Mr. Speaker, there is no link between the Statistics Canada report that is referred to and any quantification of tax revenues. The report is about investment flows, not taxes, and it provides no information whatsoever about the tax positions of Canadian companies.
More generally, it is difficult to draw empirical connections between statistics on legal outbound foreign investment and supposed tax revenue losses.
There are two main reasons for this. First, such an approach would require agreement as to the base case or starting point: what model for the taxation of international income is to be considered normative? If the answer were to use Canada's existing rules, then the only cause of revenue loss would be outright illegal tax evasion, the cost of which is by definition impossible to quantify. If on the other hand the norm were a so-called “exemption system” for the taxation of foreign source income, such as the ones operated by many other developed countries, then there would by defenition be no question of a tax revenue loss.
Those arguing that outbound investment automatically reduces tax revenue implicitly assume a third model as the norm: a system in which Canada taxes all foreign source income, with at most a credit for foreign taxes already paid. This would be a possible policy choice; some other countries do use such “credit systems”. To assume it as the benchmark is, however, to advocate a basic change in Canada's international tax rules, thus raising the second major difficulty whith this sort of analysis: the need to account for the behavioural changes that would almost certainly result from moving to a different system.
Both Canadian and foreign owned multinationals would react to a substantially higher rate of Canadian tax on foreign source income. Much of the income that now returns to Canadian parent companies, and is spent or invested in Canada, would no longer be repatriated. Similarly, it is unrealistic to assume that foreign controlled enterprises would leave offshore investments in the hands of their Canadian subsidiaries, paying Canadian tax on amounts they could have earned tax free through any number of other countries.
In short, simple statistical data do not translate into any meaningful assessment of “lost tax revenue”. First, a revenue loss can only be identified against a specific benchmark or standard. If Canada's existing tax rules, like those of many other countries, are considered the benchmark norm, as long as the taxpayers who invest abroad comply with the rules, there is no revenue loss. Second, measuring against a different standard, such as a “credit system”, is much more complex than is sometimes assumed, since account must be taken of the behavioural changes that would inevitably follow.