Debates of May 13th, 2010

Tax Conventions Implementation Act, 2010

[Ted Menzies, Conservative, Parliamentary Secretary to the Minister of Finance]

Mr. Speaker, I appreciate the opportunity to start debate on Bill S-3.

However, before I get into my prepared remarks, as this legislation involves Greece, perhaps it is a very relevant time to bring the members of the House up to speed on the latest issues in Greece. It has been very much in the media and I think it is appropriate to comment on the current situation.

First and foremost, Canada is concerned about the situation in that country and other threats to the global economy. That is why we have been taking a leadership role within the G7 and the G20 on global financial reform, including Greece.

Over the weekend, the finance minister chaired conference calls, and I emphasize “calls”, with G7 finance ministers on that matter. Canada, through the IMF and through our IMF partners, is providing key support to help ensure the situation is contained.

The Bank of Canada, working with the central banks around the world, is also helping provide key liquidity to markets.

While we are satisfied that the IMF and the EU actions to date will help address recent market volatility, we remain concerned about the fiscal situation in some countries. Hopefully, in a small way, the passage of Bill S-3 and the Greece-Canada tax treaty within it will help the turnaround in Greece by reducing tax barriers to trade and investment between our two countries. The strong ties between our two countries, bolstered by the large and active Greek Canadian community, will further be strengthened by this legislation as we create better conditions for Greek companies to do business in Canada and for Canadian companies to operate in Greece.

As Hellenic Canadian Association president, Theodoros Aslanidis, and I thank my hon. colleague from Scarborough Centre for helping me with the pronunciation of that name and I still may have it wrong, noted, “the agreement is very positive”.

The legislation would implement Canada's recently concluded tax treaties with Greece and Turkey as well as Colombia, tax treaties that would help both prevent unfair double taxation and tax evasion.

Bill S-3 is part of Canada's ongoing effort to update and modernize its network of income tax treaties, which represents one of the most extensive in the world. In fact, Canada has tax treaties in place with nearly 90 countries. Moreover, Canada is continually working on agreements with other jurisdictions.

Before I continue, let me be clear. While Bill S-3 is important legislation, it is largely routine. Indeed, in the 39th Parliament, the House adopted similar legislation related to tax treaties with Finland, Mexico and Korea. In the 38th Parliament, under the former Liberal government, legislation concerning tax treaties with Gabon, Ireland, Armenia, Oman and Azerbaijan were also adopted.

Bill S-3 and all the aforementioned similar legislation related to tax treaties are in fact patterned after the OECD model tax convention. This OECD framework is widely accepted in the international community.

As Peter Barnes, the noted former deputy international tax counsel at the U.S. Treasury Department, noted in the OECD Observer magazine:

—the OECD model has achieved a consensus position as the benchmark against which essentially all tax treaty negotiations take place....the OECD Model Tax Convention is a tremendously important tool for smoothing the way of international business and global trade.

Rest assured, the provisions in the three treaties in Bill S-3 comply with the international norms that apply to such treaties. They are exactly like the legislation from the 38th and the 39th Parliaments. Accordingly the tax treaties with Greece, Turkey and Colombia have all been designed with two goals in mind: avoiding double taxation and preventing international tax avoidance or evasion.

Before elaborating further on the importance of these two objectives, there are a couple of general points to discuss regarding tax treaties and their role in contributing to a competitive tax system in Canada.

Our Conservative government is always working to expand its network of tax agreements with other countries. In order to combat offshore tax evasion, we unveiled a policy in budget 2007 that introduced incentives that have non-treaty countries enter into OECD-modelled tax information exchange agreements with Canada. It also required that all new tax treaties and revisions to existing tax treaties include that standard for tax information exchange.

I am happy to report that negotiations on tax information exchange agreements have commenced with more than a dozen jurisdictions. What is more, in August 2009, Canada signed its first tax information exchange agreement with the Netherlands Antilles. That agreement, along with those between Canada and Colombia, Greece and Turkey, all include the OECD standard on international tax information exchange.

We have built on that record in recent years as well. For instance, we have given the Canada Revenue Agency additional resources for international tax audit and enforcement. I believe all members realize and understand that tax treaties are an important tool for improving our system of international taxation.

As I mentioned, the tax treaties with Greece, Turkey and Colombia are designed with two key objectives in mind. The first objective is to remove barriers to cross-border trade and investment, most notably the double taxation of income. The second objective is to prevent tax evasion by encouraging cooperation between Canada's tax authorities and those in other countries.

First, we all recognize that removing barriers to trade and investment are paramount in today's global economy. Investors, traders and others with international dealings need to know that the tax implications associated with their activities, both in Canada and abroad, are protected.

Canadians also want to be treated fairly, with consistent tax treatment that is set out from the start. In other words, they want to know the rules of the game and they want to know the rules will not change in the middle of the game.

Bill S-3 will remove uncertainty about the tax implications associated with doing business, working or visiting abroad in Greece, Turkey and Colombia.

These tax treaties will establish a mutual understanding of how those tax regimes will interface with those in Canada. This can only promote certainty and stability, and help produce a better business climate, especially with respect to eliminating double taxation. Nobody wants to have their income taxed twice, nor should it be, but without a tax treaty, that is exactly what could happen. Both countries could claim tax on income without providing the taxpayer with any measure of relief for the tax paid in the other country.

To alleviate the potential for double taxation, tax treaties use two general methods, depending on their particular circumstances. In some cases the exclusive right to tax particular income is granted to the country where the taxpayer resides. In other cases, the taxing right is shared. For example, if a Canadian resident employed by a Canadian company is sent on a short-term assignment, perhaps for three months, to any one of the three treaty countries noted in Bill S-3, Canada has the exclusive right to tax that person's employment income. If, on the other hand, that same person is employed abroad for a longer period of time, say for one year, then the host country can also tax the employment income.

Under the terms of the tax treaty, this individual will be treated fairly. When the individual files his or her taxes, a credit will be provided on the tax that has been paid in that other country, thus avoiding double taxation and keeping the tax system fair.

It has been noted that one way to reduce the potential for double taxation is to reduce withholding taxes. These taxes are a common feature in international taxation. They are levied by a country on certain items of income arising in that country and paid to residents of another country.

