Mr. Speaker, I am pleased to speak to Bill S-3 this afternoon. A number of very important parts in this bill do require more debate before it passes on in the House.
The bill originates in the Senate and a considerable number of bills have come to us from the Senate this year. This is an act to implement conventions and protocols concluded between Canada and Colombia, Greece and Turkey for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income. The bill relates to Canada's continuing efforts to update and modernize its income tax treaties with other countries. At present, Canada has tax treaties in place with 87 countries, a figure that has been mentioned before. The bill would implement three new treaties that Canada has signed with Colombia, Greece and Turkey.
At this point, I want to get into the double-taxation agreement situation as it relates to Panama and the free trade agreement with Panama that was being discussed in this House and approved and implemented by the government.
As members know, the OECD has a grey list of tax havens but France has a black list of tax havens. Countries on those lists, in many cases, try to do what they can to get off the list. They do that by negotiating these agreements.
In February of this year, the Government of France got tough with Panama and took proactive measures. It put a tax on French corporations and individuals dealing in Panama. Only a few months after it took that ambitious and courageous stance against its own companies, Panama said that it was willing to sign a tax-sharing agreement with France. I do not have the full list with me today but I have spoken on this before.
The rule is that the country must sign, I believe, a dozen of these treaties before it can get itself off the black list. I believe the same rule applies for the OECD grey list. In just six short months after it was put on the French black list and the French government took action against its companies by bringing in huge withholding taxes on companies doing business there, Panama managed to scurry around and get, I believe, eight treaties in place. I believe Italy was one of the countries and there were other countries.
Interestingly enough, on the very day that we were debating the Panama free trade deal here in the House of Commons, the Prime Minister was meeting with the President of Switzerland and was broaching with her the issue of the taxation agreements. However, this was at a time when his own government was debating the Panama free trade deal and yet Canada was not one of the eight countries that Panama had a deal with. It just seems that there is a credibility gap here with the government.
On the one hand, it is negotiating a trade deal with Panama but one would think that it is known by the government that Panama is a tax haven of note, that it is a country that has a problem with the Colombian drug cartels and Mexican drug cartels that launder money through Panama. According to an American source in the American Congress, there are 350,000 companies or perhaps more doing business in Panama.
All this information is well documented. It is a tax haven. It is on the blacklist. It is on the OECD grey list. It is noted by the United States Congress that it is 350,000 companies that are using Panama as a tax shelter and a drug laundering place.
President Obama's group in Congress is using this information as a reason for not proceeding with the free trade agreement with Panama at the current moment.
Canada should be aware that Panama is trying to get itself off the list by signing agreements, and it has not got an agreement with Canada, one of the countries that it is trying to get a free trade agreement with. It is unbelievable that this would happen.
Another reason the Americans are reluctant to pass the free trade deal with Panama is that one of the companies, I believe it is AIG, and the member for Sudbury may know the amount of money involved, but the fact of the matter is that AIG, which got a multibillion dollar bailout compliments of the American people and the American government just two years ago, is now in the process of suing the very government that gave it all these billions of dollars to bail it out. It is suing the American government, trying to recover monies, back taxes, that the Americans say it owes and trying to reclaim this money by virtue of its investments in the tax haven of Panama. These are unbelievable stories that we encounter.
The Americans have good reason for holding back in approving the Panama free trade deal for all the reasons I have outlined, because of these tax treaties that we are talking about.
Clearly governments have to get proactive and force these tax havens, which are a moving target, we must be aware. A country that is a tax haven today may get off the tax haven list, and yet another country will take its place. It will be and is a constant battle that the governments have to deal with.
However, I think we have seen more activity and more proactive intervention than ever before as far as tax havens are concerned since the 9/11 experience.
The Swiss banking system has been rock solid for many years, and it does not give out information on its customers. That is one of the reasons it has so many customers. It has drug dealers, arms dealers and all sorts of shady people who deal with the Swiss banks, and some not so shady too but who put their money in Swiss banks for the purposes of hiding the money.
Their concern is not interest. As a matter of fact, if we ever wonder why the Swiss banks are able to lend their money out at such a low interest rate, it is because they are not paying much in terms of deposits. As a matter of fact, I believe there are some depositors in Swiss banks who actually pay the bank to store the money. Not only do they not get interest on their deposits but they actually pay the bank. They are paying for that shield of secrecy.
For example, in 1987 when GICs in Canada were yielding 18% to 20% for 30-day treasury bills, it was possible to get money in Switzerland for perhaps 6%.
One might ask: How could that be? If the banking system is shrouded in secrecy and clients are being protected by the banks and by the state, then a lot of shady things can happen over there and they can lend that money out and make huge profits at much lower rates. The system stayed intact for many years.
