Debates of April 14th, 2016

Financial Statement of Minister of Finance

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

Mr. Speaker, I took particular note of the member's comments about infrastructure and the need for infrastructure renewal.

I also represent a riding from Ontario, and having some experience in the municipal sector prior to this, I know that only seven or eight cents out of every tax dollar that is collected is actually going to municipalities. Yet, at the same time, during the last number of decades, there has been more and more pressure on municipalities to provide and make those investments and to get that money through property taxes.

I wonder if the member could provide some input as to how this infrastructure renewal and our investment in infrastructure will benefit his community in St. Catharines.

[Chris Bittle, Liberal, St. Catharines, ON]

Mr. Speaker, I would like to thank the member for Kingston and the Islands for having such good humour today. His Frontenacs lost in the OHL play-offs to the Niagara IceDogs. I thank him for maintaining such good humour about that.

We are a government that is committed to having our municipalities as partners in this endeavour. We have committed to the largest infrastructure investment in Canadian history. I met with municipal leaders and advised them to come to me to advise of their concerns and that we will take it up. It is no longer a top-down approach. As the minister said, municipalities do infrastructure better than the federal government. We are looking forward to investing this historic investment in infrastructure and working closely with municipalities.

The infrastructure deficits are enormous across Ontario and across Canada. If we do nothing, it will fall on taxpayers through increased property taxes. It is time for the federal government to act.

[Monique Pauzé, Bloc, Repentigny, QC]

Mr. Speaker, can our colleague tell us why the Liberal Party is bringing back an infrastructure program that does not work?

In the last program, because of Ottawa's interference in provincial jurisdictions, it took 27 months to get a framework agreement, and then 15 months for each project. We have talked to municipal representatives in the riding of Repentigny, and the needs are urgent. There is no time to wait four years.

Why is the government yet again taking the most complicated route when it comes to its infrastructure program?

[Chris Bittle, Liberal, St. Catharines, ON]

All evidence to the contrary, Mr. Speaker, I have had the opportunity to go back after the budget and consult with municipal leaders, who are excited about this infrastructure plan.

This infrastructure plan delivers on what communities are looking for on programs that are often overlooked, such as sewers, water, and things that we do not necessarily have to cut a ribbon in front of that have been ignored for too long. There is digital infrastructure for our rural communities so that they can compete in the 21st century.

This is a budget that delivers on what municipalities care about, and I look forward to working with our municipal partners going forward.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Mr. Speaker, I am honoured to stand in the House today to convey a few of my thoughts about the federal budget, but more importantly to convey the feelings of the residents of Calgary Signal Hill. I am also delighted to be sharing my time today with the member of Parliament for Calgary Nose Hill.

I am privileged to represent a riding where about half of my constituents used to either rely directly or indirectly on the energy sector for their livelihood. As has been stated many times, inside and outside of the House over the past six months, our energy industry has not had such a dramatic downturn in close to 30 years.

When I was door knocking last fall, about on every street I would run in to at least one person who was unemployed as a result of the downturn. If that election were taking place today, I am sure that number would be more like two or three people on every street. In almost all instances, these were highly educated and highly trained men and women, many with young families. Many have moved into my riding over the past number of years from other provinces and from other countries. They did so with high hopes and high expectations for the future.

“Hope” is a word that members will hear me refer to on many occasions in my few minutes this afternoon. It is a word that is important to the folks I just talked about, the next generation of CEOs, community leaders, and probably some political leaders. They were not expecting the budget to solve the current economic conditions, but they were looking for hope. The budget failed badly in that respect.

The budget leaves each and every Canadian deeper in debt. It means more money for their children to eventually pay back, and there is a strong likelihood of higher taxes in the future. This is especially disappointing because many Canadians, including a lot more than I thought in my riding, voted for this Prime Minister because he seemed to be giving them hope. Instead, it has been one broken promise after another, and the budget is more of the same.

Instead of a $10-billion deficit as promised, this budget deficit is much higher, in fact three times higher. It is three times higher, not in a recession but in a growing economy. While Alberta is clearly in a recession, the overall Canadian economy is growing. However, the government is proposing to plunge our country a further $150 billion into debt over the next five years. Even worse, there is no plan to get out of debt.

How can my constituents have any hope for their future? What could the budget have looked at that would have given some hope to my constituents? The government could have said, as an example, that all efforts will be made to get out of the way and let the private sector create jobs for the future. It is a simple statement, one that would have cost nothing, but it would have provided some hope. Instead, we have more regulations and more spending on government programs.

We hear time and again from the government that running a huge deficit is necessary to creating jobs by investing in infrastructure spending. Now on the surface I could support those types of expenditures, but I want to break those numbers down a bit.

The budget provides $10 billion over the next two years for infrastructure. When that money is spread across the country on a per capita basis, that means about $1 billion for our province over the next two years. In contrast, the infrastructure budget of the Province of Alberta over the last half dozen years has averaged $5 billion annually, almost 10 times what this federal budget is going spend to in Alberta on infrastructure. I have heard members across the way talk about it creating thousands and thousands of jobs. I think they are going to be in for a big surprise.

Second, the government could have said it made a mistake by extending the timeline for a decision on pipelines and LNG projects. It was going to speed up the process so that a project that was approved by the National Energy Board would receive immediate cabinet go-ahead. If the government had said that in this budget, my constituents would have felt some hope.

We all know that immediate approval of a pipeline will not put constituents back to work in the short term, but there were some temporary measures that could have been included in the budget. Let me give an example. While the government is throwing around billions of dollars, it could have thrown a little toward an environmental clean-up initiative in western Canada for abandoned oil well sites.

The Prime Minister committed $2.5 billion to a UN fund that will not create a single job in Canada. An environmental cleanup of oil well projects would have not only been a good environmental initiative, it would have been good for job creation.

I want to briefly touch on the middle-class tax cut, which we hear a lot about, and the math is not difficult. We can do it without a calculator.