The types of income normally subjected to withholding tax would include, for example, interest, dividends and royalties. Withholding taxes are levied on the gross amounts paid to non-residents and represent their final obligations with respect to Canadian income tax.

Without tax treaties, Canada usually taxes this income at a rate of 25%, which is the rate set out under own legislation, the Income Tax Act. Accordingly, Bill S-3, as with all tax treaties, addresses this issue with numerous withholding rate reductions. Specifically, Bill S-3 will provide for a maximum withholding tax on portfolio dividends paid to non-residents of 15% in the case of Colombia and Greece, and 20% in the case of Turkey.

For dividends paid by subsidiaries to their parent companies, the maximum withholding rate is reduced to 5% in the case of Colombia and Greece, and 15% in the case of Turkey. Withholding rate reductions also apply to royalty, interest and pension payments.

The treaties in Bill S-3 cap the maximum withholding tax rate on interest at 10% in the case of Colombia and Greece, and 15% in the case of Turkey. Each treaty in this bill caps the maximum withholding tax rate of a royalty payment at 10% and on periodic pension payments at 15%.

I mentioned the tax treaties have two objectives. I have spoken at length about the first objective of removing barriers to cross-border trade and investment by eliminating double taxation. While double taxation is clearly problematic, tax evasion and avoidance are also unfair and economically damaging. The loss of revenue resulting from tax avoidance and evasion obviously negatively affect the efforts of governments to function.

Not only that, tax evasion is blatantly unfair as it places an uneven share of the tax burden on honest taxpayers. That is why the second objective of tax treaties is to encourage co-operation between Canadian tax authorities and those in other countries.

We all appreciate that the best defence against international tax avoidance and evasion is through improved and expanded mechanisms for international co-operation and information sharing. By increasing co-operation between Canada and other countries, in this instance Colombia, Greece and Turkey, we are able to better prevent tax evasion.

Tax treaties are an important tool in protecting Canada's tax base by allowing consultations and information to be exchanged between our two governments. This means that we can better catch those trying to avoid taxes, ensure the integrity of our tax system, and that everyone is taxed equally.

Indeed, our Conservative government firmly believes that Canadians should be confident that all taxpayers contribute their fair share. We demonstrated that commitment in budget 2010 through a number of initiatives intended to protect the integrity of Canada's taxation system, initiatives that will help ensure that all taxpayers pay their fair share of tax on income earned in Canada and abroad.

For instance, in budget 2010 we proposed to address tax planning practices that have developed, which have allowed under particular circumstances a portion of stock-based employment benefits to escape taxation at both personal and corporate levels, by: preventing tax arbitrage opportunities involving leases with government entities, other tax exempt entities or non-residents who are not subject to Canadian taxation; consulting regarding a proposal to require taxpayers to identify aggressive tax planning, which will provide the Canada Revenue Agency with early notice of new and emerging aggressive tax-avoidance schemes; consulting on revised proposals to prevent tax avoidance through the use of offshore trusts or other foreign investment entities; and ensuring that businesses cannot inappropriately capitalize on the differences between the tax systems of Canada and other countries to artificially increase foreign tax credits related to cross-border transactions and, thus, pay less tax.

We also propose to prevent aggressive tax planning by ensuring that income trust conversions into corporations are subject to the same loss utilization rules that currently apply to similar transactions involving only corporations, and finally, to ensure the provisions of the Criminal Code that apply to serious crimes related to money laundering and terrorist financing can be invoked in cases of tax evasion and prosecuted under Canada's tax statutes.

Taken together, such initiatives are consistent with our Conservative government's ongoing commitment to tax fairness.

In conclusion, as I mentioned at the outset, Bill S-3, while standard legislation at heart, is nevertheless very important. There is little doubt that its benefits are clear. The tax treaties covered in this proposed legislation will promote certainty, stability and better business climate for taxpayers and businesses in Canada and in these three treaty countries.

Moreover, these treaties will help to secure Canada's position in the increasingly competitive world of international trade and investment. They comply with international OECD standards and will help ensure a stronger tax system for Canadians. It will help ensure our goal of tax fairness for Canadians.

[John Cannis, Liberal, Scarborough Centre, ON]

Mr. Speaker, I enjoyed listening to the parliamentary secretary and I must say I am pleased. He touched on income trusts and we know that the government made a commitment. It reneged on it. With income trusts, I think there is a provision in there where it seems that Canadian companies are at a disadvantage. Foreign companies can borrow money to expand and acquire companies, invest, et cetera, and write off those borrowing costs. Canadian companies have lost that advantage.

Could he please talk about that? Are there any provisions in here that address that? We are trying to bring tax fairness and I see that. Can we bring some fairness to our corporate world as well?

[Ted Menzies, Conservative, Macleod, AB]

Mr. Speaker, I thank my hon. colleague not only for his question, but for his assistance in pronouncing the Greek gentleman's name. I did have trouble with that.

Certainly, as I mentioned in my speech, this is about tax fairness. He likes to keep bringing up in this House the fact that we actually implemented tax fairness with the income trust issue that the Liberals were either scared to address or just buried their heads in the sand and did not deal with.

This Conservative government has dealt with some very difficult issues, but we have dealt with them head-on, such as the environment. Canada is a leader with our environmental record because we met it head-on. We listened to the fact that other countries were not meeting their commitments and frankly, we were a little ashamed that we were not meeting the commitments that the Liberals had challenged us with. They had never followed up, so we went to Copenhagen and we were sponsors of a commitment to an accord that many countries have now signed on to. We take the tough decisions.

Getting back to Bill S-3, this is very important for his home country, for Colombians, for Canadians operating in Greece, Turkey and Colombia. They need to be assured that when they send employees of a Canadian company to those countries, they are not going to be overtaxed or double taxed.

It is a part of our pattern of expanding trade. We continue with our very strong and very bold trade agenda in putting forward new trade initiatives and agreements. This is just part of a treaty that will protect our Canadian companies to help protect their employers as well as those countries.

