, that are tax havens. That may explain why there is a contradiction in what we are hearing, when on one hand, people say they want to tighten up the rules on money laundering, and on the other hand, nothing is done.

These zones encourage bank secrecy. Their officials are not very inquisitive, their taxes are light, as I pointed out, and they specialize in various fields. Sometimes anonymous trusts are set up, making it possible for individuals and companies to avoid their fiscal responsibilities. Other times, it may be individuals or businesses. And we know that ship owners are among the heaviest users of these tax havens.

There have been laws passed in this House—I believe the hon. member for Saint-Hyacinthe—Bagot will be able to speak to this more fully later on—which have directly benefited the former finance minister and his businesses which, we should point out, he has transferred to his children. If I have time, I will come back to this point.

Thus, minimal taxation, virtual corporations, leading-edge high-tech infrastructures, and contracts in most banks mean that today, even the upper middle class has easy access to tax havens.

And that is why the Auditor General is right to be worried. It is not just the very rich businesses and the very rich taxpayers who could take advantage of such stratagems tomorrow to evade their fiscal obligations. It could be anyone who has access to brokers through the Internet. Action must be taken quickly.

To illustrate the fact that anyone can benefit from tax havens as long as one has enough money to pay for the necessary services, I give as an example the former finance minister's businesses registered in Barbados. That should say something about the sort of businesses found in these tax havens.

These companies are directly or indirectly owned by Canada Steamship Lines. The former finance minister, the hon. member for LaSalle—Émard transferred his shares in this company to his son.

So, there is Atlasco Shipping Ltd., head office, Barbados; CSL Cabo Shipping Inc., head office, Barbados; Paiton Shipping Inc., head office, Barbados; Semisub Transshippers Inc., head office, Barbados; Lati Transshippers Inc., head office, Barbados; Hull 2227 Shipping Inc, head office, Barbados; Hull 2229—the former finance minister was seemingly lacking in imagination when he named these companies—, head office, Barbados; Guadeloupe Cable International Inc., head office, Barbados. There are others, but I will not bore the House with the list of what our former finance minister and future Prime Minister used to own.

There is a moral problem. It must be mentioned. And perhaps we would be doing the former finance minister and future Prime Minister a favour by adopting my motion, which seeks to ensure that there is no hint of conflict of interest.

I would remind the House that even if the companies were transferred—I am giving this example, because it is really the tip of the iceberg, and it bothers many of my constituents, who are doubtless not alone— the ethics counsellor, who is not known for his tough stand on ethics problems, stated nonetheless in a letter he sent to the member for LaSalle—Émard on July 28, 2003:

—there will still be a requirement for you to recuse from a narrow range of matters—

He must do so once he becomes Prime Minister.

—which would be directly beneficial to Canadian Steamship Lines. When the transfer is complete I know you will personally have no further financial interest in CSL.

It was completed at the end of August.

Ownership will, however, rest with your sons.

Yes, but let us not be naive here.

The ethics counsellor continues:

By definition this transfer has to be distinguished from a sale to a third party—

This illustrates the need to keep right out of certain decisions. Even though it was transferred to his sons, the ethics councillor is not naïve either. He knows full well that there could be a conflict of interest in the decisions made by the future Prime Minister.

In that sense, we would be doing him a favour by adopting my motion.

The report entitled “Rapport moral sur l'argent dans le monde, 2001”, published by the Association française d'économie financière, identifies 35 countries or territories as tax havens. There are 4,000 offshore banks. These offshore banks are reserved for non-residents. The term offshore comes from the time of prohibition. Americans would take boats to the U.S. maritime boundary in order to drink and gamble. That is where the expression comes from.

There are 2.4 million shadow companies, fake companies, fictitious companies, that are simply there to protect individuals and companies from having to pay taxes.

I mentioned earlier that there is currently $5,000 billion in assets in these tax havens. I will give an example. The Cayman Islands have a population of 26,000, which is not a lot. However, for those 26,000 people, there are 450 banks. Those people must be very wealthy indeed. I wonder what the main industry is in that country. There is $400 billion dollars in assets in a country of 26,000. I cannot believe that the money in those 450 banks belongs to the local residents. It is dirty money or grey money from all over the world. This is morally unacceptable for a civilized society, if we consider our common desire to have fair development for the whole planet.

As I said earlier, the auditor general is worried. I will read what she said in her report:

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.

This is not a Bloc Quebecois invention. It comes from the Auditor General. Since his report —and it was a he at the time—nothing has happened. My motion offers us an opportunity to remedy this.

I have just listed three places: the Bahamas, Bermuda and Barbados. We have seen that Barbados is the favoured place for the major Canadian banks, as well as the former finance minister. They are not the only ones, however, as there are 1,700 Canadian corporations in Barbados, and it is the third favourite foreign investment destination. All told, $40 billion has left Canada for the tax havens of Barbados, Bermuda and the Bahamas combined.

Once again, in the 2001 auditor general report, a number of the strategies used were studied. She found that that 53 taxpayers had managed to save $800 million in taxes by using one or the other of these known tax havens.

According to the report:

The Agency has identified 53 examples of this scheme—

She went on to list a whole series of schemes, ending with a recommendation that the government and the House take the necessary steps to ensure that the Canada-Barbados tax convention is not prejudicial to our ability to collect taxes.

The only way to solve the problem is to terminate, do completely away with, this tax convention with Barbados, and to expand our international service at Revenue Canada. Canadian legislation must be extraterritorial and Canadian companies must be answerable to the Parliament of Canada, regardless of where they are actually located on the planet, when they are seeking to escape social responsibility. Canada must—and the Bloc Quebecois will lobby for this—change its attitude toward tax havens and abandon its complacency.

