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House of Commons Hansard #115 of the 39th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was fisheries.

Topics

Income Tax Amendments Act, 2006Government Orders

4:20 p.m.

Conservative

Dean Del Mastro Conservative Peterborough, ON

Mr. Speaker, the hon. member may want to check his facts. Budget 2006 removed 655,000 low income Canadians off the tax bracket permanently, plus it reduced the GST for all Canadians. That was tax fairness.

On the hon. member's question relating to income trusts, I am very happy to take that. Does the hon. member believe that all Canadians should pay more taxes so corporations pay no taxes? Is that his point? Would he like to see the Government of Canada pursue that? I do not think that is tax fairness whatsoever.

The government did the right thing for standing up for Canadians. The hon. member should support it.

Income Tax Amendments Act, 2006Government Orders

4:20 p.m.

NDP

Peter Stoffer NDP Sackville—Eastern Shore, NS

Mr. Speaker, it is not a question of whether the government taxed the income trusts. The hon. member for Yukon is correct. The government made a promise that it would not do so.

We in the NDP are intellectually honest about it. We said that we never should have had income trusts in the first place. Without notification, the Conservative government reversed itself. Thus, thousands of pensioners and individuals, who trusted the words of Conservative government, that it would not tax income trusts, lost thousands of dollars.

The hon. member can stand up and at least apologize to the constituents of the member for Yukon and to other Canadians. If he cannot blush and admit he was wrong, then at least say he is sorry, that eventually the government had to do the right thing. At least apologize for screwing these people out of so many thousands of dollars.

Income Tax Amendments Act, 2006Government Orders

4:20 p.m.

Conservative

Dean Del Mastro Conservative Peterborough, ON

Mr. Speaker, I enjoyed listening to the hon. member's question. Quite frankly, I am amused the way he comes around to making his point. When something is clearly the right thing to do, one does it, that is leadership.

Clearly, as the finance minister has outlined, the situation pertaining to income trusts changed. That meant we had to take a different position on it, and it was the right thing to do. It has been backed up by credible sources, including the Governor of the Bank of Canada and every finance minister in Canada.

I know Liberal members are trying to make hay on this, and the actions they have taken are deplorable. We have taken a position of leadership for Canadians, one of which I am very proud. I am very proud of this government and the leadership it is demonstrating in protecting the tax base. We will be able to provide the services on which Canadians rely and a system of tax fairness by the decisions the government has made. I stand behind those decisions.

Income Tax Amendments Act, 2006Government Orders

4:20 p.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

Mr. Speaker, I am very pleased to rise in debate on the bill. As my colleague opposite said, it is a technical bill. I do not think it is very controversial and it does useful things. In fact, it was produced under the Liberal government. Therefore, I do not think my party will have trouble supporting it.

However, I did notice a few of the comments of my colleague across the way and I would like to comment on some of them.

His comment about the allegation that the Conservatives cut income tax is a very good illustration of why politicians in our country are in such disrepute in public opinion. While he uses a technical argument about legalities, that our tax cut was not in legislation, the fact is it happened. Every Canadian who filled out his or her tax form paid that lower tax. The basic personal exemption actually went up under the Liberals. Yes, it was passed by a ways and means motion, but it happened, it was reflected on the tax forms and in the taxes paid by every Canadian. Then the Conservatives came along and raised the tax and put more Canadians on the tax rolls by reducing the basic personal exemption.

What I have just said is true. Every Canadian who has filled out his or her tax form knows it. The Conservatives raised income tax. Now they are saying they cut it, which is patently false, except if we use this legality subterfuge, which matters not a whit to Canadians who pay their income tax.

The point is the Conservatives raised income taxes and added people to the tax rolls in order to finance their GST cut. That is bad enough in itself, but when they do not have the basic honesty and decency to admit it, then I believe they have put all politicians into disrepute.

Income Tax Amendments Act, 2006Government Orders

4:25 p.m.

Conservative

Dean Del Mastro Conservative Peterborough, ON

Mr. Speaker, I rise on a point of order. Quite frankly, we are debating Bill C-33 and his comments have nothing to do with it.

The member is basically suggesting that I have misled the House. I have not misled the House, and I ask that the point be—

Income Tax Amendments Act, 2006Government Orders

4:25 p.m.

NDP

The Deputy Speaker NDP Bill Blaikie

Order, please. I think the hon. member for Markham—Unionville was speaking about the hon. member's party collectively. The rules are such that he can say pretty much what he likes about people collectively as long he does not reflect on individual members.

The hon. member for Markham—Unionville.

Income Tax Amendments Act, 2006Government Orders

4:25 p.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

Thank you, Mr. Speaker. I did refer to the bill and I also am following up on some of the points the hon. member made in his own speech.

To resume that part of my speech, what I said is that not only is it patently false to say that the Conservatives cut income taxes when all Canadians know they raised them, and not only is it patently false to say that they took people off the tax rolls when all Canadians know they put them on the tax rolls, but it is also doing a general disservice to politicians from all political parties because it feeds this notion that politicians cannot be trusted.

There is another point I would like to allude to. In his speech, the hon. member talked about income trusts. My contention is that the government did two things wrong. First of all, there is absolutely no doubt that the Conservatives broke their promise. They said as clearly as it is possible to say that they would not tax income trusts, and then they did. As a consequence, one million-plus Canadians lost some $25 billion of their hard-earned savings, some $25,000 per person on average.

However, as if that was not bad enough, the second crime, the second indecency, is that this action was executed extremely incompetently. The evidence shows, and the witnesses that appeared before the finance committee will agree, that the government simply did not think through the consequences of its action.