[Jim Maloway, NDP, Elmwood—Transcona, MB]

Mr. Speaker, I want to thank the member for his speech on Bill S-3. I have several questions for him, but the main one that I am interested in is the fact that even though we have 90 or so of these treaties in existence right now, and they do deal with the whole issue of tax evasion and tax avoidance, I would like to ask him whether he could tell us how much money has actually been recovered under the existing treaties that have been signed?

He talks about how we can co-operate between our tax department and the tax departments in other countries. I presume that there are some provisions to get our hands on bank records. I am just not sure how that works.

Under the existing 80 to 90 agreements that are in force and have been in force for a number of years, how much money has actually been recovered by the Canadian government in terms of tax avoidance or evasion?

[Ted Menzies, Conservative, Macleod, AB]

Mr. Speaker, I will certainly see if I can get that information, but we are dealing with the Canada Revenue Agency and I am not sure that those numbers would even be available to me. If that is possible, I would certainly like to fulfill that commitment.

That is a major part of these treaties. We are always concerned with those who are less than honest. No one likes paying taxes, and I am sure that the Speaker would be at the head of the campaign to reduce Canadians' taxes. No one likes paying taxes, but everyone likes to have the advantages that this country provides through some of the social programs. The only way that those social programs are paid for is through taxation.

I am sure my colleague in the NDP will be supporting this bill wholeheartedly to make sure it is fair for all Canadians and for all members of the three countries that we are trying to help.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Mr. Speaker, I want to thank my colleague for his hard work on the finance file and for his speech today.

On these tax treaties, could the member talk specifically about some of the efficiencies to businesses and individuals that are received from these tax treaties? Could the member also comment on some of the challenges around some of the privacy issues that are associated with the exchange of information?

[Ted Menzies, Conservative, Macleod, AB]

Mr. Speaker, I think the member, in having a strong business background, understands the complexities of tax compliance.

If we do not have such treaties in place, these tax compliance issues are duplicated. Then we are back and forth, and an employee of a company is taxed twice. The employee will come back to his or her member of Parliament and ask the member to try to get the taxes back from one country or the other.

The reporting mechanisms that Canadian companies have to deal with would be extremely simplified in this process. It is an assurance when we have a treaty in place. Things will go wrong. Mistakes will be made, and I am not suggesting just by accountants, but mistakes will be made, and if we have a treaty in place with secure legislation that requires compliance, it makes it much safer for employers and employees.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Mr. Speaker, I have a couple of questions that arose out of comments a few moments ago.

Of course, one is that with such a valuable piece of legislation, especially with all of its tax implications, one might have thought it would have been addressed by the government here in this House first. I would like to ask the member why the government chose the route of the Senate in order to get this kind of legislation here.

The second question is around his statement that his government has made courageous decisions. I am just wondering about the definition of courage that sees the government making a promise during an election regarding income trusts, then reversing itself because there was about a $300 million tax leakage. That correction caused an overnight collapse of $35 billion in the assets of all of those people who had put money into those income trusts. By the way, 85% of those companies that had turned themselves into income trusts are now owned by Americans, so they pay no taxes here.

I am just wondering whether the member thought that the tax treaties we had arranged in respect of the income trusts worked to Canadians' advantage. Canadians lost $35 billion as opposed to giving up $300 million in taxation. Did he think that was a good exchange to reduce taxes by $300 million so that taxpayers could lose $35 billion in assets?

[Ted Menzies, Conservative, Macleod, AB]

Mr. Speaker, my how memories lapse. Those are wonderful numbers. They are totally irrelevant to today. They are totally irrelevant to anything we are talking about.

We have some new senators in the other place who are looking to help further the work of this government. We had a senator who was very interested in putting forward some legislation. We gave Senator Stephen Greene the opportunity to bring this legislation forward. I see nothing wrong with that. It is great that members in the other place have the opportunity to recognize all the benefits that are in here. We look to them for guidance, but many businessmen in the other place understand that this needs to move quickly. They have sent it here. Let us move it forward and get this done so that we can protect Canadians.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Mr. Speaker, I am delighted to speak to this bill today.

Those of us in the Liberal Party are into what is called nation-building. Nation-building is a bit different from what the parliamentary secretary said a moment ago is the primary function of parliamentarians, that is, to make sure they conduct things the way a businessman would run his corner shop. That is not to diminish the fact there always needs to be economic probity, financial probity in everything that we do, but there is a different action.

In this place, all members of Parliament, whether their background is in business, law, academic teaching, small business, or worker, are interested in building this nation. They do it through the economic stimuli available to a Parliament like our own to ensure that all men, women and children have the opportunity to fashion out a future for themselves in this country, to avail themselves of all of the natural resources that are here and the human resources that come with the interaction of people who live in a collective, and all of the entrepreneurial skills that are developed either through some of the institutions that are funded by government in part on the one hand and stimulated by those who see the value in research and development on the other.

Bill S-3 addresses one component of that social economic development that comes with nation-building. One would expect that I as a Liberal and those of us in the Liberal caucus would be supportive of any initiative that would render the free flow of capital for investment to allow enterprise to capitalize on its ingenuity and create wealth as a result, and to do it not just here in our country but elsewhere. It is called the exporting of our intellectual property, of our entrepreneurial skills, indeed of our culture.

Those of us who are nation-builders, those of us who are members of the Liberal Party, understand that government is not only about operating a balance sheet. We understand that balance sheet has to include the ambition and the dreams of all Canadians in whatever fashion they are developed around the country.

The reason taxation treaties are important and why Liberal governments in the past have sought them in the context of the OECD and the model tax convention that has driven it is that we believe in fairness, the fairness that comes with making an investment and recovering revenue from that investment, but not an investment or return that would be double taxed. In other words, we do not have to make a contribution twice to the infrastructure of a culture, economy and society that may be thousands of kilometres away.

That does not mean our corporate culture would go in and ransack and pillage and walk away without any responsibilities. We believe in a mutual co-operation with legitimate authorities in other locations that welcome our entrepreneurs, our investors and co-operate with them in developing the local economy while allowing ours to come back with the merited profits without being taxed there and here.

When we have to tax here and we have to tax back, the first casualty is probity, i.e., it is replaced by corruption. The second of course is people look for ways to avoid tax and that obviously leads to tax evasion.