This must in fact be an ongoing concern in all conventions and negotiations in which we are currently involved internationally.

In closing, it is my hope that the House will give unanimous support to a motion which, in my opinion, is nothing more than common sense.

[Gurmant Grewal, Canadian Alliance, Surrey Central, BC]

Mr. Speaker, I commend the Bloc for bringing up this particular motion. The member has spoken well on this issue, articulating his party's position.

I believe that generally taxes have gone up in Canada in the last few years. The compliance costs of regulations or statutory instruments in Canada have gone up significantly. It is estimated that $12,000 per family is the compliance cost of various regulations in Canada. It is a hidden tax. On top of that, user fees have gone up, particularly beyond cost recovery. It is unfair and unauthorized taxation. In total, taxes, the compliance costs of regulations and user fees, all types of taxes, are very high.

Where there is unfair competition from countries such as Barbados or the Bahamas and others, it undermines Canada's tax system. Various Canadian institutions and political leaders have taken advantage of this unfair competition. Surprisingly, the former finance minister is alleged to have taken full advantage of this. I would say that he has abused the process, even though there is conflict of interest. Ordinary Canadians do not have the privileges the former finance minister had.

This whole process has created a situation when there is abundant loyalty to Canada and it has jeopardized the sovereignty of Canada in this whole system. I would like to know from the hon. member what he thinks about the system. On the one hand in this system, taxes have gone up, all kinds of taxes, hidden and otherwise, whereas the treaty with Barbados, for example, shows that political leaders in various situations have taken advantage whereas ordinary Canadians cannot. Would the member like to comment and say if he is in agreement?

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, I thank the member for his question. Indeed, this gives me the opportunity to talk more specifically and quickly about schemes that are available to Canadian taxpayers who want to avoid their tax obligations. They ensure that those who, like us, do not have a choice or abide by the spirit of the law, pay more.

For example, I will give you a very simple trick and I will not make you pay anything for this. You take some money to the United States, go to a casino in Las Vegas and pretend that you lost your money. You give that money to a broker who invests it in a tax haven and you do not pay taxes on the gains that you will make. Anybody can pull this trick.

There are schemes that are a little more sophisticated, but not that much more. This is in the report of the Auditor General. The ownership of a Canadian private company is held by a trust that resides in Barbados. The capital gain on the sale of the shares is subject to Canadian tax because the shares are taxable Canadian assets. The trust sells the shares and asks for the exemption from Canadian tax provided for in the agreement. The capital gain is not taxed in Barbados. This is legal.

Currently, there are holes in the act and the convention with Barbados does not pass muster. If the future prime minister were consistent, he would champion the motion that I moved.

[Bryon Wilfert, Liberal, Parliamentary Secretary to the Minister of Finance]

Mr. Speaker, it is too bad that the time of the House is taken up with this kind of nonsense. This is purely a politically motivated motion we have here. Clearly the member knows there are 1,700 companies that have a similar situation in Barbados. In fact, we have reviewed the Barbados cases since 1995. There continue to be reviews and the member knows that.

The member knows we have over 70 tax treaties with countries around the world, yet this member for some reason is focusing on one particular company, one particular individual. The fact is that there are 1,700 companies in operation. I find it rather ludicrous that the member has the audacity to stand up and talk about something when he knows that since 1995 we have been taking specific steps and in fact currently there is a review of the treaty that continues with Barbados, as there is with other countries.

The fact is that to unilaterally abrogate this treaty, as the member might suggest, would in fact affect 1,700 companies. I do not think that would be in the public interest and the member knows that. I suggest we are listening to nonsense from the other side. It is pure garbage to suggest that some people are not paying their taxes. We have these treaties and the member knows why we have them.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, even told with conviction, a lie is still a lie. I was not the first one to raise the alarm on this issue. The Auditor General mentioned it in her 2001 report. Even if a study was carried out in 1995, with the way things change, the problem might have gotten worse.

Just because something was done in 1995 does not mean that nothing should have been done in 2001 after the release of the Auditor General's report. She herself made the following recommendation:

The Canada Customs and Revenue Agency should continue to be vigilant in ensuring that tax treaties are not used inappropriately to reduce Canadian tax and, if necessary, should seek legislative or treaty changes to protect Canada's tax base.

It is not me but the Auditor General who said so. That is why I find the comments made by the parliamentary secretary irresponsible. Mind you, I have come to expect this of him since being appointed finance critic for the Bloc Quebecois.

This very serious issue is being considered by the OECD and should be raised at the meeting of the Monetary and Financial Committee of the International Monetary Fund and at the meeting of the Development Committee of the World Bank, which the current finance minister will be attending over the weekend. If anyone here is being irresponsible, it is the members opposite.

[Elinor Caplan, Liberal, Minister of National Revenue]

Mr. Speaker, I rise today to speak to the motion raised by my honourable colleagues in the opposition regarding our tax convention with Barbados.

I would like to make clear at the outset that I cannot support this motion, not just because of the importance of tax conventions in the international context but because of Canada's strong, longstanding relationship with Barbados.

I would like to focus my remarks on why Canada signs tax conventions with other countries around the world. These treaties are designed to protect taxpayers from double taxation and to assist tax authorities in their efforts to prevent fiscal evasion.

For the past several decades, Canada along with other nations of the Organization for Economic Co-operation and Development, OECD, have sought ways to avoid double taxation and protect against fiscal evasion and their corrective efforts have resulted in model double taxation conventions prepared by OECD.