The government thought there was a problem to address and, let us give it the benefit of the doubt, there was. Let us take that assumption, but the government addressed that problem by dropping a nuclear bomb on the industry unnecessarily, not only breaking its promise but destroying billions of dollars in savings by Canadians when it could have addressed those challenges in a much more surgical approach, which is what our Liberal proposal is doing.

I think the evidence shows conclusively that the finance minister not only broke the Prime Minister's promise, but he did not think through the consequences of his action. So it is not just that he destroyed $25 billion of Canadians' wealth, but he did it unnecessarily, because there were surgical, cleaner, more subtle methods available, which he chose not to use. So yes, he acted decisively, but he ended up being decisively wrong.

Part of the proof of my position is that he keeps changing his story on the subject of income trusts. First of all, in the early days he said we had to stop Bell and Telus because otherwise it would cost taxpayers $800 million in lost revenues. That was the basis for his action. Then, a little while later, Bell and Telus came out with statements saying that as corporations they would pay no tax or negligible tax for the foreseeable future. Whoops. That argument had to be jettisoned.

The finance minister had to scramble and find another argument so he said it was tax fairness, that income trusts would cost the government $500 million a year of lost revenue so we had to stop it or else corporations and income trusts would not pay their fair share and the burden would be shifted to families. That was his second argument.

However, we then had all those witnesses before the finance committee. About four of them testified that those numbers were totally wrong. Not one witness came to the defence of the finance department in terms of the numbers. They did in other matters, but I am talking about the $500 million number. The only witnesses there were against the finance department. The most credible witness, one who has worked with the department and has used the same methodology, said the cost was not $500 million a year but $32 million a year. Whoops. Another argument went out the window.

If the finance minister truly believed his story about tax fairness, he would release the numbers, but in spite of repeated requests from Liberals, the Bloc and other members of the committee, all we get is a blacked-out censored document with not one legible number. That is the government's defence of its basic argument for destroying those savings of Canadians.

He does not have a leg to stand on. His first argument about Telus and Bell was shown to be wrong. He then switched to his second argument, which was shown to be wrong. Now he is starting to talk about governance. There may be governance problems, but that has absolutely nothing to do with the central issue before us, which is why he so unfairly destroyed $25 billion in hard-earned savings of Canadians.

The government is guilty not only of breaking a promise, which is bad enough, but of acting incompetently, acting before it thought, not thinking it through and, in so doing, unnecessarily destroying $25 billion of the hard-earned wealth of Canadians, and also unnecessarily destroying a vehicle for savings, income trusts, which is extraordinarily important to seniors because it offers a higher yield than is available from many assets.

The seniors who have to live on the savings they have accumulated throughout a long working life to pay the bills are in a bad way, because the government destroyed income trusts. Not only did it did not fix the problem, it acted with such irresponsible and incompetent behaviour by dropping a nuclear bomb on it that it destroyed all those savings of Canadians. It took away this instrument that was extremely valuable for Canadian seniors. It is destroying a sector which, many studies have shown, and with which the Governor of the Bank of Canada agrees, improves the productivity in the energy sector. This is a disaster.

Our Liberal proposal, instead of imposing a draconian 31.5%, imposes a modest 10% tax that is refundable to all Canadian residents. That is enough, our experts have shown, to cover any tax leakage and ensure tax fairness. Experts tell us that will return to the Canadians who have suffered this terrible loss at the hands of the government some two-thirds of the $25 billion that has been lost.

I am disappointed that the NDP is refusing to join with the Bloc and the Liberals to force the government to change. The NDP, which prides itself historically as the party of social democracy, is abandoning in their hour of need those hundreds of thousands of Canadians who have lost millions of dollars. If the NDP were to join forces with the Bloc and the Liberals, we would come to a solution which would at least mitigate some of the terrible damage done by the government and would at least help the seniors and others, who have lost thousands of dollars each and billions of dollars in total, to recover part of those losses.

If the NDP, with its social democratic roots, were simply to come to the aid of those hundreds of thousands of Canadians in their hour of need, those Canadians who have suffered a grievous loss as a consequence of the behaviour of the government, then we would have the votes in Parliament to force the government to change its policy. But the NDP so far, probably because it is so low in the polls that it is desperately afraid of an election and feels it has no choice but to support the government, is refusing to do the rational, sensitive, caring thing, which is to come to the aid of the hundreds of thousands of Canadians who, because of the incompetent broken promise of the government, have seen their saving go down disastrously.

There is another thing I would like to comment on. I have just spoken for several minutes on income trusts and demonstrated not only the broken promise but the incompetence of the government and the fact that it did not think through the consequences of its actions. It is very important for a finance minister of any party, likely to be Conservative or Liberal because I do not think the NDP or the Bloc will be in government any time soon, but whatever party the finance minister belongs to, I think that person should think through the consequences of his or her actions before acting.

There was a really important situation affecting the livelihood of a million-plus Canadians and the finance minister simply did not think it through. I guess he likes to look decisive, but he ended up being decisively wrong and unnecessarily costing all of those hard-working Canadians some $25 billion in losses.

I think it is shameful that the government broke its promise and behaved incompetently, but I would add that it is equally shameful that the NDP, which purports to be the party of social democracy, is refusing to come to the assistance of those hundreds of thousands of Canadians in their moment of need.

However, it is not as if that is the only negative thing that one can say about this government. I would remind the member opposite that his finance minister is one of the gang of three who were senior members of the Harris-Eves cabinet. I would remind all members opposite of their fiscal record.