That does not work well for the development of any country, because the underlying weakness is one that says the individuals, or the corporate individuals who make an investment, who garner wealth from the activity in whatever place that activity is resident, no longer have a responsibility to their community.

In the Liberal Party we believe in a collective responsibility. We believe there should be profit and capitalization of all intervention and investment that is made in a territory or a collective, but we believe that something must be left behind: growth. Growth is what we leave behind, and a respect for the individuals that allowed us to move along.

We have developed a series of treaties with many countries. I am glad to see that we are now moving ahead with Greece, Turkey and Colombia. I understand that we are already in negotiations with other countries like Cuba. The idea is that those countries and their legitimate authorities help our own investors to secure a proper investment environment and at the same time leave behind an additional investment through taxation that is not so onerous as to generate avoidance, evasion and corruption.

Legislation like this seeks to impress upon the international stage that one can be a responsible and active democracy and still be very dynamic economically. One can be socially oriented, i.e., have a sense of responsibility to the collective and at the same time pursue a very dynamic and rewarding bottom line. We wonder why legislation like this, which purports to do that, would not have been presented earlier and would not have been initiated in the House of Commons, where all money bills, tax initiatives and fiscal responsibilities are developed, debated and promulgated.

We would have thought that. Not to be light on this, but it seems to me that it did happen in the past, but prorogation came along and killed it. Now it has returned again through the Senate. It has come back here. Maybe there will be another prorogation. I must think about it a moment. Why? Because the parliamentary secretary talked with such great earnestness about the government's commitment to all of these bottom lines and fiscal responsibility issues and about how this is almost indispensable to everything in the world.

I agree, but I am not sure that the issue of commitment can be attached to that speech. The legislation was presented, debated, prorogued and killed. Now it has been raised in the other place and brought here. We will make a few interventions. There is no indication that things are going to be moving with any speed. It is important for our businesses to understand that the government is actually in a position where it wants to help and prepare the road so that foreign governments are at least as sensitive to the dynamics of the marketplace as our own might be.

It struck me as well that the parliamentary secretary talked about the greatness of the Canadian financial system and the basis upon which it is founded, how solid it might be, how much of a beacon it is for the rest of the world, how the marketplace is solid and how there is an appropriate balance between business and government, between society and business and between what must be invested and what must be taxed. In other words, how do we make a contribution to renewal and growth?

The parliamentary secretary said that all of these things are part of the Canadian culture. In saying that, he is paying a compliment to the governments of former prime minister Jean Chrétien and former prime minister Paul Martin, who were able to establish a system of balanced budgets.

Someone is going to say, “Oh yes, but somebody had to pay for it”. Canada had balanced budgets and surpluses, in the western world, so that we had the most solid financial system, financial administration, anywhere among the G8. In the OECD countries, Canada was seen as a country that reduced taxes. Of course we had a reduction in the national debt from roughly $600 billion to about $500 billion and an elimination of the deficit, from $43 billion to zero. No, I am sorry, it did not go to zero; it actually went to a $12 billion surplus, at last count, which was then reinvested in our collective, our community, Canada. It was invested in the taxpayers. It was invested in those Canadians who wanted to make this country grow.

Every country lusted at our model. They asked how it could be that Canadian administrators, Canadian legislators, could make investments in research, in human resources, in universities and colleges, could produce a federal system that allowed for two levels of government to be able to make investments in their young people, in the infrastructure to take care of the old, in the hospitals and medical systems that are required to give a quality of life that is the envy of the world? How can this be? What do they do?

Well, they took a look at the tax system. The two governments of Jean Chrétien and Paul Martin, over a 15 year period, produced the kinds of results I mention. They were able to initiate all these treaties that were reciprocal arrangements with countries, with the business environment in other places and the expectations of our business community.

The Government of Canada and the governments of the provinces were able to go into countries around the world in support of their businesses and receive the red carpet treatment. Why? Because when they struck those deals, those reciprocal arrangements, like those proposed by Bill S-3 right now where two countries are talking about recognizing which of the two has the residual authority to tax an activity, to tax an income, they do it on the basis of fairness. The Canadian government has demonstrated a culture of probity, a culture of continuity, a culture of respect for those who contribute the earning and those who withdraw from that earning to reinvest with their partner.

That is why countries around the world approached us and asked “Can we get an arrangement with you, because you can be trusted?”. People do business with those whom they know, with those who have established a record of continuity, those who have established a record of trust.

That is why I mentioned a moment ago the issue of income trusts. The justification for it was that there was tax leakage here. We needed to get a little bit more. We could not lose that $300 million. The parliamentary secretary said, “That's old hat”, three years ago. But it is not old hat to refer to the environmental standards that were set, perhaps not met, by previous governments of 10 to 15 years ago and replaced by no standards. Therefore, there is no judgment.

The issue of income trusts is extremely important because it goes to the heart of internal tax treaties. Those are the arrangements the Government of Canada, i.e. the people, the collective, makes with those who engage in economic activity to produce wealth and to share it, to fund programs.

When the Conservative Government of Canada made a big deal of saying, “We are making the tough decision; we are going to cancel these income trusts because that is $300 million”, it said that these guys through a legal tax loophole were avoiding paying $300 million. That is going to be replaced by a circumstance that sees 85% of those activities bought by American and foreign-owned enterprises. As my colleague from Scarborough Centre mentioned a moment or two ago, what happens is they get all the benefits and advantages out of the Canadian tax system and ours do not.

Of those companies that became the target of that $300 million tax leakage, 85% are now in the hands of foreigners. By the way, they are not paying taxes here. They are paying taxes there.

What is worse is that those Canadians who had made an investment in their own future and in their own retirement lost $35 billion overnight. They saw their savings melted away like rare snow on a hot June day. They just melted away because the Minister of Finance and the Prime Minister, both Conservatives, said “We need to make a tough decision. You pay for it. You have got $35 billion to burn. You pay for it so that we can save $300 million”. We save $300 million and we are losing whatever is the balance to all those Americans who took the 85% of the income trusts that still exist. That is great.