Canada's tax treaties, while tailored to address our particular needs, are generally patterned on this document and are in accord with international norms in this area. Canada imposes tax on the worldwide income of Canadian residents and on the income from Canadian sources of non-residents. In other words, all income of Canadian residents, whether earned in Canada or abroad, is taxable in Canada. Non-residents, on the other hand, are only subject to Canadian income tax to the extent that they participate in the economic life of Canada or receive income from sources in Canada.

In this regard, these two fundamental features of Canadian income tax that have been with us for several decades and our tax system functions in accordance with international norms.

When our system was overhauled in the early 1970s, one of the results was the expansion of Canada's network of tax treaties with other countries. We have constantly made efforts to update and expand our network of tax treaties and we will continue to do so in the foreseeable future.

Our network of tax treaties is one of the most extensive of any country in the world. At present, Canada has tax treaties in force with more than 70 countries. As well, Canada has tax treaties in force with all of its major trading partners and with almost all of the 30 members of the OECD.

The tax treaties adopted by Canada have been developed with two main purposes in mind. First, they are designed to protect against double taxation and to offer a degree of certainty about the tax rules that apply to international transactions. The issue of double taxation arises when a taxpayer resides in one country and earns income in another. Without a tax treaty, both countries would claim income tax and would have a claim on that income. Double taxation treaties therefore insure that income is not taxed twice, a situation that would be extremely unfair to the taxpayer who is caught between two jurisdictions.

Our tax treaties accomplish this goal in three ways: first, they allocate the right of taxation of between Canada and its treaty partner over different categories of income; second, they set out rules and procedures for resolving dual claims about a taxpayer's residential status and source of income; and third, they allow taxpayers who feel that they have received unfair treatment under the terms of a tax treaty to present their case to tax authorities.

The second goal in participating in tax conventions with other nations is to encourage cooperation between governments to prevent tax evasion or avoidance. This is achieved in a number of ways including: first, the allocation of profits between parties on an arm's-length basis; second, ensuring that domestic law applies in cases involving transfer pricing and other international avoidance practices; third, providing for information exchanges between respective national tax authorities; and fourth, in some cases, allowing for mutual assistance in the collection of taxes.

Let me take a moment and explain why it is important that Canada provide relief from the burden of double taxation.

Tax treaties have a positive effect on the Canadian economy, particularly because they help facilitate international trade and investment by removing tax barriers to cross border dealings. This is significant because, as members of the House know, Canada's economy relies to a significant extent on trade with other nations around the world. Exports are the lifeline of our economy, accounting for almost half of our GDP and providing jobs for hundreds of thousands of people right across the country.

At the same time, Canada's economy is also stimulated by inflows of foreign investment, which include information, capital and technology. In other words, by eliminating tax impediments and by creating more predictable tax results for traders, investors and other taxpayers with international ties, our tax treaties promote opportunities at home and international trade, and investment abroad.

As recent events have shown, Canada's economy is becoming more integrated in the global economy. This means that now more than ever eliminating tax impediments in cross border trades is a crucial element to our long term prosperity.

I would like to point out that there can be economic disadvantages for countries that do not enter into tax agreements with other nations.

The absence of such agreements can have harmful effects on the economic relations between the countries because without a tax treaty in place setting out tax rules, income is at risk of being taxed in both countries. This outcome stands to produce unfair results and can very adverse economic impacts. It is fair to say that tax treaties help promote certainty and stability, and in doing so they help produce a better business climate.

I would like to turn to another element of the motion presented before us today and that is the question of ending our tax convention with Barbados, which the motion describes as a tax haven. I cannot support such a move and I would certainly disagree with the description of Barbados in this manner.

Once again, a bit of background is in order so that members can understand the position. First, we need to recognize that while Canada taxes the income of Canadian based corporations whether they earn it in this country or abroad, it also taxes in some situations the income of their foreign subsidiaries as well. Canada's rules must therefore take into account that the income of those companies could be subject to a foreign tax as well as the tax payable here in this country.

There are two basic ways that countries around the world deal with foreign taxes in these circumstances. One way is to have taxpayers claim a foreign tax credit, which reduces their home country tax by the amount of the foreign credit, or simply to exempt the foreign source income from taxes in the home country.

Our Canadian system combines these two methods. The Canadian corporation's direct foreign source income and portions of the income of its foreign subsidiaries are eligible for foreign tax credits. This reduces Canadian tax on that income. At the same time, Canada exempts certain kinds of foreign income of foreign subsidiaries from Canadian tax.

The rules are complex, but essentially it boils down to the fact that an exemption is usually given for the active business income of a foreign subsidiary that is resident in a country with which Canada has a tax treaty, provided the income is earned in such a country.

In 1992 the Auditor General raised questions relating to the possibilities of tax avoidance by foreign subsidiaries for some Canadian companies. In response to these questions, the government proposed a number of amendments to its existing foreign subsidiary rules.

These modifications were first unveiled in the 1994 federal budget and affected the definition of active business income, the deduction of business losses and computing foreign accrual property income and the list of countries where foreign subsidiaries can earn exempt and active business earnings from which dividends might be received tax free in Canada.

The question before us now, and one that has been raised a number of times in the House is why, when the government revisited certain aspects of these rules several years ago, was the exemption left in place for a particular kind of subsidiary resident in Barbados that did not pay a substantial rate of tax?

The answer has several important elements.

