House of Commons Hansard #92 of the 43rd Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was workers.


Fight Against Tax EvasionPrivate Members' Business

April 30th, 2021 / 2:10 p.m.


Alexandre Boulerice NDP Rosemont—La Petite-Patrie, QC

Mr. Speaker, I hope you did not pay too much attention to the last two speeches we just heard, because they were rather hypocritical.

These people say one thing and do the opposite. They are grasping at straws, looking for excuses. When they find things that do not suit their narrative, they say it is too complicated, it would be hard to do, or we have to wait for the OECD. These people have incredible resources, but they look for excuses to get out of doing anything.

We see that from both the Conservatives and the Liberals. As far as tax evasion and the use of tax havens are concerned, the system was built under Conservative and Liberal governments with the support of Canada's big banks and major accounting firms, which have spent years having fun helping Canadian millionaires, billionaires and corporations profit from not having to pay their fair share of taxes.

I want to point out that the NDP has been monitoring and working on the issue of tax evasion and tax havens for years.

I have already congratulated my colleague from Montarville on Motion No. 69, which we are debating today. I also want to acknowledge the work of the member for Joliette, who has been passionate about this file for years and has spoken about it a number of times. I can assure him that we want the same thing.

I do want to caution my colleagues though. I moved a motion in favour of fighting tax havens during the previous Parliament. The motion we moved in the House was adopted, and the Liberals voted in favour of it. However, they went on to sign new tax treaties with other tax havens.

I wish my colleague from Montarville the best of luck, but I want to warn him that the Conservatives and the Liberals may sometimes vote in favour of a given declaration of intent or worthy principle with which we agree as a progressive, left-wing political party, but that does not always produce the expected results. Let us hope it will be different this time. My colleague can always count on the NDP caucus to demand more justice and equity in this area.

The principle behind tax havens is not very complicated. I spoke about it earlier. It has been explained by many people, including Alain Deneault, who wrote a book called Une escroquerie légalisée: précis sur les « paradis fiscaux », or “A legalized scam: a closer look at tax havens”. Contrary to what my Conservative colleague said, we must fight all illegal actions. That is obvious, but the problem is that, with all the agreements and treaties that have been signed over the years, the use of tax havens is largely legal. This is due to the principle of avoiding double taxation.

Based on that principle and the use of tax havens, the same income or profit cannot be taxed twice. Let me give a simple example, that of Barbados, which is the oldest tax haven with which Canada has had an agreement, since 1980, if memory serves.

People send their money, profits or income to Barbados, where they pay 1% tax on that income. Then they can bring that money back to Canada and say that they have already paid taxes on it, and they will not be taxed twice on the same income. If it is a business, it should pay a minimum of 15% tax here. If it is an individual, it would be 30% in taxes. I am giving these percentages as examples, but the principle is that income cannot be taxed twice.

However, why could we not eliminate the advantage of using tax havens by telling these people that although the tax in Barbados is 1%, when they return to Canada, repatriate their money and put it Canadian accounts, the difference will be taxed?

They would be made to pay the taxes they did not pay here, in Canada. If someone only pays 1% in taxes on their company's profits because they were sent to Barbados, why could we not make them pay 14% in taxes?

This would eliminate any incentive to use such schemes. In the end, they would not pay more tax, but they would pay exactly the same percentage as other Quebec and Canadian citizens and other businesses, small or large, in Canada. This would uphold the principle of tax equity and eliminate all the advantages of using these schemes, which Alain Deneault does not refer to as avoidance of double taxation but rather “double non-taxation”, meaning these profits are basically not taxed anywhere. Someone pays a negligible amount of taxes in the tax haven, and then they pay nothing here, with the excuse that the revenue has already been taxed.

According to the member for Montarville, the traditional governing parties, the Liberals and Conservatives, sometimes say they cannot do anything about it. The NDP thinks they can. We think they are accommodating, complicit even, because they operate according to these rules. They want things to work this way, so they work hand in hand with the big Canadian banks. For years, those banks have had branches in tropical paradises, where it is warm and lovely, so they can help the super-rich, the millionaires and billionaires, avoid paying their fair share for our public services, like health, public transit, education and well-funded, public universities.