Let us go back to these tax treaties. Foreign countries are looking at us; now it is tougher to negotiate with them. We are negotiating with them and happily there are people who still want to sit at the table with us, but they are wondering about our right-wing government, I am sorry, an extreme right-wing government. It does not pay attention to that dynamic I mentioned a few moments ago, the dynamic with the individual citizen, the individual taxpayer, engaged either as a worker, a subcontractor, an entrepreneur, an administrator in a large enterprise, or indeed, an administrator in one of those social institutions that make us the great country we are. That relationship of trust and mutual service is being eroded, if not snapped. They look at us and say, “If they have a country whose government has so little respect for all of the elements that go toward wealth creation, that go toward the development of a society that is an economic model for the world, what can we expect? If the Government of Canada has little regard for its own citizens, if the Government of Canada is busy in the process of eroding all of those programs and institutions that have got it to this place of such elevation, what can we expect in any agreement we sign with them?” We should think about that.

Sometimes we listen to people like the parliamentary secretary, who say to us that this is good, that is good and this is good, then take a look at each item of the puzzle and go out and say, “Look at how many pieces we have in the puzzle”. Put it together and see what it looks like.

We want to support a system, and we will support Bill S-3. We find that those initiatives are a logical outflow of those initiatives we had as a Liberal government. They have to flow from the logic of nation-building that we established in this place and that we still adhere to very proudly, despite the mudslinging that is thrown at us for all of the achievements we made through all those years. Those achievements no longer belong to the Liberal Party. They belong to the country of Canada. They belong to every province. They belong to every municipality. They belong to every citizen.

We have a responsibility in this place to ensure that all the interests of all Canadians, be they workers, small entrepreneurs, administrators or large corporate citizens, are always weighed in an equilibrium, a balance that sees them first as members of Canada, and Canada always.

[Jim Maloway, NDP, Elmwood—Transcona, MB]

Mr. Speaker, I am not aware of any government briefing. Normally there are some sort of government briefings on bills, where critics could be briefed on the provisions of the bill. In this particular case, one would have to brief the parliamentary secretary, because after he made his speech I asked him how much money has been recovered in terms of tax avoidance and tax evasion issues. Given that these treaties have been enforced for many years, and there are 80 of them in place, one would think he would be able to tell us right away how much money had been recovered in terms of tax avoidance and tax evasion issues.

For many years in Manitoba, I was able to get in estimates, on an annual basis, the amount of arrears on PST, on provincial tax arrears. In estimates it was an open book. I find it really surprising that the member would not have that information at his fingertips.

Another question I want to ask him is: To how many people does this apply? Surely the government has some idea of how many citizens this particular new initiative, the new Bill S-3, would apply to in terms of citizens from Greece, Colombia and Turkey who we are dealing with here.

Clearly the government should be a little more prepared and have more information when it brings in bills such as this. I ask the member if he would like to make some comments about those points.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Mr. Speaker, the hon. member for Elmwood—Transcona addressed the main issue to which I had already spoken, which is what the objective is of this bill. What do we want to do when we engage in tax treaties with countries like Turkey, Greece and Colombia? We need to have an objective. What is our strategy?

I hear the minister for war and peace in the Middle East saying that we need to have a strategy. I do not know what the strategy of the government is. When our government engaged in a tax treaty like this, it had very specific objectives and tactics in place, which were to stimulate increased activity, to attract companies to those places and to invite companies from those countries to the Canadian environment. We tabulated specifically over a five and ten year period the amount of increased economic activity that would be governed by this kind of legislation.

I, too, am as surprised as the member for Elmwood—Transcona is that the parliamentary secretary could not give him an indication or even a ballpark number. If the member looks at the estimates and the budget, he will find the line that indicates other sources of income from the Government of Canada and he will see that it goes into the hundreds of millions of dollars as opposed to the $250 billion that is part of the budget.

The member can then divide those three countries by 80 and come up with his own figures because I am not sure the government knows, which is why it did not write them down. Not only that, it does not care.

[John Cannis, Liberal, Scarborough Centre, ON]

Mr. Speaker, I listened very carefully to my colleague from Eglinton—Lawrence. The area that touched me was when he referred to income trusts and tied it together in terms of economic development, sustainability, competitiveness and future investments. I was very moved when he said that some $30 billion were wiped out.

I know how much he has spoken about seniors in the past. I want him to take the opportunity to talk about the impact that decision on income trusts had on seniors. In essence, the Conservatives misled Canadians during the election when they promised they would not touch income trusts and then did the opposite. I would like the member to focus on the impact that it had on seniors.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Mr. Speaker, my colleague from Scarborough Centre will know that one of the significant demographic developments over the course of the last generation and going forward is that we cannot talk about seniors as people we put on display in a museum. We are talking about 15% of the population. These are people who have already made great contributions to the country and took seriously the government's recommendation that they begin to save for this period in their life by making investments in companies that would structure themselves in a fashion that they would provide a reliable source of income for seniors in their later years.

Over the course of this last generation, not only has the percentage of seniors in our society increased, but the number of people making contributions to the growth of the GDP has, by reflection, diminished. They now find themselves in a situation where the Government of Canada made specific promises to provide them with certain stability in their later years and then, with one wretched, sneaky move, took $35 billion out from under them.

Can anyone imagine being in one's 70s or 80s and watching one's life-savings snatched away, dismissed by the Minister of Finance and the Conservative Prime Minister who said that his government was doing this because it had to make a tough decision? It was too bad for seniors who were at the most vulnerable period of their life. It was more important for the government to spin the message that it could make the tough decisions, although stupid, but it demonstrated its toughness, although heartless. The government was absolutely disinterested in the future of the Canadian collective.

Welcome to the Conservative world that erodes away the values that make us a cohesive society, that erodes away all of the values that make us a thriving economic unit and that thumbs its nose at the mock parliamentary process that permitted people to get to where they are.

[Jim Maloway, NDP, Elmwood—Transcona, MB]

Madam Speaker, I want to follow up with another question for the member.

I was watching the committee hearings on television last night regarding Mr. Jaffer and the whole argument about whether he did or did not look to Belize as a tax haven. When I look at the list that I have here of all of the 80-some countries with which we have agreements, I do not see any of the tax havens on the list. I do not see the Cayman Islands or Belize on the list. I do not see any of these other countries.