Canadians have been putting money in these tax shelters as well. The 9/11 experience changed things. The Americans finally got tough with the Swiss and some of the other countries because they know that a number of terrorist organizations are funnelling money through these avenues.
That is why the facade is starting to crumble. It is starting to crumble more because of the fear of terrorism and the Americans' putting pressure on the Swiss system. They are now starting to force more of these tax treaties to be signed and more information to be made available.
In the last couple of years there have been at least two high-profile cases, one in Liechtenstein and one in Switzerland. Bank employees were not happy with their employers so they took computer disks. In the case of the Liechtenstein bank, the employee sold the computer list to the German government, which was happy to get it. The German government chased down the people on the list and has collected a substantial amount of money in back taxes and penalties from these tax evaders. I am not aware of any jail terms but they were hit with penalties and back taxes. They collected a huge amount of money from these people.
The experience of the Canadian government is totally different. The German government gave the Canadian government a list of 100 people, most of whom were from B.C. How have these 100 Canadians been treated? First of all, Canada Revenue Agency approached them offering an amnesty. All they had to do was walk to the nearest Canada Revenue Agency office, admit making a mistake by investing in a tax shelter in Liechtenstein, provide the office with the information and volunteer to pay the back taxes and a penalty, and everything would be square. There would be no jail time, no other consequences, and this after the Canadian government was given the information upfront by the German government. Even then, it took the Canadian government forever to get some results.
The member for Souris—Moose Mountain might know how much money the Canadian government has collected. We suggested that nothing had been collected in the way of penalties or back taxes, but a government member did recently stand up in the House and say that some money has been collected from the people in that particular case.
There was a more recent case involving a computer person in a Swiss bank who escaped to France with the records and turned them over to the French government. That has now given us a bigger pool. About 1,600 Canadians invested money in that tax shelter. I believe the number of Americans, with ten times the population of Canada, which is 30 million, is much less than the number of Canadians.
Our tax people have all this information. Guess what? Even with this information, they are still negotiating with these people. They are still offering amnesty to these people. It is little wonder that Canada is viewed as a soft touch and not very aggressive in trying to collect and chase down people who invest in tax shelters. That undermines the public's confidence in the system when they see these things happen.
They see that all sorts of rich people are able to take their money and invest in these tax shelters, and guess what? They get an amnesty, if they get caught. If they are caught, all they do is walk into the nearest Canada Revenue Agency office, make their declaration and they are off the hook. That is almost an invitation to keep doing it.
For the average taxpayers, the working people who get a T4 at the end of the year, when they see that, they lose faith in the system, and well they should. We should be much tougher.
I have asked the government to give us a list of arrears in other areas of taxation. How do we know that the government is not going soft on the collection of arrears in GST, income tax and any other taxes that the federal government is collecting?
For example, in Manitoba a number of years ago we did get a list of arrears. Not only that, but we got some brown-bag information put under our doors that provided a list of some well-known people in the province of Manitoba, the province of the member for Souris and Killarney. Some well-known people were getting money from his former department. It was not when he was the minister, but it was the industry department. They were getting grants from the industry department; meanwhile they were in arrears with their provincial sales tax. The government was rewarding them for this. Thanks to a new computer system that was introduced when the member was in power in Manitoba a number of years ago, we were able to connect the dots and stop that from happening.
I wonder what the situation is with this government. Is it soft on collecting corporate tax, GST and income tax from people in this country? We certainly know that the government has had a very questionable experience on tax shelters.
It surfaces every so often that Canadians get caught in tax shelter situations. In future, perhaps the government should make a very strict announcement to put a time limit on the amnesty. Perhaps the government could announce a program that would give people 90 days to come clean. After that, if people are caught investing in a tax shelter, they should not simply get off the hook by taking advantage of the amnesty, paying the back taxes and some penalties, but they should face prosecution and jail terms. I think it would be interesting to see how many people would actually come forward.
The current amnesty is not working, and it will never work as long as people know that they never have to come forward until they are caught and, when they are caught, they just make the declaration. That policy is in fact encouraging tax evasion and not trying to stop it.
However, this government had poor examples to follow. It was following the Liberals. The Liberals are anything but tough on tax shelters. The former Liberal Prime Minister himself, I believe, was in fact flagging his trans-Canada steamship lines in Barbados. It is hardly an example for people to pay their taxes and be honest with the government.
It is time for the government to break with tradition and the sorry record of the previous Liberal governments in doing nothing on this issue of tax evasion. It is time for the government to get tough with the people who involve themselves in the tax shelters.
We should be pushing with the Americans and other countries. We should be getting together and co-operating with the French government to make it tougher on these tax havens so that we can take them out of business as quickly as possible.