First, it is not clear that abruptly curtailing the exemption would have benefited Canada. In a world of tax planning opportunities there is no assurance that the corporate groups would not simply move the function performed by the Barbados subsidiary to another jurisdiction where similar results could be obtained and, in that case, the corporation would not pay any more Canadian tax.

Second, Canadian business is interested in maintaining its international competitiveness. Decisions that disrupt the operation of Canadian corporations abroad can have repercussions on their competitiveness. I would say further, forcing businesses out of Barbados could actually be counterproductive. As a tax treaty partner, Barbados gives Canada's tax authorities far more information and assistance than many other jurisdictions do.

Last, as hon. members know, Barbados is a good friend to Canada, a fellow Commonwealth member with which we have deep ties. The tax treaty that formed the basis for giving this exemption to these Barbados corporations has been in place since 1980. Indeed, Barbados has also been a strong ally in the efforts of OECD to combat tax havens around the world.

In February 2002 the OECD and Barbados concluded discussions on this issue. At that time the organization concluded that Barbados has transparent tax and regulatory systems. The country also agreed to increase its information sharing efforts with other OECD members, including those that did not presently have tax treaties in place.

The Barbadian parliament also passed new money laundering legislation in 1998 and updated it in 2000 and 2001. Under this legislation, assets obtained from criminal activities are subject to freezing orders and all financial institutions are required to report suspicious transactions and to maintain records of transactions worth more than 10,000 Bahamian dollars for five years.

An anti-money laundering authority and a financial investigation unit was established in August 2000 and has cooperated with similar agencies around the world since its inception.

The evidence is clear. Barbados has a fair and transparent tax system in place and is cooperating fully with its international partners. In light of this situation, it was entirely correct for Canada to maintain the longstanding exemption for income from these Barbados corporations.

This does not mean, however, that the matter is closed entirely. We continually review our tax treaties with Barbados and others and the relevant income tax regulations to ensure that they fit into our tax policy goals. If it is deemed to be necessary, the appropriate authorities will make considered decisions.

However let me absolutely clear. If changes are implemented, they will be the result of careful and thorough analysis on the part of the Canadian tax officials. The government will not make a hasty decision that could be costly both for Canada and for our tax treaty partners.

Let me state further that Canada will continue to abide and respect its existing over 70 tax treaties with other nations. They are an important element of our efforts to develop and maintain a fair and equitable tax system. We must have a tax system that provides the government with the revenues it needs to support the social and economic programs that Canadians want. At the same time such a system must also be reasonable and flexible to adapt to the changing global environment. Canadian businesses and foreign investors who helped build our economy deserve nothing less.

For these reasons and for those outlined by my colleagues during the debate, I cannot support this motion. I would urge that it be defeated. It is not in Parliament's interest to allow this motion.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, I want to be perfectly clear. We are not against tax treaties. We are against the tax convention between Canada and Barbados, because that country is a tax haven. The question that I am asking myself, among others, is why is Canada one of seven countries that have signed a convention with Barbados. There are some 30 countries that belong to the OECD; the others did not see fit to sign a convention with Barbados. Therefore, we are among those that are the exception.

We are talking here about avoiding double taxation, and I totally agree with that. However, if we look at capital gains, for example, they are not taxable in Barbados, but they are in Canada. The Auditor General in her 2001 report stated:

Canada usually signs tax treaties to avoid double taxation. Barbados does not tax capital gains. However, the Agreement allows a resident of Barbados to claim a Canadian tax exemption on a capital gain that would otherwise be subject to Canadian tax.

My question for the member is, was the Auditor General making frivolous statements when she warned the government about these practices in 2001?

[Elinor Caplan, Liberal, Thornhill, ON]

Mr. Speaker, the government always takes very seriously the advice from the Auditor General. That is why we continue to constantly review all our treaties with all our treaty partners to ensure that they are in Canada's interest and performing as we would have them.

I would say to the member that it is obvious that his proposal to scrap the convention on a moment's notice would do irreparable harm to Canada's international reputation. In some cases we would be seen as a banana republic, but more than that it would have a serious negative impact on the trust that countries which have tax treaties with us have in our ability to continue to work with them.

Confidence and trust of the international community is something which Canada is very proud of in its reputation. We work with countries and if there are changes to be made in treaties, they are done through negotiations, not unilaterally.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I for one find it absolutely shocking that the Minister of National Revenue of all people would have the unmitigated gall to stand in her place today and knowingly and willingly turn her back and forgo, or at least turn her back on, this incredible amount of money, which is a lost opportunity for Canadians.

In her job as the watchdog or the person in charge of oversight of our revenue taxation system, it has been brought to her attention many times today and other times that people are knowingly and willingly avoiding paying their fair share of taxes in Canada through these structural and by design tax havens. They are knowingly and willingly avoiding their taxes.

I call it economic treason when Canadian businesses or individuals take deliberate steps to avoid paying their fair share of taxes in Canada, in the country that gave them the opportunity to flourish and prosper and become wealthy for one good reason, because it puts an added burden on the rest of us. We have to shoulder their burden.

I would like the hon. Minister of National Revenue to give us an explanation. Never mind the issue of double taxation. I think we all agree that we need rules in place that no one gets hit twice, but we are talking about people who do not even get hit once. There are chartered banks, for instance. Would she not agree that our chartered banks that enjoy special privileges in this country and deliberately take steps to avoid paying their fair share here should lose their charter and be disciplined in that way for what I call economic treason?

[Elinor Caplan, Liberal, Thornhill, ON]

Mr. Speaker, one of the things that I am particularly proud of as Minister of National Revenue is that CCRA treats all taxpayers with respect and we expect everyone to obey our laws.

