Mr. Speaker, this is a very interesting debate on a serious issue, that pertaining to tax havens.
Bill S-5 itself, I would concede, is rather routine in the sense that the purpose of it is to deal with a loophole, to bring some harmony to this whole issue of tax havens. In particular, the bill addresses clearing up some problems in terms of the tax treaties between Canada and Finland, Mexico and Korea. The bill is one we will support; let me say that right at the outset.
When the bill went through the Senate, we all got a pretty clear understanding of what it was about. The parliamentary secretary today confirmed the routine nature of the bill. It is clearly, as many have said, about dealing with the issues of double taxation and about preventing misuse of offshore venues in terms of tax havens. This is all well and good. We are glad that this small step has been taken.
However, as my colleague from the Bloc has pointed out, the bill begs the much larger question of the Conservatives and forces us to ask why in the world the government did not do what it said it wanted to do in opposition. The Conservatives said repeatedly in opposition that they were bound and determined to close all tax loopholes. They said that they were bound and determined to close tax havens, that they were bound and determined in particular to deal with Barbados.
I have just been going through the Hansard from a year ago. A little more than a year ago, in October 2005, there was a fairly significant debate in the House, some of it initiated by the Conservatives when they were in opposition, about tax havens and about Barbados. I will refer to a few of the speeches that were made on October 6, 2005. The member for Durham, who is now the Minister of Canadian Heritage and Status of Women, the person who is cutting all of our women's programs across the country and taking away from women the right to help shape their own futures, that same person back then said:
Closing tax loopholes that allow Barbados to operate as a tax haven for Canadian companies should be part of an overall strategy to restrict the use of tax havens.
That is interesting. She went on to say:
Merely closing tax loopholes that allow the Barbados to operate as a tax haven without addressing other tax havens will cause many companies to shift their operations to other tax havens. More important, the government should make Canada more attractive to business by implementing competitive corporate tax levels.
We know that the Conservatives have moved significantly on reducing corporate taxes. That was clear in the budget of May 6, 2006. The Conservatives clearly moved on making it more attractive for businesses to operate in this country, but did they close any tax loopholes? Was there a mention of Barbados anywhere in that budget? Was there any indication that they were committed to fulfilling a long-standing commitment to Canadians to join with us in the House, knowing full well they had the support of the Bloc and the NDP to deal with a most egregious situation? No, they did not.
Instead, today we have a tiny piece of the problem being addressed, which is fair enough. We appreciate that the Conservatives took one small step to deal with some outstanding issues on this front, but why in heaven's name did the government not decide to do it all at once? Why does this bill not deal with the whole range of concerns that the Conservatives themselves enunciated when they were in opposition?
Moving on to other speeches, there is an interesting one by the chair of our finance committee, the member for Portage—Lisgar. He interestingly started off his speech on January 31, 2005, almost two years ago, in a way that only the member for Portage—Lisgar could do, saying:
I learned the other day that goldfish apparently cannot create new memories, which is interesting. I guess that every time they swim around their bowl that little plastic castle is a brand new thing to them, an exciting new event.
Of course, he was mocking the Liberals, making fun of the Liberal government, suggesting that the Liberals never seem to learn how to deal with a situation and they continue to make promises that they never keep. They keep forgetting, apparently, that they ever made those promises. He went on to say:
This may be humorous when it comes to goldfish, but it is not an appealing quality in a government. It is not an appealing quality for a government to be unable to learn from its mistakes or to learn from the past. Unfortunately that is what we have in this country. Canadians deserve better.
In the context of that speech, he enunciated some actions that he thought were necessary and which he thought the Liberals should have taken, thereby suggesting that the Conservatives themselves would have taken them. That has to do with tax havens.
In his speech, our chairperson for the finance committee said:
This is a government that continues to allow the diversion of profits from this country to tax havens abroad by the creation of debt-reducing tactics allowed here, such as leveraging on Canadian assets and borrowing money to invest offshore, which results in the shifting of profit and the reduction of tax obligations for Canadian corporations so located, such as Canada Steamship Lines International.
That is interesting. We all agree on the saga around Canada Steamship Lines. In fact no one was more active on this file than the federal New Democratic Party caucus in this House. We repeatedly asked questions of the then prime minister, now sitting as the member LaSalle—Émard, about his own private company and why in fact he chose not to deal with the situation in Barbados and instead left it as a clear opening for investment by Canada Steamship Lines.
I can remember, going back to 1994, when the then finance minister said:
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 Canadian taxes which are otherwise due.
It sounds familiar, does it not? Those are the same words that the government is using today. It is concerned about closing tax havens and it is taking the initiatives as we see under Bill S-5, all the while avoiding the big, tough questions, avoiding previous statements, acting like goldfish in a bowl, refusing to learn from their mistakes, refusing to be consistent in their approach to Canadians.
Just as we saw back then, the former prime minister said one thing and did another. He made all these fine statements about tax havens but did not shut down Barbados. When his company was asked why it moved its shell company to Barbados in 1995, the company representative answered that it was moved because of the change in Canadian tax rules.
Question: Was the member for LaSalle—Émard aware of this when the company moved to Barbados in 1995? Answer: His assets are in a blind management trust. Question: Was he part of this decision to move to Barbados? Answer: This is a question that should be asked of Mr. Wilson, the federal ethics counsellor. Question: Was this discussed at any of their meetings? Answer: These are all questions that should be put to Mr. Wilson.
