Debates of Sept. 28th, 2018

Multilateral Instrument in Respect of Tax Conventions Act

[Lawrence MacAulay, Liberal, Cardigan, PE]

moved that Bill C-82, An Act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting, be read the second time and referred to a committee.

[Jennifer O'Connell, Parliamentary Secretary to the Minister of Finance (Youth Economic Opportunity), Lib.]

Mr. Speaker, I am pleased to rise in the House to speak to this important piece of legislation, one that would help bring more fairness to the tax system and help our government continue its work to strengthen and grow the middle class. To have an economy that works for everyone, we need a tax system that is fair, and we need all Canadians to pay their fair share. After all, the taxes we pay as Canadians build the infrastructure that gets our goods to market, and help create good, well-paying jobs. They keep us healthy, support arts and culture, and help us build strong communities. However, the tax system only serves Canadians well when it is working fairly.

Canadians work hard, and they expect the government to do the same. Their hard-earned tax dollars must be used wisely and effectively to provide the services and supports that Canadians want and need. Delivering the programs and services that Canadians need while keeping taxes low for small businesses and middle-class families is important to our government, and to all Canadians.

When our government took office more than two years ago, we made a commitment to invest in growth while upholding the principle of fairness for all taxpayers. A fair tax system is key to ensuring that the benefits of a growing economy are felt by more and more people with good, well-paying jobs for the middle class and everyone working hard to join it. The government is taking action on multiple fronts to ensure that all Canadians are paying their fair share of tax.

Let me remind hon. members that one of the government's first actions was to cut taxes for the middle class and raise them on the top 1%. In total, more than nine million Canadians are benefiting from this tax cut. Then we moved to provide simpler, more generous and better targeted support to those Canadian families with children that need it most. We did that by replacing the previous child benefit system with the Canada child benefit. Compared to the old system of child benefits, the Canada child benefit, or CCB, is simpler, more generous and better targeted to those who need it most, and it is tax free. Nine out of 10 families are better off under the CCB, and the benefit has helped lift 521,000 individuals, including nearly 300,000 children, out of poverty. On average, families benefiting from the CCB are receiving $6,800 per year to help put healthy food on the table, pay for lessons and buy clothes and supplies for school. The CCB is especially helpful for those families led by single parents. These families are most often led by single mothers, who have lower total incomes on average, and so benefit more from an income-tested benefit like the CCB. In fact, close to 95% of CCB amounts paid to single parents with incomes below $30,000 are paid to single mothers.

We have also taken steps to help Canada's hard-working small businesses through a reduction of the federal small business tax rate. We reduced the small business tax rate to 10%, effective January 1, 2018, and will reduce it further, to just 9%, starting next January. For the average small business, this will mean an additional $1,600 per year. By this time next year, the combined federal-provincial-territorial average tax rate for small businesses will be just over 12%, by far the lowest in the G7, and among the lowest of all OECD countries.

Tax fairness continues to be a cornerstone of our government's promise to Canadians to grow a stronger middle class. In each of our three budgets, the government has taken steps to enhance the integrity of Canada's tax system and give greater confidence that the system is fair for everyone. An important focus of our efforts is cracking down on tax evasion and tax avoidance, which have serious financial costs for our government and all taxpayers.

Since our first budget in 2016, the government has continuously strengthened the Canada Revenue Agency's ability to successfully crack down on tax evasion and combat tax avoidance with increased funding. This funding has enabled far-reaching changes to the CRA's compliance programs, allowing them to better target those posing the highest risk of tax avoidance, including wealthy individuals with offshore accounts, and more effectively limit tax evasion and avoidance.

Those efforts are showing concrete results for Canadians. With our new systems, we are able to review all international electronic fund transfers of over $10,000 entering or leaving the country. This adds up to more than one million transactions each month.

Reviewing these transfers helps us do better risk assessments for unfair tax avoidance by individuals and businesses. Over the last two fiscal years, the government reviewed all large money transactions between Canada and eight countries of consent, with a total of 187,000 transactions worth a total of more than $177 billion.

Working closely with partners in Canada and around the world, there are now over 1,000 offshore audits and more than 40 criminal investigations with links to offshore transactions. The government is also aggressively pursuing those who promote tax avoidance schemes, and so far has imposed $44 million in penalties on these third parties.

This year, we are also gaining easier access to information on Canadians' overseas bank accounts with the implementation of the common reporting standard. With this new system, Canada and close to 100 other countries will begin exchanging financial account information. This information will help us connect the dots and identify instances where Canadians hide money in offshore accounts to avoid paying taxes.

We have expanded our specialist audit teams who focus on high-net-worth taxpayers. These teams are comprised of approximately 250 auditors responsible for scrutinizing more than 500 high-net-worth individuals and their webs of corporate structures.