More than $80 billion Canadian are hidden in Barbados alone, the oldest tax haven with which Canada does business. Canada cannot access that money. That is what happens when people use tax havens. It undermines the equality of individuals and our ability to act.

Tax havens have multiplied over the years. One of the most obvious and glaring examples is the Cayman Islands, where there are more registered companies than there are residents. This means one of two things. Either their inhabitants are extremely entrepreneurial and own two or three companies each, or the Cayman Islands have become a kind of post office box where companies pretend to have a branch or office. Entire buildings contain nothing but post office boxes, so that companies can prove they have an address there, and therefore not pay taxes.

All of these schemes are well known, and yet Canadian governments, led by the traditional parties, have done absolutely nothing for years. This has serious repercussions, especially in these pandemic times, when huge investments are needed not only to fight COVID-19, but also to ensure an equitable, fair and green economic recovery that takes climate change and the climate crisis into account.

Government spending or investments are considerable and that is normal. We are living beyond our means, however, and at some point we are going to have to think about making cuts. Then it will be time for the Conservatives' favourite topic: austerity and making cuts to public services and services for families, seniors and students.

That is not the path the NDP wants to take whatsoever. If we look at government spending alone without looking at revenues, then we are getting it wrong. As the left-leaning progressive party, we are saying that we can bring in a healthy portion of revenues from the fight against tax havens.

We must seize this opportunity. A few years ago, the Department of Finance said that Canada loses roughly $16 billion a year to tax havens and that was a conservative estimate. The Conference Board of Canada thinks it is more than $90 billion. That organization is not known to have an international socialist bent that wants to bleed the big banks and the wealthy. Let us just say that we are talking about tens of billions of dollars.

Why can we not all work together and take this opportunity to say that enough is enough and put an end to this? We can accomplish a lot of things more effectively in a coalition or multilaterally with our OECD partners, and that is a good thing.

However, most of Canada's tax treaties are bilateral, between Canada and one other country. There is therefore no need to wait for the United Nations or the OECD to act. If they do, that is great and we will collaborate, but we can act on our own initiative. That would bring in more money and would be more fair for our businesses that pay their fair share of taxes in Canada.

The NDP has other measures to propose to increase revenues, such as a tax on wealth for those who earn over $20 million a year and a tax on the excessive profits of companies like Amazon and Netflix. In that regard, a report from the Parliamentary Budget Officer indicated that a temporary tax on the excessive profits of these companies could bring in up to $8 billion a year.

We therefore have to seize these opportunities, and the NDP will be very proud to support Motion No. 69. It is a step in the right direction, but there are still many other things we can do to improve tax fairness. The NDP has all kinds of good ideas to share in that regard.

Fight Against Tax EvasionPrivate Members' Business

2:20 p.m.


Mark Gerretsen Liberal Kingston and the Islands, ON

Mr. Speaker, on a point of order, I believe if you seek it, you will find unanimous consent to put the question on Bill S-3 at second reading.

Fight Against Tax EvasionPrivate Members' Business

2:20 p.m.


The Deputy Speaker Conservative Bruce Stanton

All those opposed to the hon. member for Kingston and the Islands putting this proposition forward will please say nay. I hear none.

The House has heard the terms of the motion. All those opposed will please say nay.

Hearing no objection, I declare the motion carried.

(Motion agreed to)

The House resumed consideration of the motion that Bill S-3, An Act to amend the Offshore Health and Safety Act, be read the second time and referred to a committee.

Offshore Health and Safety ActGovernment Orders

2:20 p.m.


The Deputy Speaker Conservative Bruce Stanton

The question is on the motion.

If a member of a recognized party present in the House wishes to request a recorded division or that the motion be adopted on division, I would invite them to rise and indicate it to the Chair.

The hon. member for Kingston and the Islands.

Offshore Health and Safety ActGovernment Orders

2:20 p.m.


Mark Gerretsen Liberal Kingston and the Islands, ON

Mr. Speaker, I request that the motion be carried on division.

Offshore Health and Safety ActGovernment Orders

2:20 p.m.


The Deputy Speaker Conservative Bruce Stanton

Is that agreed?