We have one of the best compliance rates in the world. We know that over 95% of all Canadians and businesses comply with Canadian tax law. We also know that in the international environment, and Canada is an international trader, the most important thing for those companies is a rules based approach, rules that they can count on and rules that have been negotiated with other countries, so we can be sure our businesses can be compete and be successful. That is in Canada's interest. It creates prosperity and wealth for Canada.

These treaties are negotiated. We have over 70 of them. They are based on an OECD model. It gives us the information and partnership to go after those who would avoid paying their fair share. We have experts at CCRA with tremendous expertise in understanding the international tax environment of members of international organizations. They are always up to date with the latest information to ensure that CCRA, Revenue Canada as it used to be called, has the information and the tools that it needs to go after those business, those people who would not pay their fair share in Canada.

For anyone to suggest that these tax treaties are not in Canada's interest is making a very false claim. Those tax treaties, which avoid double taxation and set out very clear rules for all of those Canadian companies that are trading in the international arena, give them confidence and let them know what they can expect. The treaties tell them that they will be treated fairly. If they improperly or unduly attempt to avoid our taxes, we go after them and we go after them with the help of our treaty partner that provides us with important information so we can do that.

No system is perfect and that is why we continually review and update through our experience those treaties which may need modification over time. We have made many changes in the past and I am sure there will be many changes in the future. However we will continue to negotiate those treaties through the Department of Finance and see that they are properly and fully implemented through CCRA and the experts who work in my agency.

It is our goal to see that Canada has the resources available to meet its social and economic needs and to ensure that all Canadians, Canadian individuals and businesses, pay their fair share so they can help this country to continue to grow and prosper.

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, I listened to the minister and I am absolutely astounded by what I heard.

Year after year, the current Auditor General and her predecessor Mr. Desautels have condemned the government for aiding tax evasion by not amending the Income Tax Act and refusing to abolish tax conventions that make no sense. Some do make sense, such as those signed with countries that have roughly the same tax rates as we do. If profits are taxed once, they must not be taxed a second time.

But in Barbados the tax rate is zero—zero is zero—and when profits come back here, they are not taxed. Should that be allowed? Can the minister explain how allowing billions of dollars to be invested abroad without being taxed either here or there is in the best interest of Canadian taxpayers? Who benefits from that? A tiny proportion of the population and big multinationals.

I would like the minister to answer.

[Elinor Caplan, Liberal, Thornhill, ON]

Mr. Speaker, we know there is a very significant partisan element in this debate. I know many people can get upset and excited about taxes but he should be ashamed of himself for engaging in this kind of a partisan debate.

We know that the 70 tax treaties we have around the world assist many thousands of Canadian businesses to do their very best to create opportunities, jobs and wealth for Canada.

We review those treaties continually and we often, in discussions with our treaty partners, make changes to those agreements. However we make those changes after we have done the proper analysis and after we have done the proper studies. When we believe it is in the interest of Canada, then we move forward in making changes with our partners.

This is the way it has been in the past. The Barbados treaty has been in place since 1980. There have been changes and there could well be changes in the future. However for the member to suggest, as he has, that there is something improper is absolutely incorrect and it is in my view a partisan attempt to create an impression that is false.

[Gurmant Grewal, Canadian Alliance, Surrey Central, BC]

Mr. Speaker, I rise on a point of order. Since the minister is here and I and many of my colleagues did not get a chance to ask her questions, may I have unanimous consent to extend the questions and comments period for the minister by just five to ten minutes?

[The Acting Speaker (Mr. Bélair)]

Is there unanimous consent?

[Some hon. members]

Yes.

[Some hon. members]

No.

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

Mr. Speaker, I am splitting my time with my colleague, the member for Lethbridge. I am pleased to stand today to take part in this debate because I think it is an important one.

In my view, this is really a story about hypocrisy: the hypocrisy of those in this government who want one set of rules for themselves and another set of rules for ordinary Canadians, the mom and pop corner store operations that have to pay a lot of taxes.

The reality is that Canada is a high tax country. Most Canadians would like to pay lower taxes. I think that is a given. We hear it all the time. But they also recognize that they have a responsibility: if they are going to take advantage of services, they have to pay tax.

What Canadians object to is wasteful spending and spending on priority areas that they do not share. They do not like to give money to huge corporations. If they want to buy shares in some corporation in Canada, they can do that through a public offering or the stock market, but they do not want the Government of Canada doing that for them. They think big government should be curtailed.

There was a little bit of a reprieve in the size of government in the mid-1990s when the Mexican peso crisis and the credit downgrades on Canadian debt forced the Liberals to deal with Canada's fiscal problems, but of course the Liberal government chose to bite the bullet only after it was forced to. How did it do so? Basically it transferred its problem to the provinces by offloading a whole large area of government spending. Health care, I would suggest, has never fully recovered from that offloading. The government chose the easy way. Transfers to provinces were cut very dramatically while cuts to its own departments were very small.

Canadians did get a tax break in the year 2000, after six years of tax increases under this government, but just before the last election. In early 2000, the Canadian Alliance proposed a $100 billion tax reduction plan which the Liberals claimed was not affordable. To ensure electoral success, however, following strong Alliance polling numbers, the Liberals introduced their tax plan to appeal to a growing number of Canadians demanding a tax cut. Although the Liberal plan was smaller than the Alliance plan, it stole several key proposals to augment its policy expediency.

Further spending and tax cuts are required, but since the government's spending has been increasing since that time, the total federal expenditures are up by over $36 billion since 1997. I will not hold my breath that we will see tax cuts any time soon.