In addition, in December 2017, the Minister of Finance and his provincial and territorial counterparts committed to ensuring that the appropriate Canadian authorities know who owns which corporations in Canada and to better harmonizing corporate ownership record requirements between jurisdictions. This information will help Canadian authorities take appropriate action against those engaging in international tax avoidance and criminal activities such as tax evasion, money laundering and other criminal activities perpetrated through the misuse of corporate vehicles.

While the actions the government has taken to date represent real progress, tax fairness is a complex goal requiring ongoing engagement and progress on many fronts. With this bill, the government is going even further to fight aggressive international tax avoidance. We are proposing rules to prevent taxpayers from inappropriately reducing or avoiding Canadian income tax through treaty shopping and other transactions or arrangements.

Canada is active in the efforts by the OECD and G20 to address tax planning strategies that exploit gaps or mismatches in existing tax rules to shift profits to locations where they are subject to little or no taxation. These groups are also working to counter strategies that shift profits away from jurisdictions where the underlying economic activity has taken place. This multilateral effort is known as the “base erosion and profit shifting” project.

The OECD's work on the base erosion and profit shifting project identified a number of instances in which the terms of current tax treaties could be modified to prevent potential abuse. However, given the large number of treaties in existence and the extended period of time the bilateral renegotiation of each of those agreements would entail, a new approach was developed to implement these modifications on an expedited basis. The result is the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, also known as the multilateral instrument or MLI.

The MLI is the central focus of today's legislation. It will enable those jurisdictions that sign on to it to swiftly modify their bilateral tax treaties to incorporate the tax treaty related measures developed through the base erosion and profit shifting project.

The MLI was developed and negotiated by more than 100 countries and jurisdictions, including Canada. It is the first multilateral treaty of its kind allowing jurisdictions to incorporate the results of the BEPS project into their bilateral tax treaties and to work together more effectively in the fight against aggressive international tax avoidance.

At the same time, the MLI will provide greater certainty for taxpayers by including measures designed to improve dispute resolution under Canada's tax treaties.

Canada signed the MLI on June 7, 2017, and as we committed in budget 2018, we have tabled the legislation in the House to enact the MLI into Canadian law. The MLI will build on actions that the government has already taken to enhance the integrity of Canada's tax system at home and abroad, giving Canadians greater confidence that the system is fair for everyone.

Adoption of this legislation would modify the application of many of Canada's bilateral tax treaties, including the base erosion and profit shifting standards on treaty abuse, improving dispute resolution and certain other more specific anti-avoidance rules as well as mandatory binding arbitration in relation to tax treaty disputes.

With this legislation, the Government of Canada is taking the next step in the fight against aggressive international tax avoidance and safeguarding the government's ability to invest in the programs and services that help Canadians across this country.

From wherever we look today, there is no shortage of challenges facing the world economy and that means challenges for Canada as well. The good news is that we have strong economic fundamentals that allow us to seize opportunities in the global economy.

Our strong fiscal position is the envy of every G7 nation and gives us the flexibility to make strategic investments today that will help grow our economy tomorrow and for years to come.

The federal debt-to-GDP ratio remains firmly on a downward track. Canada's net debt-to-GDP ratio is the lowest among the G7 countries and our deficit-to-GDP ratio is projected to reach 0.5%.

Over the last three years, Canadians' hard work has expanded our economy, creating about 540,000 full-time jobs and driving down the unemployment rate to one of the lowest levels in nearly 40 years.

By cracking down on tax evasion at home and abroad, we are building on these tremendous advantages that Canada enjoys. We are ensuring that our government has the money needed to deliver programs that help Canadians and that Canada remains positioned as an excellent place to work, invest and do business.

As I have made it clear today, we have already made tremendous progress towards this stronger Canada, but as I have also noted, tax fairness is a complex goal requiring action on many fronts.

The government will therefore continue to identify and address tax evasion and aggressive tax avoidance schemes to ensure that the tax system operates as fairly and effectively as possible.

The legislation we are considering today is an important step towards this goal. I have every confidence that this will become increasingly evident as we proceed with our debate.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Mr. Speaker, let me first publicly congratulate the member opposite for her appointment to parliamentary secretary. That is a big achievement in this place.

I would like to go right to the subject of base erosion and profit sharing. The hon. Jim Flaherty put this in budget 2014, on consultations. It was a subject that the G20 looked at. I am happy to see the government pursue this strategy, because it is important for us to tackle.