I would remind the member opposite of the 2003 Ontario budget. It was a pre-election budget, no doubt full of election goodies, but according to the government of day, of which the current finance minister was a very senior member, it was a balanced budget. People would vote for this government, the government hoped, because it was handing out all sorts of goodies and running a balanced budget. We Liberals believe in balanced budgets and have had surpluses for many years consecutively. The mere act of running on a balanced budget is not bad, except we know what happened. They lost.

Dalton McGuinty's government came in. That in itself was a good thing, but then the government called in the auditors and said, “Tell us. Is this really a balanced budget?” The auditors went through all the items in the budget with a fine-tooth comb and issued a report. Do members know what the auditors said? That it was not a balanced budget at all. It was full of lies. In reality, there was a $5.6 billion deficit. Now, that is at the level of the Ontario government, but could members imagine how big the deficit would be if this finance minister learned from his earlier trickery, tried to repeat the same thing at the federal level and left an even bigger mess?

Those members ran on a balanced budget. It ended up that the auditors came in and there was a $5.6 billion mess that Dalton McGuinty and his government had to clean up.

That is the Conservative way. It is exactly what happened in 1993 with the Mulroney government and the Kim Campbell government. Do members remember that? The Conservatives ended up with two seats. Do members remember what their deficit was? It was $42 billion. It makes the Harris-Eves gang look like misers with only a $5.6 billion deficit. However, that was at the Ontario level.

Income Tax Amendments Act, 2006Government Orders

4:35 p.m.

An hon. member

What was Trudeau's deficit?

Income Tax Amendments Act, 2006Government Orders

4:35 p.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

The member mentions Trudeau. Canada had a consecutive AAA credit rating from Standard & Poor's from 1951 on, all through the Trudeau years. Do members know when it was downgraded? In 1992. Who was the prime minister? Brian Mulroney. What was the deficit? It was $30 billion to $40 billion. Standard & Poor's downgraded Canada under the Conservative regime. Under Trudeau, it had been AAA all the way.

We can detect a pattern emerging. There was a $5.6 billion deficit under Harris and Eves and our current finance minister, with the worst thing about that being the fact that they claimed it was a balanced budget, so they were lying. They only got caught because they lost the election and the auditors came in and went through every single item. They left a $5.6 billion deficit and left Dalton McGuinty to clean up the mess.

What do members think happened when Kim Campbell came in? She had a $42 billion deficit. She ran and was left with two seats. Who was left to clean up the Conservative mess? The Liberals. This is the sad fate of Liberals. It has been our lot in Canadian history and our lot in Ontario history that we are always called in to clean up these Conservative fiscal messes.

Someone has to do the job, so when the Liberals came in in 1993, Mr. Trudeau had had a AAA rating all the way, which I think the hon. member did not hear. He was a magnificently fiscally prudent chap in addition to all his other virtues. How else could he have been AAA all the way? Obviously Standard & Poor's thought he was doing okay.

The Conservatives left us this huge unimaginable $42 billion fiscal mess in 1993, and we lost our credit rating of AAA. We were downgraded by Standard & Poor's but we got to work. We took the tough decisions under Mr. Chrétien and the member for LaSalle—Émard. After getting a credit downgrade because of Conservative fiscal irresponsibility, we could not get our good rating back right away. It took until 2002, 10 years after the Conservative downgrade, before Canada finally got back its AAA rating, thanks to the Liberals successfully cleaning up the Tory mess.

My concern is that this Tory pattern, although I should not say Tory, this Alliance, neo-conservative, Conservative pattern of creating fiscal messes might be about to repeat itself. We had the Mulroney fiscal mess in 1993 of $42 billion. We had the fiscal mess of the current finance minister and his provincial colleagues in 2003, having claimed they were running a balanced budget. I am afraid that the fiscal accounting trickery that he learned during his time at Queen's Park might be about to be imported to Ottawa in the lead-up to the budget. I will not go further into that, but certainly the Conservative pattern is to run huge deficits.

I remember Mr. Pearson saying that John Diefenbaker, and we can go back that far, had run seven consecutive deficits. Diefenbaker was a Conservative. Before that it had been surpluses all the way under the Liberals. It is the fate of Liberals to inherit Conservative fiscal messes. We saw it under John Diefenbaker. We saw it under Brian Mulroney. We saw it under Mike Harris and Ernie Eves.

Look south of the border. We saw it under Ronald Reagan. He ran huge deficits. Remember: voodoo economics, Reagan economics, tax cuts paid for themselves. That had to be cleaned up by the Democrats. Look at the United States today under George Bush. Hon. members laugh but if they just look at the facts, Bill Clinton, a Democrat, ran--

Income Tax Amendments Act, 2006Government Orders

4:40 p.m.

NDP

The Deputy Speaker NDP Bill Blaikie

Order. The hon. member's time has expired. I did try to give him some warning, but if he does not look at the Chair, it is hard for me to warn him.

The hon. member for South Shore--St. Margaret's.

Income Tax Amendments Act, 2006Government Orders

4:40 p.m.

Conservative

Gerald Keddy Conservative South Shore—St. Margaret's, NS

Mr. Speaker, the hon. member mentioned John Diefenbaker. Whenever I think of John Diefenbaker, I think of a Canadian prime minister who decided that Canadians needed a bill of rights. I think of a Canadian prime minister who was the first prime minister in the history of this country to give the vote to first nations. That is what I think about: real, honest to goodness, forward moving ideas from a Conservative prime minister.

I take exception to the hon. member's comments about a $42 billion debt. It was not a $42 billion debt. The debt, we all know, was much higher than that. It was the deficit, and $38 billion of that belonged to the previous Liberal government. That $4 billion increase in deficit, at a time when all governments were running deficits, was also at a time when this country had 19% interest rates. It was a ferocious time, a terrible time to be in business.