Why would the government not be looking at establishing these sorts of treaties to avoid double taxation and tax evasion? Why would we not be working with some of these countries that are known tax havens to rein these countries in a little more and also demand that they have proper bank rules set up in those countries?

I know the United States is putting a lot of pressure right now on Switzerland to make its banking system more transparent in light of some of the computer tapes that have been sold over the last year that have ended up in the German government's hands and it is chasing the German tax evaders who are hiding money in Switzerland.

It seems to me that if we are going to get at the problem of tax evasion, we should be getting some tax agreements perhaps with some of these tax havens so that we can start chasing some of this money that is evading us.

What does the member think of those observations?

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Madam Speaker, my colleague from Elmwood—Transcona speaks to the essence of the government's presentation. Is it believable or is it just going for low-hanging fruit on tax treaties and economic activities? I think it is going for the low-hanging fruit.

Of course it is difficult, but the government is not about to make difficult decisions. The difficult decisions require work. The government must be able to go to the large corporate investors in many of these offshore accounts that are free of taxation and tell them that they can make all the money in the world in our country but that some of it must stay here. It must tell them that they cannot hide the money, that they cannot take it with them when they go to the other world and, therefore, they should not take it with them when they go across the ocean.

What he wants, of course, is something that the government is not prepared to do, which is to face up to the big boys and say that we should build this country together and that no one should just come, take, pillage and then leave. That sounds a little socialist but it is a question of responsibility and community involvement, and the Conservative government opposite does not understand what that means.

[Daniel Paillé, Bloc, Hochelaga, QC]

Madam Speaker, earlier, I heard our Liberal colleagues talking about broken election promises. As members will recall, during the last election campaign, the Conservatives promised two things: they promised to put international treaties before the House prior to ratification and to give the provinces a role in concluding treaties pertaining to their jurisdictions. But as we can see, and as the hon. member mentioned earlier in response to one of his Liberal colleagues, the Conservative Party made promises during the election campaign, but as soon as it took power, it forgot all about them.

We are not comfortable with this bill because it comes from the Senate, and we have to wonder what the Senate has to do with any of this. Earlier, the Parliamentary Secretary to the Minister of Finance said that we look to some senators for guidance. I realize that many of them have had successful careers and are knowledgeable, but what good is this knowledge in the upper chamber if it wastes away from lack of use?

Bill S-3 would implement tax treaties between Colombia and Canada, Greece and Canada as well as Turkey and Canada. One interesting aspect is that this seems to be a pure, unadulterated bill, unlike Bill C-9, which is a mishmash of things, odds and ends, that the government sent to us in parliamentary committee. We will be studying those 888 pages clause by clause this afternoon. I do not know what time we will finish. But this bill is focused strictly on avoiding double taxation and exchanging information. That is very important.

We in the Bloc Québécois will take our roles as parliamentarians seriously, and we will be diligent in our work. We have studied this bill and, because we encourage diligent and serious examination of issues, when it comes time to vote, we will do our jobs as parliamentarians. We want to see this bill further studied in committee. This is very important to us because we often hear that the Bloc is systemically opposed to everything, that we are here just to stonewall, as some token Quebeckers in the Conservative Party seem to enjoy saying or erroneously suggesting. I am obviously not insulting anyone here in the House by saying that because they are not here. The Bloc Québécois will vote in favour of this bill because we believe in looking at things carefully.

Trade between Canada, Colombia, Greece and Turkey affects the revenues of the Government of Canada, but it also affects the revenues of provincial governments and of Quebec. There was no consultation about that. We do not even know how much this will cost. It will cost something, obviously, but we have no idea what it will cost the government.

Of course, for Quebeckers with companies that do business abroad—and I used to work in companies that did business abroad—tax conventions are attractive. I will always remember when I made my first foray into politics in 1994 in the Government of Quebec. At the time, my employer and immediate superior was Pierre Péladeau, who was president of Quebecor Inc. I was his executive vice-president of acquisitions.

He told me that if I went into politics in the Government of Quebec—I became Minister of Industry, Trade, Science and Technology—I should try to do as little harm as possible. That was how he liked to talk. Pierre Péladeau was a believer in the popular KISS principle, which recommends keeping things simple. To keep things simple, I will try to remember this man I loved working with.

This bill opens loopholes and revolving doors, and we will want to ask questions in committee or here in the House. For example, how is it that Canadian companies can register elsewhere to avoid paying their fair share here? We are concerned that there may be loopholes.

This bill is also supposed to fight tax evasion. Earlier, an NDP colleague wondered whether the current government really wanted to fight tax evasion. That is disturbing. We have to wonder which countries are tax havens and whether they have agreements with the Government of Canada. This is something that needs to be looked at. I still believe that we are being presented with a done deal, but we still need to examine a number of provisions in the bill.

For example, in subclause 1(d) of the General Definitions in Schedule 1, which pertains to the agreement between Canada and Colombia, the term “person” is defined as including “an individual, a trust, a company, a partnership...”.

On page 29, in subclause 1(c) of the General Definitions in Schedule 2, which pertains to the agreement between Canada and Greece, the term “person” includes an individual, a trust and a company. There is no mention of a partnership. This is the sort of question we could ask, but the agreement is a done deal. We have to take it or leave it.

Moving on with general definitions. In that same paragraph of the agreement with Turkey, the term “person” is defined as an individual, a trust, a company and an estate. As a parliamentarian, I would like to ask a question before signing this kind of agreement. Why are estates not mentioned in the agreements with Greece and Colombia, but they are mentioned in the agreement with Turkey? What does that mean? It is our job as parliamentarians to know what that means. There may be good answers out there, but I have not had a chance to get any. The parliamentary committee will try to get those answers.

There are currently 87 conventions between Canada and other countries, but only one contains the ideal standard of information exchange recommended by the OECD: the Canada-Netherlands convention. It is all a bit vague when it comes to other countries, and that raises a question.

Canada is apparently in talks with 14 other countries: Anguilla, Aruba, the Bahamas, Bahrain, Bermuda, Gibraltar, Guernsey, the Cayman Islands, the Isle of Man, Turks and Caicos, the British Virgin Islands, Jersey, Saint Kitts and Nevis and Saint Lucia. But there have been delays. Until these agreements are signed, people will continue to take full advantage of tax havens. That is the important thing here.