The other part of this is, while we can worry about base erosion and profit sharing outside, what I am worried about is our tax base being eroded right now from a lack of investment, where we see the uncertainty that the government has allowed to continue by not being able to negotiate a successful NAFTA negotiation, when Mexico has. At the same time, it is introducing carbon taxes, extra payroll taxes, which ultimately would make us less competitive.

The member's portfolio specifically mentions youth employment. These things will harm the economic ability for young people to get employed in this country if this continues.

This legislation is welcome because it continues the great work of the previous government.

What is the parliamentary secretary going to do to ensure those young people have those opportunities and do not go down to the United States?

[Jennifer O'Connell]

Mr. Speaker, I thank my hon. colleague for mentioning my recent appointment. I am very excited to be in this role.

Let me start with the point about young people. What young people want as they graduate and get new jobs is stability and fairness in the tax system, just like anyone else. What businesses want is confidence in the tax system and the ability to compete globally and not be uncompetitive because of unfair profit shifting in other jurisdictions or base erosion through treaty shopping.

This legislation was introduced in 2014. Why did the previous government not enact it? It would be good news for Canadians, because it would ensure that our tax system was fair and ensure that we had the resources to spend on the programs that actually grow the economy.

In regard to competitiveness, the Minister of Finance pointed out yesterday that we have had 8% growth, over the last six consecutive quarters, in business investment. Our plan is working. This would ensure that our system remained fair and competitive for businesses.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Mr. Speaker, my colleague talked about tax fairness. I think about my friend, Mike, who is working at the mill. He is paying taxes like everyone else. However, the government continues to hold up the tax loophole for CEO stock options. I have concerns and Mike has concerns.

Why would CEOs get a tax deduction of almost 50% when they are having a big win? We know who benefits from this tax deduction. Ninety-two percent of it goes to the 1%. This benefits the very wealthy. When people have success, they are winners. We want them to do well, but they need to pay their fair share of taxes. The government continues to support a tax structure that protects the privileged.

This is a step in the right direction, but it is far from what is needed. We need something with more teeth. We need them to follow through on their promise to close the CEO stock option loophole. Will the government take the next step and close that CEO stock option loophole so that CEOs and the 1% pay their fair share of taxes like everyone else in this country? That is tax fairness.

[Jennifer O'Connell]

Mr. Speaker, I agree that tax fairness needs to be at the core of our system so that all Canadians are paying their fair share. That is precisely why one of the first things we did was lower taxes for middle-class Canadians and actually raise them for the top 1%.

In addition, I want to be very clear that this legislation would not replace or amend. It would actually work in conjunction with other treaties or programs Canada signs on to, such as on information sharing. This would work in conjunction with strengthening our ability globally to fight aggressive tax evasion and tax avoidance. It would also provide us with additional tools in the future if we felt that the government needed to take additional steps on aggressive tax avoidance and tax evasion so that we were equipped to be globally competitive while creating a fair tax system here.

One of the best things for this is creating business confidence in the global economy. For example, the dispute resolution process gives businesses the opportunity to deal with challenges in a timely matter. It is something that is globally accepted, and as I said, it works in conjunction with other programs. It is an enhancement, and it should provide confidence to Canadians that we are working to create a fair tax system.

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

Mr. Speaker, I would like to commend my colleague on her speech.

I think that an agreement such as the one proposed by the G20 and the Organisation for Economic Co-operation and Development, the OECD, is a good initiative.

My colleague mentioned that this bill will help fight tax havens.

To her knowledge, if Bill C-82 is passed as it now stands and treaties are ratified between various parties, will it be possible to close the Barbados tax loopholes?

According to my colleague, will Bill C-82 ensure that Canadian financial firms that repatriate their taxes from subsidiaries in Barbados will be subject to Canadian taxes?

[Jennifer O'Connell]

Mr. Speaker, this would be good news for Canada. This would be good news for businesses and Canadians, because it would create a fair tax system. As I said in answer to the last question, this would work in conjunction with other measures this government has taken.

The hon. member mentioned Barbados. Barbados is actually one of the countries that is part of this agreement. The measures being taken would enhance our ability to avoid profit shifting and base erosion, which most people refer to as treaty shopping, to avoid paying one's fair share. This would be good news for Canadians. This would be good news for businesses that participate globally. It would keep them competitive while ensuring that our tax system was fair and able to deliver the programs Canadians need.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Mr. Speaker, I know that this legislation seeks to prevent double taxation as well. The member talked about dispute resolution. I know there were issues with many residents across Canada who own Canadian corporations. When the U.S. changed its tax rules recently, people living in the U.S. who own Canadian corporations ended up paying hundreds of thousands of dollars of double tax, and dispute resolution was not present.

Could the member describe how that would work to bring a timely resolution for these people?