They were tough times. The previous Conservative government moved forward on a number of issues to bring this country out of the hole it was in at that time. It signed the free trade agreement with the United States, which was totally misrepresented and fought against by the Liberals. It brought in the GST to help finance debt reduction in this country and allowed the previous government to actually get rid of that deficit.

What is more, that $42 billion deficit was at a time when we did not cut transfer payments to the provinces. We did not cut payments for education and we did not cut health care. We did not get rid of the deficit on the backs of ordinary hard-working Canadians.

Income Tax Amendments Act, 2006Government Orders

4:45 p.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

Mr. Speaker, I must profess to being a little shocked as I think the hon. member's comments have gone beyond the scope of Bill C-33. I would have thought you might have reprimanded him for that but since you did not, I would assume he is in order.

Certainly I am an admirer of Mr. Diefenbaker. I am just old enough to remember him. I used to enjoy listening to his French when my French was not very good. An anglophone listening to him could understand every word of his French.

I do not think he was uniformly perfect. I think he cancelled the Avro Arrow. He was nevertheless, I am sure, a great prime minister in many ways and I do not deny that. My only point is that numbers were not his forte because he ran seven consecutive deficits. The story is that Lester Pearson almost fired his speech writer because Mr. Pearson had a bit of a lisp and instead of saying “seven consecutive deficits“, he said something like “theven conthecutive defithits” and the speech writer almost got fired. That is why it stuck in my mind.

But, it is a fact that he did run seven consecutive deficits and it therefore goes along with my hypothesis. We can go from Diefenbaker, to Mulroney, to Harris, to Ronald Regan and George W. Bush south of the border, who were all examples of Conservative or Republican leaders who ran huge deficits and left big fiscal messes for their Liberal or Democratic successors to clean up.

Income Tax Amendments Act, 2006Government Orders

4:45 p.m.

NDP

Peter Stoffer NDP Sackville—Eastern Shore, NS

Mr. Speaker, if he wants a lesson on fiscal records, Allan Blakeney of the NDP had 11 straight surpluses. In fact, a finance report that just came out said that the best fiscal premiers in the history of this country were New Democrats.

I do not have to remind my Conservative colleagues of the great Grant Devine who took Saskatchewan and ended up with half of his cabinet in jail. I do not have to remind them of the great Conservative John Buchanan who put Nova Scotia in such serious debt that we are still paying for it.

For my question we are going to go back to Bill C-33. The member talked about tax havens. According to records there may be over $80 billion worth of money offshore in these tax havens. In fact, the former prime minister, the member for LaSalle—Émard, is one of the beneficiaries of those tax havens. The reality is that this bill does nothing to stop those tax havens and nothing to close the loopholes.

The reality is that the member can yell and scream all he wants about income trusts. At least we are honest about them. We never would have had them in place had we been in government. The member is right about what the Conservatives did. They misled the Canadian people and on a promise Canadian people invested in those income trusts and now they are being punished.

If he is coming to the NDP to fix their problems, it is not going to happen. The reality is that I would like him to stand up in the House and say what the Liberal Party is prepared to do to close these loopholes and to stop the offshore tax havens.

Income Tax Amendments Act, 2006Government Orders

4:45 p.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

Mr. Speaker, I recall from my days as minister of national revenue that we were working in that area and making good progress, but I would like to answer the hon. member on income trusts because we agree on certain things. Yes, the Conservatives were wrong to break their promise.

The member says that income trusts should not exist. They do exist. We cannot will them out of existence. The fact of the matter is that they do exist. The Conservatives were wrong to break their promise and the reality of the situation, as of today, is that there are hundreds of thousands of ordinary Canadians, not rich Canadians, many of them senior Canadians who have been saving all their lives, who put a lot of their money into income trusts wrongly believing the word of the Prime Minister and then because of the broken promise they lost a fortune.

We can debate whether income trusts should or should not exist. It is irrelevant. The reality is that those people are crying out for our help. They are getting help from the Liberals. They are getting help from the Bloc. Those ordinary Canadians in their moment of need are getting no help from the NDP. If the NDP would have helped us, we could have helped those people recover some two-thirds of their losses.

I say shame on the NDP, especially with its social democratic roots, for failing to come to the help of hundreds of thousands of ordinary Canadians in their moment of need.

Income Tax Amendments Act, 2006Government Orders

4:50 p.m.

Bloc

Thierry St-Cyr Bloc Jeanne-Le Ber, QC

Mr. Speaker, this debate is somewhat scattered, probably because the bill before us is quite technical in scope. Nonetheless, some of the measures in this bill are intended to prevent tax evasion. What is missing, however, are stricter measures to prevent Canadian companies from using tax havens—Barbados, for instance—to avoid paying taxes. As we know, certain members of the previous government frequently used this legal provision.

I would like to know the opinion of my Liberal Party colleague. Now that the Liberals are in the opposition, do they not think it is time to go further with this bill to put an end to tax havens and ensure that Canadian companies pay taxes, even if they reside in tax havens like the Barbados?

Income Tax Amendments Act, 2006Government Orders

4:50 p.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

Mr. Speaker, I want to thank my fellow member of the Standing Committee on Finance for his question. It is true that the Bloc and the Liberals do not entirely agree on the details, but we are united in the sense that we want to help those who have lost a fortune over the broken promise of this government. I want to thank him for that.

To get back to his question, when I was Minister of National Revenue, we had started to create a program where we were going to be much stricter as far as tax evasion is concerned. We recognized that there was a lot of it going on. It is difficult to do because lawyers, who are extremely well paid, always try to stay one step ahead of us when it is a matter of hiding these funds. Nonetheless, I think that if we were back in power, we would like to be much stricter than the current government is toward those who are trying, in an illegal manner, to evade Canada's tax system

Income Tax Amendments Act, 2006Government Orders

February 21st, 2007 / 4:50 p.m.