By the government's own admission, the average annual benefit to a middle-income couple—let us call them Kevin and Kelly—would be about $540. Stop and think about that for a minute. Three hundred and sixty-five divided into $540 works out to an extra $1.25 a day. Kevin and Kelly could not even go to Tim Hortons and buy a coffee for that price.

I will conclude by saying that it was two years ago that I decided to return to public life. The Alberta economy was booming. We had a stable government in Alberta that was balancing the books and a solid Conservative government in Ottawa that was headed for a surplus after steering this country through one of the worst global recessions in 50 years. Optimism was everywhere.

Today as I stand here, however, as the representative for Calgary Signal Hill, many of my constituents have been laid off, and fear and pessimism have replaced hope and optimism. As I stand in my place in the House to respond to the budget, an NDP finance minister is standing up at the same time in the Alberta legislature and presenting a budget with the largest deficit in the province's history, some $10 billion. How things have changed. However, I remain an optimist and believe that the economic situation in Alberta will improve, because Albertans are a creative and entrepreneurial bunch.

There has never been a time in history when my constituents have had so little faith in their governments, both in Ottawa and in Edmonton. However, I am confident it is going to get better, and that alone gives me some hope.

[Matt DeCourcey, Liberal, Fredericton, NB]

Mr. Speaker, I enjoyed my colleague's theme of hope. I would invite him to join me anytime on a Saturday morning in Fredericton at the Boyce farm to listen to my constituents talk about the hope they feel now that this government is installed and is using this budget to deliver on the commitments that were put forth in the election.

There is hope for young people who are starting out on careers that they will find employment opportunities. A middle-class tax cut will help them with their car payment or mortgage payment. It will help them invest in the economy. There is hope for seniors in my community, who will benefit from a 10% increase in the GIS for the lowest-income single seniors. There is hope for veterans who will see increases to their disability awards. Many more commitments will be followed through on, including an innovation agenda that will have a tremendous benefit to the universities in my riding, UNB and St. Thomas.

I wonder if the member opposite could talk a bit more about the hope that is being spread across the country by this budget.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Mr. Speaker, I too have spoken to a number of the member's constituents who used to work in Alberta in the oil patch. Their hope was that the government would get out of the way and approve a pipeline.

This budget does nothing for those unemployed people from the riding of Fredericton who used to fly out to Alberta every week and had a good quality of life. They are not going to benefit from any kind of tax break, because they are unemployed.

That particular member could push on behalf of his constituents to get that pipeline built and get the government out of the way. Then his constituents would be back working, not sitting in Fredericton with hope.

[Don Davies, NDP, Vancouver Kingsway, BC]

Mr. Speaker, I listened to the comments of my hon. colleague from Edmonton. I was born in Edmonton and grew up there. I spent 27 years in Edmonton before moving to Vancouver and representing the great riding of Vancouver Kingsway.

I was intrigued by my friend's comments where he appeared to be very critical about the Alberta government's decision to run a $10-billion deficit at a time when the Alberta economy is facing a global collapse of commodity prices, particularly oil and gas, but of course, he represents the Conservative Party.

I was in this House when his government, the Conservative Party prior, added $125 billion to Canada's debt and ran seven straight deficits, including a $50-billion deficit in 2009 when Canada was facing a great recession. At that time, the Conservative Party argued that running stimulus spending and deficits was critical for the economy of Canada, yet now he stands in this House and criticizes the Alberta government for running stimulus spending in Alberta. Premier Rachel Notley is showing that there is a way to have responsible resource development in this country while showing national leadership in terms of climate change and dealing with environmental protection.

I think Albertans see there is a different way, because the Conservative government that Ms. Notley replaced was a government that failed to diversify that economy, as Peter Lougheed once said was so instrumental to that economy, and left the Alberta government and the economy in a very vulnerable position for a global oil collapse, which is what happened. That is the reason the Alberta economy is in trouble. It is the failure of the Conservatives to plan.

I wonder if he has any comments about those facts.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

You bet I have some comments, Mr. Speaker.

One of the reasons the economy in Alberta is struggling today is that member and his party continue to stand in the way of pipelines being constructed. Let us be honest about that.

Will the member stand up in this House and say that his party will get out of the way and approve a pipeline or help approve a pipeline?

We will stand behind the people of Alberta to get a pipeline to the west coast.

I ask that member, will he do that? Will he stand up in this House and say, “Yes, I will support a pipeline to the west coast”?

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

Mr. Speaker, I understand I have about five minutes to talk about climate change.

I want to reference page 149 of the budget, wherein the Liberals condense their approach to addressing climate change, with the main argument being, “Pricing carbon emissions will drive Canada’s transition to a stronger, more resilient, low-carbon economy and help Canada address the global climate change challenge.”

When it comes to pricing carbon, we have to consider something called the price elasticity of demand. Basically, what that means is we have to look at whether, if the price of something increases, the demand for that product will drop. Something is considered price inelastic when, even if the price is increased dramatically, the demand for that product might not necessarily drop. Historically, one could make a very good argument that what research is out there shows that oil, and certainly gasoline, is fairly price inelastic in the short term and even in the long term.

I have a question for the government, and I hope it will consider this. When it is looking at carbon pricing as a mechanism to address climate change, especially to address the targets it put in place at the Paris conference, will it look at whether or not the price that it is setting is actually going to have an impact on greenhouse gas emissions?

I read an article in the January 22 edition of The Globe and Mail. I will not have time to quote from it as it is quite lengthy. It talks about how regional differences in our economies can in fact have different strategies on greenhouse gas emission reduction targets.

I would caution the government that there is a large body of research—in fact, I was talking on Twitter the other night with Andrew Leach, an economist who had some involvement with the Alberta government's carbon pricing model—saying that it would likely be close to $100 a tonne that would be required as a price to have any sort of major reduction in greenhouse gas emissions.

My concern is this. I am not advocating for a $100 price on carbon. Actually, what I am trying to say is I am not sure that even if the government puts a carbon tax in place it will have any real reduction in greenhouse emissions, any effect on that, but what it will have an impact on is people's pocketbooks.