That sets the stage for a government that says one thing and puts in special rules for its friends, or in some cases maybe even its own members, but raises taxes time after time in Canada for the mom and pop operations and individual Canadians. I think this is the height of hypocrisy.

I said earlier that Canadians understand the need to pay taxes. Therefore, it is especially galling when those in a position to take advantage and dodge their responsibilities to the taxman do just that. I would suggest that those in authority, those in that position, include the former minister of finance. It is downright infuriating when somebody who is in that position of authority to require Canadians to pay extra taxes, as he has done over a long period of time, ensures that their own tax bill is considerably lighter than otherwise might be the case. How are they doing that?

I thank the Bloc for introducing this motion today, because it just reveals the hypocrisy, with special tax havens and special rules for dividends coming back that avoid taxes. Who could take advantage of that? I want to quote the former auditor general, who talked about those who took advantage of Liberia. It was said that “Liberia wasn't simply a tax haven--foreign affiliates there were also allowed to bring their profits back into Canada, tax-free”.

So it was not good enough that they could register their companies there and stay there themselves, but they were able transfer their profits back to Canada, tax free. There were very, very low taxes or none at all in some cases.

What did the auditor general at that time say? The former auditor general was trying to shut down these kinds of tax havens. Denis Desautels said that they were costing the government hundreds of millions of dollars. To deal with that, in early 1994 the former minister of finance said in his budget speech:

Certain Canadian corporations are not paying an appropriate level of tax. Accordingly, we are taking measures to prevent companies from using foreign affiliates to avoid paying taxes which are otherwise due.

That sounds pretty good, but what was the reality? What did he choose to do? He did choose to close one loophole, that which encouraged Canadian companies to locate in countries that did not have a tax treaty with Canada. That is why the former minister of finance's company, Canada Steamship Lines, used to proudly fly the flag of Liberia. However, when he ended that tax advantage, which he said he was going to do in his budget, he very conveniently had an escape hatch, one that most Canadians did not know about at the time. He quickly relocated his businesses at CSL and his flag to Barbados.

Although Canada does have a tax treaty with Barbados, there is a loophole, one that the Minister of National Revenue conveniently forgot to mention today. It allows companies, and in particular the company belonging to the member for LaSalle--Émard, to transfer CSL dividends back to Canada completely tax free. This was exactly the opposite of what the former auditor general wanted when he said that Canadian companies were avoiding paying hundreds of millions of dollars of tax.

I want to quote from a CBC interview about a year ago on Disclosure , which said that the former minister of finance “didn't shut down all the tax havens. Across the Atlantic, he kept Barbados open, and that's exactly where [Canada Steamship Lines] went next”. Disclosure asked, “Why did you move your shell companies to Barbados in 1995?” That is just a year after he closed down the Liberian one.

Mr. Préfontaine from CSL said, “We moved them to Barbados because of the change to Canadian tax rules”.

There just happened to be a convenient tax loophole escape hatch for the former finance minister's company. Disclosure went on to ask, “Was Paul Martin aware of this--when you moved to Barbados in 1995?”

[The Acting Speaker (Mr. Bélair)]

Order, please. I know the member is quoting from an article or something, but please, if at all possible, avoid addressing the former finance minister by his name.

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

Mr. Speaker, I would make the case that I am reading a direct quote from a CBC interview. I think that is allowed.

Mr. Préfontaine said, “Mr. Martin's assets are in a blind management trust”.

I would raise the issue with the House that if it was the case that the former minister of finance's business was in a blind management trust, maybe he did not know about it. But we know a lot about that since the time; that there were special rules written by the ethics counsellor for the former finance minister's companies. He had a chance to look at it all the time, so it was not true that it was in a blind management trust.

This practice of course attracted a lot of attention, particularly because officials at the Department of Finance and a special taxation committee recommended closing these loopholes in Canada's tax laws. The current Auditor General criticized their existence. Two auditors general have spoken very clearly on this. Mr. Desautels said it was costing Canadian taxpayers hundreds of millions of dollars and wanted it closed off. It was closed off in one area, but loopholes were left in another. The current Auditor General criticized their existence, rightly pointing out that these tax havens were unfair to other Canadian taxpayers.

When asked about the situation in the House of Commons, the current Minister of Finance, and I know because I asked some of these questions myself, made a vague reference to discussions between Barbados and Canada with respect to the treatment of income of international business corporations and the repatriation of active business income to Canadian firms. Basically, he stonewalled.

And again today, when the revenue minister had the opportunity to say “we are going to close off these loopholes, we know there is a problem here”, she basically dismissed this argument as partisan. I cannot understand why the minister would do this, except that maybe she wants to keep her job and thinks that once the new prime minister is in place she will still be in cabinet.

There has been a lot of talk about Liberal arrogance. Imagine the nerve of the government allowing these tax havens to exist and allowing some people to bring their dividends home tax free, while at the same time the revenue department has been accused, and I think rightly so, of harassing the mom and pop operations, the corner stores across the country, which have to put up with audits all the time.

So there is one set of rules for small business and individuals in Canada and another set of rules for the elite. It is galling enough that it involved the former minister of finance. Now he aspires to be even higher in government. He wants to be the prime minister. How can this man relate to the Canadian public? Most people who do not want to pay taxes in Canada think our taxes are too high. We have Canadian professionals coming right out of university saying taxes are too high and they are going to move to the United States. But they then go and live in the United States. They do not try to have it both ways. They do not try to avoid paying tax in Canada and then try to enjoy all the benefits of the Canadian system that those taxes generate from other people. It is absolute hypocrisy. I think it is hypocrisy of the worst kind.