Offshore Health and Safety ActGovernment Orders

2:20 p.m.

Some hon. members


Offshore Health and Safety ActGovernment Orders

2:20 p.m.


The Deputy Speaker Conservative Bruce Stanton

I declare the motion carried on division.

(Motion agreed to, bill read the second time and referred to a committee)

The House resumed consideration of the motion.

Fight Against Tax EvasionPrivate Members' Business

2:25 p.m.


Gabriel Ste-Marie Bloc Joliette, QC

Mr. Speaker, I would like to start by making a few comments.

In his speech, the Liberal member said that he was presenting the government's position, which made my heart sink. This is yet another example of how Ottawa is as terrible at combatting tax evasion and tax avoidance as it is on the world stage. We are already at a disadvantage since the government has a bias towards tax havens.

I also have a comment for the Conservative member. I remind him that his party, under Stephen Harper, legalized the use of 23 tax havens. It is incorrect to say that that government was the master of combatting tax havens.

My last comment is for the New Democrat member. I commend him for all of the work he has done on this issue. I simply want to remind him that the motion he moved in the House that got the support of the Liberal majority government at the time was written in a way that was not binding, unlike today's motion. I am confident that if our motion is adopted, it will bring about real change.

Over the past year, the government has supported all of the businesses that have been battered by the pandemic, including bad corporate citizens. I am of course referring to businesses that use tax havens to avoid paying taxes here in Canada. They do not pay, but they receive. That is unacceptable, and it has to change.

That is actually what will happen south of the border. The Biden administration is putting a major action plan in place to limit the use of tax havens. Our neighbour to the south is also asking other countries to take similar steps. The crisis has cost both Canada and the United States dearly. Our society can no longer afford to give plutocrats the privilege of avoiding their tax obligations.

Will the government follow the Biden administration's lead? From what we have heard, it does not seem so.

Will the Minister of Finance act in solidarity with Janet Yellen, her American counterpart? Based on what the Liberals have said, unfortunately, I would say no. The Prime Minister has only spoken once with the U.S. President since Ms. Yellen's call to take measures. The meeting summary shows that the Prime Minister did not raise the issue.

At the next annual meeting of the International Monetary Fund, the U.S. administration will likely put forward its proposal for a minimum tax on multinationals. Unless the Canadian government changes its mind, it will probably oppose this initiative to protect its interests and, need I remind my colleagues, those of the 10 tax havens it represents internationally.

The motion moved by my colleague from Montarville seeks to make the government change course. The motion sends the government a strong message. Much needs to be done to stop the use of tax havens. Measures must be implemented to truly intercept illegally diverted funds. What is more, it is urgent that we make the immoral illegal.

Bay Street banks have made astronomical profits every quarter even during the pandemic. They operate in a market that is heavily protected by the government, and every year, they save billions of dollars in taxes when they divert activities conducted in Canada by artificially recording them in Barbados or Panama. This is heart-wrenching.

What makes absolutely no sense is that the government says that all of that is legal. This government kowtows to plutocrats. Given the current crisis, that needs to change now. That is why I am urging all of my colleagues in the House to vote in favour of the motion moved by my colleague from Montarville. It sets out six things that the government needs to do right now to create a fairer society, one that stops letting plutocrats get a free ride and makes them pay taxes. These six actions are very clear and will change things.

The first action would be to amend the Income Tax Act and the Income Tax Regulations to ensure that income that Canadian corporations repatriate from their subsidiaries in tax havens ceases to be exempt from tax in Canada.

The motion calls for subsection 5907(11) of the Income Tax Regulations to be repealed. This section, which was snuck in under the radar, enables Canadian companies to repatriate amounts from subsidiaries registered in one of the 23 tax havens with which Canada has a tax information exchange agreement without paying taxes. If it is repealed, that income will be taxed in Canada when the Canadian company repatriates it.

The second action would be to review the concept of permanent establishment so that income reported by shell companies created abroad by Canadian taxpayers for tax purposes is taxed in Canada. When a company registers a subsidiary or a billionaire establishes a trust abroad, that subsidiary or trust is considered a foreign national, independent from the Canadian citizen or company that created it, and its income becomes non-taxable.