If the government is going to put a consumption tax on an inelastic good where there really are not substitute goods right now that would see a demand change over time, and I think that there is a good argument for that, the government should call it what it is. It is a consumption tax. All that a consumption tax on an inelastic good means is more revenue for the government and it does not really incent behaviour over time.

A consumption tax does a few things. It disproportionately affects the poor, especially on an inelastic good, such as oil. It is going to affect low-income people disproportionately. People still have to get around. It is going to affect the cost of public transit. It will affect small businesses disproportionately, because they do not have the same capitalization as larger businesses to be able to overcome the effects of a tax.

Again, it will not likely work. This will not likely see a reduction in greenhouse gas emissions. It will create even more investment uncertainty in different parts of the country, especially in my home province of Alberta, where we are looking at investment certainty as something that we absolutely need. Some of my colleagues here have talked about how this is all based on low commodity prices, the issues that are happening in Alberta. That is not true. For the government to send signals, like new taxes, certainly is very bad timing right now. It is not actually going to do anything. It is going to put a chill on economic growth, because when people have to pay more for a good that they have to buy, they have to make choices on how they are spending their money in other areas. That is true for families, as it is true for businesses. If their tax burden is increasing, they are going to have to figure out how they are going to get money from other places to pay for the things that they need. I think that is going to put a chill on investment and a chill on economic growth.

My advice for my colleagues is simple. If they are going to look at carbon pricing and they are going to look at some of the rhetoric saying that a price on carbon of $140 a tonne is working in Sweden, what does that mean in the context of a regionalized economy in Canada where we do not necessarily have the same economic structures or the same needs from province to province? I ask the Liberals to really consider this so that they do not promise Canadians that they are going to lower greenhouse gas emissions and do not, and worse, make Canadians pay more out of their pockets for something that is essentially a consumption tax.

If the Liberals want to raise taxes, which this does, then let us have a debate about raising consumption taxes, because Canadians would push back very strongly against that. That is a big concern I have with the budget.

I wish I had a lot more time to talk about this very important issue. I wish I had 20 minutes. I wish everyone a very good Thursday evening.

[The Assistant Deputy Speaker, NDP, Carol Hughes]

I am sure that a lot of people would like to have more time, but unfortunately, it being 5:30 p.m., pursuant to an order made on Monday, April 11, 2016, the question on the ways and means Motion No. 2 is deemed put and a recorded division deemed requested and deferred until Tuesday, April 19, 2016, at the expiry of the time provided for oral questions.

Tax Avoidance

[Gabriel Ste-Marie, Bloc, Joliette, QC]

moved:

That, in the opinion of the House, the government should put an end to the widespread tax avoidance practised by many shell companies set up in Barbados by Canadian companies, by amending subsection 95(1) of Income Tax Act and section 5907 of the Income Tax Regulations to specify that no business that is entitled to a special tax benefit conferred by Barbados under the Canada-Barbados Income Tax Agreement Act, 1980, shall be exempt from taxation because of a tax treaty.

Madam Speaker, the top story in last week's news was the leak of the Panama papers. These leaks give us some idea of the extent of the use of tax havens. It is enormous.

This week, the government was in a hurry to say that it was working hard to combat tax havens. Last year, the Luxembourg schemes were leaked. The year before that, it was documents from HSBC Bank. The year before that, it was UBS, and prior to that it was Singapore and the Virgin Islands. Every time, the Canadian government announced that it would work very hard to combat this issue. Before that, it was ships from Canada Steamship Lines, and before that, it was the Bronfman trust and the Irving family. The government has been supposedly working hard on this for 25 years. Clearly, we have yet to see any results.

With each new scandal, the government announces new measures. However, this phenomenon continues to escalate. For 25 years, the government has announced measure after measure to catch cheaters. That is good, but it does not solve the problem.

The crux of the problem is that it is perfectly legal to use tax havens. We cannot fix this problem by going after individual cheaters. We need to be going after the bad laws, the bad regulations, the bad treaties, and the tax system.

Barbados is a small, faraway country, but in 2014 alone, $71 billion left Canada and ended up in Barbados. That is more than the amount that originates from all of Asia and 12 times more than the amount that originates from France. This happens year after year.

The colossal sums of money that Canadian businesses send there to avoid paying taxes are having a direct impact here at home. That tax-free $71 billion has a huge impact on government revenue.

Since Quebec is not a country, it cannot sign tax treaties. Quebec's tax law with respect to international taxation is identical to the federal law. We simply have no choice. When the federal government allows the use of tax havens, the Quebec government loses revenue too.

All taxpayers end up paying the price, whether they are in Quebec City or Ottawa or anywhere else in Canada. They have to pay more taxes and tariffs, and they have to cope with austerity measures. That is one consequence of our current status as a province.

For now, the key is the federal Parliament, so I would like to inform the House that, this morning, Quebec's National Assembly unanimously adopted a motion that is identical to the one we moved and are currently debating. Yes, it was adopted unanimously.

In Quebec City, every member of the Liberal Party, the Parti Québécois, the Coalition Avenir Québec, and Québec solidaire voted in favour of a motion calling on this House and the Canadian government to deal with the tax haven in Barbados.

The fight against tax havens, and specifically Barbados, is something all Quebeckers agree on. I believe that may also be the case for the rest of Canada.

International taxation is complicated. Every time organizations ask the government to do something to combat the use of tax havens, the government always says the same old thing, that nothing can be done, that this can only be fixed internationally, and that Canada would lose its competitiveness if it acted alone.

Let me draw a parallel. The fight against climate change is complicated too. For 10 years, every time groups called on the Conservative government to take action, it always said the same thing, that nothing could be done and that this could only be dealt with internationally. We all know that was an excuse to do nothing.