[Jennifer O'Connell]

Mr. Speaker, to clarify, this legislation does not include anything with regard to double taxation. This legislation is specifically with regard to the MLI, which relates to base erosion, profit shifting and treaty shopping. Double taxation or the sharing of information is not part of this legislation. This is simply about the MLI and the enactment of the MLI agreement. I wanted to make the point clear that what we are dealing with here is base erosion and profit shifting.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Mr. Speaker, I asked the parliamentary secretary earlier why the Liberals have not closed the CEO stock option loophole, and I did not get an answer. We know that 92% of that stock option loophole goes to the 1%. All I am looking for is an explanation as to why they have not followed through with their promise.

[Jennifer O'Connell]

Mr. Speaker, I will reiterate once again that we actually lowered taxes for the middle class and increased them for the 1%, which I believe my hon. colleague voted against. This legislation is specific to profit shifting, base erosion and treaty shopping. This is what we are focused on. It is a piece in the puzzle to deal with tax avoidance and tax evasion, which I hope all members support.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Mr. Speaker, I have the pleasure to rise today to speak to an important piece of legislation, Bill C-82, an act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting. The bill would, upon royal assent, modify up to 75 of Canada's bilateral tax treaties, also known as covered tax agreements, or CTAs, in order to combat base erosion and profit sharing, or BEPS, as it is more commonly known in taxation vernacular, for those watching at home.

For those Canadians I just mentioned, and indeed for the members of the House who are not tax lawyers, including me, Bill C-82 is quite a mouthful, but basically, the bill purports to make it more difficult for corporations to hide money in offshore tax havens. At this early stage in debate, it is worth discussing a few of the concepts inherent in the bill so that we can have a more fulsome discussion moving forward.

First, the multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting is a multilateral instrument, or MLI, which is the product of the Organisation for Economic Co-operation and Development's G20 BEPS project, which began in 2013. Base erosion and profit shifting, or BEPS, refers to tax-planning strategies that exploit loopholes in tax rules to artificially shift profits to low- or no-tax jurisdictions where there is little or no economic activity, allowing little to no corporate tax to be paid. Moderate estimates indicate annual losses of anywhere from 4% to 10% of global corporate income tax revenues, or $177 billion to $425 billion annually. In Canada, we are looking at somewhere between $3 billion and $6 billion annually in taxes that could go to pay for any number of important programs or projects to benefit all Canadians. It might even buy us a pipeline or maybe pay off a third of the annual deficit, if the Liberals were so inclined.

Leaders of the OECD and G20 countries, as well as over 60 other countries, jointly developed 15 actions to tackle tax avoidance, improve the coherence of international tax rules and ensure more transparent tax regimes. The purpose of the MLI is to allow signatories to swiftly implement tax treaty related measures to prevent BEPS. The goal of implementing the measures in the MLI is to end treaty abuse and treaty shopping by transposing, in existing tax treaties, these jurisdictions' commitment to minimally include in their tax treaties tools to ensure that these treaties were used the way the signatories initially envisioned. Once implemented, the MLI would modify up to 75 existing bilateral tax treaties with, at minimum, the adoption of the OECD treaty-abuse and improved dispute-resolution standards.

It is important to note that there are scales on which Canada can adopt the 15 actions included in the MLI. Its treaty-abuse standard consists of two parts. First is an amended preamble, suggesting that covered tax treaties are intended to eliminate double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance. Second is a broad anti-avoidance rule, referred to as the principal purpose test, or PPT. Under the PPT, any tax benefit could be denied where it was reasonable to conclude that one of the main reasons for the transaction was to avoid paying taxes unless it was established that granting the benefit would be in accordance with the object and purposes of the relevant provisions within the treaty.

The other minimum standard is the adoption of mandatory binding arbitration to assist in resolving treaty-based disputes in a timely and efficient manner. Initially, Canada took a conservative approach toward the MLI, agreeing to implement the minimum standards. However, recently, the government has shifted that approach and has announced its intention to remove some of its initial reservations on optional MLI provisions, namely, those pertaining to dividends, article 8; capital gains, article 9; dual residency tie-breaker rules, article 4; and relief from double taxation, article 5.

I believe that this is an important factor to consider, because following ratification, Canada would be unable to add any reservations. However, signatories could withdraw or narrow a reservation following ratification.

The provisional MLI position of each country indicates the tax treaties it intends to cover, the options it has chosen and the reservations it has made. Signatories can amend their MLI positions until ratification. After ratification, countries choose to opt in with respect to optional provisions or to withdraw reservations. This makes the debate and analysis of Bill C-82 very important at committee stage.

Make no mistake, the Conservatives do support, in principle, Bill C-82. We want a full vetting at committee and we want to ensure the bill will meet the expectations of Canadians from coast to coast to coast. I think everyone in the House would agree we must get this right.