In taxation jargon, these subsidiaries or trusts are referred to as permanent establishments, in other words, they have a taxable fixed place of business independent of their owner. In many cases, they are shell companies with no real activity. There is no justification for treating them differently from any other bank account and exempting the income they generate from tax. This has to change.

The third action would be to require banks and other federally regulated financial institutions to disclose in their annual reports the list of their foreign subsidiaries and the amount of tax they would be subject to if their income had been reported in Canada. For years that was a requirement. It has to be reinstated. The Superintendent of Financial Institutions could issue a simply directive requiring the banks to be transparent again. This very simple measure could be taken swiftly because it does not require any international negotiation or any legislative or regulatory change.

In 2019, the six Bay Street banks made a record profit of $46 billion. That is a 50% increase over five years. In 2020, despite the pandemic, they made $41 billion in profits. Their profits rise, but they pay less tax because they report their most profitable activities in tax havens, where their assets keep growing.

Until the door to the use of tax havens is closed shut, consumers would be able to choose their financial institution in an informed manner, and taxpayers would be able to judge whether the banks deserve government assistance.

The fourth action would be to review the tax regime that applies to digital multinationals whose business does not depend on a physical presence, and tax them from now on based on where they operate, rather than where they reside. The budget had some good news in that regard. On the one hand, the government will finally start collecting GST on services sold by these multinationals beginning July 1. This was included in the notice of ways and means we voted on earlier. Why did Ottawa wait so long? Quebec has been doing this for two years now, and it is going great. Better late than never.

The budget also announces the government's plan to tax multinational Internet companies on their activities at a rate of 3% of their sales in Canada beginning on January 1, 2022. We will remain vigilant. That is good news, but it might be merely hot air, since that date could be after the next election.

During the last election campaign, the Bloc Québécois proposed using this 3% to compensate the victims of web giants, such as the creators, artists or media outlets whose content gets stolen by these heavyweights. It will do for a start, but the budget could have gone further.

The fifth action would be to work toward establishing a global registry of actual beneficiaries of shell companies to more effectively combat tax evasion. We all know that in many cases tax havens are opaque and that it is impossible to know who really benefits from the trusts that are created. Often, we only know the name of the trustee that manages them or of the law or accounting firm that created them, but not the name of the person hiding behind them. Such a setup is a real boon for fraudsters who can hide their money with complete impunity.

The Panama papers and the Paradise papers, which were internal documents leaked from the firms that manage these companies, showed us the extent of the problem and the amounts hidden in these tax havens. With regard to the Panama papers, Radio-Canada reported early this month that Canada's response has been wholly inadequate, as my colleague from Montarville said. Radio-Canada published an article about the Panama papers under a headline pointing out that Quebec has recovered more unpaid taxes than Ottawa. Canada has recovered 15 times less money than the United Kingdom, 12 times less than Germany, and 10 times less than Spain. It is a real scandal. This must change. We must put an end to the secrecy. We need a registry of the real beneficiaries of trusts and other shell companies, which will eradicate this fraud.

The sixth action would be to use the global financial crisis caused by the pandemic to launch a strong offensive at the OECD against tax havens with the aim of eradicating them. As we know, this measure was taken in 2008-09. It moved forward but then stalled. This type of multilateral initiative has obvious advantages, but it does have one disadvantage. Since the OECD operates by consensus, it only takes one holdout to stall progress. After the 2009 crisis, this initiative was moving along nicely, but it has since slowed down, as I just said. The COVID-19 crisis could speed things up, however, especially given the calls from the U.S. government. Ottawa needs to get on board now.

A vote in favour of the motion moved by my colleague from Montarville is a vote in favour of asking the government to take these six actions, which will make a real difference in the fight against tax havens and make the system a little fairer.

Fight Against Tax EvasionPrivate Members' Business

2:35 p.m.


The Deputy Speaker Conservative Bruce Stanton

The time provided for the consideration of Private Members' Business has now expired. The order is dropped to the bottom of the order of precedence on the Order Paper.

It being 2:35 p.m., the House stands adjourned until Monday at 11 a.m., pursuant to Standing Order 24(1).

(The House adjourned at 2:35 p.m.)