Environmental groups were not asking to withdraw from international efforts. They were simply asking Canada to take action at home and clean up its own backyard. This is also the case for tax havens. We must take action at the international level, but also at home. It can be done, and that is the point of the motion. Barbados is Canada's tax haven. It is the second-largest recipient of Canadian foreign investments, even though it is just a tiny island. The so-called investments are nothing more than accounting tricks. There is no real activity down there.

It was not a decision made internationally but a decision made by the Government of Canada that turned Barbados into Canada's tax haven. Furthermore, the decision was made without the consent of this Parliament. Parliament never supported the decision. We created the problem in this place, and it is here that we can put a stop to it. It is like environmental groups managing to fight climate change under the previous government. I want to show that we can take action in this place.

The motion offers a concrete, very specific solution. If Parliament adopts it, Canadian companies will no longer be able to use their subsidiary in Barbados to avoid paying taxes here. When they repatriate their profits, they will be taxed, quite simply, like any income for any taxpayer who cannot afford a creative and perhaps crooked tax expert.

I am not saying that this motion solves everything. We will also need to work really hard on the international scene. We need to ensure that profiteers can no longer use the differences between the various tax systems to separate their activities and ultimately not pay taxes anywhere at all. Now is the time for some real progress in this area. All over the world, governments are having money problems. Austerity is affecting people more or less everywhere. People are starting to feel real indignation about tax havens. Tax havens are like a cancer that is destroying our societies.

We do not need to wait for the entire planet to come to an agreement. The biggest users of tax havens are banks. It is hard to get the exact figures, but we know that most of the money in tax havens is from the financial sector.

Canada is able to act in a way that other countries cannot. The banking sector in Canada is protected. Banks are not subject to international competition. Canadian banks cannot move elsewhere. The Bank Act prohibits that, which means that Canada can take action against tax havens without hindering banks' competitiveness and prompting them to leave. In other words, Canada can do something.

I targeted Barbados because that is the most common tax haven to which Canadian money is directed, but the Conservatives opened the door to other tax havens in 2009. They also introduced this into the regulations, in secret, without any debate in Parliament.

Section 5907, which is targeted in the motion, has to do with Barbados. However, it also has to do with 22 other tax havens. I remind members that this motion does not have to do with a partisan issue. Yes, in the past, the Liberals authorized the use of Barbados. Yes, in the past, the Conservatives authorized others. However, Parliament never authorized a single one. The House never once made tax havens legal. Never.

I remind all hon. members that there are no party lines when it comes to private members' business. For the purposes of private members' business, Liberal members do not represent the government any more than Conservatives members represent the former government. Here, we all represent the people. We have the privilege of being the spokespeople for our constituents. We are the representatives of real people who pay their taxes so that we can live in a better society.

Of course members do not all share the same values. The Conservatives want to lower taxes. Some Liberals and the New Democrats want to put an end to austerity. Regardless of our different motivations and values, I think that we can all agree on one thing: everyone needs to pay his or her fair share. There is no reason why white collar profiteers should be making off with money and hiding it in tax havens.

I have not yet met any voter or any Canadian who is against this motion. On the contrary, what I am hearing is that we need to crack down on tax havens. What we need to do is to make changes to the regulatory framework to eliminate the loopholes that allow white collar profiteers to shirk their obligations.

Today's debate puts the issue on the table. In June, there will be a second hour of debate and a vote. In the meantime, I plan on writing to every member of the House and meeting with as many members from all parties as possible.

I would like to remind members that the motion is meant to be non-partisan and that, this morning, all members of the Quebec National Assembly from all parties adopted a motion that is exactly the same as the one that I moved. This motion calls on Parliament, on the federal government, to resolve the Barbados tax haven problem. I would also like to remind members that Parliament never voted on the regulations that allow the use of tax havens. Never. Because of this motion, for the first time in the history of Parliament, members will be called upon to vote on the regulations that allow tax havens to exist. It will be the first time. Parliament never authorized the use of tax havens. Never. That is what it will be doing if it does not support my motion. I have high hopes that the motion will be adopted in June.

[François-Philippe Champagne, Liberal, Parliamentary Secretary to the Minister of Finance]

Madam Speaker, I would like to thank my colleague for raising this important issue. I have a lot of respect for him and especially for the issue he is raising in the House this evening.

We knew that tax evasion was a problem long before the famous Panama papers. During the election campaign, the government promised to fight tax evasion. In the budget that was tabled on March 22, we made a historic $444-million investment to give the Canada Revenue Agency the tools, technology, and teams it needs to do three things: detect fraud, investigate fraud, and go after those who engage in tax evasion and aggressive tax planning in our country.

I am sure my colleague will appreciate the fact that we also struck an international committee to advise the minister. Does my colleague acknowledge that the government's historic investments will eliminate tax avoidance in Canada once and for all?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Madam Speaker, I would like to thank my colleague, the member for Saint-Maurice—Champlain, for his remarks.

I do recognize the efforts that are being made. However, the money that is being spent, the additional auditors, and the work being done are meant to detect fraudsters, individuals, people.

The problem I am raising via the motion before the House this evening is that the rules, which were never voted on in the House, allow banks and multinationals to legally divert their money into tax havens. That is the problem with tax havens, and it is a dramatically bigger problem than individual fraudsters.

The motion would cost the government nothing. It would actually bring in money, and it is a much more effective way to solve the problem.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Madam Speaker, I thank my colleague for his initiative. I would like him to revisit an important point, which is the very essence of the problem in Barbados. Whether we throw $450 million or $2 billion at this problem, it will not change anything, because Barbados has a double taxation avoidance agreement. That is the crux of the problem, and my colleague did not talk about that in detail.

I wonder if he could elaborate on the tax agreement between Canada and Barbados, one of the only tax agreements with a notorious tax haven.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Madam Speaker, I thank my colleague from Sherbrooke for his question.

A Canada-Barbados tax treaty has existed since 1980. It was amended in 1999, retroactive to 1994. The international treaty states that if a shell company exists in Barbados, when the profits are repatriated to Canada, the company or repatriated profits must be taxed and the taxes must be paid here. We can all agree on that.