I would like to turn our attention now to the four additional provisions added to Bill C-82.

The first addition is to implement a one-year holding period to access treaty-based withholding tax reductions on dividends under a covered tax agreement. A covered tax agreement, or CTA, is an agreement for the avoidance of double taxation enforced between countries to the MLI and for which countries have made a notification that they wish to modify the agreement using the MLI. Double taxation is a taxation principle referring to income taxes paid twice on the same amount of earned income. It could occur when income is taxed at both the corporate level and the personal level.

Double taxation also occurs in international trade, when the same income is taxed in two different jurisdictions, and that is the area we are most concerned with here today. Income may be taxed in the jurisdiction where it is earned then taxed again when it is repatriated in the business's home country. To avoid these issues, countries sign treaties for the avoidance of double taxation. It is the abuse of that system which fosters the need for the bill we are discussing today.

The withholding tax reductions on dividends generally apply where the recipient of a dividend is a company that owns, holds or controls more than a certain amount of the shares or voting power of the dividend-paying company. However, article 8 of the MLI will deny access to the special relief if those ownership conditions are not met throughout a one-year period, including the day of the payment of the dividends.

The second optional provision would add an examination period of one year preceding alienation of the property in determining whether a CTA would exempt capital gains on the sale of equity interests that would not derive their value principally from immovable property.

According to Osler, Hoskin & Harcourt LLP's article, “Canada tables NWMM to ratify MLI; Updates MLI reservations”: It states:

Canada’s domestic “taxable Canadian property” rules impose a five-year lookback period for determining whether shares derive their value principally from certain types of Canadian properties (such as real property and resource properties). By contrast, many of Canada’s tax treaties exempt gains from being taxed in Canada where the shares sold by a resident of the other state do not derive their value principally from immovable property in Canada at the time of disposition. Article 9(1) of the MLI, which Canada proposes to adopt, will allow the source country to tax such gains if the relevant value threshold is met at any time during the 365 days preceding the disposition.

The new provision on capital gains will also extend the application of existing provisions in Covered Tax Agreements that do not already provide for such taxation to allow taxation of gains from both shares and other equity interests (such as interests in partnerships and trusts), in each case provided the relevant immovable property threshold is met during the 365-day testing period.

The third change [Article 4] is to adopt a provision for resolving dual resident entity cases...Article 4 of the MLI adds certain factors that the competent authorities should take into account when determining residency status: place of effective management, place where the entity is incorporated or otherwise constituted, “and any other relevant factors.”

The fourth and last addition is the adoption of a provision of the MLI that will allow certain treaty partners to move from an exemption system as their method of relieving double taxation, to a foreign tax credit system.

There are a number of considerations I would like to raise, considerations I hope will be addressed at committee.

On article 4, Osler, Hoskin & Harcourt LLP, in its analysis, warns:

The new article on dual resident entities does not provide for a clear result where the entity is a dual resident by virtue of a corporate continuance. Some such entities may be governed by the laws of both the jurisdiction under which they are created and the one to which they are continued. The U.S.-Canada treaty contains a tie-breaker rule that provides that such an entity would be resident only in the jurisdiction where the entity was created. By referring to the place where the entity is incorporated or otherwise constituted as a relevant factor, the new MLI provision may be signalling that a similar approach should be applied...

Whether there is a one-size-fits-all template that can be applied to address the concern or that this is best solved by an agreement between signatories is not clear. I again encourage the committee to look into this matter and provide some clarity on this.

Article 5 of the MLI allows countries to adopt one of three different options when removing such treaty-based guarantees. It is unclear at this moment which of the three options the government intends to implement. This may be a matter for the government to decide after ratification or it may not.

In any event, some time to consider witness testimony on the options available to eliminate the issues of double taxation will provide some guidance, I think, for the government when the time comes to implement an option.

The government did not announce an intention to remove its reservation on article 7(4), which would specifically allow treaty benefits that would otherwise be denied under the PPT to be granted in full or in part by the competent authorities in appropriate circumstances.

Osler, Hoskin & Harcourt LLP cautions that this is problem, illustrated with this example. It states:

...assume that an investor would be entitled to a 15% withholding tax rate on dividends had it made a direct investment into Canada, but instead invests into Canada through an intermediary that would have been entitled to a 10% withholding tax rate. A denial of treaty benefits under the PPT could lead to a 25% withholding tax rate on dividends to the investor.

Without the provisions in Article 7(4) the mechanism to allow for remedies will not exist.