The questions were put to Mr. Wilson and the questions went like this: Question: What was discussed at these meetings? Answer from Mr. Wilson: “Well, I'm not really in a position to go and tell you. These are matters that are covered by the Privacy Act”. Question: We are just asking what went on in those meetings. And what was discussed in those meetings. Answer from Mr. Wilson: “Well, you've got my answer on that”. Question: We are not going to know. Mr. Wilson: “No”.
Clearly the situation back then of the continued presence of the Barbados tax haven is still of paramount concern today. Obviously at that point we were certainly concerned about the whole issue of conflict of interest and the possibility of a prime minister doing something untoward. That is all well and good.
The Liberals paid the price at the polls for their failure to be completely open and transparent and for their failure to be honest with Canadians about closing tax havens. They paid the price for their failure to address the real needs and concerns of Canadians around a fair deal for ordinary working families as opposed to always catering to the interests of big corporations and wealthy individuals.
Today we had a chance to start over. This was a new beginning. We were rather encouraged by the fact that the Conservatives had agreed with us several years back and every year since then about the need to close this tax loophole. We had discussions at the finance committee. The Bloc brought forward a motion. There was complete agreement on the part of the Conservatives at that table to review this issue and to find ways to close the tax loophole.
There was very definite interest and a firm belief that the government would act. Today is a disappointment because the Conservatives still have not answered the question of when they will come to us with a complete package dealing with tax loopholes and tax havens. Every day we see the dire consequences of that inaction.
A month or so ago the news came out that Revenue Canada was seeking $2 billion from a huge brand name drug company by the name of Merck Frosst in Montreal for unpaid taxes and for using the Barbados tax haven as a way to avoid paying those taxes. As was reported back then, it was clear that Merck Frosst, which is one of the largest pharmaceutical companies in Canada employing some 1,600 workers, had actually used the Barbados tax haven to avoid paying taxes and the government was now spending our hard-earned taxpayers' money to pursue the company to make it pay the taxes owing to Canadians.
This process has just begun and it will be a lengthy and costly one. Why did it have to come to this? Why was action not taken earlier, or at least now with the benefit of this knowledge, why is the government not prepared to say it will close the Barbados tax haven and bring forward a complete package of legislative proposals dealing with problems in this regard generally?
It was not too long ago that we dealt with the project loophole case. A prominent family in this country had managed to ship $2 billion out of Canada and to put it in an offshore haven, thereby avoiding paying any taxes on that money. That became a Canada-wide case. It was headed up by a volunteer organization in Winnipeg, Cho!ces--A Coalition for Social Justice. It was George Harris who took it upon himself to champion this case right through the court system. In the end he did not win the case, but there was a clear statement from the court that this was a situation that the finance department had to deal with and that there were problems within the administration of the Department of Finance around oversight in this regard.
It became a high profile case which brought our attention to this whole problem. It is not news. We are dealing with an old situation that continues to be very disturbing for Canadians because it means lost revenue for this country at a time when we have seen so many of our important programs gutted and destroyed by the present government and the former government, all under the guise of inadequate resources. Yet here we are with incredible resources available, if only we had the courage, the guts and the willpower to actually crack down on some of these tax havens.
The problem gets even more serious when we look at the statistics. It was not that long ago when we received information about how much money was being invested in offshore tax havens. Information was also released less than a year ago indicating that the amount of money had increased many times over. I will quote from a study, and I think my colleague from the Bloc also mentioned it. It states:
Between 1990 and 2003, the amount of money Canadian corporations put into tax havens, mainly in the Caribbean, soared to $88--billion from $11--billion, according to a study by Statistics Canada. Direct investments in these countries increased 18 per cent annually on average. That compared with an annual increase of 8 per cent for investments in the United States and 14 per cent annually for investments in other countries. Tax haven countries “accounted for more than one-fifth of all Canadian direct investment abroad in 2003, double the proportion 13 years earlier”.
The most popular tax havens were Barbados, Ireland, Bermuda, the Cayman Islands and the Bahamas.
This was the first time we had a serious measure of the amount of direct investment that was occurring. It was an eye opener for all of us. I know at the time it caused the Conservative members to describe their horror at this development and call even more forcefully on the Liberal government at the time for action.
What did the government do at the first chance it had to put its words into action? Nothing. Yes, there was some rhetoric. The House will recall that a couple of weeks ago, when the government decided to deal with the loophole made available to corporations through income trusts, the Minister of Finance suggested the Conservatives were interested when asked to close other tax havens and loopholes. We expected something to be forthcoming by now.
Here we have legislation that deals with tax havens, with offshore investments, with levelling the playing field, with double taxation and with trying to keep money in our country, but it does nothing about the most egregious, biggest, notorious tax haven that ever existed. It was used by the Liberals apparently. I will not make unsubstantiated comments, but we all know that questions remain about Canada Steamship Lines and the role of the member for LaSalle—Émard in the continuation of that tax haven.
Why in the world did the Conservatives not decide it was time to shut that loophole? Why do we have to fight Merck Frosst? Why do we have to spend money to try to collect money that is rightfully ours? How many other cases are there out there that Revenue Canada is pursuing?
I tried to get that information and I cannot. We are told this is a matter of confidentiality and privacy. It is time the government told us exactly, at least in broad terms, the kind of situation with which we are dealing. I would expect a plan of action from the government to help correct this problem.
We are talking about billions of dollars that belong in Canada, money that ought to be put to use in Canada and invested in Canada so Canadians can be a part of our economy in the fullest way possible, using their talents to the fullest. We are talking about an incredible loss of talent and resources, which has a very direct impact on our productivity and prosperity.
It is absolutely unfair and improper of the government to continue to heap problems on top of ordinary working families, while allowing big corporations and wealthy Canadians to make use of these tax loopholes. It is time the government kept its word.