The problem is that section 5907 of the income tax regulations states that this regulation will not be enforced and companies do not have to pay taxes on repatriated funds. This section was not negotiated with Barbados and was changed by the Chrétien government at the time. It might be illegal. It has never been challenged in court.

[Anthony Housefather, Liberal, Mount Royal, QC]

Madam Speaker, I have a question for my colleague. I appreciate his passion for this matter.

We are talking about Barbados, but we have tax treaties with about 114 countries. Other countries, like Panama, are also tax havens.

If we adopt the resolution as it stands and agree to crack down on subsidiaries in Barbados, what will happen to all the other Canadian companies that have subsidiaries elsewhere? If I had a company with a subsidiary in Barbados, I would simply move it to another country. How is that fair, if we crack down only on Barbados?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Madam Speaker, I thank my colleague from Mount Royal.

Section 5907 that is targeted in the motion focuses on Barbados. That is Canada's tax haven. Some $71 billion is hidden there. By way of comparison, when it comes to Panama, we are talking about $128 million.

Nonetheless, section 5907 also deals with 28 other tax havens, including Panama. This motion deals with other tax havens. We are focusing on Barbados because there is a great deal more money there than in all the other tax havens.

[François-Philippe Champagne, Liberal, Parliamentary Secretary to the Minister of Finance]

Madam Speaker, again, I thank my colleague for his initiative. However, I would like to point out that it is this government that has made an historic investment to combat tax evasion.

My colleague is talking about Barbados, but I might point out that the Minister of National Revenue was clear on the subject of tax evasion. We are currently conducting audits on the Isle of Man. To put what my colleague said into perspective, in a 12-month period, $860 million was transferred to the Isle of Man. This is a global problem that requires international co-operation. It is historic investments like the one we have made that will help us work on eradicating tax evasion.

I appreciate the opportunity to discuss the issue raised in today's motion.

Addressing questions of tax fairness and integrity are a fundamental part of and a priority of this government, and that is because they are a matter of fundamental importance to Canadians.

Canadians work hard to build a better life for themselves, their families, and for their communities. Through their efforts, innovation, and integrity, they are building a strong economy for today and future generations. They deserve to fully share in the promise and potential that Canada has to offer.

We believe that Canada's tax system should reflect this fundamental principle of fairness. Our government is inspired by this vision in everything we hope to accomplish. It is based on the premise that everyone contributes their fair share and that everyone can benefit in return.

Unfortunately, tax evasion and avoidance undermine this basic social contract. It comprises our ability to collectively support some of our most vulnerable fellow Canadians. It shifts the financial burden on to Canada's middle class, while inappropriately benefiting some who may be more than capable of paying their own fair share.

This is why we have taken decisive action through budget 2016 to crack down on tax evasion and combat tax avoidance. Our budget will invest $444.4 million over five years to enhance the Canada Revenue Agency's assessment capabilities, through hiring additional auditors and specialists who will have the resources needed to undertake more comprehensive investigative work.

However, we also recognize that assessing tax revenues alone is not enough. Once we assess these tax revenues, we then need to collect the unpaid amount. That is why budget 2016 is investing an additional $351.6 million over five years to improve the CRA's ability to go after and collect these outstanding tax debts.

However, our efforts to support tax fairness do not stop at improved compliance and collection. Canada's tax system needs ongoing adjustment to ensure it is functioning as intended and contributing to the objective of an economy that works for everyone. Therefore, we will continue to take legislative and other actions to improve the integrity of Canada's tax system on both international and domestic fronts to ensure that.

For example, we are acting on a number of recommendations from a multilateral project to address international tax planning arrangements undertaken by multinational enterprises to inappropriately minimize their taxes. We are also in the process of implementing the automatic exchange of financial account information to better combat international tax evasion.

As well, budget 2016 takes action to address unintended tax advantages that businesses and wealthy individuals may be able to obtain through sophisticated tax planning techniques involving private corporations. I want to assure all Canadians that the government will continue to identify and address inappropriate tax planning schemes to ensure that the tax system operates as fairly and effectively as possible.

These actions are not just consistent with the basic principles of economic efficiency and responsible fiscal management. They are consistent with the basic principle of fairness that defines us as a nation. Tax evaders and avoiders would do well to take note of these initiatives.

By improving compliance both domestically and internationally and from the underground economy, we expect to recoup around $2.6 billion in fairly owed revenues over five years.

This is revenue that we will be investing in empowering all Canadians to build better lives for themselves. It will help strengthen and grow our middle class, and enable more Canadians to contribute to and share in the prosperity that our country has to offer.

A strong and reliable federal revenue base is essential to the well-being of Canadians. It helps pay for things like the Canada child benefit that was introduced in budget 2016. The Canada child benefit is the most significant social policy innovation in a generation.

A stronger revenue base will help support our new budget 2016 investment in education, infrastructure, training and other programs that will help to secure a better quality of life for Canada's indigenous people, building a stronger, more unified, and more prosperous Canada.

It will support our budget's new investment to modernize and upgrade public transit, improve water and waste water systems, expand affordable housing, and protect the infrastructure we depend on from the effect of climate change.

The billions of dollars we recoup in forgone tax revenues will also support our budget investments to help seniors in their retirement years, with increased benefits to ensure that Canadian seniors have a dignified, comfortable, and secure retirement.

It will support increased funding for innovation, collaboration, and partnerships to protect the integrity of our health care system.

In short, it will help us advance our plan to put people first, and deliver the help they need now, while investing for the years and decades to come. It will do so while helping to prevent underground economic activity, tax evasion, and the exploitation of tax loopholes.

These achievements are two sides of the same coin. On the one side, everyone contributes their fair share and on the other, everyone can benefit in return.