According to Osler:

This is particularly important, for example, for private equity and other collective investors that may be resident in multiple jurisdictions. Canada has also not provided any additional guidance on when or how the PPT is intended to apply to private equity and other collective investment vehicles--despite many suggestions that further guidance is needed (either on a unilateral or bilateral basis).

I would strongly encourage the committee to examine this matter and pay particular attention to the very broadly worded PPT, which may be open to various interpretations.

Gowling WLG's partner, Laura Gheorghiu, in her article on the MLI tax treaty and what it means for taxpayers, brings to our attention concerns regarding article 8. She states that article 8:

...addresses the reduction of the 25% domestic dividend withholding rate under most CTAs to 5% where the dividend is paid to a corporation that, at the time of the payment, owns, holds or controls directly (and in certain CTAs, indirectly) at least 10% of votes (or in certain cases holds more than 10% of the shares) of the dividend payor. Article 8 will deny the reduced treaty withholding tax rate unless the applicable ownership conditions are met throughout a 365-day period that includes the day of the payment of the dividends. For this purpose, ownership changes resulting from corporate reorganizations (e.g. amalgamations) of the dividend payor or shareholder are ignored. This...holding period is meant to ensure that non-resident companies that engage in certain short-term share acquisitions will not benefit from the lower treaty dividend withholding tax rates.

The application of the hold period rule will be problematic in practice because the 365-day period can straddle the transaction date. Where the holding period test has not been met at the transaction time, the corporate dividend payor has a difficult choice to make. If it withholds at the lower rate, it exposes itself to the risk that the shareholder will not meet the holding period test and, therefore, the payor will be liable for the additional withholding tax and penalties. Alternatively, if it withholds on the dividend at the domestic rate, and the test is met, the shareholder will then need to apply for a refund of the excess withholding, which will engender additional costs and delays.

As of today, 84 countries have signed the MLI including Canada. Six more are interested in signing and 10 have ratified the convention.

It is interesting to me that the United States has chosen not to sign the MLI. Rather than pursuing legislation to recoup unpaid taxes in an investment like the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS, the U.S. has chosen a different approach.

When the OECD first announced its plan to go after tax planning and double taxation by multinationals, the U.S. had the highest statutory corporate tax rate in the OECD. Since then, the U.S. has passed historic corporate tax cuts as part of the tax cuts and jobs act, lowering its headline corporate tax rate from 35% to 21%, less than the OECD average.

The U.S. has also made significant changes to the international taxation of its U.S. multinationals.

The U.S. has taken steps to address BEPS and non-taxation of multilateral income by creating strong incentives for companies to relocate investment, economic activity and profits in the U.S. through a more competitive tax code..

To be clear, I am not advocating for the abandonment of Bill C-82 As I mentioned earlier, the Conservatives support the principles behind the bill, but we also support lower taxes for Canadians and businesses. Lower corporate taxes, reducing red tape and creating an investor-friendly climate is something we need to do in concert with Bill C-82. The more investment dollars we can attract and retain in Canada, the less taxes we need to spend in pursuit of those who exploit loopholes in tax rules.

In 2013, the previous Conservative government supported the effort to establish the OECD G20 BEPS working group to curtail profit shifting and tax avoidance.

The Conservatives support measures to crack down on tax evasion. Aggressive tax avoidance is a major source of lost tax revenue for high tax jurisdictions like Canada. However, let us remember that the vast majority of citizens, residents and businesses in Canada pay their taxes and follow the rules. Having a fair tax system for all Canadians and corporations that do business in Canada is fundamental to a healthy and equitable economy.

I want to quickly talk about what is happening when there is a lower-tax environment, something we do when we lower regulations and red tape and allow businesses to thrive in open and free markets. We are seeing that, as I mentioned, in the United States. The last number I saw was that there were 6.7 million unfilled jobs in the United States. Obviously, when that happens, wages go up, which we are seeing that all across the board, unemployment goes down, bonuses are given out and employees are better off than they were before. More money in more people's pockets gives them more options, more choices in their own lives to spend on projects and things they feel are important to them.

When we look at what is going on in Canada, we are almost doing the exact opposite: taxes are going up; red tape and regulations are grabbing onto businesses, they are strangling them; and businesses are looking for options elsewhere. We are already seeing it in the energy sector.

We have lost out on tens of billions of dollars worth of investment because of the government. Investment is fleeing; we are losing jobs, families are worse off than they were before; and we are going in the opposite direction in what most countries are doing, including one of our competitors, the United States. This is important to note because those of us on this side of the House believe that lowering taxes, allowing free markets to weed out bad actors, allowing people to have more choice and freedom in their daily lives is the best way to have a free and open society, like we do here.

With careful consideration of the bill and amendments at committee, these measures would prevent treaty abuse, improve dispute resolution and reduce the incidence of tax avoidance. However, I also laid out another case as well.