I hope very much that this is exposed in the run-up to the next election. I think it is going to be a huge issue, which needs to be dealt with. It seems to me that a person who aspires to be prime minister should be able to relate to the Canadian public. He should be able to relate to the person who says that these high taxes are hurting us.

High taxes are hurting us, and the taxes are being collected for what? They are being wasted on ad contracts. We have a big RCMP investigation of the Liberal Party itself in Quebec right now. We had the HRDC scandal, when they lost a billion dollars of taxpayers' money. How does that relate to someone in this House who is in a position of authority and does not have to pay any taxes, saying, “Oh, that does not really bother me that much, because I do not pay taxes.” I think that is the height of hypocrisy and he should pay a heavy price in the next election.

[Alex Shepherd, Liberal, Durham, ON]

Mr. Speaker, one of the words the previous member used was hypocrisy. As I listened to his speech I thought what great hypocrisy that that party has today in the House. Essentially what members of that party are saying is that Canadians who are successful business people have no place in the country's decision making process.

I have practised as an accountant for many years and there is a difference between the definitions of avoidance and evasion of income taxes. Avoidance is the things that one does in the normal operations to try to reduce one's taxes. Today when people buy an RRSP, they are avoiding paying income taxes. Does the member suggest that those people should also somehow be victimized by the system, that people who use the system to reduce their income taxes should also be subjugated and not eligible for elected office?

We live in a trading country. Canada's GDP represents about 40% of trade. Forty per cent of the income of our banks comes from off shore, from foreign sources. Are we suggesting that they stop doing that, that they stop being engaged with those countries around the world?

The fact of the matter is that the economic activities of Canadian companies do not just occur in Canada. They occur in other countries, and they are taxed or not taxed according to the rules of other countries. Does the member suspect that the opportunities exist in this country for people like that?

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

Mr. Speaker, I can only conclude that I now understand why the hon. member is no longer an accountant, because to suggest that Canadians who buy RRSPs pay no taxes on them is simply not true. Tax is delayed, but as soon as they take the money out of course they have to pay taxes. That is unlike the companies that are bringing dividends home through a very elaborate scheme, a scheme that does not meet with the approval of auditors general in this country who are obligated to look at whether Canada and Canadian taxpayers are being well served. It is unlike those individuals who are bringing the dividends home and paying nothing on them in terms of Canadian taxes. Canadians who have RRSPs will pay tax to the government as soon as they start to take the money out.

The member asked the question of whether people should not be allowed to be in office just because they are successful businessmen. That is not the case at all. But I think that those who are trying to misuse our system certainly should not be in office, especially those who simply cannot relate to the average voter out there, to the average person who has to earn a paycheque and sees the government taking bigger and bigger amounts out of that paycheque every month.

In fact, in 1997 when I was campaigning I just happened to be in a heavy duty equipment shop. A person there told me that his take home pay was less then than it had been 10 years before. I said that I did not think so, and he said that it was and he showed me his pay stub.

That is what is happening. Our standard of living has declined under the government, under a series of governments for 30 years. Our productivity is now only 80% of that of the United States, our major trading partner.

The member talked about companies that are deriving their incomes from off shore. I would suggest that most of that is not off shore, it is from the continent. Eighty-seven per cent of our trade is with the United States and it does account for a very big part of our GDP. I do not discount that. But these same companies are only 80% as efficient in terms of productivity.

The industry committee over a number of years has done a series of studies. One of the main culprits time after time is the high level of government taxation in Canada, because government is 11% bigger in Canada than it is in the United States. The same Liberal government over there will argue that it is health care, but health care accounts for about 2% of that 11%. A lot of the rest of it is wasteful spending, and being in areas of business it should not be, and high degrees of regulation. That comes up time after time.

Who was in office during all this time? The same party of the member who asked the question, the same party to which he belongs. I suggest that the Liberals are the biggest part of the problem. When the former finance minister who now aspires to be the prime minister cannot understand or relate to what Canadians are paying in taxes because essentially he does not have to pay any, it seems to me that there is a big problem.

[Rick Casson, Canadian Alliance, Lethbridge, AB]

Mr. Speaker, it is good to speak to this issue because it is very important. My colleague who spoke previously laid out some glaring problems with the tax system in the country. The system is double tracked. There is one set of taxation rules for mom and pop and the people who get up every day and work hard for a living and there is another set of taxation rules for corporations and people who can manipulate all the systems at their disposal to avoid paying tax. The only place that a working person can put some money away to avoid paying tax is into an RRSP and the tax is not forgiven, it is deferred. When that money is taken out the tax is payable.

This summer has been one which I will never forget, nor will many people in our country forget. Out west we have had drought, forest fires, grasshopper infestations and smoke in the air. Some days when getting out of bed one would just wonder what one was doing. BSE affected the country from coast to coast and is still an ongoing issue that the government has not solved. Our border is still closed to beef, to cattle. It goes on and on.

One of the groups affected this summer by the whole BSE issue is the trucking industry. When this thing hit there were 1,000 cattle liners in western Canada working every day moving cattle around. Since this has happened, the vast majority of trucks have been parked. One of the things we asked for immediately after this happened was that the government forgive the tax on fuel for the truckers so they could at least save that amount of money, but no way.

The billions of dollars that the government takes in taxes out of the pockets of hardworking truck drivers and everyone else in the country who drives a vehicle go into general revenue and get lost. The country's roads, highways and infrastructure are falling apart. The people who are paying the tax through gas taxes have to drive on those highways to make their living and it is appalling. It is breaking them. It is costing in maintenance. It is hard on gas mileage. For a government that thinks it is green to the core, it is absolutely unbelievable that it would not do something to improve the infrastructure program so that people who are trying to make a living can do that on the infrastructure that is available.