These are the principles that unite and inspire us as Canadians and as a government. I can assure the hon. member that these principles will continue to guide us in our efforts to clamp down on tax evasion and avoidance, to improve the integrity of Canada's tax system, and to invest in a Canada that is fair and prosperous for all.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Madam Speaker, I appreciate the opportunity to rise and speak to Motion No. 42. This is an important and timely discussion, part of a broader debate, about international tax avoidance that is taking place in Canada and around the world. The idea that all Canadians should pay their fair share of taxes is one our Conservative Party strongly supports. That is why we took a number of important steps in government to combat tax avoidance.

Most significantly, we created the stop international tax evasion program aimed at reducing international tax evasion and avoidance. We are looking forward to working with the new government to continue building on our strong record in this area.

With respect to Motion No. 42, the basic premise behind this motion is the condemnation of tax avoidance practices. Again, the idea that all Canadians should pay their fair share of taxes is one that we support. We do not contest the premise of the motion. However, what we do contest is the method employed in the motion to achieve its purported aim.

The Bloc believes that implementing the motion would result in more money back in the hands of the Government of Canada. In reality, it is not so clear-cut. The motion would nullify the Canada-Barbados Income Tax Agreement Act.

The Canada-Barbados Income Tax Agreement Act was designed to limit double taxation, a situation where the same profits are taxed twice as they are earned in a foreign country and then again when they are remitted to the parent company's country of residence.

Here is how it works in Barbados. Tax payable in Canada shall be deducted from the Barbadian tax payable on such income, profits or gains. In the case of a dividend paid by a company that is a resident of Canada to a company that is a resident of Barbados, which owns at least 10% of the voting power, the credit shall take into account the tax payable in Canada in respect of the profits out of which the dividend was paid.

In Canada, tax payable in Barbados shall be deducted from the Canadian tax payable on such income, profits or gains. For the purpose of computing Canadian tax, a company resident in Canada shall be allowed to deduct, in computing its taxes payable, any dividend received by it out of the exempt surplus of a foreign affiliate resident in Barbados.

Through the allowance of tax credits between particular countries, the international tax burden on companies and investors is effectively minimized. There is a general international tax principle that the country in which immovable property is located should have the right to tax the gains from the disposition of such property.

To successfully operate a foreign affiliate and legally benefit from the low tax rates available, the company must satisfy a set of regulations in place. These include both Canada Revenue Agency's demands as well as the local laws that govern IBCs.

The Canada-Barbados Tax Agreement Act was amended in 2011 to follow in the framework of the OECD treaty models and ensure holding corporations, trusts, or partnerships that held Canadian investments in real property and resource properties would be subject to Canadian taxation on sales of the shares of the holding company or the interests in the partnerships or trusts.

The Conservatives believe that any motion to override the act's provisions should be regarded with skepticism. Why target specifically this act? Undermining an existing act does not seem to be the most appropriate response. Minister Findlay signed the Multilateral Competent Authority Agreement, helping to set the stage for the automatic exchange of financial information with international partners.

Economic action plan 2015 reiterated the Government of Canada's pledge to working with international partners to address international tax evasion and improve tax compliance, including a proposal to adopt the OECD's Common Reporting Standard, starting on July 1, 2017, with the first exchanges of financial account information beginning in 2018.

Canada is one of more than 90 jurisdictions that, to date, have committed to implementing the common reporting standard. The Liberal government is implementing more direct measures to investigate tax evasion.

I will repeat that we highly condemn the practice of tax evasion. However, we disagree that overriding a flexible act set in compliance with international standards is the best way to address the problem.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Madam Speaker, once again, I would like to thank the sponsor of today's motion, the member for Joliette, for his speech and his initiative on an extremely important and timely issue.

In 2016, I believe it is more important than ever to address this problem. Although efforts have been made by the current and previous governments, there is still much work to be done in several areas. Therefore, it is quite appropriate to raise the issue of Barbados today.

It is fairly obvious that there is a problem with Barbados. We need only look at the numbers to realize it. My colleague mentioned a few. In 2014, $71 billion was invested in Barbados. Over the past 10 years, $390 billion has been invested there. It is the second-largest destination, after the United States, for Canadian foreign direct investment, ahead of the entire Asia and Pacific region. The reason is quite simple, and I will explain later.

Why are such incredible amounts of money being invested in a country like Barbados, which has a population of 284,000 and a GDP of roughly $3.7 billion?

In 2014, Canadians invested $71 billion in Barbados. There has to be a reason. I do not think it is because the sun is warmer than in the Cayman Islands or Hong Kong. There is a very simple fundamental problem: Canada signed a tax treaty with Barbados that prevents double taxation.

My Conservative colleague explained the rules. When someone brings back profits reported in a foreign country and Canada has an agreement with that country to prevent double taxation, the individual simply needs to prove that he has paid taxes in the original country so that he will not have to pay taxes again in Canada.

It makes sense to have an agreement to prevent double taxation with countries like the United Kingdom or United States, since this is fair for our businesses. However, Barbados has a tax rate of 0.25% to 2.5% for international companies, so it is clear why Canadian businesses are interested in investing there and reporting their profits there. Why pay 15% tax in Canada, or 11% in the case of small and medium-sized businesses, if you can get a better rate in Barbados?

It is not surprising that $71 billion from Canada ended up in Barbados in 2014. That was handed over on a silver platter. It is not difficult to come up with such strategies, and they are completely legal.

It is all well and good for the government to say that it will invest $450 million to go after cheaters, since everyone acknowledges that tax evasion is illegal, but all of that money will do nothing to prevent perfectly legal activities. How can we prosecute someone whose actions are legal?

This is a serious problem. I thank my colleague for raising this issue. It is not a new one, but it is still very important.

Earlier I said that tax evasion was simple. I do not want to encourage Canadians to engage in it, but I just want to make my point to parliamentarians.