Bloc

Thierry St-Cyr Bloc Jeanne-Le Ber, QC

Mr. Speaker, I will continue to address tax evasion and the tax havens used in Barbados.

As my colleagues who spoke before me have said, Bill C-33 is somewhat technical and contains a number of provisions to prevent circumvention of the tax rules and to prevent tax evasion. It responds to a number of requests made by the Auditor General. The Bloc Québécois will therefore support the bill. However, as I said in the question I asked earlier, I think that it does not go far enough in dealing with tax havens. Contrary to what my colleague from the Liberal Party said, we are not talking about people committing tax fraud, we are talking about people who avoid tax and find legal schemes so that they do not pay tax. The reason they can do that is that the existing legislation lets them.

In my presentation, I will try to explain how these people operate and what has to be done to stop this. On the question of tax havens, I would like to tell the House about a comment made by the Auditor General on February 27, 2001. He said that one of the biggest threats to the tax base lies in the international activities of Canadian taxpayers, particularly the use of tax havens.

Tax havens are countries that have a zero or very low tax rate and loose tax rules. That combination is an incentive for taxpayers to settle there or transfer a portion of their activities there in order to be exempt from the Canadian tax system and not have to pay taxes here. Most of the time, these are countries that are notable for their absolute bank secrecy, which makes it impossible to trace all the movements of capital that take place there.

Because of that bank secrecy, it is difficult to measure this phenomenon. In 1998, the OECD estimated that from 1989 to 1994 foreign direct investment rose three times faster in tax havens then elsewhere. That is not a small matter. The OECD drew up a list of tax havens based on four criteria: no or only nominal taxes; lack of effective exchange of tax information; lack of transparency in the operation of tax laws; and no substantial activities in the country where operations are purported to occur. Thirty-five countries met those criteria. The OECD pointed a finger at 47 other countries which, while they were not tax havens, had provisions worthy of a tax haven in certain areas. It should be noted that Canada was on the list of 47 countries because of its tax policies relating to the international shipping of goods.

In 2001, that list was amended by a group of 13 OECD member countries, including Canada, to remove the no substantial activities criterion, which brought the number of tax havens—on paper, obviously—down to 7 from 35. Those countries have not ceased to be tax havens; they are still tax havens.

In 2002, Barbados was removed from the list of countries regarded as tax havens by the OECD. However, Barbados has not changed its fiscal practices; quite the opposite is true. The tax system in Barbados is interesting. I hope that the fact that I am talking about it will not encourage any Quebec or Canadian companies to move there, despite the wonderful conditions it provides, such as a fixed fees of $250 per year and a tax rate of only 2.5% on the first US$5 million in profits. It then declines gradually, to 1% after $15 million. For a company that does not want to pay income tax, this is extremely advantageous.

In Canada, the tax system is tailor made, expressly for Barbados. Let us look at how it operates. The general rule is that all income earned in Canada or abroad is taxable in Canada. However, if income is earned in a country with which Canada has signed a tax treaty to avoid double taxation, that income may not be taxable.

If the foreign subsidiary is deemed to be non-resident in Canada and the tax treaty prohibits double taxation, the general rule that all income received by a Canadian is taxable is bent. It is then the tax treaty that applies.

In theory, in the case of Barbados, the treaty does not apply to subsidiaries that have a tax rate of virtually zero. Like the tax treaty with Cyprus, the Canada-Barbados tax treaty specifically excludes what is known as international business companies or any other similar kinds of companies that enjoy the favourable tax treatment I referred to earlier in Barbados. If we exclude these companies and consider only the normal tax rate in Barbados, which is approximately 40%, virtually all the Canadian companies with a subsidiary in Barbados have established it specifically to enjoy favourable tax treatment. For the most part, these have been established under the Barbados International Business Companies Act and are therefore excluded from this convention.

The companies covered by this provision of the tax treaty are therefore considered under the Income Tax Act to be resident in Canada and therefore subject to Canadian taxation. Based solely on the Income Tax Act and the tax treaty between Canada and Barbados, dividends received by the Canadian parent corporation of a subsidiary in Barbados should be taxed in Canada when they are transferred home. So far, so good.

There are, however, provisions in the Income Tax Regulations which are specifically designed to enable companies to circumvent this difficulty and transfer profits from Barbados tax-free in Canada. I will spare you the whole list of provisions; suffice it to say that paragraph 5907(11.2)(c) of the Income Tax Regulations, if anyone feels like looking it up, renders moot article 30 of the tax treaty, the one that excludes international business companies. It sets out a series of criteria for a company to be considered non-resident in Canada and therefore not subject to tax. Thus, Barbadian subsidiaries of Canadian companies fall into that category.

By invalidating article 30 of the tax treaty, the regulation allows the dividends of Barbadian subsidiaries of Canadian companies to be tax exempt in Canada. Incidentally, through the Access to Information Act, the Bloc Québécois obtained a copy of correspondence between the Minister of Finance and an accounting firm, confirming that this section of the regulations was drafted specifically to allow Canadian businesses to use Barbados as a tax haven.

In July 1994, Wallace Conway, of the taxation policy branch of the finance department, confirmed the following to Craig Cowan, who was employed by the accounting firm Arthur Andersen:

Be advised that proposed paragraph 5907(11.2) is intended to ensure that a Barbados international business corporation which is a foreign affiliate will remain eligible to earn an exempt surplus.