Let us look at income tax. Why is the government not reducing income tax for people who are trying to make a living and put food on the table? Let us look at our payroll tax. Let us look at almost $50 billion in overtaxation that goes into the general revenue of the government through payroll deductions through the EI program. It has been suggested by the Auditor General that that reserve could be a fraction of what it is and still handle any downturn in the economy, but no.

The government promised to get rid of the GST, but it is rolling in it. Also it put GST on top of the gasoline tax, which is a tax on a tax. It just goes on, and the spending goes on. It is unbelievable that the government can go on.

My colleague mentioned productivity. No wonder productivity is down. Who wants to get up and go to work for half of the year to pay the government its tax bill? How are we going to buy homes and vehicles? How are people who are trying to raise and educate their children going to get by when half of what they earn goes to the government to feed an over-blossomed government that does not deal with the issues at hand?

Perhaps some Canadians may go to a financial adviser who will tell them to borrow some money and invest it so they can deduct the interest payments. That is a great idea. It is a wonderful idea that allows Canadians to invest a bit of money back into the country.

However, a corporation dealing with a Barbados subsidiary can borrow the money and get the tax break on the interest, but it is invested in Barbados, in a low tax jurisdiction. Then the earnings that come back from the investment in Barbados can go into a U.S. subsidiary and come back into Canada tax free. It is not good enough that one can borrow the money and get a deduction on the interest, one can go through this double dipping process, which I think is more like money laundering, and get another benefit. Where are our priorities? Where are the government's priorities?

We have tax treaties with I believe it is 79 countries. I suppose there are some that are reasonable. In 1972 there were 16 and now there are 79. The ones that have been structured specifically for the benefit of people in a position of power are wrong. People who are in a position to make decisions and make laws which come back to benefit them in any way, we all know that this is wrong. It is a conflict of interest and it should not be allowed to happen.

Let us encourage corporations, Canadians, everybody to invest in Canada. If this country had a tax regime that allowed people or businesses to keep a few bucks, they would invest it in their businesses. They would hire another person; they would get somebody working on research and development. Unlike some other parties that would tax corporations into oblivion and put everybody out on the street at soup kitchens, if we had a reasonable tax regime that allowed strong reinvestment back into the country, it would bode well for all.

Let us look at some of the tax treaties to get specific on what we are dealing with today and the motion that the Bloc has brought forward. Bloc members claim that tax treaties should facilitate information sharing and mitigate or eliminate double taxation. If they do that, what they are doing is doubling income on the other side. We have tax treaties with 79 countries.

Dividends received by Canadian corporations from foreign affiliates in treaty countries are exempt from tax at the corporate level to avoid double taxation. When that rule was put in place, it allowed money to come back from these offshore investments into Canada at a lower tax rate. The dividends received by Canadian corporations from foreign affiliates resident in non-treaty countries qualify for a credit with the underlying foreign taxes on income out of which a dividend is paid.

We can see when tax havens are created with these special countries it is creating a huge advantage for the industries or companies that deal with them. When the Canadian parent corporation declares dividends to its owners, they pay personal income taxes on the dividends although at a reduced rate because of the dividend tax credit.

It is set up in such a way that we see this double dipping idea. Money can be borrowed, invested in a country, create income there and bring it back through the back door and pay a lower tax on it. At the same time hardworking Canadians are getting whipped through the EI system. It makes me wonder what priorities the government has.

I have to go back a few years and my colleague alluded to this when he proposed that there could be $100 billion tax cut in Canada. That perked people's ears up. That is a lot of money. How could that be done? We showed how we could do that over a number of years. Lo and behold a few years later because it became such a popular idea, the government across the way thought it could do it as well. But the Liberals were going to do it in a vastly different way.

Taxes have continued to remain high, some of the highest in the world. We would have done it through cutting a little of the wasteful spending and there are quite a few places as is becoming more apparent every day. A lot of money is being spent on things in this country that I do not think taxpayers appreciate very much. It gets into the billions of dollars in some cases.

It gets into advertising contracts that were issued and a percentage of the contract was paid to the person who delivered the cheque. Are there not enough people working in government who could do that without having an outside firm make a percentage of every cheque that is delivered?

People hear about this and then they have to get up every morning and work hard, and in a lot of cases both mom and dad have to work just to get by. The country's cattle industry is on its knees and these things continue to go on. Canadians are fed up with what they are seeing and the only way they are going to have change is to change the government, in the next six or seven months. We are going to give them some options in the next three months which will make it pretty clear who the government should be instead of that bunch over there.

[Bryon Wilfert, Liberal, Parliamentary Secretary to the Minister of Finance]

Mr. Speaker, I am interested in the comments of the hon. member because I thought his party supported a rules based international trading system. I assumed that his party was one which believed in a simple taxation system. I assumed his party believed in transparency and predictability. Yet the position of his party seems to be that we should unilaterally cancel these tax treaties. The member mentioned that we had 79 around the world.

At the same time the member would suggest that we forget a rules based system, that we simply eliminate and terminate it which will have the effect of affecting 1,700 companies that do business in Barbados. As the member knows, we are continually reviewing these. We have been reviewing them since 1994, with the latest review in 2002.

How does the member reconcile the fact that on the one hand I believe his party supports a rules based system and on the other hand it would today, if that party were in power, simply terminate or abrogate the agreement?