Imagine that there is a company here in Canada with a subsidiary in Barbados. Obviously, the company hires a consultant to make things easier. There are consultants on every street corner in Barbados, and some in Canada too. The company hires a consultant who starts a company in Barbados in accordance with that country's laws. That company becomes a subsidiary of the Canadian company, which then becomes a multinational corporation. It is not difficult to conduct all of the business in Canada and then have the subsidiary in Barbados issue an invoice for $5 million, for example, for expert or advisory services, even if no services were rendered. The subsidiary will bill $5 million, which will be paid. Then, the company owner will declare in Canada that the year was somewhat but not overly profitable. In Barbados, the subsidiary will declare profits of $5 million or $4.5 million. The subsidiary will then be taxed in Barbados, according to that country's tax rate for multinational corporations. Obviously, if business is really being done in Barbados, that is legitimate. It is legitimate to have companies throughout the world, in Barbados or elsewhere. However, these corporations are not even taxed at such low rate in Barbados. It is therefore quite obvious that there is a problem.

Just last Monday, the Minister of National Revenue responded to journalists by saying that what the government also wants to work on is trying to make what is immoral illegal.

She also said that if any changes need to be made to the legislation, they will be made.

According to her, the trap is set.

It seems pretty clear that something can be done in the case of Barbados. That is what my colleague from Joliette is proposing today. Solutions are within our reach, for this is not the only possible solution. However, it is quite clear that the minister and the members of the other parties really need to take a serious look at this matter and the problem of Barbados. This situation could be resolved, although it is far from simple.

As everyone knows, the NDP has always fought for greater tax fairness to ensure that our fellow citizens and our businesses pay their fair share. We are pretty fortunate in Canada. Our country delivers important services to Canadians, but someone has to pay for those services. Things like health care and education come to mind, for example.

As more and more individuals and businesses try to avoid their tax obligations, our base will shrink progressively, and it will become harder and harder to pay for the services people expect.

I can guarantee that when the people and the CEOs who engage in these immoral but legal practices have a health problem, they will not go to a hospital in Barbados. They will go to a hospital here in Canada. They will use our health care services. The first thing they will do is come here to take advantage of our good services, but the first thing they will do when they leave the hospital is continue to avoid paying their fair share for the services they received.

It is time to legislate a solution. My colleague from Victoria proposed a solution in the previous Parliament, and it still makes sense: it addressed the economic substance of a transaction. People would have to prove that there is real economic substance for a transaction, not just tax reasons. That is one solution, and there are other legislative solutions.

Yes, the agency needs more resources. We do not oppose that. It is a good solution, but it does not solve the problem, which is purely a legal one.

We need tougher penalties and no more amnesty. That is another solution that still makes sense. When the agency finds that certain taxpayers have engaged in illegal activity, they should not be granted amnesty so they can avoid penalties and legal action.

Lastly, there is no denying that international co-operation is extremely important here. I look forward to hearing the rest of the debate.

[Paul Lefebvre, Liberal, Sudbury, ON]

Madam Speaker, I thank my colleague across the way for raising this question. If someone had told me six months ago that we would be talking about tax havens in the House of Commons, I would not have believed it, but here we are.

Tax havens and the tax system are not simple issues. It is a question of multinationals and taxation. We talk about international taxation, but that is not the right term. It is about how a government collects taxes on income earned abroad by residents or corporations of that same country. There is therefore no such thing as international taxation.

Today, I would like to go over the Canadian tax system and talk about how the budget will address this issue. The last two members who spoke made rather simplistic analogies. It is a bit more complicated than that and I will try to explain why. I will do so in English, and then I will talk about the budget in French.

Canadian income tax rules allow active business income earned by foreign subsidiaries of Canadian corporations to be repatriated back to Canada free of Canadian tax if the income was earned in a jurisdiction with which Canada has a tax treaty or tax information exchange agreement. We currently have 114 tax treaties around the world. Barbados is one of these countries, as are several other countries with low tax rates or provincial regimes. The exempt surplus rules in the Income Tax Act and the income tax regulations allow active business income to be earned by a foreign affiliate.

So we have active business income. What does that mean? Basically, the test is that, as long as a corporation has five employees, it qualifies as active business income. That is the test.

It has to be earned by a foreign affiliate. A foreign affiliate is a corporation of which a Canadian corporation has at least 10% equity. It is repatriated to the Canadian parent corporation as dividends without being subject to Canadian tax, provided that the foreign affiliate is resident in, and the income is earned in, a jurisdiction with which Canada has a tax treaty, such as Barbados.

In contrast, active business income earned by a foreign affiliate of a Canadian parent corporation that is resident in a country with which Canada does not have a tax treaty is subject to Canadian tax when repatriated to the Canadian parent as dividends. So we have a foreign tax credit system. Basically, if there is no treaty it is taxed in a foreign jurisdiction. If the dividend is paid to Canada, we recognize and give credit to the foreign tax that was paid and then we tax that income in Canada.

We have two regimes: if we have a tax treaty; and if we do not have a tax treaty.

Budget 2016 would be a start to addressing tax evasion in Canada from Canadian corporations and individuals as well.

Tax evasion and aggressive tax avoidance by individuals and businesses entail a fiscal cost to governments and taxpayers, and reduce the fairness and integrity of the tax system. As a matter of fairness for all taxpayers, the government seeks to prevent underground economic activity and tax evasion and to close tax loopholes. Consequently, budget 2016 provides resources to ensure more effective administration and enforcement of tax laws and includes measures to improve the integrity of Canada's tax system.

A key component is the $444-million investment over five years to help the Canada Revenue Agency, the CRA, do more to crack down on tax evasion and combat tax avoidance. This significant increase in funding will see examinations of personal income tax returns increase from 600 to 3,000 every year over five years. This large increase should generate additional tax revenue of approximately $400 million over five years.

Furthermore, the CRA will hire more than 100 senior auditors and specialists to audit high-risk multinationals, which should generate even more revenue over five years. The CRA will also create a program to charge those who promote tax schemes, thereby increasing the number of files that the CRA can review every year to 200, which is 10 times the current number.