So, the bill did not come into force until 1997, but it was specified that it would be retroactive to 1994. With this amendment to the regulations, Canadian businesses with a subsidiary in Barbados win on both fronts. First of all, since their business is not covered by the tax treaty, Barbados is under no obligation to share information with Canadian tax authorities and, second, since the income tax regulations disregard that exclusion, profits sent back to Canada are tax exempt. The behaviour of the Canadian government, particularly under the Liberals, was all the more deplorable considering that Canada even worked to undermine all the efforts being done by the OECD, this to ensure that Barbados would not be deemed to be a tax haven.

This work to get Barbados off the list was done in two stages. In 2000, the notion of tax havens was replaced with the notion of non-cooperative tax havens, following a recommendation made by a 13 member committee, which included Canada.

Secondly, that same committee changed the criteria to determine whether these countries were cooperative or not. Now, a tax haven simply has to commit to being transparent and to sharing tax information with other countries to be taken off the list. That is really very little.

The tax treaty is essentially based on the exchange of tax information. Thus, once a tax treaty is signed with a tax haven, it is virtually automatically removed from the list. That change made the working group on harmful tax practices completely pointless, and Canada, as a result of what the Liberal government of the time did, was a major participant in weakening it.

For years, the failure to act could be laid at the doorstep of the Liberal Party. We must now recognize, however, that the Conservative government has proposed nothing to fix this. I hope it will soon do so. Probably the budget will be an appropriate opportunity to do it.

The Auditor General has repeatedly deplored Canada's failure to act. She first did this in 1992. In 1996, she took up the issue for the second time; in 1998, for the third time; in 2001, for the fourth time; and ultimately, in 2002, for the fifth time. Still there has been no action by the government, no action by the Liberals at the time and still no action by the Conservatives today. In fact, Canadian investments in tax havens continued to multiply over the same period when the Auditor Generals were issuing us their warnings.

From 1990 to 2003, Canadian companies invested major and growing amounts in countries recognized as offshore financial centres, particularly in the Caribbean. Between 1990 and 2003, Canadian assets in those countries grew by a factor of eight, rising from $11 billion to $88 billion. In 2003, the five main OFCs I referred to earlier were among the 11 countries where there were the most Canadian assets, and so on.

We must realize, from the various reports on television that have dealt with the subject, that this is a situation in which there is more and more money being invested in tax havens, despite the warnings from the Auditor General and, of course, from the Bloc Québécois. The government has never done a thing and we still see nothing being done about this. This is particularly unfortunate from the Conservatives, who claim to want to stand up for taxpayers. What are they waiting for, to ensure that big businesses pay their fair share of taxes, by preventing them from using tax havens?

The Bloc Québécois proposes that all tax treaties go through the House of Commons, which they do not do at present. Bill S-5, which provides for tax treaties to come into force, shows the importance of international treaties in everyday life.

These treaties do not need implementing legislation to be passed. In this case, no treaty will be submitted to Parliament, quite simply.

The federal executive controls all phases of the process of adopting an international treaty. The executive is also responsible for what takes place in negotiations—which are for the most part secret. Nothing is made public during negotiations.

The provinces are seldom consulted, and in many cases they are completely excluded from those negotiations, even though, because of something that falls under their jurisdiction, they often have an interest in the negotiations.

Today, there is no democracy at all when an international treaty is involved. It is worth noting that there is no complete collection of treaties published. The government makes them public on a sporadic basis, and we do not even know whether it discloses all of them. Even the treaty section of the Department of Foreign Affairs does not have a list that we can consult. This is quite incredible, when you think about it.

The government is not even required to table them in the House. It is not even required to inform the House or the people when it signs or ratifies treaties. I find it incredible that in 2007, in our democracy, a government can sign an international treaty without even informing the population. Obviously, the House does not approve them, yet since 2002, in Quebec, the agreement of the National Assembly has been required for Quebec to sign any treaty. This improvement was brought in by the Parti Québécois at the time. It would be interesting to propose such an improvement in this House.

Not only does the House not approve international treaties, but the members are not involved in any way in the process. All we can do is consult with the people and try to obtain their approval.

As I said earlier, the government is not required to consult the provinces even when treaties concern areas of provincial jurisdiction. It is totally absurd that no consultation mechanism is in place. This situation is completely unacceptable.

It used to be that international treaties governed relations between States and had little or no impact on how society functioned or on the lives and rights of citizens. At the time, it was acceptable for the government to unilaterally sign or ratify treaties.

Now, however, international treaties, especially trade agreements, affect the power of the State, the workings of society and the role of citizens. Furthermore, they often have an even greater impact than many bills.

The Canadian treaty ratification process is not in line with this new reality. The people's representatives must be involved in decisions that affect the people they represent.

During the election campaign, the Conservatives promised to bring treaties before the House prior to ratifying them, but they still have not kept that promise. Recently, the government signed an investment protection agreement with Peru. I would note that the agreement still has not been put to the House and that it was already signed before the members could approve it. This agreement is based on chapter eleven of NAFTA, which has been criticized by many.

When the House presses the government to honour its international commitments, as it has done in the case of the Kyoto protocol, the government does what it pleases, with no regard for the will of the people or the promise it made when it signed the treaty.

It is rather paradoxical that the Kyoto protocol is probably the most important of all the treaties this House has approved, yet the government is refusing to acknowledge and implement it. This is a far cry from the Conservatives' promise to submit treaties to the House. I do not know whether the Conservatives meant that they would submit treaties to the House, but would not abide by the House's decision or respect its will. They may have forgotten to mention that when they made their election promises.

The government should have treaties approved and then enforce them.

Not involving representatives of the people is an anachronism in treaty ratification. I would like to point out that Canada is less democratic today than it was in the 1920s.