Let us look at three random cases: Bermuda, the Cayman Islands and Barbados. There are no conventions with these countries. They say negotiations are ongoing, but between 2000 and 2008, Canadian investment in those countries rose from $30 billion to $90 billion.

Can anyone tell me what it is about those three countries that caused investment to triple in the absence of tax conventions? Some might suggest that 300% divided by eight is 37% growth per year. As a financier and former university and HEC professor, I would say that that is not how it works. We have to consider compound interest. That is still 15% growth per year. Investment rose from $30 billion to $90 billion. Can anyone tell me what it is about those countries that supports that volume of international trade?

There are other countries as well. We remember the enthusiasm of President Sarkozy, who had the political will to act quickly, to sign and to condemn tax havens. He condemned what is known as the grey list. Who is currently on this list? Belize. My NDP colleague spoke about Belize earlier. In fact, it seems that some Conservatives do business in Belize. It would seem so. It is still on the list along with the Cook Islands, Dominica, Grenada, Liberia, the Marshall Islands, Montserrat, Nauru, Niue, Panama, Saint Lucia, Vanuatu, Brunei, Costa Rica, Guatemala, the Philippines and Uruguay. They are all on the grey list. What are they waiting for? Canada does not have agreements with these countries and therefore why not take full advantage.

What is a tax haven? The OECD has established criteria for identifying them. We have agreed on 0.08 as the legal alcohol limit for driving a car. I can say that the taxation rate is 0.0 when looking for tax havens. That means that there is no or nominal taxation. When you go to a country and ask about the corporate tax rate or the tax rate on capital gains, and you are asked in turn what tax rate and told 0.0, that should be a sign.

A lack of transparency is the second sign. It is like opening files and there is no system of record-keeping. Organizations specialize in not keeping records.

Lack of diligence is the third sign. It is expressed by administrative, legal or bureaucratic barriers or evasive answers when responding to our questions.

There is no transparency, no diligence and no taxation.

I find the fourth sign interesting: a total absence of economic activity associated with the investment.

I would like to go back to the three examples cited earlier. Canada's foreign investment in three countries went from $30 billion to $90 billion and we wonder what is in those countries.

There is nothing. Well, there are beautiful beaches, beautiful people and beautiful places, but in terms of industrial activity, there is nothing.

When a company that does metal and chemical processing invests in Barbados, we have to wonder what that country has to accommodate that. If there is nothing, along with a 0% tax rate, no transparency and no diligence, that is the perfect example of a tax haven.

In the 1950s, there was a sign on the way into Montreal meant to attract American investments in Quebec where, supposedly, labour was cheap and docile. Older people may remember it. Mr. Duplessis boasted about it. In a tax haven, you would see a sign that says that taxation is very cheap and very flexible. It is very docile. That is what a tax haven is all about.

Consider Barbados as an example. It is said that the tax laws in that country include a specific section for international business corporations. An international business corporation is a corporation that is registered in Barbados, but that conducts most of its business outside of Barbados.

Very few conditions have to be met to be there. The business has to be registered in Barbados, have its head office there, hold one annual meeting there—which can be a teleconference—keep records of a board of directors there and employ a local resident as the manager. How interesting: a job is created. However, the manager does not have to have any power. Accordingly, the board of directors recruits a manager from Barbados and tells that person they have no power and that is just fine.

How are the companies taxed? The maximum tax rate is 2.5% and the minimum tax rate is less than 1%, which is not much more than zero. They are exempt from capital gains tax, exempt from exchange controls and they can import anything they like duty free. One small detail: the average salary of a manager of a foreign subsidiary in Barbados is $1,500 a year. That same Barbados branch manager simply has to find 1,000 jobs at $1,500 each and he or she is the manger of 1,000 companies. It is a great way to earn a very good living.

I will close by talking about the road to healthy co-operation. We are told, of course, that things are improving and that this occurs less and less. Attempts are made to have tax agreements with countries, but under what conditions? We are told a country will be removed from the list if we can have access to real, valid information, if there is no banking secrecy, if access to information is relatively easy and if taxpayers' rights are protected. What happens if there are a dozen agreements? The trick is to have a dozen agreements with lenient countries and then continue to operate as a tax haven.

We are voting in favour of the bill. I know that my colleague from Alfred-Pellan will address some of the Bloc's other concerns, but we are voting in favour of the bill in order to be able to go over it with a fine-toothed comb.

With all due respect, it would have been better if the agreements had been submitted to the House beforehand and with input from the Government of Quebec.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Madam Speaker, I listened carefully to my hon. colleague's speech. I know that he is very familiar with parliamentary procedure, because in a case like this, we would usually hear from the government representatives in charge of care of finance or international trade. He said that this is the procedure today.

I would like to know whether he has any advice for the members and ministers who will be examining this Senate bill. Since senators cannot sit in this House, the ministers or members who currently take care of financial and trade matters will probably be able to explain to us how Bill S-3 will close the loopholes he mentioned in his speech.

[Daniel Paillé, Bloc, Hochelaga, QC]

Madam Speaker, that is what is disappointing. I know we cannot name members who are absent, and the list would be too long in any case. The Parliamentary Secretary to the Minister of Finance, a man I respect a lot and who I am getting to know, made a speech, but we must move forward and carefully examine the issues. They cannot simply introduce a bill and say that everything is fixed.

We signed an accord with Liechtenstein, but tax evasion is still tolerated. In 2009, the Minister of Veterans Affairs, the former revenue minister, made a big deal of saying that he had a list of 106 Canadian taxpayers who were using Liechtenstein as a tax haven, but this list was criticized by someone at a German bank.

When it comes down to a witch hunt like that, I would say that we need to take things seriously. We need to thoroughly examine the issues and the accords we are presented with, to ensure that they are complete and detailed, and that there are no loopholes.

That is obviously what we will look at in parliamentary committee. We will probably see that this type of bill has some loopholes. I will be happy to use my experience to help them find these loopholes.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Madam Speaker, I would like to congratulate my colleague from Hochelaga on his speech. He managed to make this normally dry subject interesting. Thanks to his extensive experience in economics, he was able to broaden the point of view we might have regarding such a bill.