The number of auditors working on these schemes will increase sixfold, from four to 24. This is highly technical and highly specialized. This team will be able to conduct audits, apply penalties, and refer cases for criminal investigation, where appropriate. Furthermore, to make sure they deliver results, the CRA will embed legal counsel within the investigation teams. These lawyers will ensure that the cases are properly prepared and go to court as quickly as possible.

Canada is also taking measures to protect the integrity of Canada's tax base internationally. First, Canada and other members of the G20 and the Organisation for Economic Co-operation and Development, the OECD, are working together to develop the base erosion and profit shifting action plan, also known as the BEPS action plan. This refers to international tax-planning arrangements undertaken by multinational companies to inappropriately minimize their taxes, for example by shifting taxable profits away from the jurisdiction where the underlying economic activity took place.

As part of its commitment to protect the integrity of the Canadian tax base, the Government of Canada is acting on certain recommendations of the BEPS project in budget 2016. As we announced in our first budget, we are proposing new legislation to strengthen transfer pricing documentation by introducing country-by-country reporting for large multinational enterprises.

The Canada Revenue Agency is applying revised international guidance on transfer pricing by multinational enterprises, which provides an improved interpretation of the arm’s-length principle.

We are participating in international work to develop a multilateral instrument to streamline the implementation of treaty-related BEPS recommendations, including addressing treaty abuse.

The CRA will also undertake the spontaneous exchange with other tax administrations of tax rulings that could potentially give rise to base erosion and profit shifting concerns.

As for the future, Canada is committed to the BEPS project and will continue to collaborate with the international community to ensure a consistent and standardized response to the BEPS project.

Second, the government is working with its international partners to increase transparency through the automatic exchange of financial account information between tax authorities. The implementation of the new global standard in that regard, the common reporting standard, which was developed by the OECD, will help promote monitoring, combat tax avoidance and tax evasion, and restore public confidence in the fairness of the Canadian tax system. Right now, over 90 jurisdictions have agreed to implement this new standard.

Finally, the ability of the wealthy to use private companies abroad to inappropriately reduce their taxes or defer paying them is another source of national concern.

The fact that these people have money and access to clever accountants and lawyers should not excuse them from having to pay their fair share of taxes.

Budget 2016 includes measures that respond to this concern and indicates that a review of the tax system will be conducted in the coming year.

I can assure my colleagues that, in the future, the government will continue to identify and take action against tax planning schemes in order to ensure that the tax system operates as fairly and effectively as possible.

[The Assistant Deputy Speaker, NDP, Carol Hughes]

Before we resume debate, I want to advise the member for Regina—Lewvan that the time for debate on private members' business will expire at 6:30. I will have to interrupt you, but you will be able to continue your speech at the second hour of debate on a different day.

Resuming debate, the hon. member for Regina—Lewvan.

[Erin Weir, NDP, Regina—Lewvan, SK]

Madam Speaker, since I have only a few minutes, I would like to focus on three key questions: what is the problem; how big is the problem, and what, if anything, is the government doing about it?

What is the problem? We need to talk about what tax rates are actually in effect in Barbados on international business companies. What we find is that on the first $5 million U.S. of profit the tax rate is 2.5%. That used to go down to a tax rate of 1%. However, as of 2013, Barbados has cut that all the way down to 0.25%. A quarter of a percentage point on profits over $15 million a year is what international companies pay in Barbados, so when the Conservative member for Brantford—Brant or the Liberal member for Sudbury give us these textbook explanations about avoiding double taxation, we have to talk about what is really happening in Barbados.

Certainly it makes sense that if a Canadian company actually pays a decent amount of tax somewhere and then repatriates profits back home it does not again pay Canadian tax on that same money, and fair enough. However, is the position of the Conservatives and the Liberals in this debate that when a Canadian company pays a tax rate of 0.25% in Barbados that is good enough, that the company has paid its fair share of tax and it should not owe any more Canadian tax on that money? It seems that is what we heard from the previous speakers.

There is absolutely a very serious problem of Barbados being a tax haven and it really does not make sense to exempt profits repatriated from that country from Canadian tax.

The next question is, how big a problem is it? Maybe there is a little loophole there, but if Canadian companies are not really taking advantage of it, we would not worry. The member for Mount Royal tried to suggest that there are all kinds of different tax havens out there, so why focus on Barbados. I will tell him why. If we look at Statistics Canada's figures on foreign direct investment positions, we find that most of Canada's foreign direct investment is in the United States, as one would expect, but the second largest Canadian foreign direct investment position in the world is in Barbados at $71 billion. Why is that? Barbados is a pretty small country. Its GDP is something like $5 billion Canadian, so why would we be parking $71 billion in an economy of that size?

We have not heard an answer to that this evening. I think it is obvious that Barbados is just being used as a tax shelter. Why would Canadian companies be investing more in Barbados than, say, in the United Kingdom, the third largest country for Canadian foreign direct investment? The United Kingdom, of course, has an actual economy and there are things there that corporate Canada might actually want to invest in.

There is a really big issue with Barbados. It is not to say there are not other tax havens, but clearly, Barbados is the biggest tax haven being abused by corporate Canada. We have to start somewhere and it makes sense to start with the biggest part of the problem. That is exactly what this excellent motion from my colleague, the member for Joliette proposes.

The third question that we need to address here is, what is the government doing about this very serious and very large problem? There was a lot of talk in speeches from the Liberals about all the good measures in the budget to deal with tax evasion. Indeed, the budget documents use the term “tax evasion” about a dozen times. It even uses the term “tax avoidance” about half a dozen times. A word that does not appear in the budget at all is “Barbados”. We are going to fight tax evasion without even talking about the largest source of tax evasion and tax avoidance. That is a very major problem, and that is the reason why members of the House need to vote in favour of the motion presented by my colleague from Joliette.

[The Assistant Deputy Speaker, NDP, Carol Hughes]

The next time this private member's motion is debated, the member will have five minutes and twelve seconds to debate.

The time provided for the consideration of private members' business has now expired and the order is dropped to the bottom of the order of precedence on the order paper.