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.