In fact, in 1926, Prime Minister Mackenzie King introduced a resolution that was unanimously adopted by the House of Commons. It read as follows:

Before Her Majesty's Canadian ministers recommend ratification of a treaty or convention involving Canada, Canada's approval must be obtained.

In 1941, Mackenzie King reiterated his commitment to this approach:

With the exception of treaties of lesser importance or in cases of extreme urgency, the Senate and the House of Commons are invited to approve treaties, conventions and formal agreements before ratification by or on behalf of Canada.

Over the years, the House of Commons had been consulted less and less, and even when it gave its approval in the case of the Kyoto protocol, the government refused to implement it. Nothing in the rest of the industrialized world can compare with that.

I said earlier that Canada was lagging behind Quebec. In Quebec, treaties signed by the Government of Quebec are approved.

On three occasions, the Bloc Québécois has introduced a bill on treaties to modernize the whole process of concluding international treaties. I am referring to Bills C-214, C-314 and C-260. Each time, the federalist parties have rejected the bill. This is very unfortunate.

In conclusion, this bill should be improved—

Income Tax Amendments Act, 2006Government Orders

5:10 p.m.

Conservative

The Acting Speaker Conservative Royal Galipeau

The hon. member for Peterborough for questions and comments.

Income Tax Amendments Act, 2006Government Orders

5:10 p.m.

Conservative

Dean Del Mastro Conservative Peterborough, ON

Mr. Speaker, the member is a contributing member of the finance committee and I have a couple of questions for him regarding his speech.

We heard the previous speaker in the House refer to the income trust hearings that have been going on in our committee and the member spoke about a number of things, and this certainly comes under the heading of some of his discussions. I would like to ask him, on behalf of his party, if he could make their position clear.

We know the Liberal Party has had three specific policies on income trusts, all quite different, and none would have solved the situation that surfaced on income trusts.

We heard supporting testimony from people such as David Dodge, from the Bank of Canada, Jeffrey Olin from Desjardins, Kevin Hibbert of Standard & Poor's, Dominic D'Alessandro from ManuLife, Kevin Dancey of the Canadian Institute of Chartered Accountants, Art Field of the National Pensioners and Seniors Federation, Ramy Elitzur of the University of Toronto, the hon. Mitch Murphy from the Government of Prince Edward Island, and I could go on and on.

This is really important because I know that the issue of the fiscal imbalance is very important to the Bloc Québécois. We have had many people coming forward and saying this tax leakage issue is a real issue, it is something that the government has done correctly. They are saying that we have acted correctly to protect the tax base and encourage tax fairness. I would like to know if, after listening to all these expert witnesses, the Bloc Québécois is now prepared to support the measures taken by the government relating to tax fairness on the income trust issue.

Income Tax Amendments Act, 2006Government Orders

5:15 p.m.

Bloc

Thierry St-Cyr Bloc Jeanne-Le Ber, QC

Mr. Speaker, it is somewhat surprising to see my colleague from the Standing Committee on Finance oppose these infamous income trusts, given that, during the election campaign, he promised not to tax them. In my opinion, the crux of the problem before us today and the billions of dollars lost by investors basically stems from that absurd, irresponsible and ridiculous promise made by the Conservatives during the election campaign. That said, the Bloc Québécois has always believed that the financial structure of a corporation should not be dependent on tax benefits.

For this reason, we believe that we should no longer—as was true in the past and remains true today—give tax benefits to income trusts, which means and which meant that more and more corporations were converting to income trusts, not because it was the best business structure for them, but simply to reap the tax benefits. That is an unhealthy way to structure the economy.

The Conservatives' promise to not do what they have just done was irresponsible. They should not have promised it. They could have then done things differently and done them properly. The Bloc Québécois proposes increasing the transition period from four years to ten years, in order to stop the conversions to income trusts and to grant more time to existing income trusts, in order to appease and accommodate investors.

Income Tax Amendments Act, 2006Government Orders

5:15 p.m.

Liberal

Larry Bagnell Liberal Yukon, YT

Mr. Speaker, I have two questions for the member.

First, as he mentioned, the Conservatives seem to be ignoring more and more what Parliament does in motions and even in bills. When they were in opposition, as the member will remember, they would say that it was an affront to Parliament or an affront to the people.

In particular, relating to the bill put forward by the hon. member for Honoré-Mercier on Kyoto, which the member mentioned in his speech and which basically told the government to come up with a plan, the government's answer was that there was no plan in the bill.

Obviously, the bill is telling the government by law to come up with a plan. I would like the hon. member to comment on that.

Second, does the hon. member not think that the government tax increase on July 1, 2006 for the lowest income people in this country from 15% to 15.5% was totally unreasonable and unCanadian when everyone else was getting a tax decrease?

Income Tax Amendments Act, 2006Government Orders

5:15 p.m.

Bloc

Thierry St-Cyr Bloc Jeanne-Le Ber, QC

Mr. Speaker, following the tabling of the budget and discussions of the Standing Committee on Finance, I had the opportunity to sit in on the never-ending debate between the Liberals and the Conservatives about who raised taxes and who lowered them. Frankly, I find this rather ridiculous. They do not want to acknowledge that the decrease in taxes planned by the Liberals had not yet been adopted but that, in practice, it had already gone into effect. It is a silly game and they can keep on playing it.

To return to the first question, it is disconcerting to see the government disregard the will of this House. It is unfortunate and it seems that the government does not understand that it is in a minority position, that the majority of Canadians did not support it, that it must find a way to work with various parties and that if it is isolated, it must give way to the opinion of the majority.