[Matthew Dubé, NDP, Beloeil—Chambly, QC]

Mr. Speaker, I thank my colleague for his speech. Tax evasion and tax avoidance are extremely important issues. As he said when he referred to how most businesses and individuals pay their taxes, problems arise when we consider the amounts that are not making it to the government coffers. Some people who are already in a position of privilege and power are benefiting from a system that has clearly failed in achieving fairness, in this case tax fairness, within our society.

The multilateral instrument that we are talking about here today reminds me of the debate that we had in the House of Commons during the last Parliament about the free trade deal with Panama. Before ratifying a free trade agreement with that country, the United States made sure that Panama had made a firm, official commitment to combat tax evasion and that it was making an effort to ensure that the United States was getting the money it was entitled to. Canada did not do that. That was one of the reasons why we opposed the agreement signed by the previous government.

Does my colleague not believe that we should ensure that the countries with which we sign free trade deals do more to ensure that the money belonging to our own citizens comes back to us?

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Mr. Speaker, as I mentioned, I did lay out my concerns, and I think that addresses much of the question.

I also mentioned that there are ways, in addition to this piece of legislation, to allow money to be repatriated to our country. We continue to spend money to go after these bad actors. On the other side, we see the money that we are losing out on, which could pay for a number of programs that Canadians love and cherish. I do think there is an obligation to go after that, as I mentioned in my speech, in concert with the bill, and there are ways to do it.

We can see what is happening in the United States. Money is being repatriated to the United States in hundreds of billions of dollars, because the Americans were able to lower the tax rate and provide incentives for companies to bring that money back. We could go after them in a meaningful way through this legislation. We could also be a tax magnet as well. We could allow companies to repatriate the money they have, invest in their workers, invest in their companies, pay their taxes here domestically, and I think we would all win because of that.

This is not a situation with one solution only. I think the government needs to look at that avenue as well and ensure that we are being competitive on the world stage in terms of a friendly business environment.

[Kevin Lamoureux, Liberal, Parliamentary Secretary to the Leader of the Government in the House of Commons]

Mr. Speaker, here we have another piece of legislation that I believe would assist in setting the agenda which really started virtually on day one with this government when we brought in legislation to look at giving Canada's middle class a tax break, which is something I would remind my colleague across the way that he voted against. Also, we put a tax on Canada's wealthiest 1%. Today, we have legislation before us which looks at ways in which we can ensure there is a higher sense of tax fairness, which is something Canadians want to see. It has been a priority for this government. We have invested literally hundreds of millions of dollars to look for and prosecute tax evaders.

Would my colleague across the way not agree that in good government we take the measures such that we have taken virtually from day one? There may be a bit of remorse for not supporting some of the previous legislation, but I would hope that the Conservatives will be supporting this piece of legislation.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Mr. Speaker, as I mentioned in my speech, we are supporting the bill. We do have our concerns, and I laid them out in my speech. I spoke for 20 minutes on what I thought could be ways we could improve this piece of legislation.

I would also point out that this project has been ongoing since 2013 under the previous Conservative government. We supported the effort to establish the working group to curtail profit sharing and tax avoidance. The agreement in 2013 has developed into the multilateral convention.

I should mention that the previous Conservative government began cracking down on tax avoidance measures. One example from January 2015 is that electronic measures of $10,000 or more must be reported to the Canada Revenue Agency by banks and financial institutions. The actions were already being taken on this side of the House when we were in power.

Again, on this piece of legislation, I laid out my concerns. I am hoping that through the committee process, the committee is a able to work on and iron out some of the concerns I mentioned. I am sure some issues will be raised by my colleagues at committee and through the testimony, and we will be able to improve the bill and hopefully make Canada a more competitive place on the world stage.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Mr. Speaker, it is good to hear that the Conservative Party is going to support this step forward in terms of closing loopholes and tax avoidance. However, we do not believe that this bill goes far enough.

My colleague talked about tax fairness. The Conservatives do not believe that New Democrats support risk takers in our country doing well, but we do. However, we also support them paying their fair share of taxes.

With respect to the CEO stock option loophole, CEOs are getting a 50% discount. Risk takers who have done well, who have won because of their hard work, are getting a discount on their taxes, which is not fair.

My friend Maureen Fraser owns the Common Loaf Bake Shop in Tofino, B.C. She pays her fair share of taxes. When she has a good year, she pays a little more, and she is happy to do so. But she does not think it is fair that CEOs get a discount on their taxes when they have a big win. Ninety-two per cent of the CEO stock option loophole would go to the 1%. That is unfair.

Does my friend and colleague support closing the loophole for the CEO stock option?

