Mr. Speaker, it is always an honour to stand on behalf of the citizens of Central Okanagan—Similkameen—Nicola. I will be sharing my time with the very capable member for Calgary Rocky Ridge, who in addition to his duties as member of Parliament, also stands as the shadow minister for national revenue. Even though this is a finance bill, ultimately it is the CRA and the Minister of National Revenue that will become accountable for this. I know he will have many things to say on that end of it.
The two are very important, because, for example, in 2013-14 and particularly in the 2014 budget, the former minister of finance, the hon. Jim Flaherty, had opened consultations on the subject of base erosion and profit sharing. He did this specifically so he could go to the G20 and be able to make proposals and participate fully in those discussions on base erosion and profit sharing, which we are the beneficiaries of today.
I must give the government a little credit for taking its ideological blinders off. It does not seem to say that this is a Harper initiative. It has not blamed the former prime minister yet. I certainly hope that as we go through my speech today it will recognize sometimes there is much need for a new government to carry on the very good work of a previous government. We should not always judge something simply because of who had started an initiative.
During my time as the parliamentary secretary to the president of the Treasury Board in the previous Parliament, we worked on some pretty technical legislation from time to time. I will admit to having a certain affection for regulatory related bills that could provide benefits to Canadians and Canadian industry, particularly if they are done in such a way that is harmonized to reduce red tape. We recognize that Canada is increasingly becoming a competitor on the world stage, and we are likely to see more international trade, not less.
We must also recognize that with that come challenges. As one example, we have a situation where over this past summer the Liberal government was forced to modify its national carbon policy. Basically, it provided more carbon tax relief to some of Canada's biggest polluters. This is not unlike what happened in my home province of British Columbia, where greenhouse growers and cement manufacturers, to name a few, have been given so much in subsidies, exemptions or other kinds of carbon tax relief there is actually a word for it. It is called “carbon leakage”. It is defined in the 2018 B.C. NDP provincial budget as “...industries that compete with industry in countries that may have low or no carbon price. If BC loses market share to more polluting competitors, known as carbon leakage, it affects our economy and does not reduce global greenhouse gas emissions.” This is the same reason this Liberal government provided increased carbon tax relief to big polluters, because, ultimately, they compete with industry in the United States and elsewhere that do not have a nationally imposed carbon tax.
We are not here to debate the carbon tax. I am using it as an example because it illustrates the importance of being competitive. As we all know, being competitive in the corporate world often comes down to the bottom line, and we know how much the bottom line bears on our businesses, at least on this side of the House, as the Conservative Party has a very strong understanding. This creates a situation where, ultimately through creative, and some would argue dubious accounting practices, some companies can find creative ways to transfer wealth created in one country into another country with a much lower tax regime. Some countries even make a point of creating a regulatory and financial environment that actively encourages this sort of behaviour.
How do we fix that? Obviously, one approach would be an attempt to lower taxes to a level on par with some of these countries to stop the outflow of revenue. Many refer to this as the “race to the bottom” approach.
There is possibly another solution, which brings us to Bill C-82, which we are debating here today. What if we could get as many countries as possible to sign on to a common regulatory fiscal taxation approach that would better protect countries from this problem? Having similar fiscal language with respect to taxation would help reduce the regulatory red tape burden more than if we went at it piecemeal.
Not to mention there are greater efficiencies in adopting the kind of universal standard with OECD countries which sign on as opposed to having the same individual countries try to collect and negotiate separate tax treaty agreements among themselves.
To be fair, this multilateral instrument allows for Canada to quickly and efficiently update its agreements so that both the CRA and the tax authority in the adjoining country will immediately start to proceed, as the multilateral instrument has said, through the existing tax treaty. It is a very efficient way.
This is called, obviously, the multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting. Because that is a mouthful, we will simply refer to it as the MLI agreement. This work was started with the former Conservative government and I am pleased that the current government is continuing to work on this to the point we are here today debating the ratification agreement. Again, the agreement covers 75 jurisdictions worldwide and it is expected in the near future it will be over 100. That is a good thing.
While there are many benefits to the agreement, I should say it is not without some criticism. Some have suggested adopting the OECD MLI would result in the loss of tax autonomy for the country in question; however, I would point out there are provisions in the MLI agreement that allow countries to opt out of certain parts of the MLI at their discretion. This, by extension, can allow countries to still enable a specific tax structure but ultimately might provide unique tax benefits in certain areas. While some may consider that to be a bad thing, I also believe having a framework that allows some competitive incentive that keeps overall taxation levels in check is an important tool for countries to have.
Ultimately, this agreement is more targeted toward those who transfer money between countries for the sole purpose of avoiding taxation. Some people might say that some of this might be borderline tax evasion and in certain cases there may be, but let us be clear that Canada already has existing laws on tax evasion. That is not legal and the CRA should pursue those people who push the envelope much too far and know they are past the envelope.
I believe this agreement is more targeted toward specially transferred money between countries for the sole purpose of evading. In balance, I believe that is positive. Some have said that these types of agreements have not been successfully implemented in Canada before, but I would disagree with that. In the previous Parliament, we passed Bill S-12, An Act to amend the Statutory Instruments Act and to make consequential amendments to the Statutory Instruments Regulations. That bill proposed the ability to import standardized regulations from other jurisdictions so we have parity here in Canada. That makes it much more convenient for Canadian manufacturers as it can be extremely costly in addition to meeting a plethora of different standards in other jurisdictions.
Getting back to the MLI, time will tell the overall effect of this. The challenge right now is that some of these tax avoidance schemes are entirely legal, so this agreement creates a taxation environment that would provide common tax measures that will help to eliminate abusive taxation policy.
Before I close, I would like to take a moment and relay one concern I do have. As we know, the United States is not a signatory partner to this agreement. Given the close relationship in industry between our two countries, with many companies having U.S.A. and Canadian ties, there could be long-term impacts down the road. Obviously we also see concern over NAFTA where we will need to be vigilant in monitoring our competitiveness with our neighbours to the south.
Overall, I believe the bill is an important one and moves Canada in the right direction in parity with the majority of our G20 partners. I will be voting for the bill and believe that added scrutiny at committee stage, particularly on some of these thorny points, will be beneficial. I appreciate the House hearing my thoughts on the bill today.