He mentioned that this bill originated in the Senate. One senator said that the purpose of the bill was to lower taxes, not only for individual Canadians, but also for businesses. The bill's aim is rather clear.

This tax conventions bill relates to three countries whose economies are weaker and taxation lower than Canada's. Accordingly, this will have an impact on government revenues, as the member for Hochelaga mentioned. Regarding these three countries, I wonder if the member could elaborate on the economic losses that this bill could cause.

[Daniel Paillé, Bloc, Hochelaga, QC]

Madam Speaker, I would like to thank my colleague, whom I work with on the Standing Committee on Finance, for having made such a dry file interesting. It is true that taxation and finances can seem dry when we delve into these kinds of details.

As I sometimes jokingly say, no one is coming to blows over bills like this on Holchega's buses. However, these issues are very important, and I have a passion for making dry topics interesting.

My colleague's comment is very interesting because the three countries we are talking about have sizable economies, but they are in no way comparable to Canada. They will not be the ones losing out, but the Government of Canada will probably lose even more, as will we, while we are still here.

These are the kinds of evaluations we would like to have before the agreement is signed and not afterwards; otherwise, the only thing we can do is say yes or no. We do not have an opportunity to improve the agreement. And I am sure that we could improve it.

The only thing we can do is say no. But saying no means that there would be no agreement and no exchange of information. It also means that these loopholes in the law and these tax havens will continue to be used.

We are between a rock and a hard place, but it is the government that has put us there and we will study this project honestly and rigorously in committee. I am sure that the opposition parties will work with us and I hope that the people of the Conservative Party, the members in power, will become interested in this topic, which, I know, is dry but very interesting.

[Thomas Mulcair, NDP, Outremont, QC]

Madam Speaker, I am pleased to speak to Bill S-3, An Act to implement conventions and protocols concluded between Canada and Colombia, Greece and Turkey for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

The first thing I want to say is that the bill's alphanumeric designation is a clear indication that it comes from the Senate of Canada. We have to say that the Conservatives talk out of both sides of their mouths when it comes to the Senate's status as an undemocratic and unrepresentative institution.

In the House and at rallies in Alberta, they rail against the Senate, but when it comes to signing treaties, which are the most important expression of our international diplomacy, they do not hesitate to introduce bills like this one in the Senate rather than the House. This is another fine example of the Conservative government's hypocrisy.

What is more, as the bill's title indicates, this bill is supposed to avoid double taxation and tax avoidance or fiscal evasion, as the bill title states.

I will start by talking about double taxation. Because there are many countries in the world and we live in a world in transition that is increasingly open to trade in goods and services, many people spend part of their professional lives in different countries. This sort of treaty is valuable in that it prevents people from being penalized and having difficulty working and crossing borders. We do wonder, though, whether it will really do anything to prevent tax evasion.

My colleague, the member for Hochelaga, just gave several examples, including Liechtenstein, which is very high on the list of opaque countries, to say the least.

According to the OECD, there is $6 trillion in opaque countries, that is, $6,000 billion. This is not far off the estimate of $10 trillion to $12 trillion that the Tax Justice Network, an extraordinary English organization, came up with. These figures are very close.

Madam Speaker, I must ask your consent to share my time with my friend and colleague, the member for Sault Ste. Marie. I was asked to remind you.

[The Acting Speaker, NDP, Denise Savoie]

Order.

Does the hon. member have unanimous consent to share his time with the member for Sault Ste. Marie?

[Some hon. members]

Agreed.

[Thomas Mulcair, NDP, Outremont, QC]

Madam Speaker, I would like to thank all of my colleagues, especially those who are kind enough to remind the members that they are supposed to ask for that at the beginning of their remarks.

As I said, the numbers are breathtaking. These are sums of money earned by individuals and companies—both real people and corporations—in jurisdictions like our own where there are institutions that guarantee the rule of law, competent courts untainted by corruption, police forces, educational institutions and so on. All of that costs our society money to ensure the peace, order and good government we have enjoyed here in Canada for 150 years. Then, once they have earned money thanks to these institutions that cost all taxpayers money, they are rich enough and organized enough to get their money out of this country and stash it away in opaque—non-transparent—jurisdictions. In other words, they do not pay their fair share of the cost of the social institutions that helped them get rich.

This is not just about cheating on taxes. This is about swindling the society that helped them get rich. That is what we need to tackle, and it is hogwash to suggest that such a treaty will curb tax evasion. That is not true. All we have to do is review the list of jurisdictions that have signed similar conventions with Canada to see that we are still signing agreements with problematic countries.

That brings me to another major concern about Bill S-3. This bill covers three countries. The issue I am about to raise has nothing to do with Greece or Turkey, but it does have to do with Colombia, and we believe that including that country in this treaty is a poison pill. The government knew exactly what it was doing when it included Colombia in a bill that also covers two countries that are not problematic in this regard.

All members are aware of our fierce opposition to the Canada-Colombia free trade agreement. There is a reason for it and it is not difficult to understand. If Canada is prepared to sign a free trade agreement with another country because it says that how we do business, deal with people, train our professionals, our way of being and our values are fairly similar, the other party must respect our basic values such as the respect for human rights. Unfortunately, this is not the case with the current government in Colombia.

That is at the root of our fierce opposition to the free trade agreement with Colombia, proposed by the Conservative government. We will vote in favour of the principle of Bill S-3. This bill could make it possible, for example, for a young Greek couple, working one half of the year in Canada and the other in Greece, to avoid double taxation. That is reasonable. However, we want to make it clear right now that although we are voting to send Bill S-3 to a parliamentary committee, once it gets there, we will do everything possible in terms of House procedure to split the bill, to amend it and to use every means available to remove the part concerning Colombia. That is understandable because we have to be consistent.

Therefore, while recognizing that there may be a young Colombian couple in the same situation, we will continue to work with the authorities in that country and with groups trying to raise the bar for human rights. Let us be clear, we cannot, on the one hand, express our fierce opposition to a free trade agreement with Colombia and, on the other, agree to the signing of this type of treaty. Consequently, it can be expected that the NDP will do everything possible, at the parliamentary committee, to split the bill and remove the part concerning Colombia or, once again, to amend it.