We know it is not about competitiveness. I have talked to CEOs and not one of them has told me they are going to move their business out of the country or they are not going to work in Canada if they do not get a discount on their taxes and they are not paying their fair share like everybody else.

The Liberals promised to close the loophole. Would the Conservatives do the same? Does my colleague think that the CEO stock option loophole is unfair?

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Mr. Speaker, I know my friend is a supporter of the free market for the most part and I do appreciate that.

I would point out to him a couple of things. One way to fix that would be a flat tax, which would fix the problem of tax avoidance altogether. This is the place for debate and we can discuss that back and forth.

I would also point out that as investment is currently fleeing this country in tens of billions of dollars in the oil and gas sector, jobs are being lost and opportunities are going south of the border where the environment is more favourable to business.

We are already seeing that the money the Liberal government paid to nationalize the Trans Mountain pipeline, those taxpayer dollars went to the United States to build infrastructure in that country. We continue to fund projects in other countries rather than attract investment to ours. It is totally backward. Do not even get me started with the Asian infrastructure bank, where we are paying to build pipelines in other countries except ours. We did nationalize, which we did not have to do, but that is a discussion for another day.

[Todd Doherty, Conservative, Cariboo—Prince George, BC]

Mr. Speaker, I find it rich that our hon. colleague from Winnipeg North proudly stands and talks about his government from day one when the Prime Minister has openly admitted that Canadians know that most small businesses are just an opportunity for rich people to hide their money and the finance minister conveniently forgot that he had a French chalet.

We have talked about government not being there to create jobs but it is there to create an environment for business to invest. I wonder if our hon. colleague would share some of the stories he has heard from local business owners in his riding about their concerns.

[The Speaker, Liberal, Geoff Regan]

I am afraid the hon. member for Haliburton—Kawartha Lakes—Brock will only have about 10 seconds to share stories, so that will be a challenge.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Mr. Speaker, because I come from an agriculture community, I will say this. Farmers are getting frustrated because in order for them to do business they continue to struggle with red tape and regulations which are strangling them. When it is more profitable to regulate the farm than be a farmer, we have a problem.

Unmanned Aerial System Centre of Excellence

[Richard Hébert, Liberal, Lac-Saint-Jean, QC]

Mr. Speaker, the town of Alma in Lac-Saint-Jean provided the setting for a major event this week, a trade show hosted by the Unmanned Aerial System, or UAS, Centre of Excellence.

The TECH DEMO event was organized to showcase the latest technology developments in the UAS industry. The presentations were truly awe-inspiring. The innovation demonstrated by this centre of excellence in Lac-Saint-Jean impressed Nav Canada, Transport Canada and the National Research Council Canada.

I am very proud of the amazing work done by the UAS Centre of Excellence and especially by the mayor of Alma, Marc Asselin, and the CEO of the UAS Centre of Excellence, Marc Moffatt. The UAS Centre of Excellence is playing a key role in regional sustainable development. I am proud to support the success of Lac-Saint-Jean.

Agriculture and Agri-Food

[Arnold Viersen, Conservative, Peace River—Westlock, AB]

Mr. Speaker, a few weeks ago, winter arrived in Alberta. Snow covered the fields before the summer had officially ended, but the farming men and women of Alberta are hardy people. The rest of us might grumble about the snow, but farmers have their livelihood at stake if they cannot harvest their crops. While we are all grateful that the snow has since melted, we pray that they can bring their crops in. Their work feeds the world.

Farmers are not alone in the fields. Bees love our long summer hours and the crops that we grow. This combination creates an amazing honey that has made Alberta the largest honey producer in Canada. In fact, our bees produce twice as much honey as the world average. In Alberta, even our bees work hard.

I salute our farmers and our beekeepers. Their perseverance year after year in the face of uncertain weather and their willingness to work long hours to produce top-quality products ensures that the rest of the world does not go hungry.

Charlottetown

[Sean Casey, Liberal, Charlottetown, PE]

Mr. Speaker, imagine working on a cruise ship travelling to ports of call all over the world. Now picture pulling into port in Charlottetown, Prince Edward Island. This, of all places, was the city that inspired our Quebec-born singer/songwriter to write a song that has hit number one on French satellite radio.

Karine Ste-Marie was on the Rotterdam cruise ship in 2016 when it visited our city. It was on a beautiful fall day where she found inner peace and the motivation to write a song called Charlottetown.

The song describes how Charlottetown helped her vanquish her demons and make peace with the past. It is a song about deciding to go back home and knowing what she had to do.

Tomorrow night, Karine will return to Charlottetown to perform at the Cool Moon cultural festival.

I take this opportunity to publicly congratulate Karine on her success, and look forward to doing that in person tomorrow.