I do not understand why the government would not abide by the Kyoto protocol bill. It must abide by it. If the House adopts a principle, it must respect the principle and the rules. The Bloc Québécois tabled a motion calling on the government to set absolute targets for greenhouse gas reductions and this resolution was adopted by the majority of the House. In my opinion, a responsible government would not wait to have a bill before it to respect the will of the House.

Income Tax Amendments Act, 2006Government Orders

5:20 p.m.

NDP

Peter Stoffer NDP Sackville—Eastern Shore, NS

Mr. Speaker, I thank the hon. member for his continued support for the Kyoto protocol. My question to him is related to taxation and the discussion we are having today.

As he knows, a few years ago the Bronfman family sent $2 billion out of the country to avoid paying taxes. A gentleman from Winnipeg actually took the issue all the way to the Supreme Court. Unfortunately, he was not successful, but the fact is, it should not have been an individual from Winnipeg doing that. It should have been the government putting a stop to that.

The problem is that the loopholes for tax havens are still there. If I am not mistaken, the finance minister recently reported that over $80 billion are secured offshore in tax havens.

I would like to know if the hon. member can speak on behalf of his party. Is the Bloc Québécois prepared to close the loophole that stops Canadian dollars from being secured in offshore tax havens?

Income Tax Amendments Act, 2006Government Orders

5:20 p.m.

Bloc

Thierry St-Cyr Bloc Jeanne-Le Ber, QC

Mr. Speaker, for some time the Bloc Québécois has been seeking to limit and prohibit the use of tax havens.

As I previously explained in my presentation, some might say they are loopholes in the legislation. However, as I demonstrated earlier, they are not loopholes but are put there by design to enable people, certain wealthy individuals and companies, to avoid paying taxes.

I mentioned the case of an exchange of e-mails proving the intent. I will attempt to find it because it is very interesting. In 1994, an official of the Department of Finance told Craig Cowan, of Arthur Andersen, the following:

Be advised that proposed paragraph 5907(11.2) is intended to ensure that a Barbados international business corporation which is a foreign affiliate will remain eligible to earn an exempt surplus.

Obviously the government wanted a way around the legislation. It is not a loophole. It was designed that way.

Income Tax Amendments Act, 2006Government Orders

5:20 p.m.

NDP

Judy Wasylycia-Leis NDP Winnipeg North, MB

Mr. Speaker, I am pleased to participate in the debate on a lengthy bill, Bill C-33.

For those viewers watching the program today, who may have missed the point, this bill is about income tax changes, many of them technical in nature, but we have digressed a great deal and we are talking about a number of other issues.

I intend to speak to the bill and I will do it in three ways. I will address the issues of income trusts, tax havens and the question of unfairness in our tax regime.

I will begin with income trusts because it seems that the Liberal finance critic, the member for Markham—Unionville, has chosen to spend most of his time attacking the New Democratic Party. I did not realize that we had so much power and that we were in a position to determine the affairs of the nation but that clearly is what the member from Markham thinks.

The member's bullying tactics against the NDP, and myself in particular, will not work, just as the bullying tactics of the big oil companies will not work when they take out paid advertisements attacking me directly and the NDP for having dared to suggest that income trusts have no place in our system and should have been phased out. We acknowledge the fact that we have been consistent on this issue from day one and have not flip-flopped or changed our minds, as both the Conservatives and the Liberals have done.

We have not used this issue as a political football and we have not attempted to put one over on Canadians. We will continue to indicate why we are concerned about income trusts and the huge loss of revenue for government programs and the very important programs and initiatives for Canadians.

There is no question in our mind that we are talking about tax leakage, tax slippage and tax loopholes that the Liberals, for over 13 years, upheld and which the Conservatives now seem determined to be party to.

When it comes to this issue, it is clear that the Liberals cannot hold a candle to anyone. They are absolutely shameless when it comes to attacking others, when in fact their record is horrific. The Conservatives, obviously, have fallen into the footsteps of the Liberals by ensuring the perpetuation of large tax loopholes and havens for their corporate friends. That needs to be stopped for the good of all Canadians.

I am not surprised at the member for Markham—Unionville, given his banking background. We know that when push comes to shove the Liberals will be the defenders of big oil and big banks. That was apparent over the last 13 years.

Today we are dealing with a bill that arises out of concerns from the Auditor General about the perpetuation of tax loopholes and tax havens. If truth be told, we are talking about Auditor General reports that go back 14 years, to 1992. The first report of the Auditor General on tax havens happened in that year. It was followed by a report in 2001, a report in 2002 and, more recently, a report in 2007. In each and every case, the Auditor General raised concerns about tax havens.

The Liberal government had ample opportunity to address this very serious issue and chose not to. In fact, it chose to go the opposite way by encouraging tax havens and ensuring that the Barbados remained as a tax haven for investors. That haven continues to be used today by big drug companies, big banks, big oil companies and big shipping companies.

We are talking about the loss of a huge amount of money that ought to have been put to the benefit of Canadians to ensure they and their families were able to make ends meet. If truth be told today, one could say that if anyone deserves a break, it is average families, hard-working Canadians who have seen their ability to cover growing expenses become more and more difficult, while in fact the rich get richer and big corporations get more and more access to tax loopholes and havens.

The point of today's legislation is to crack down on tax loopholes and tax havens but I doubt that this bill is adequate to do the task. However, we will, over the course of the debate, be making some suggestions.

I will be proposing an amendment to the bill that would deal with one of the outstanding issues pertaining to income trusts, which is that many investors, in using income trusts as a way to make money, have overvalued their trusts. As a result, Canadians have been taken to the cleaners and have lost a great deal of money.

Today we propose that the government take the NDP private member's bill to deal with this and ensure accountability and transparency in all aspects of the income trust field so long as they are with us knowing in fact we would like to see them phased out.