Mr. Speaker, I am pleased to rise today to speak to Bill S-2, which has to do with the tax convention between Canada and the United States. We could see a rather important conclusion reached here today, but this is hardly anything new. This is not the first time that the economy, culture or any other aspect of society has had to be managed between two countries. This is not a recent phenomenon. Significant demographic exchanges have been taking place between Canada and the United States for years.
Naturally, at the time, no one seemed to be too concerned about this overall dynamic. For example, when the United States of America achieved independence, many loyalists left that country and came to settle in Canada, including many in the Kingston area and in the Saint-Jean-sur-le-Richelieu area, where I am from. Many people from Lacolle are close to the American border and are descendants of loyalists. These people wanted to maintain their allegiance to the British crown and therefore came to Canada.
The reverse is also true. At one time, jobs in Canada were very rare and there was a great deal of immigration to the United States. My riding is right next to Burlington, in the state of Vermont. Many Quebeckers crossed the border in search of work on the American side. Furthermore, at present, nearly a third of the population of New England is of francophone descent. It was immigration following difficult working conditions here at home that led these people to cross the border to work and to start their family. Francophone generations have followed one after the other in an interesting manner. Family names often associated with Quebec have been changed slightly on the American side. However, everyone is perfectly aware of this and anyone you talk to who has these names will say that they are of francophone origin and that this carries some importance for them.
One thing leading to another, the economy and culture have developed on both sides of the border. I think that is forcing both governments to come to an agreement on economic practices. We cannot talk about integration, since the tax convention will be signed by two sovereign states, but this is forcing them to adjust to new realities, which are important. Just 60 kilometres or so from here, in Plattsburgh, in the State of New York, the Buy America Act, legislation enacted in the U.S. to encourage foreign investments to maintain a workforce in the U.S., ensures that 700 people work at the Bombardier plant located there.
This goes to show that the economy is stretching and shattering borders, and the situation is becoming increasingly complex. There was a time when the people working across the border fell into a kind of grey zone. They did not know to which side to pay their taxes or how they could claim deductions for a retirement plan. New situations and the new world are forcing countries like Canada and the United States to sign tax treaties to ensure fairness for all workers and industries as well.
I look at the issue of the new generation of workers. For instance, my daughter Geneviève started by working for Deloitte & Touche in Montreal, then was transferred to Toronto, and finally ended up in New York City. Many of our young people do not necessarily feel any particular ties to one country or another anymore. Theirs is almost an international mindset, and they go wherever their work takes them. This forces countries to think about the type of tax measures or tax treaties that should be put in place.
So this is nothing new. It has developed gradually over time. Today, the reality is that we have to adapt and that is the purpose of this piece of legislation.
As I was saying earlier, the pension plans for Canadians working in the United States were problematic, among other things. Those workers could be told they could not contribute to a Canadian pension plan. This had significant consequences. We have to understand that those who want to secure a decent future today have to invest in RRSPs, for example. If they do not, they will fall back on the public plan, which, in a few years, will no longer be able to pay the same level of benefit it does today.
Imagine someone who left Canada to work just across the border. That person could not secure a decent pension plan for himself. The purpose of the legislation before us is to correct that situation. The reverse situation of an American working in Canada was the same. The Americans probably told that person they could not invest in a pension plan because they were not working in the U.S. The bill before us resolves the issue of pension plan contributions for those workers. This allows a migration of workers from one side to the other and that is important.
I want to come back to the Buy American Act in effect in the United States. Earlier I gave the example of the Bombardier plant in Plattsburgh, New York. It employs Quebeckers since its headquarters are not in the United States, but in Quebec. Quebeckers will work there for significant lengths of time. This will allow them to save money in their pension plan as though they were working in Canada. That is important.
There is a second, equally important aspect of this bill that we support and that is the use of an arbitration board. This type of tax convention can leave room for anomalies or be open to interpretation. The bill provides workers with the opportunity to go before an administrative body to argue that they have been treated unfairly under part of this tax convention. This is a good addition because it is important for a worker to have legal recourse when he or she suffers an injustice. Furthermore, the composition of the board seems fair. Naturally, there is a representative from Canada, a representative from the United States and a third person selected by both countries. Understandably there might be alternation. For example, if the chair of the board has been filled by an American for some time, then it will likely be filled by a Canadian the next time around and so forth.
We believe that it is very important to have a board for a true hearing of the problems. We find that smart. We should not fall into the trap of international treaties where there is no recourse in the event of differences. Unfortunately, in our society, this still happens. Individuals suffer an injustice and face a void. Often there is not even an appeal mechanism. Having a board to hear difficult cases and to resolve issues is an important addition.
We are pleased to note efforts to plug certain tax loopholes. Tax law and various laws pertaining to tax treaties could allow companies to have it both ways. We must avoid that. We must avoid tax havens. From our perspective, it is an absolute disgrace. Take Barbados, for example. Canada had tax treaties with about a dozen countries that were tax havens. This allowed large companies to take part of their profits and invest them in these tax havens, where they could not be traced. What is truly ironic is that these big companies paid no taxes as such.
Canada loses hundreds of millions of dollars every year because of this type of tax haven. Thus, it is important that we not repeat the mistake even though tax havens continue to exist. I find fault with the former prime minister of Canada who one day announced that he was setting everything right and shutting down about 11 tax havens. Good for him. Except that in the meantime he did not tell us that his own company had transferred all its assets to Barbados, which was the only tax haven he was not shutting down.
Problems still exist. This part of the bill before us ensures that companies cannot play with two investment systems, two different tax systems and ensures that these companies will pay their due where their head office is located.
There are some amazing statistics on tax havens and offshore financial centres. Between 1990 and 2003, Canadian investment in tax havens and offshore financial centres rose from $11 billion to $88 billion. I would remind hon. members that companies avoid paying tax on this money, which means that Canadians lose. These companies are not doing their part and are poor corporate citizens, because they are not contributing to the public sector of Canada, Quebec or the provinces. These loopholes must be plugged.
The financial sector is another absurd example where investments in tax havens rose from $8 billion in 1990 to $72 billion in 2003. The financial sector is truly a poor corporate citizen, because it is not doing its part to support its country, its province or its municipality. This money is lost to the public coffers, which is totally unacceptable.
Consequently, with regard to the tax treaty covered by the bill that is before us, we are going to make sure companies cannot have it both ways. That will improve this bill.
The bill also clarifies the investment rules. This is more or less what I was just saying. Often, investors can deduct a portion of their fees. From now on, these investment rules will be harmonized, for greater tax fairness. There will be no loopholes, and both countries will come out ahead.
In conclusion, we are fairly satisfied with the bill. It could create a precedent. It would be good if this tax treaty served as a cornerstone for other types of tax treaties elsewhere, so that we get back to basics and big corporations pay their fair share and stop avoiding tax on their profits or setting up shop in tax havens to protect themselves. They need to do their fair share.
Finally, this is a good thing for workers. Regardless of which side of the border they work on, this shows that there is a great union between the United States and Canada and that these workers will be subject to the same rules and will be treated more equitably.